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Understanding the return on investment of a hybrid cloud strategy

How to quantify your hybrid cloud strategy

Scott Sanders
cloud
© Shutterstock / Artur Szczybylo

While it’s relatively easy to understand that hybrid configurations allow enterprises to lower expenses while taking advantage of the scale and flexibility that access to a cloud platform provides, a deeper understanding of how workloads affect other variables is vital in determining and optimizing Hybrid Cloud Return on Investment (ROI). In this article, Scott Sanders explains why it’s important to understand the Hybrid Cloud Return on Investment (ROI).

As I engage with enterprise leaders who are moving their datacenter environment to the cloud, I’m often asked about understanding the return on investment of a hybrid cloud strategy.  While it’s relatively easy to understand that hybrid configurations allow enterprises to lower expenses while taking advantage of the scale and flexibility that access to a cloud platform provides, a deeper understanding of how workloads affect other variables is vital in determining and optimizing Hybrid Cloud Return on Investment (ROI).

It’s simple to get started by creating a master list of all your VMs, generally by exporting a list from your existing cloud service, combined with a reporting of your cloud resources controlled in your private datacenter. There are several good software programs available that will give real-time feedback of your VM utilization and can make this job much easier for you. This master list will allow you to answer the question of “What do I have, and how is it being used?”, as well as create a baseline of capacity and performance, to understand if your environment is over or under-utilized on a relative basis, and what returns can be generated with a hybrid model.

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Quantifying security risks of your hybrid cloud strategy

Security risk is generally an understated factor when it comes to determining the ROI of a hybrid cloud strategy. However, it’s one of the most important. According to the Ponemon Institute’s 2017 Cost of a Data Breach Study, the average security incident costs an organization $3.62 million. This figure includes expenses like legal fees, reputational damage, government fines and more, and does not include incremental fines that might be incurred due to loss of consumer private information that could lead to GDPR violations. Key questions to ask might be: “what type of expenses will I incur if my company has a breach?” and “what reputational damage / loss of sales will my company suffer if we’re breached?” Few companies attempt to actually quantify both the risk and value of a breach, but these are critical variables in your model. Understanding this risk in a quantitative way can help determine if you should maintain certain workloads in your private cloud, where security can generally be more closely controlled.

Quantifying operating expense of your hybrid cloud strategy

It’s no secret that many organizations consider hybrid cloud as a means to save money, but most companies do not take the time to project the operating expenses of maintaining private cloud and public cloud instances. According to David Linthicum, chief cloud strategy officer at Deloitte Consulting, you can calculate public cloud costs with the following formula: Cloudops Cost Per Year = ((NW*CW)*COM)+((NW*CW)*SR)+((NW*CW)*MR). The definitions of his variables are as follows:

  • NW: Number of workloads under cloudops
  • CW: Complexity of workloads (on a scale of 1.01 to 2.0)
  • SR: Security requirements (on a scale of 100 to 500)
  • MR: Monitoring requirements (on a scale of 100 to 500)
  • COM: Cloudops multiplier (on a scale of 1,000 to 10,000), based on resources used, including the cost of cloud services and the cost of people

Quantifying the operational expenses for private cloud workloads is a little different; you have to take into account other variables like hardware costs, depreciation, energy costs, and any other variables attributed to an on-premises model. Some companies find that they have substantial unused internal capacity, and therefore they can keep some workloads in their private cloud since expenses there are already fixed.

SEE ALSO: How Kubernetes improves IT’s operational efficiency

Quantifying the business impact of your hybrid cloud strategy

Finally, some workloads are only as valuable as their ability to scale. If degradation in VM performance can impact sales velocity, customer support response time, or other transactional business functions, then it is critical to assign weightings to those variables in the model, in proportion to their relative impact. In many cases, these business scale impacts are worth far more than the actual cost or efficiency gains created with a hybrid cloud model, but they are often ignored vs. the more obvious outcome of reduced operating expense.

By creating a model that keeps the above variables in mind, an IT decision-maker or leader can readily understand and calculate the returns of their investment in public cloud, and can easily understand whether to shift even more resources toward a public environment.

Author

Scott Sanders

Scott is currently the CEO of 5nine, the leading virtualization security and management software for the Microsoft Cloud (www.5nine.com). 5nine offers automated end-to-end cloud management and the first and only agentless, multilayered cybersecurity solution for Hyper-V and Azure.

5nine is an Insight Venture Partners portfolio company (www.insightpartners.com).

Prior to his CEO role at 5nine, Scott served as Senior Vice President of Security Services for Verisign, a S&P 500 company (Nasdaq: VRSN), where he had full P&L responsibility for Verisign’s security lines of business. In this role, he was responsible for GTM strategy, sales, product development, marketing and operations. Also at Verisign, Scott served as head of corporate strategy for the company, as well as head of corporate development (M&A).

Scott currently serves on the Board of Advisors of PFP, an IoT security and counterfeiting prevention company, SecondWrite, a disruptive malware-sandboxing company, and Steel Mountain Systems, a provider of physical security products for the consumer IoT market.

In addition, he serves on the Board of Directors for the National Cybersecurity Society, a D.C.-based non-profit dedicated to helping small and medium-sized businesses with their security posture.

Scott holds a Masters degree in Business Administration as well as multiple undergraduate degrees from Virginia Tech.


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