Tag Archives: value

The Cloud Procurement Pecking Order

I was planning to go to this meeting here in town about “Preparing for the post-IaaS phase of cloud adoption” and it brought home to me how backwards many organizations are when they start thinking about cloud options. So now you get Ernest’s Cloud Procurement Pecking Order.

What many people are doing is moving in order of comfort, basically, as they start moving from old school on prem into the cloud.  “I’ll start with private cloud… Then maybe public IaaS… Eventually we’ll look at that other whizbang stuff.” But here’s what your decision path should be instead. It’s the logical extension of the basic buy vs build strategy decision you’re used to doing.

Cloud Procurement Flowchart

Look at the functionality you are trying to fulfull.  Now ask in order:

  1. Is it available as a SaaS solution?  If so, use that. You shouldn’t need to host servers or write code for many of your needs – everything from email to ERP is commoditized nowadays. This is the modern equivalent of “buy, don’t build.” You don’t get 100% control over the functionality if you buy it, but unless the function is super core to your business you should simply get over that.
  2. [Optional] Does it fit the functional profile to do it serverless? Serverless is basically “second gen PaaS with less fiddly IaaS in it” so this would be your second step. Amazon has Lambda and Azure and Google have shipped competitors already. Right this moment serverless tech is still pretty bleeding edge, so you’d be forgiven for skipping this step if you don’t have pretty high caliber techies on staff.
  3. Can I do it in a public PaaS?  Then use a public PaaS (Heroku/Beanstalk/Google App Engine/Azure), unless you have some real (not FUD) requirements to do it in house.
  4. Can I do it in a private PaaS? Then use Cloudfoundry or similar. Or do you really (for non-FUD reasons) need access to the hardware?
  5. Can I do it in public IaaS?  Then use Amazon, or Azure. Or do you really (for non-FUD reasons) need it “on premise” (probably not really on premise, but in some datacenter you’re leasing – which is different from being outsourced in the cloud why)?  Even hardcore hardware render is done in the cloud nowadays (you can get GPU driven instances, SSDs, etc.)
  6. Can I do it in a private cloud? Use VMWare Cloud or Openstack. This is your final recourse before doing it the old fashioned way – unless you have extremely unique hardware requirements, you probably can. Also, you can do hybrid cloud – basically private cloud plus public cloud (IaaS only really). This gets you some of the IaaS benefits while complicating your architecture.

What About Compliance?

Very few compliance requirements exist that cannot be satisfied in the cloud.  There are large financials operating in the cloud, people with SOX and PCI and FISMA and NIST and ISO compliance needs… If your reason for running on prem is “but compliance” there’s a 90% chance you are just plain wrong, and coasting on decade-old received wisdom instead of being well informed about the modern state of cloud technology and security and compliance. I’ve personally helped pure-cloud solutions hit ISO and TUV and various other compliance goals.

What About The Cost?

This ordering seems to be inverted from how people are inching into the cloud. But the lower on this list you are, the less additional value you are getting from the solution (assuming the same price point). You should instead be reluctantly dragged into the lower levels on this list – which require more effort and often (though not always) more expense. A higher level needs to be a lot more expensive to justify the additional complexity and lag of doing more of the work yourself.

“But what about the cost,” you say, “the cloud gets more expensive than me running a couple servers?” It’s easy to be penny wise but pound foolish when making cloud cost decisions.

You need to keep in mind the real costs of your infrastructure when you do this – I see a lot of people spending a lot of work on private cloud that they really shouldn’t be. If you simply compare “buying servers” with “cost per month in Amazon” it can seem, using a naive analysis, like you need to go hybrid on prem after a couple hundred thousand dollars appear on your bill. But:

1. Make sure you are taking into account your fully loaded cost (includes data center, power cooling, etc.) of all assets (servers, storage, network…) you are using to do this private. Use the real numbers, not the “funny money” numbers – at a previous company we allocated network and other shared costs across the entire company, while “our IT budget” had to pay for servers, so that was the only number used in a comparison since it was our own department’s costs only that were considered – don’t be a goon (technical term for a local optimizer),  you should consider what it’s costing your entire company. Storage especially is way cheaper in the cloud versus enterprise SANs.

2. Make sure you are taking into account the cost of the manpower to run it.  And that’s not just the techies’ salary (fully loaded with benefits/bonuses), and the proportion of each layer of management going up that has to deal with their concerns (Even if the director only has to spend 30% of his time messing with the data center team, and the VP 10%, and the CTO 5%, and the CEO 1% – that’s a lot of freaking money you need to account for). It’s also the opportunity cost of having people (smart technical people) doing your plumbing instead of doing things to forward your company.  I would argue that instead of putting in the employee’s salary in this calculation, you’d do better to put in your revenue per employee!  Why? Because for that same money you could have someone improving product, making sales, etc. and making you additional revenue. If all you are looking at is “cost reduction” you are probably divorced enough from the business goals of your organization that you are not making good decisions. This isn’t to say you don’t need any of that manpower, but ideally with more plumbing being outsourced you can turn their technical skills to something of more productive use.

3. Make sure you are taking into account the additional lag time and the cost of that time to market delay from DIYing. Some people couch this as just for purposes of innovation – “well, if you’re a small, quick moving, innovative firm or startup, then this velocity matters to you – if you’re a larger enterprise, with yearly budget cycles, not so much.” That’s not true. Assuming you are implementing all this stuff with some end goal in mind, you are burning value along with time the longer it takes you to deliver it – we like to call that cost of delay. Heck, just plain cost of money over that period is significant – I’ve seen companies go through quite a set of gyrations to be able to bill 30 days earlier to get that additional benefit; if you can deliver projects a month earlier from leveraging reusable work (which is all that SaaS/PaaS/IaaS solutions are) then you accelerate your cashflow. If you have to wait 12 months for the IT group to get a private cloud working, you are effectively losing the benefit of your deliverable * 12 months. “We saved $10k/year on hosting costs!”  “Great, can we deliver our product that will make us $10k/month now, or do we get to continue to put ourselves out of business with cost cutting?”

4. Account for complexity.  The problem with “hybrid cloud,” in most implementations, is that it’s not seamless from on prem to public, and therefore your app architecture has to be doubly complicated.  In a previous position where I ran a large SaaS service, we were spread across AWS (virtual everything) and Rackspace (vserver, F5 LBs, etc.) and it was a total nightmare – we were trying to migrate all the way out to the cloud just so we could delete half of the cruft in all our code that touched the infrastructure – complexity that caused production issues (frequently) and slowed our rate of delivering new functionality. The KISS principle is wrathful when ignored.

I’m not saying hybrid cloud, private cloud, etc. are never the answer – but I would say that on average they are usually not the right answer, and if you are using them as your default approach then it’s better than even money you’re being inefficient. Furthermore, using SaaS and PaaS requires less expertise (and thus money) than IaaS which uses less than private cloud – people justify “starting with private” because you are “leveraging skill sets” or whatever – and then 6 months later you have a whole team still trying to bake off OpenStack vs Eucalyptus when you could have had your app (you know, the thing you actually need to fulfill a business goal) already running in a public PaaS. I’m not sure why I need to say out loud “delivering the most amount of value with the least amount of effort, time, and expenditure is good” – but apparently I do. Just because you *can* do something does not mean you *should* do it.  You need to carefully shepherd your time to delivery and your costs, and not just let things float in a morass of IT because “these things take time…”


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