Interview

Discussing Cloud with Appirio

Arun Mysore
ryan

Most cloud vendors promise to cut cost. But cloud-based solutions provider Appirio has gone a step ahead and guarantees to save at least $ 1 million a year when its customers migrate to cloud.

The offer comes with two caveats: Customers should be already spending over $ 5 million on IT infrastructure. They should switchover to public not private cloud.

Arun Mysore interviewed Ryan Nichols, Appiro’s vice president of cloudsourcing and cloud strategy, to find out more about the million dollar deal.

Most cloud vendors promise to cut cost. But cloud-based
solutions provider Appirio has gone a step ahead and guarantees to
save at least $ 1 million a year when its customers migrate to
cloud.

The offer comes with two caveats: Customers should be already
spending over $ 5 million on IT infrastructure. They should
switchover to public not private cloud.

Arun Mysore interviewed Ryan
Nichols
, Appiro’s vice president of cloudsourcing and
cloud strategy, to find out more about the million dollar deal.

Ryan has over 10 years of experience in brining together
business and technology. He has previously worked with SAP,
McKinsey and Intuit, and is an MBA from Stanford’s Graduate School
of Business.

1) There is no consensus on the cost savings achieved by
migrating to cloud. Analysts have made various divergent
projections. Mckinsey even said cloud was more expensive when
compared to alternatives. What explains this
divergence?

There are a lot of factors behind these divergent options. 
One of the biggest factors though is everyone has a different
definition of cloud computing.  People will have different
answers on ROI depending on what you’re asking them to
measure.  We did a blog post  on this very issue when the
McKinsey study first came out. 

2) In this context, it is a bold statement for Appirio
to make that it will assure $ 1 million savings when its customers
migrate to public cloud. You say your assurance is backed by the
experience of migrating nearly 200 customers to cloud. Can you give
an idea of your experience of working with 200 customers and the
sort of internal analysis you did to arrive at the million dollar
assurance? 

Our experience moving nearly 200 enterprises to the cloud and
our own experience operating as a serverless enterprise, gives us
confidence that a million dollars in savings is just the tip of the
iceberg.  As a serverless enterprise, we ourselves spend
around 3% of revenue on IT – that’s half what industry benchmarks
say a company our size should spend.  Our work with customers
show that when they move 100% to the cloud, entire categories of
spend just drop away (things like VPN, hardware and cooling costs,
etc.), lowering IT costs by 30-50%.  That doesn’t even touch
the top line business benefits of cloudsourcing – business agility,
the ability to enter new markets and work in a totally different
way. 

 
4) Have you seen million dollar savings in all your
customers who migrated to public cloud and have an annual budget of
over $ 5 million? Have there been exceptions? If so, what
explains?

The vast majority of our large enterprise customers are not yet
ready to commit cloudsourcing 100% of their IT
infrastructure.  That’s partly why we’re offering this
guarantee – to encourage companies to be more aggressive in their
move to the public cloud.  For those companies who we are
working with in this capacity, they do expect to save much more
than $1M.   We’ve also seen this in our own business,
which runs completely in the cloud.

5) Many vendors pitch their cloud solutions around
several value propositions: agility, cost savings, scale,
provisioning, capx etc. With the million dollar offer Appirio seems
to emphasizing on cost? How important is cost on cloud vis a vis
other value propositions? What are customers saying on
this? 

Cost savings is simply the easiest thing to quantify for this
type of guarantee.  But as we’ve said, that’s really just the
beginning.  When we work with customers on their cloud
roadmap, cost is only one of the elements.  In fact, business
agility and time to market for new solutions is probably the number
one business driver for companies to move to the cloud.

6) Would cost become the biggest growth driver for cloud
the way it is in the offshoring industry, which assures a cost
saving of 30%? As things stand now, what percentage of cost can
shaved off by migrating to cloud?  

Cost is one driver but not necessarily the biggest driver for
cloud adoption. In fact, we believe that TCO savings is just table
stakes in terms of benefits. The bigger driver is the business
agility – ability to quickly respond to the changes in the
business. This will result in better time to market, increased
ability to capture new revenue streams from new business models,
etc.

In terms of percentage savings from cloud – most studies show
that companies can save between 30 and 50% in Total Cost of
Ownership. Of course, this varies based on the vendors and company
specific environment. Here is a study from IDC  that shows 54% TCO reduction per app.
From Appirio’s own experience as well as studies we have done with
our customers, we believe that 30 – 50% of TCO cost savings is
achievable.

 7) How does your million dollar assurance play
out? Can you give a walk through of where the savings kick
in?

If a customer is interested in pursuing this, here is the
process:

  • Customer engages Appirio’s Cloud Strategy team to assess the
    current IT environment in detail and size the business benefits of
    moving to the cloud.
  • Appirio will develop a business case-driven Cloud Roadmap. The
    business case will articulate the annual TCO savings and identify
    areas of savings across software, hardware, personnel and other IT
    cost areas.
  • Customer will review and approve the business case and roadmap,
    and decide whether to engage Appirio Professional Services and
    purchase Appirio Products to execute the roadmap.

The TCO Savings will be across multiple categories: 1) Hardware
savings: Multiple categories of cost will go away when companies
move 100% to the cloud – VPN, DMZ, power, cooling, rackspace costs
to name a few. 2) Personnel costs: Leveraging cloud applications
and platforms can lead to leaner application development and
management teams focused on innovation. 3) Software and Outsourcing
costs: Moving to the cloud can potentially decrease upfront license
costs on planned projects and outsourcing costs. All of this
depends on the current infrastructure and we will spend significant
time to understand the current state as well as where exactly the
savings will come for each customer. 

8) What do customers do with their IT infrastructure
when they migrate to a public cloud? Is legacy infrastructure
making customers go slow towards the cloud? What is the way out
here?

We recommend they turn their servers into art pieces, like we did for our office. 
Seriously, legacy infrastructure can be a challenge for some
customers – but the maturation of the various SaaS, PaaS and IaaS
layers is making this less of an issue moving forward.  
We always advise customers to start their journey where the most
critical business need lies and go from there.  This is why
every cloudsourcing engagement starts with a business-case driven
roadmap that we put together with IT and business leaders.

9) How does economics play out when an enterprise moves
to private cloud from traditional infrastructure? Is it expensive
given that there is an upfront cost to be met? How does cost,
savings and ROI play out in short run and long run?

Just to clarify – this guarantee is associated with moving the
companies infrastructure to the PUBLIC cloud, not private
cloud.

We recommend a phased business case driven roadmap to migrate to
the cloud. With this approach, most phases are self-funding, with a
1-2 year pay back period depending on the customer situation.
Typical costs associated with the migration are subscription costs
for the cloud applications and platforms selected, implementation
costs and training/change management costs associated with the
change. The savings are primarily the TCO savings (articulated in
question 7) and business benefits.

10) A Yankee Group report has slammed cloud providers for shoddy SLAs and
poor customer service?
Given that you are trying
to get companies to migrate to public cloud, what is your advise to
customers?

The industry is maturing and as it does this will become less of
an issue.  We obviously do not agree with Yankee’s take that
cloud risks outweigh the benefits – otherwise we couldn’t offer a
guarantee like this.  And we’re not the only ones. 
Gartner Group states that cloud computing is the #1 strategic
technology for IT organizations in 2010.  That said, it is
hard to argue with Yankee’s advice that “companies should read the
fine print and be proactive in managing cloud engagements.” 
That’s good advice for the adoption of any technology, and another
good reason for companies to look to an experienced partner like
Appirio.

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