The Essential Guide to Hybrid IT

What is hybrid IT?

Hybrid IT appropriates the right mix of on-premises, public, and private cloud solutions for your needs.

Hybrid IT isn’t a one-size-fits-all operating model—a specific blend of on-premises, private, and public cloud solutions that work for one organization is a poor fit for another. When you adopt hybrid IT, you must meet the challenge of recognizing the right mix of solutions. And that’s not easy with the multitude of options out there. The luxury of choice turns into a burden when options are overwhelming and—seemingly—duplicative. These are perfect conditions to ferment frustration and indecision.

Cloud services are a vital aspect of the new IT operating model, but pragmatism has replaced the starry-eyed innocence of early cloud adoption. Legacy on-premises systems continue to play a role because of security concerns, compliance, and organizations wish to keep critical parts of their business in the safety of their own data centers.  Cloud services are part of the new IT operating model but not its sole constituent.

Hybrid IT solutions

On-premises (on-prem)

The original  IT operating model was built on-prem.  Keeping all IT on-site, managed by the organization, was a decision of necessity rather than choice.  When IT isn’t part of your core business,  managing IT may be a distraction you could do without.  The bill-by-the-second element of cloud puts a price on poor optimization; on-prem costs are dictated by a depreciation schedule rather than usage. When organizations do not have cloud optimization strategies in place, on-prem solutions may have more appeal.

Infrastructure as a Service (IaaS)

IaaS delivers pre-configured hardware with a virtualized interface. IaaS provides the infrastructure you need in place to build an application or run a database. In the on-prem world, IT invests in infrastructure first and workloads second. IaaS commodifies the infrastructure choice with a swipe of a credit card—organizations only concern themselves with what they want the infrastructure to do.

IaaS is a good solution for organizations with seasonal swings in demand. Meeting peak demand with pay-by-consumption cloud solutions avoids the burden of under-utilized on-prem solutions outside peak periods. The flip side to pay-by-consumption billing is unchecked spend surprises from unchecked cloud sprawl. When the cloud taximeter is always running, you need strong governance (including tagging) to avoid an expensive ride.

Platform as a Service (PaaS)

Whereas IaaS only delivers infrastructure, PaaS provides the underlying infrastructure and development tools for an application.  PaaS provides middleware frameworks to build new apps or customize existing apps. It’s for creating and hosting applications. Geared to agile DevOps, PaaS makes it “easier” (through the lens of cost, speed, and access to innovation) to develop, test, and deploy applications.

The PaaS selling point is simplicity—no hosting or management of the resources.  It’s all accessed via a browser, and the responsibility of maintenance is passed over to the provider.

The two biggest concerns about PaaS are availability and provider lock-in. Their downtime is your downtime. You can point to SLAs in a service contract, but that doesn’t help during an actual outage.  Sticking to one provider makes you a hostage to fortune when they make decisions that impact PaaS (e.g., changes to supported programming languages, billing rates, and development tools).

Software as a Service (SaaS)

SaaS is the most democratized aspect of cloud computing. Any service accessed through a web-browser is SaaS—everyone has exposure to it. Which isn’t something you can say for IaaS and PaaS. Most SaaS vendors offer up different points of entry to their solution through a browser or a dedicated app. SaaS provides a much easier upgrade path for customers than for on-prem solutions. With SaaS, it’s all in the browser; with on-prem, it’s on a customer’s server (behind a firewall).

Typically, SaaS is a monthly or annual subscription-based model that forces organizations to focus on renewal rates and net promoter scores. Shelf-ware isn’t a thing with SaaS—CS organizations in SaaS companies are as influential in the retention of customers as account management and sales teams.

Organizing for hybrid IT

Hybrid IT is a technical definition that, if deployed and managed correctly, is a meaningless classification for an end-user. The flexibility and scalability of public and private cloud is a compelling value-prop for corporate IT, but end users need to use the services they want when they want them–whether it’s public cloud or on-premises (on-prem). Cloud-first directives often position hybrid IT as a half-way house to between on-prem and public cloud only. As cloud-first initiatives roll out, organizations uncover use-cases where retaining an on-premises footprint is either essential (e.g., non-cloud native apps in their portfolios) or preferred (e.g., ownership of intellectual property on their servers).

Hybrid IT requires an organizational structure where the IT organization acts as a broker between end-user and providers of IT (e.g.,  traditional IT management and a cloud center of excellence that oversees the public and private cloud footprint).

Hybrid IT benefits and challenges

Benefits

IT. Your way.

Hybrid ITs flexible, leverage-as-appropriate operating model allows control of how and where you apply security controls and privacy settings. The combinations are virtually limitless and put you in control.

Scalability for right-sizing

When scalability is the primary goal, resources can be migrated to the cloud and ramped up (or down) as needed. With automated workload optimization solutions in place (try Apptio for Cloud), organizations avoid paying for underutilized cloud resources and avoid needing to provision on-prem solutions to meet peak utilization that remains resolutely underutilized outside those periods.

Hybrid IT environments deliver flexibility

The CIOs C-suite peers are expected to communicate the value of their line of business to the organization and demonstrate agility in the face of change. Plans aren’t static, and meeting change with options is the sign of strong C-suite leadership. CIOs use the flexibility of hybrid IT to meet the challenge of change.

Challenges

Cloud sprawl drives runaway costs

Cloud costs and usage are buried in monthly billing detail across multiple providers, accounts, teams, and business units. This mass of billing detail, dispersed across the enterprise, makes it hard to identify the business partners who drive budget overruns.

When public cloud bills aren’t fully burdened, the true cost of cloud isn’t a brake on cloud sprawl. Public cloud bills aren’t burdened with labor, security, and other costs required to maintain cloud services. A system of record must show a fair comparison between on-prem and cloud solutions. Without fully-burdened cloud spend, you are comparing apples-to-oranges—and setting yourself up for spend surprises when actuals come in.

Public cloud costs are driven by consumption. Favorable pricing from volume discounts and reserved instances is undercut with best-guess estimates of optimal instances, sizes, and the right services. Public cloud adoption is an incremental process, and spend will vary. To rely on the opportunistic discovery of underutilized and inefficiently deployed resources puts IT in a bind.  If cloud services are pre-paid, you’ll be forced to change behavior to accommodate your financial commitment. Pay-as-you-go gives you the agility you want, but at unfavorable unit rates.

Misinformed investments drive inefficiency and waste

Distributed views of infrastructure and cloud assets force decision-making with incomplete data. Public cloud billing is loaded with operational data, but light, in lieu of a good tagging strategy when it comes to communicating which parts of the business it supports.

On-prem infrastructure costs are fixed in a depreciation cycle, but apples-to-apples comparisons with public cloud need the fully burdened cost of on-prem applications and services. The purchase cost (and financial treatment) of an asset is easy to track but burdening the appropriate costs to each on-premise application is not. Fully-burdened app TCO (total cost of ownership) needs labor, help-desk, and underlying infrastructure costs; none of which are found in your general ledger or operational data. You must combine these siloed data sources to build a cost model to capture ongoing app TCO.

Organizations burden their decisions with added risk; then they make investment decisions with incomplete data. Informed decisions require a fair comparison between public cloud and on-prem options. The comparison won’t stand up if the data isn’t there to back it up. Providers of infrastructure-as-a-service and platform-as-a-service claim a 30-40% cost saving compared with on-prem alternatives. A healthy attitude of “trust-but-verify” requires organizations to cost out their current on-prem solutions to justify and prioritize migration decisions (e.g., maintaining data centers versus moving to the cloud).

“Free” IT delivers unaccountable consumption

Business units (BU) are unaware of the costs of their IT decisions. With infrequent communications of costs (or a singular line item in their budget to corporate IT), BUs have no visibility into what’s driving charges and consumption of cloud and on-prem infrastructure. When it’s all normalized into one view, BUs see IT costs without any options to change it. This is an opportunity-cost for public cloud (where costs are primarily driven by consumption) and on-prem infrastructure (where older platforms incur a high amount of capital expense overhead).

Automated showback or chargeback shapes business demand by communicating the true costs of IT services. Preferred services are promoted through incentivized pricing while expensive legacy applications are pushed into retirement with the full burden of old infrastructure and costly maintenance.

Cloud agility and hybrid IT

A Hybrid IT model is measured against standard ROIs of cost savings and improvements in efficiency. However, successful hybrid IT models deliver a value-add of simplicity and agility. The right mix of on-premises, public, and private cloud solutions allow CIOs to deliver IT value in lock-step with the accelerated business cycle.

When on-premises IT was the only game in town, corporate IT had to invest long-term. Public cloud undercuts that requirement with the promise of agility. And that’s all good.  Maybe. The promise of “agility” needs some verification. If public cloud offerings were unadulterated good news, hybrid IT wouldn’t be a thing. We would all shift over to the cloud and get out of the on-premises business altogether. Here are five impacts of cloud agility and what that means for your hybrid IT strategy:

#1 OpEx vs. CapEx debates are about public cloud spend

A conversation about OpEx or CapEx for IT investments is a proxy for the choice between using on-premises infrastructure or the public cloud.  Traditionally, project costs fell into CapEx spend with attendant depreciation showing up in OpEx: the CapEx budget was the investment budget. Public cloud options have upended IT investment approaches. The agility of the cloud has repercussions on the financial treatment of IT investments.

Satisfying project demand for virtual compute resources with public cloud passes service delivery responsibility to a third-party vendor and limits the financial commitment to the length of the project. Organizations now only need to plan (and pay) for what they need, and no longer worry about how they will maximize an asset over its usable life.

#2 Public cloud changes the role of I&O

Infrastructure and Operations (I&O) responsibilities are altered by OpEx-fueled public cloud spend.  An on-premises IT footprint needs dedicated resources (people, hardware) to build, optimize, and maintain capacity. Technical, focused work has always been in I&O’s remit—and is the reason many I&O professionals were drawn to the profession in the first place. But with cloud agility, I&O leaders are pulled away from those operational responsibilities to become more focused on vendor management.

There’s nothing wrong with this transition, but not everyone in I&O wants, or has, the skill set to embrace this shift.

When IT Finance discusses OpEx or CapEx choices to fund innovation, I&O hears a debate about the very nature of their work.

An investment strategy in cloud agility only works when I&O understands and can advocate for those changes. OpEx-fueled innovation fails without the support (and the operational data) of I&O.

#3 Start-ups love (OpEx-fueled) cloud agility

CapEx investment is defined by the long-term: a depreciation schedule for a server is at least 36 months. But many organizations—think start-ups—struggle to think three years ahead about anything. If the goal is to grow market share from zero, you aren’t looking to be distracted by locking capital into fixed assets which, if the company sinks, will be sold off in a fire-sale.

OpEx investments align to projects with compressed timelines and organizations with short-term priorities, which is a perfect fit for organizations focused on growth.

#4 Define operational goals or over-pay for public cloud

When organizations use on-premises, CapEx-fueled infrastructure, asset costs are already defined. The public cloud is different—usage drives cost.

Public cloud bills cause organizational turbulence when IT costs aren’t connected to consumption. Take archive storage. On-prem archive backup storage utilization rates may vary, but there isn’t a financial impact—the 36-month depreciation on the general ledger is predictable and non-contentious. Compare that with the benefit of cloud agility. There are standard /GB storage rate, different retrieval service options (e.g., expedited, standard, and bulk) and a /GB upload rate for data—any combination of which could be right for your organization.

Agility, a compelling value prop of public cloud, is tempered if you over-pay for a service you don’t fully understand.

It’s in your interest to work out the best options before signing up for the service.

#5 Retain strategic independence

When your organization plans for the long-term, CapEx investments protect market share and competitive independence. Cloud service providers are building massive infrastructure footprints to satisfy public cloud demand. Every service you utilize is increasing their market share and making you more dependent on a third-party to deliver value to your customers. This is the same with any managed service/service provider relationship, but public cloud services can become so embedded in business processes that the promise of agility and lack of long-term commitments turn out to be empty.

Applications must be suited to the pricing model of public cloud.   Operational metrics (uptime, disaster recovery SLAs) between on-premises IT and public cloud services are equitable; apples-to-apples comparisons between application portfolios are more complicated. For example:

• Existing legacy applications may not run in public cloud environments—or not at a unit rate compelling enough to justify migration.
• Compute resources may suffer from bursts in usage patterns (e.g., e-commerce sites around Black Friday/Cyber Monday) that are covered by existing on-premises capacity but generate excess usage fees in the public cloud.
• Standards of latency (i.e., response time between a request for access and response from the IT resource) will compromise legacy application performance in the public cloud.

The public cloud gives organizations an OpEx-fueled IT investment option they didn’t have before. Agility and the lack of long-term commitment are compelling, but when public cloud becomes embedded into business processes, you may pay for it 24×7 at (possibly) more prohibitive unit rates than if your apps and services were run on-prem.

There is no correct blend of public cloud and on-premises IT to deliver IT—your mileage will vary based on usage, application portfolio, and use of underlying infrastructure.

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Read more:  5 steps to prepare for your cloud migration

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Red Hat pursues a hybrid IT strategy

Open source software company Red Hat describes next-generation IT as: “driving business innovation through technology using industry best practices and lead the way in defining and adopting new approaches that allow us to execute in an optimal way.”

North Carolina-based Red Hat lacked a standardized way to gather and report on data that revealed the exact amounts going towards business overhaul, such as product development. Before adopting the TBM model, the bulk of IT spending was categorized as part of business operations, thus obscuring the true value of IT to Red Hat’s business.

Red Hat struggled to form a core set of services because discussions of IT were siloed to internal discussions of IT complexity rather than toward strategic solutions that would benefit everyone. Before using the TBM framework, Red Hat spent 18 months trying to define their original set of services. After implementing TBM, planning time spent on reinterpreting their services was slashed, to just two months.

The transparency of TBM has enabled Red Hat to increase performance, resiliency, and availability while optimizing cost at the same time.  “The tagging we had in our public cloud provider, drove down costs even as we expanded the use of those platforms, and tie them to the business services that they were supporting,” said Matt Lyteson, Senior Director of Digital Solutions Delivery.

Red Hat IT is now implementing TBM to draft out a comprehensive portfolio of IT projects for the very first time. Applying TBM taxonomy to their IT portfolio yielded better alignment with business partners and increased operational agility. “The important thing for us is not cloud TCO, but the business value we’re bringing through operating in that model and painting this cohesive picture,” said Lyteson.

Read more: The essential guide to building a cloud center of excellence

Hybrid IT management

Cloud services are one of the most valuable and disruptive forces in the modern enterprise IT organization. Channeling these disruptive forces in your hybrid IT operating model requires a persistent model that allows the consistent capture, measurement, and evaluation of cloud performance.

Here are the four key steps IT leaders must cycle through to successfully manage cloud environments: transparency, planning, engagement, and optimization.

1. Transparency

Cloud can change the way IT funds and delivers projects and services to the business. But to achieve objectives, you have to know a) where cloud can have the most impact, b) where to prioritize migration, and c) how to quantify the impact of cloud investments on the business. This requires IT leaders to improve transparency around both unique aspects of each workload (average utilization, ability to batch process, etc.) and the fully-loaded costs of a hybrid environment.

Analyses of multiple alternatives and apples-to-apples comparisons of public cloud to legacy systems help IT leaders understand the TCO of investments and make more informed investment decisions. The more cost transparency is applied to the blended IT environment, the better this gets. That’s because having an accurate assessment of total IT spend provides valuable insights into what is driving demand. And this, in turn, informs your migration strategies.

2. Planning

Cloud spend can be volatile, which makes planning for demand a key success factor. IT leaders can measure cloud spending against the IT plan, running scenarios to understand and forecast the impact of cloud decisions. This drives alignment and guides the prioritization of IT resources, projects, and services.

Deliver a unified view of the IT financial plan that:

• captures hidden costs like labor, security, and disaster recovery
• reflects contract terms like renewals or rate changes
• aligns capacity spend with business demand
• incorporates OpEx cloud costs into project budgets during build and run phases
• enables “what if” scenarios such as migration delays or alternate vendors
• forecasts the impact of demand or consumption changes on a monthly basis

3. Engagement

When you can demonstrate the value of cloud services compared with other options, you open new opportunities to increase performance and agility in project and service delivery. This transparency helps line of business owners and other partners better understand the benefits of cloud migration and make informed, cost-effective decisions about how and when to embrace cloud-based infrastructure and applications.

Automated showback and/or chargeback of fully loaded costs, including labor, help shape demand for on-prem and cloud solutions. Business units can influence consumption and mitigate sprawl and shadow IT when they have a consistent, trusted view of cloud’s TCO.

4. Optimization

Auditing your ongoing spend and consumption to identify inefficiencies and harvest savings is critical to effectiveness. When you make good cloud decisions at the beginning, you achieve cost savings and gain agility. But most likely, it’s not as good yet as it could be.

Optimization is about the ongoing refinement of your IT environment. To fine-tune your cloud investments, you’ll need to dive deeply into billing, utilization, and consumption data to uncover optimization opportunities. These opportunities allow you to:

• refactor applications to leverage cloud characteristics such as ephemeral instances, serverless services, etc.
• consolidate multiple accounts across the business for better pricing or terms
• mitigate fragmentation across multiple vendors offering the same service
• inspect SaaS licenses for underutilization

Hybrid IT optimization

Many organizations look at their existing cloud spend and see a small problem not (yet) needing a solution. IT budgets are huge. If the cloud portion of that spend is small, the consequences of poor optimization are negligible. But benign neglect only works if that cloud spend stays small. And that’s not realistic.

The biggest consequence of cloud solutions is the luxury of choice. Most organizations aren’t making a binary choice between cloud and on-premises solutions. Cherry-picking the most appropriate solution based on business need is the new default—hybrid IT is the ecosystem you are working in.

Managing hybrid IT optimization is complicated because of the resulting mix of systems and tasks. Cloud promises speed, flexibility, and cost benefits, but organizations have no understanding of the total costs, no methods to forecast cloud spending, and no chargeback mechanisms to drive accountability—and are unsure of the trade-offs and duplicate capacity in a hybrid IT ecosystem.

CIOs get ahead of the issues and bring better control to their computing environment by reevaluating their infrastructure with an eye to enterprise business imperatives that drove adoption of each component, then adjusting as necessary.

Cloud-based infrastructure may be different from legacy computing environments in many ways, but just like their older counterparts, cloud environments evolve and become increasingly complex. CIOs who see their computing budgets being squeezed by growing cloud provider costs should look at these three areas as opportunities to bring expenses under control while better serving the enterprise’s needs.

Challenges with hybrid IT optimization

• Existing processes like buying, depreciating, and allocating server costs don’t scale to the cloud world of per-second billing, thousands of services, and multiple buying options.
• Cloud Centers of Excellence (CCOE) spend too much time attempting to translate complex billing details directly from cloud providers into a view of cloud costs that is easy to understand and communicate.
• CCOE lacks effective cost allocation techniques, which prevents them from holding cloud users accountable for their consumption.

Opportunities for hybrid IT optimization

#1 Mission-critical operations

Major enterprise applications are either the first to be cloud-based or the last. The difference usually depends on the age of the company and when the application was first initiated. Legacy systems that run operations tend to be slow to migrate because the risk of having any downtime could be disruptive and expensive.

Companies that began their operations using cloud-based options are likely to expand operations there as well, eschewing locally installed applications for lack of experience. The point is that those apps that are most important to day to day operations tend to stay resident on the platform they were initially installed.

But things change. As the business changes its needs can change, and decisions that guided how and where those applications were hosted may no longer be valid. That doesn’t mean the original decision was wrong, or even that a change is necessary, but proper management dictates that hybrid IT optimization should be reviewed based on current conditions and evaluated against factors that may have changed. This includes business imperatives, product offerings, market forces, and changes to technology.

CIOs need to evaluate whether some or all of a locally installed application could better serve its purpose deployed to cloud infrastructure. Conversely, would it benefit the business to internalize some or all an app that currently exists only as a cloud-based system? These kinds of decisions can make significant differences to company operations, but the transition may cause disruption, and that possibility must be considered along with possible benefits expected from a change.

#2 Stakeholder concerns

Changes in IT ripple through the enterprise and even the best intended and most thoroughly planned, and tested transitions can cause anxiety from all levels of the enterprise and its customers.

CIOs should have ongoing relationships with top-level executives and business unit leaders and actively enlist them as they begin investigating transitions. It’s essential that changes to computing environments are endorsed and promoted at as many levels of the company as possible so that questions about them can be addressed within business units and developed as part of a unified plan.

As part of the planning process, be sure to assist business managers as they prepare those who will be affected by the changes. Work with them to develop the reasoning and explanations they can use to announce changes.

#3 Business performance

Effective management of the variety of platform options that make up hybrid cloud environments can impact business performance in many ways. When changes are done right, CIOs can positively impact both financial performance and application response times. But additional if less obvious performance impact can be seen in better data management and increased security.

CIOs who want to impact overall business performance can take advantage of analytic tools that help them determine optimal uses of the various platforms and application combinations and point them to recommended changes. And applying the best in class security practices based on data content and location can make a difference in protecting company assets.

Hybrid cloud infrastructure delivers application deployment flexibility, but it doesn’t come for free. Pay-as-you-go billing and poor optimization serve up an out of control bill of cloud.

Infrastructure-as-a-Service (IaaS) optimization

Infrastructure as a Service (IaaS) makes developing cloud-based infrastructure simple. But that simplicity masks highly complex pricing practices that can lead to underutilized resources. IaaS optimization is the key to delivering maximum business value.

It’s easy to lump the monthly spend into a single expense category, but CIOs can do better and reduce overall costs by identifying and monitoring individual areas of use and evaluating their efficiency, then adjusting contracts and usage to optimize on a granular level.

IaaS reduces the pain of traditional infrastructure management because the necessary computing platforms have already been set up and made available for immediate use. What’s more, they offer instant and unlimited scaling on-demand, meaning IT never needs to install another server, networking equipment, or storage system. While this reduces the management tasks within the organization, it doesn’t come cheap.

IT leadership must understand the services and costs associated with their IaaS to balance performance against costs. Put another way, plan to optimize IaaS to take the best advantage of it continuously. Five factors to deliver IaaS optimization:

#1 Start and never stop

One significant difference between managing internally hosted infrastructure and IaaS is the upgrade/expansion process. IaaS handles expansion automatically as services and storage capacity is needed to accommodate increased loads. This is a seamless process and one reason for the popularity and expansion of cloud deployments.

Internally hosted systems require distinct processes including purchasing, plugging in, configuring, and optimizing the resource.

Most IaaS platforms aren’t monitored to a deeper level than is convenient because billing is challenging to decipher, and charges fluctuate minute by minute. That means finding the right balance of utilization vs. price requires continuous vigilance and evaluation.

#2 Contract specifics

Initial IaaS contracts can be simple enough and provide pricing based on usage, and even provide caps to limit run-away processes. But the particulars of the contract can produce invoices with thousands of lines of detail that are difficult to understand and evaluate. CIOs should be aware of the details included in their IaaS contracts and develop methods to assess actual billing against utilization with an eye toward optimization.

#3 Everything changes

As IT becomes more comfortable with mixed cloud presences, there’s a tendency to add new processes to existing IaaS providers. CIOs need to evaluate new instances with the same eye to detail they used when they first started. Even though a new app instance may be the same as another added earlier, it may be used differently or with different frequency. Also, evaluate IaaS provider charges change over time – especially when adding new services.

#4 Know that over-allocation is the norm

The nature of IaaS systems is that they are flexible and are designed to automatically increase capacity when applications call for more. But baseline capacities can be overestimated when services are first set up in anticipation of specific loads. IaaS systems don’t automatically adjust baseline allocations, and when those base allocations prove to be more than required, IT gets billed for more than they use. Even automatic increases need to be reviewed regularly to assure they return to appropriate levels for each application.

#5 Network matters too

Network connections can enable or cripple a cloud-based infrastructure. This is particularly true in mixed-cloud architectures, where multiple cloud providers support various applications that interact. It’s also essential in hybrid-cloud environments where locally-installed computing couple with cloud-based services. Network efficiency needs to be reviewed and monitored continuously to detect performance issues that cause bottlenecks and data loss that interferes with application performance.

Each of these components affects the performance of the enterprise application environment and the costs of running them. It’s easy to let IaaS systems automatically tune themselves to deliver high performance, but they may allocate more than is necessary in pursuit of better performance.  IT leadership must step in to mediate the trade-off between excellent performance and delivering services at the lowest cost.

IaaS business outcomes

Organizations optimize infrastructure spend when they focus on business outcomes first, and technology second.
IaaS is just a delivery mechanism for technology—by itself, it’s no more likely to be optimized than on-premise infrastructure or hybrid solutions.

To drive optimization, infrastructure and operations (I&O), teams need to limit IaaS to the business outcomes it’s most suited to support. Those limitations define the size of the IaaS footprint.

To achieve optimization goals, focus on the business outcomes that you are looking to deliver.

Here are four business outcomes that IaaS can support:

#1: Fund innovation

Tie IaaS to RTB and GTB spend categories.  Through rationalization and consolidation, organizations reduce their run-the-business (RTB) spend to fund innovation. But some organizations build a technology-centric IaaS strategy (for example, pushing 30% of infrastructure spend to the public cloud by end-of-year) that blurs the distinction between RTB and grow-the-business (GTB) spend. Without these categories, IaaS RTB cannot be identified and reprioritized to fuel innovation.

Maximize infrastructure you are already paying for before expanding to IaaS.  A poorly thought out push to IaaS leaves I&O with excess legacy infrastructure. On-premise infrastructure will always have excess capacity to cover peak-utilization needs—it’s an operational imperative. But that capacity will spike after a move to the public cloud, and I&O needs to either use or decommission it.

Decommissioning fixed assets carries a financial liability that throttles innovation. I&O teams want to turn off unused hardware, but a server array decommissioned 12 months into a 48-month depreciation schedule immediately places all the remaining depreciation as an operating expense on the balance sheet. The benefit of the asset is realized in a year; the cost must be recognized in that time too. There are scenarios where this is valid (a failing project with sunk costs), but this is bad news for organizations looking to fund innovation using IaaS. How can I justify IaaS when I’m still paying for decommissioned on-premise capacity? The better approach is to optimize on-premise assets you are already paying for before leveraging IaaS.

Leverage IaaS to for cyclical innovation patterns.  IaaS is not a one-size-fits-all solution to deliver innovation. Application development work is a natural fit for IaaS: building up and tearing down fixed-cost, depreciating assets that you own is more expensive than using as-you-need-it IaaS. But innovation and experimentation may be so ingrained in an organization’s development culture that the concept of tearing anything down may seem ridiculous. If innovation is permanent, and the infrastructure is available, development work should stay on-premise; an innovation agenda with peaks and troughs (application development project portfolios) is most suited to IaaS.

Identify RTB IaaS spend and clarify fixed cost commitments.  Organizations looking to IaaS to fund innovation must also assess their fixed-cost obligations. On-premises infrastructure, with a locked depreciation schedule, needs to be used effectively before considering IaaS. Otherwise, IaaS will add costs without any reduction in legacy on-premises costs.

#2: Increase employee productivity

All infrastructure platforms can deliver business value, but the winner in a bake-off between IaaS, on-premises, or hybrid infrastructure is the solution with the best chance of adoption. For example, an application development team wants the agility of the cloud to spin up and down IaaS as they need it.  They don’t wish to corporate IT to provision an on-premises solution. The team’s culture is biased to IaaS, and I&O understands that any other solution faces a harder path to adoption. That’s not to say there aren’t other considerations (the application development team may have a workload better suited to an on-premise solution that is cheaper to run and support than IaaS), but team culture influences adoption and productivity.

#3: Mitigate change management risk

Hybrid infrastructure, with a blend of on-premises and public-cloud offerings, can be a transitional step to IaaS. A significant infrastructure change (for example, a reduction in infrastructure demand due to an Office 365 migration) doesn’t usually happen in just one switch—an incremental approach minimizes change management.  Hybrid infrastructure supports this incrementalism. An existing legacy email service runs in parallel with the roll-out of Office 365. Eventually, the roll-out is complete, and the freed-up infrastructure is repurposed or decommissioned.

#4: Strengthen vendor relationships

An I&O team needs to have the right skill set to optimize IaaS. The person with in-depth technical knowledge to run a data center may not have overlapping expertise in brokering and managing a cloud vendor relationship. They aren’t at fault for this blind spot; it just hasn’t been part of their job remit. Organizations need to commit to providing I&O with the skills to manage IaaS vendors. If they don’t, they are unable to optimize their IaaS spend
Without a focus (and a tool) for hybrid IT optimization, CIOs are ill-prepared to reap the rewards from public cloud innovation and will over-pay, and under-utilize, cloud resources.

SaaS migration considerations

Software as a Service (SaaS) has a compelling value proposition: one code base, available to everyone, hosted and supported remotely. But a decision to migrate to it shouldn’t be rooted in the technology alone—governance and adoption are the deciding factors.

Here are five areas you need to consider when planning a SaaS migration.

#1 Cloud brokerage

As SaaS portfolios grow, IT leaders become cloud brokers, focusing less on operational support and more on vendor management.

When CIOs embrace a cloud broker role, they spend less time arbitrating standoffs between IT finance (“Do more with less”) and infrastructure and operations (“There is no ‘less’ here”) and more time providing capabilities (helpdesk, procurement, and contract management skills) that make SaaS successful. Technical questions around capacity planning are nullified—the SaaS vendor takes care of that side of the house—and are replaced by a focus on business outcomes (e.g.,  Are there enough Microsoft Office365 Enterprise E5 licenses to support field sales?).

CIOs should embrace the cloud broker role to align SaaS to business outcomes.

#2 Shadow IT

SaaS is an enabler of shadow IT. Low oversight and pay-as-you-go billing empower business units (BUs) to provision their own IT solutions. For as long as corporate IT has been disparaged as ‘The Department of No’, shadow IT has existed to try and go around it.

The sheer variety of SaaS solutions (and the simplicity of signing up for free trials) is a nightmare to track and build a strategy around.  A marketing organization wants to craft and manage messaging on social (Sprinklr), tweak digital advertising content based on performance (RevJet) and get real-time insights into social posts (Blurrt): three SaaS applications to deliver three different outcomes.

There is a consumer-driven assumption that SaaS will sync with corporate IT. An end-user doesn’t care about on-premises or hybrid solutions (go on, try it—see how quickly their eyes glaze over) but they do care about web traffic slowing to a crawl when corporate IT requires internet access via a virtual private network.

And, by the way, we can use single sign-on too, right?

Sigh.

Shadow IT amplifies connectivity issues between SaaS and corporate IT systems.  Corporate IT uses request for proposal standards to iron out governance issues, but shadow IT spend isn’t pushed through the same stage-gate.

The office of the CIO is accountable for syncing SaaS with existing IT systems but shadow IT hides the true size of this accountability—until things don’t work. And then they need it right now. Or yesterday, preferably.

Accountability without total responsibility.

Welcome to the world of SaaS for CIOs.

CIOs are expected to provide connectivity between SaaS and corporate IT systems.

#3 SaaS governance

SaaS needs the same oversight as an on-premises application portfolio. There are several roles that typically manage SaaS relationships (Chief Information Security Officer, vendor managers, application owners), but it’s the CIO’s responsibility to align SaaS to the governance and service levels in place for the existing IT portfolio.

CIOs should apply the same governance to SaaS as on-premises IT solutions.

#4 SaaS creep

The SaaS pricing model of land (basic functionality) and expand (premium functionality and expanded use case support) impacts what you adopt today and what will be on a vendors’ sales roadmap tomorrow.

SaaS vendors are happy to go undetected by IT departments—less oversight means an accelerated sales cycle. But an IT vendor manager provides a more holistic view of SaaS than a business stakeholder with a corporate credit card and an immediate problem to solve. As more SaaS solutions are rolled out in an enterprise, there has to be a SaaS strategy to maximize negotiating leverage and rationalize duplicate capabilities. Individual BUs do not have that line-of-sight. Only the office of the CIO has the remit to validate that SaaS procurement is aligned to business goals—and isn’t a hodgepodge of randomness.

CIOs need a strategy to maximize SaaS negotiating leverage and rationalize redundant capabilities.

#5 Customizations

When application customization is a prerequisite, SaaS is problematic.

Customization is often more of a perceived issue rather than an actual one. Anyone who has worked in software professional services knows that customers push for customizations to support edge cases. Often these same edge cases can be achieved out-of-the-box, but sometimes they can’t. In either event, there has to be an evaluation of actual (rather than perceived) customization requirements before migration.

Standardization is a forcing function to improve existing processes. Email, teleconferencing, payroll, instant messaging: no-one really cares about these systems, but over time customizations creep into them. A SaaS migration imposes a clean slate and a standardized process. Salesforce standardization of the sales pipeline has been so successful that customers align to it rather than push for their customizations. Customers accept the standardizations because the out-of-the-box functionality is so compelling.

Ultimately, all SaaS solutions can be customized—particularly if there are enough zeros in the annual contract value for the vendor to justify the engineering investment.  Customization drives product improvements—nothing validates a use case like a happy customer—but it’s not an action you should hang a migration plan on.

CIOs should leverage SaaS as part of their IT portfolio when they understand required customizations.

Hybrid IT cost management

Follow hybrid IT cost management principles to pay out the bet that a combination of on-prem and public cloud delivers more business value than a monoculture of one or the other. This bet can be for the short-term (an incremental step in your organization’s strategic plan for public cloud adoption) or long-term (your organization wants ownership and control of their IT investments). Regardless of timescale, you shouldn’t make this bet without understanding how to manage, plan, and optimize investments across on-prem and public cloud services. You need an IT cost management solution.

You may not realize it, but your organization may already have a desperate need for an IT cost management solution.  Corporate IT may be debating IaaS/PaaS choices to supplement or replace on-prem IT, but lines of business are already all-in on the cloud. Your finance team uses cloud-based ERP, Marketing and Sales use CRM, and your PMO leverages its collaboration and work management SaaS. In other words, your business partners have already decided that the cloud is part of their IT landscape.

If your business partners have embraced the cloud, IT must too—or risk irrelevancy. Hybrid IT is now the default delivery model of IT solutions, and IT leaders are embracing this shift by adopting a hybrid IT cost management solution.