Authored by: Ho Chye Soon, Singapore Country Manager, Nutanix
With its speed, ease and agility, it is easy to fall in love with cloud computing at first sight. But without disappointing any romantics, ‘love at first sight’ is usually nothing more than an illusion. Typically, once you get to know the object of your affection a little better, cracks begin to emerge.
Cloud computing can be much like this. Once the haze of initial ‘romance’ has worn off, organisations are often left with some unpleasant surprises. For example, a recent survey showed that cloud users can incur unexpected costs, with 69 per cent of respondents regularly overspending on their cloud budget by 25 per cent or more. This translates to millions of dollars’ worth of unnecessary cloud spend.
In the current environment, the potential for excess spending is of even greater concern. Given the impact of COVID-19 on the Singapore economy, businesses across all sectors are tightening their belts – and the resulting spill over effects on technology spending have not gone unnoticed.
Global Data’s Market Opportunity Forecasts model reveals that the COVID-19 outbreak will lead to a decrease in ICT spending year-on-year across almost all industries in Singapore, and many businesses will delay their long-term digital transformation initiatives until at least 2021 to mitigate the risk of financial instability in business operations.
In response to mounting uncertainties, it’s understandable that businesses are rethinking their IT spend and finding creative ways to cut costs – even as it becomes clear that the future will be digitally driven.
With all this in mind, should organisations stop provisioning cloud? Certainly not. Cloud can offer tremendous cost savings, if used wisely. Here’s how.
Use hybrid and multi-cloud strategy for cost optimisation
It’s in the current climate, where most enterprises are sniffing out cost-saving solutions, that the benefits of hybrid and multi-cloud really shine through. In fact, 91 per cent of firms will have adopted a hybrid or multi-cloud environment by next year, according to Gartner, and will save up to 69 per cent in the process.
However, using hardware for some workloads and cloud for others – or using different cloud service providers (CSP) for different applications – isn’t a strategy in and of itself.
The trick is to encourage optimisation by matching the right services with the right option. As a general rule for hybrid and multi-cloud approaches, bandwidth and storage services are better suited to hardware and its underlying Capex model, which enables costs to be maintained at a manageable flat rate. This means TCO won’t be negatively impacted if, for example, your website sees a dramatic influx of visitors. Meanwhile, compute and data-based services tend to be more cost-effective when using cloud’s Opex model.
As a general rule for multi-cloud, organisations should think long and hard about the specific offerings of their CSP. Some are well-equipped to deal with large and complex data transfers; others aren’t. Flexibility requirements should also be considered in advance, as some vendors lock customers into lengthy contracts, resulting in weighty exit fees. Whereas those which don’t, tend to charge a higher upfront cost. Businesses need to use strategic foresight to establish which providers are the best for their needs.
Find your ‘Techquilibrium’
A term coined recently by Gartner, ‘Techquilibrium’ refers to the ‘sweet spot’ between traditional and digital capabilities within an enterprise. Move too far towards the tech end of the ‘digital revolution scale’ and IT spending may outpace the immediate business costs. Businesses that don’t move far enough, on the other hand, might lose out to tech-savvier competitors – and miss the significant cost savings new technologies can bring.
Whilst Techquilibirum is an easy concept to grasp, it isn’t always easy to achieve. To find their Techquilibrium, businesses need to be aware of the constraints that are preventing them from reaching their ideal technology equilibrium point, and how they can address these. For example, Nutanix’ latest hybrid cloud report reveals that enterprises are delaying their transition to hybrid cloud, citing cost as a top concern – despite the fact that hybrid cloud will help businesses unlock the most long-term value from their IT and cloud strategies.
Investing in new technologies may feel counterintuitive in a climate that seems to encourage belt-tightening. But businesses that want to survive and thrive the new normal can’t afford to panic. Instead, they need to actively customise their IT infrastructures to adapt to economic fluctuations amidst constraints.
Despite the challenges, organisations should forget ‘cost cutting’ and think ‘cost optimisation’ to efficiently navigate digital transformation journeys and set themselves up for long-term success in Singapore’s fast-accelerating digital economy.