Cloud Choices Quantifying the Cost and Risk Implications of Cloud

© 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
John Enoch
Principal Technical Business Development Manager, Amazon Web Services
Cloud Choices
Quantifying the Cost and Risk
Implications of Cloud

Your next 40 minutes: What to expect
• Transformational IT projects statistically fail:
Why? Is failure an option? What is your risk appetite?
• Perception of problems determines outcomes:
How can organisations best approach cloud adoption as a key decision?
• Methods for quantifying cost, risk and value:
How to mitigate risk and reduce cloud migration costs? Example: Data
Centre exit. Presented by Mark Trevor, Partner Cushman & Wakefield

Cost & Risk in Cloud Choices:
“How you think is what you get”

Alan Shepard,
Apollo 14 Astronaut
“ It's a very sobering feeling to be
up in space and realize that
one's safety factor was
determined by the lowest bidder
on a government contract.”
Are your outcomes driven by cognitive bias?

Is your status quo disrupted (even sustainable)?
Big IT platform
Small cloud
2018 2021
? ?
Status quo Evolution Transformation
Small IT platform
Big cloud

What are your odds in IT? (i) Assess Complexity
Standish Group’s Chaos Report
Source: Standish Group Chaos Report: Decision Latency Theory, 2018
• Success = delivered on
[time, budget, to
expectations]
• Validates “Keep IT
Simple” thinking
• Decision speed is critical

What are your odds in IT? (ii) Assess Decisiveness
Decision
Latency
Source: Standish Group Chaos Report: Decision Latency Theory, 2018
https://en.wikipedia.org/wiki/OODA_loop
Entropy

7 Cloud Choices that impact outcomes
1. Focus on technology, not business impact
2. Accountability and KPIs
3. Learnings (reflected in the business case)
4. Importance of planning head
5. Stakeholder consensus
6. Leadership: managing & motivating
7. Execution capabilities: talent, tools & techniques
Discenza, R. & Forman, J. B. (2007). Seven causes of project failure: how to recognize them and
how to initiate project recovery. Paper presented at PMI® Global Congress 2007—North America,
Atlanta, GA. Newtown Square, PA: Project Management Institute.

Your decisiveness (i.e. decision latency) is… ?
0%
20%
40%
60%
80%
100%
LEADERSHIP
BUSINESS CASE
TEAM CONSENSUS
ACCOUNTABILITYURGENCY
IMPORTANCE
CAPABILITY
CHANGE READINESS SELF-ASSESSMENT
AWS tool: Can we help?

Customers that AWS supports with a
business case adopt cloud about
60% faster than those who don’t.

A solid, optimized business case needs real
cost, usage and licensing data, not
guesswork.
TSO Logic finds this reduces costs in
excess of 30% and accelerates migration
timelines by 90 days
Aaron Rallo,CEO TSO Logic

HOW?WHY? WHAT? WHEN?
Change IT platform? Cloud?
“Hybrid”?
On-premise?
Which partner(s)?
Capability & systems upgrades?
Application due diligence?
Governance?
Project planning?
Which supplier(s)?
Analysis:
Cost, Risk, value?
Window of opportunity?
Important to Urgent?
Framing The Decision
Making The Investment Case
Executing Change On Time & On Budget

Cost & Risk in Cloud Choices:
“How you act is what you get”

Challenge linear progression maturity models

How suppliers think about you = how they act
“For decades, we have relied on the
old, sequential lifecycle model to
help plan and budget our activities
in each stage, moving customers
sequentially across each of those
stages.
Now that our buyers have higher
expectations and are self-
educating, our marketing needs to
become more personalized and
respond to individual behaviors. ”
https://blog.marketo.com/2016/11/the-evolution-of-the-customer-lifecycle.html
Relationships are
iterative & agile

0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Total in-house cost per year Total AWS cost per year
Total in-house cost to date Total AWS cost to date
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
RESERVED
INSTANCES
SPOT
INSTANCES
Illustrative
TCO, trade-offs and tipping point

APPLICATION
CHOICES
INFRASTRUCTURE
INFLATION
PEOPLE & TALENT
INNOVATION
DECOMM
INSURANCE
PROCUREMENT
Cost

• Financial metrics (ROCE,
EBITDA…)
• Security posture
• Cost of change/inertia
• Talent &
Knowledge
• Org. Change
• “Lock-in”
• IT Assets: Gap between Book & Market value
Risk

APPLICATIONS
INFRASTRUCTURE
CULTURE
PEOPLE & TALENT
FINANCE,
GRC
SUPPLIERS
BUSINESS
INTELLIGENCE
LEADERSHIP
Productivity

Methods for Measuring
“What you inspect is what you get”

Arthur Stephenson,
Chairman, Investigation Board
“The 'root cause' of the loss
of the spacecraft was the
failed translation of English
units into metric units”
Do you have a valid scale of measurement?

Which IT
Platform?
How to use IT?
How to exit
legacy IT? Cost
Reduction
Agility
IT
Performance
Productivity
Customer
Needs
Business
Case
Innovation
Operate &
Optimise
Decision
Outcome
Uncertainty
Change Project
(suppliers, discovery, plan,
design, build)
Illustrative view of Cloud Adoption as a System

Measuring and comparing for trade-offs
• Create a 0-100 scale for
measuring value
• Put all aspects of value
on the scale
• Consider how risk
appetite reflects value in
each aspect
• Factor the 2 coefficients
to create an additive
utility score
• Eliminate bad options

1. Benefits of moving IT delivery
from on-premise to AWS cloud
Discovery and TCO
Identify and analyze
on-premise compute, storage,
memory and software licenses
Agentless, no training required
Cloud Planning
Fast, accurate planning
Rightsize and right-cost
workloads to AWS
Continual Visibility
Ongoing insights and
predictive analytics
Proven cost savings of
30% or more
Accurate, data-driven recommendations for rightsizing and right-costing
workloads from on-premise to AWS

Optimise on compute e.g. rightsizing…

SQL Server Windows Server
(Production
Workloads)
Microsoft Dev/Test
Workloads (With MSDN
Subscription)
Up to 88%
Savings when moving SQL
Server with BYOL
Up to 43%
Savings when moving
Windows Server with BYOL
22%
Savings when moving MSDN
workloads with BYOL
With Software Assurance: Move to
Dedicated or Shared Instance
Without Software Assurance:
Requires Dedicated Host (max
savings) or Dedicated Instance
Requires Dedicated Host Requires Dedicated Instance and can only
be used by MSDN Subscribers
Application Cost per Month - On Demand
Sample Customer Scenario
Savings For Customers Who Bring Their Existing Licenses To AWS
…simplify licensing

The migration to Cloud often will not occur at:
• the optimum stage of an IT refresh cycle nor
• either the point that the investment in the dedicated facility has been fully written
down or the contract on the colo is reaching the end.
The key IT objectives behind most decisions are usually to:
ü reduce opex;
ü eliminate capex; and
ü provide a better IT service and experience for both internal &
external customers.
A lack of analysis and measurable impact assessment typically
creates decision inertia.
2. Benefits of exiting data centres
…with a fact based plan

The consequential impact of Cloud migration
32%
68%
An increasingly
common picture…...
Utilised
Non-utilised
(the ‘Problem’)
In-house
data centre
utilisation
0.0
1.2
2.4
3.6
£50
£100
£150
£200
£250
90% 70% 50% 30%
Cost per IT kW & PUE
vs utilisation
IT Load PUE

What is the solution and a way out..
example
32%
68%
IN-HOUSE DATA CENTRE
COLOCATION DATA CENTRE
ü
û
Legacy
Don’t exit the in-house data centre
Sell the data centre to a colocation operator and retain, as the anchor customer,
the required capacity under a MSA.
The unutilised capacity creates the basis for additional revenues for that operator.
ü It eliminates:
Ø The cost of migration and;
Ø The migration risk
ü The cost per kW/ cabinet is fixed and transparent;
ü As the operator is successful in securing new customers the PUE will reduce
and thus the cost per kWh reduces;
ü No further capex spend and;
ü The potential for a capital receipt on the sale that could potentially cover the
current NBV
An Opportunity,
not a Problem
£

Summary

*QRM: “Quality and risk management”
1. Thinking
ANCHORING THE
BUSINESS PROBLEM
RISK APPETITE
AND DECISION
CULTURE
21
VALUE ANALYSIS
AND CLOUD
ECONOMICS
APPLICATION
MIGRATION
ANALYSIS
3 4
STRATEGIC
DECISION
OPTIMISATION
& BENEFITS
REALISATION
5 6
Problem & Objectives…. Options & Outcomes…. Trade-Offs & Tracking

2. Doing
1. Pricing: Cost vs Commitment
Reserved
Instances
On
Demand
Spot
2.Transparency:
Tag,
Trigger,
Report,
Automate.

VALUATION
3. Measure & Inspect
Operational
Financial
QRM*
K
P
I
s

Thank You
johnenoc@amazon.co.uk

Cloud Choices Quantifying the Cost and Risk Implications of Cloud

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