Cloud in the Enterprise–Agility 3–Elasticity

Project 2012: Day 146

Elasticity is one of the most compelling promises of (public) cloud computing. Speak to any of the public vendors, or their (start-up) customers, and they’ll wax lyrical about not having to pay for what you don’t need, scaling automatically on demand, and scaling back when workloads change.

They’re right.

But does this also apply to the Enterprise?

More importantly, what is the business impact of elastic compute delivery.

Operational Expenses

I recently conducted a CIO Vision workshop with a client of ours. As part of the workshop we looked at the organisation’s IT spend as a percentage of revenue, with two comparative points.

  • Historic spend vs. current spend. This shows whether a company has been investing/overspending or benefitting from efficiencies/under investing.
  • IT Spend ratio vs. competitors. Again this can show interesting insights.

What was interesting is that this organisation spends a miniscule percentage of their revenue on IT. Down in the single percentage point range. Their biggest spending competitor had an IT spend of about 2 percent of revenue.

So even if we managed to save 10 percent of their IT spend across the whole business, this would be negligible as to be a rounding error.

Don’t get me wrong, I do believe in saving operational expenses and driving efficiencies. I also believe we should use capital effectively as much as possible, and not invest in assets that we can’t use to drive revenues. Yes, it would be good to shift the greater part of the IT budget from BAU or “Keeping the lights on” to innovation.

Other Inputs

What I am suggesting is that an enterprise has a far different usage profile to a small or start-up business. But I still agree that the large enterprise can benefit from elasticity, at a business level.

Workloads

Let’s have a look at our workloads more closely again.

There are some workloads that are core to the business. Perhaps the inventory control system for a manufacturing plant, or the logistics system for a trucking company. Without these systems, the business can’t operate. At least, not for very long.

By and large, these systems also don’t have peaky workloads. They scale predictably, if at all, and a business can realise the benefits of depreciating their capital investment over a number of years.

But even large businesses do have workloads that are seasonal.

Perhaps the trading systems for an investment bank that needs to cope with loads when companies make their Initial Public Offerings; or the marketing department runs seasonal campaigns; accounts needs to deal with quarter and year end processing; even the Point of Sale system for a retailer.

Agility

If we can bring small company agility to the enterprise, we have an opportunity to make a substantial difference, not only to costs, but also to the revenue, profit, and cash flow.

As part of the overall IT strategy then, look at the various applications and systems that support seasonal, or really dynamic workloads. Consider how to deliver these applications through cloud computing architectures.

Perhaps this is through a privately owned, standardised and automated infrastructure platform, e.g. HP’s Cloud System offerings. Perhaps it’s using a virtual private, or even a public cloud offering. Or maybe  you own infrastructure for normal workloads and “burst” to various cloud providers as necessary.

Full Circle

Coming back to the organisation I mentioned earlier. It turns out that reducing their “Day Sales Outstanding” by just 1 day would improve their overall cash flow by more than the entire annual IT spend.

This then  is where elastic cloud platforms, driving agility, could really benefit the enterprise.

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