How to Move from CapEx to Cloud-Based OpEx (and Save Money!)
Here’s something you probably already know: Most legacy IT networks are largely CapEx driven. You buy your servers, switches, cables and other hardware, forecasting demand and buying whatever disk space and memory you think you’ll need. If something breaks or needs upgrading, you just have to hope whoever approves IT purchases is in a good mood.
Now here’s something you may not know: You don’t actually have to outright buy (or maintain) any of the things you need for your network. And it’s all thanks to a little something called Infrastructure as a Service, or IaaS.
The concept of IaaS is a relatively simple one: it’s a form of cloud computing that delivers virtualized computing resources via the internet In other words, you only pay for what you actually use.
This commoditization of compute resources can help shift your IT provisioning into the OpEx side of the balance sheet, which is a very alluring concept for CFOs and Finance Directors charged with finding cost efficiencies wherever possible.
What’s more, IaaS allows you to add or reduce processing and storage capacity on demand, which not only means that you’ll never run out of memory or disk storage ever again (especially during peak demand), but also that you no longer have to overspend on compute resources you never use.
The easiest way to determine the best Infrastructure as a Service (IaaS) model for your business is by going through one of The Big Four commodity public cloud providers who offer it: AWS, Azure, GCP and IBM.
Each platform delivers IaaS in their own way, though, so don’t hesitate to partner with a no-cost and vendor-neutral consultant like Shamrock to understand how the options differ and who fits your use case best.
Building a Case
It’s no secret that any major change to business operations requires the support of executives and key stakeholders to enact effectively. In fact, the CIO reports directly to the CFO in a whopping 42% of company structures, so any suggestion from IT which would alter the corporate business model will most likely have to be approved by the individuals who hold the company purse strings.
As such, there isn’t much point in going to your board with a highly technical document or stats based around 99.99% availability, throughput improvements, etc. – even if your pitch makes perfect sense from an IT standpoint. Instead, your case needs to be built around an element that your finance department can jive with: overall cost reduction.
These items include:
Server hardware you won’t need to buy
Software licenses you won’t need to renew
Savings realized on software upgrades
The ability to deduct all IT expenses immediately (no depreciation or amortization delays)
Savings in upfront data provisioning (these calculations will need to include scenarios where demand is both less and more than expected)
Cost projections based on low, medium and high demand using a PAYG service
Anyone who has consulted the pricing tables for AWS, Azure or GCP products will know that there is a lot of detail to go through in each – and the information is not something you can easily jot down for reference.
If you need help in calculating TCO, Shamrock’s team of financial experts can support you as you build your case for your own finance team.
Eye on the Prize
Let’s be clear: If your only goal is to simply “get to the cloud” at all costs, then you’re missing the point. The cloud is a tool that can help you achieve your business goals, but it’s not a goal in and of itself.
Bringing down costs will of course be a key aspect of your argument to finance, but you also need to make sure that your existing applications and services will still work in a software-defined environment, with little to no reduction in performance.
When it comes to architecting your IT network, there are more choices and combinations available than anyone could realistically fathom.
Most businesses don’t want to tie themselves completely into one of the big commodity public clouds, which is why a hybrid cloud architecture is being adopted by more and more companies who desire both flexibility and scalability. But be forewarned that choosing a hybrid network adds yet another layer of complexity to process.
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Whichever direction you decide to take, there is a ton of groundwork and research that must be done first. This is where companies get into trouble, as they either employ an overtaxed IT staff that doesn’t have time to vet all options completely, or a mistake was made along the way (either via misinformation or a haphazard rollout) and they find themselves too far down the road trying to fit a bunch of square pegs in round holes.
Don’t be one of these unlucky souls. See below for how it should be done.
Precision is King
As the late, great former coaching legend John Wooden used to say, “Be quick, but don’t hurry.” This saying lends itself quite well to the “CapEx to OpEx” shift, especially when the impetus comes from IT initiatives.
A poorly crafted migration, beset by choosing the wrong IaaS vendor, misconfiguring the architecture, or rushing the process (or all three), typically winds up being much worse than no migration at all.
So while you’re beholden to the finance department to show tangible cost savings quickly, those who make decisions too quickly or try to cut corners will only find themselves getting hurried out the door after they’ve been fired.
Here’s how the process should work:
Start by setting up a fully fleshed out change management project. This should include taking accurate inventory of all your hardware, networks, applications and services.
Next, perform a data audit so you can track every bit and byte that comes into (and goes out of) your network. You should also have a plan in place to ensure any necessary compliance with industry and federal data protection laws.
Now get some quick wins under your belt: start moving applications which are the easiest to ‘lift and shift’. Ideally these will be apps with the least amount of dependencies so as to not overcomplicate your migration from the very beginning.
As you migrate these ‘easy’ apps and your IT costs inevitably start coming down, the subsequent buy-in from finance should be much easier to come by now that you have a proven ROI and you’ve made them (and yourself) look like heroes to the C-suite for saving the company money.
Now you can continue migrating the more complex services and apps until the process complete. Just be sure to have a keen eye on ongoing costs and performance so that your team can make adjustments as necessary.
Shamrock can Help with Your Migration
Shifting from a CapEx model to OpEx by transforming your network architecture is not by any means a minor undertaking. But, when done correctly, it can be a major financial win for your business.
Shamrock is a globally recognized IT consultancy that can help you on your journey from CapEx to OpEx. From full network audits and detailed financial forecasting, to cloud comparisons, app discovery, readiness assessments and the eventual migration itself, we’ve helped thousands of businesses with tactical cost reduction strategies that have saved an average of 34% on IT expenditure.
Our consultations are free and all products and services are guaranteed best price from every provider.