Modern CIOs are focused now more than ever on business outcomes. IT is shifting from managing data centers to delivering value to the business. As this shift occurs, business and IT become more agile. This can help open new markets more quickly and move service delivery closer to the customer where necessary, due to business and regulatory requirements. Freedom from your data center doesn’t necessarily mean you have to move it to the cloud. You can work with a trustworthy partner to free up your team’s time to deliver greater value with the business. The economics of IT are constantly evolving; evaluate what makes business sense. Is it to hold workloads in your own data center or utilize a provider’s data center whereby they own and maintain it? Or is it a combination?
A data center exit may be the freedom needed to achieve business objectives and a move can be made around multiple environments. According to a Gartner report, by 2025, 85 percent of infrastructure strategies will integrate on-premises, colocation, cloud, and edge delivery options, compared with 20 percent in 2020. Businesses are smart to transform their IT estate into a cloud-smart model and to self-fund IT modernization to emerge with flexible and responsive cloud-based systems.
Data center challenges impeding IT modernization
Growing technology gap
As an aging hardware estate nears end of life, maintenance costs increase, ultimately requiring a significant CapEx refresh. Further, aging data center assets are prone to outages and are vulnerable to security threats.
High total cost of ownership
The lack of a standardized, central IT framework leads to an uncontrolled technology spread and ultimately results in a high total cost of ownership. The costs accrue from:
- Lack of common best practices across multi-technology environments
- Lack of efficiencies from prior integration and consolidation
- Multiple service providers supplying a patchwork of services
- Duplicate IT costs across business units from multi-provider support and silo structure
- Excessive number of servers compared to industry benchmarks for businesses of similar size and revenue.
Enterprises managing their own data center are also challenged with solving for projected volume fluctuations on their own – and paying for it regardless of consumption.
Manual best-effort delivery
The lack of an industrialized IT process contributes to a highly reactive best-effort delivery model. This ad-hoc approach makes it harder to introduce automation or to maintain SLAs. It also means organizations are reliant on in-house knowledge. This operating model does not set up IT to advertise success, provide for reporting or transparency to the business, or help shape a business case with finance for modernization investments.
No defined cloud strategy
Getting out of the data center business does not mean a complete move to cloud. It does, however, mean that the way enterprises own, manage, and utilize a data center will be substantially different in the future. The change means adopting a cloud strategy that fits the enterprise, security and compliance requirements, and its business objectives. Without a cloud strategy, IT has no plan for exiting its data centers, no roadmap to consolidate and sunset aging applications and platforms, and no strategy to consolidate and optimize services. These add up to missed savings and risk.
These are the impediments to growth for businesses that they cannot afford any longer. All of this places constraints on the organization’s ability to maneuver – and, in the current business climate, that is particularly unwelcome news.
Example: supplier of education materials
- Growing technology gap: >60% of its data center assets at end of life, seven-year average hardware life; prone to outages and security threats; required immediate refresh and capital expenditure of $15 million to $20 million on existing data center
- Lack of standard IT: high number of servers; multi-provider support and silo structure created duplicate IT costs across business units
- No defined cloud strategy: no ability for IT to exit the data center and stop the sprawl
- Manual best-effort delivery: highly reactive to ad-hoc IT requests
- Workshops to define scope and value proposition
- Data center consolidation and migration to private cloud on Microsoft Azure VMware solution
- Move to a robust delivery model within just a year
- Industrialized and standardized services with SLAs
- Multi-tower managed service solution includes full ITO and breadth of infrastructure portfolio: cyber, end-user, data center, and cloud
- Custom commercial model developed to commit financial savings based on success of transformation
- Corporate IT transformed to support bookless education prompted by COVID-19 market changes
- 30%+ IT operational cost savings total over five years in transformed state
- Immediate savings to be realized by moving to an industrialized IT model, which helped fund the move to cloud in first year
- 80% reduction in data center footprint
- Efficiencies from automation and software optimization will deliver overall savings of 30 to 40 percent in years three to five
- Established customer experience with intelligent service desk to improve collaboration capabilities using omni-channel access plus real-time performance reporting and transparency
Discover the art of the possible
Despite the challenges, organizations can identify potential cost savings across IT and leverage those funds to frame a business case for how to do more with less. They can demonstrate the art of the possible by reframing the IT investment from running the business to growing the business. This involves a hard and honest assessment of the current allocation of funds by area and projecting how spend, even cost savings, could be used to self-fund IT modernization and drive greater business value.
The CIO and CFO would then be poised for a conversation about how much more value IT could deliver if it were afforded more funds.
Make infrastructure invisible
As the primary role of IT shifts, so too does the technology to grow the business and where that technology is located. The location depends on the scalability to the cloud and in the cloud, as opposed to the criticality of the application to the business. For example, ERP systems are considered mission critical and can move to the cloud. The traditional data center has a place in the mix but will be demoted essentially to a holding area for very specific services that cannot be supported elsewhere or for those that are too costly to move to the cloud. Quite simply, there will be workloads for which, from a technical, security, or financial standpoint, it doesn’t make sense to be in the cloud. The total cost of ownership and the business objectives should guide the plan.
How infrastructure becomes invisible must relate back to business outcomes – for example, enabling quicker service delivery to customers or facilitating the remote workforce. By analyzing the state of play, businesses can create a roadmap for a compelling cloud-value case that is tied back to business objectives.
The route forward is to move from ownership to a consumption-based model in the cloud. This enables organizations to eliminate shadow IT and optimize their operations, buying only the capacity they need, and only when they need it, so they need to make far lower allowances for unexpected demands.
Unlock savings to help self-fund modernization
One of the most important arguments for moving to a cloud-based model is not merely that it can deliver all the benefits of agility, speed, and dependability we have discussed – but that it can do all this as a cost savings program and with limited expenses. How often can that be said of such a fundamental change in business infrastructure? In fact, it’s possible to secure savings of 15 to 30 percent in IT operational costs.
These savings can be achieved in a number of ways. First, and obviously, there’s no longer any need to refresh those costly fixed assets. Indeed, once the transition is under way, it may even be possible to sell some of them off. The result isn’t just lower spend and overheads but also a replacement that is both future-proof and that has a smaller environmental footprint.
Many other significant returns on investment are possible. The flexibility of a cloud-based operation means that new platforms and apps can be brought to market sooner, amortizing the development more rapidly and bringing profitability forward. Some apps may even start delivering immediately.
Working with a reputable services provider can also pay dividends. If that provider has good relationships with leading technology platform partners, it’s possible to make some arrangements at little or no cost that might otherwise need a big outlay, such as proof-of-concept trials and credit assessments and migration.
There’s no single blueprint for action here, no one route to savings and success. The path a business takes to a cloud environment will be determined by its own circumstances, needs, and ambitions. A good start towards the art of the possible is to define the desired business outcomes and a financial business case. This will lay the foundation and modernize IT from applications to infrastructure.
Making this move enables the business to be more integrated and connected, which makes the difference between those that are fast, agile, responsive, and efficient and those that aren’t. Enterprises that are accelerating know they cannot afford to wait and are building their business case to fund change now.
Also, watch our latest Vlog – Art of the possible: Data Center Freedom, where Ryan Murphy, Head of NA Cloud Center of Excellence shares his perspective with ISG analyst Jan Erik Aase on how IT is shifting from managing data centers to delivering value to the business.