Cloud Adoption – The Price of Inaction

To cloud or not to cloud?

Agility, cost-efficiency, security, and resiliency are the key attractions of cloud-based services for businesses, regardless of the industry or other specifications. These core gains allow organizations to focus on their priorities, which are operation, innovation, and long-term value delivery. Having been stated innumerably frequently, these words, however, are best illustrative and convincing when backed up with numbers and real-case examples – these will be presented further in the text.

Core Reason for Cloud Migration: Cost Optimization and Infrastructure Efficiency

The first case study is centered on a speech by Aaron Rallo, General Manager in Migration Services at AWS, delivered at the global cloud computing community conference in 2022. Back in 2008, Rallo was involved with a thriving online photo-finishing business, which, as the company expanded, faced escalating infrastructure costs that limited its revenue. The decision which commenced the company’s cloud adoption journey was taken in the same year, at the dawn of Amazon’s cloud story, with the Lift-and-Shift of their enterprise infrastructure to AWS. What they did was implement cost optimization strategies, including workload analysis and auto-scaling, and eventually migrate to the cloud. This move resulted in a more favorable cash flow model, reducing their infrastructure expenses by a significant 71.43%. Additionally, successful cost optimization and cloud adoption played a key role in attracting private equity investment four years later. This fact highlights the transformative impact of efficient infrastructure management and cloud adoption on business profitability and investment opportunities.

Other typical reasons to adopt the cloud

Reducing customer and infrastructure costs

Another recurring case features businesses known for their innovation and strength in various aspects that also recognize the need to innovate and find a forward-looking approach to reduce customer and operational costs. This often leads them to consider migration to the cloud; the scale of cloud adoption, however, is an open question for each individual business.

Moving away from the legacy way of operating

One more common objective in cloud adoption is to transition from the conventional mode of operation. Automation instead of manual and request-based processes is the only logical path to follow, as are excessive team handoffs reliance elimination and promotion of self-service capabilities and seamless collaboration.

Moving away from monolithic applications

Applications now heavily favor event-driven, microservice architecture. The more responsive, independent services and event-driven patterns, which make up a solution, provide for its scalability and agility. Alongside the shift away from monoliths, when it comes to infrastructure, organizations that value flexibility move away from the capital-intensive infrastructure acquisition process in support of the pay-as-you-go pricing model.

Typical beginnings of cloud adoption

Though individual cloud journeys may vary, as a rule, the majority of them are not intended as a comprehensive cloud adoption strategy. Since legacy infrastructure setup is a time-consuming process and product lifecycles are fairly lengthy, some teams decide to covertly bypass the hassle of the established processes and set foot in the cloud, giving rise to the shadow IT, which is bound to face up against company restrictions. A much more promising scenario, on the other hand, means openly embracing the cloud-native approach and leveraging the full range of cloud-based services in order to take care of the operation and release resources for the priorities.

Organic adoption

This inconsistent cloud adoption model can be explained as a spontaneous step-by-step immersion into cloud-native services. Organic adoption is decentralized as it is firstly driven by individual teams that recognize the benefits of agility and cost-efficiency that the cloud possesses. The ways of organic adoption include:

• Shadow IT: Central IT processes may be evaded by employees if they meet their individual development needs with cloud services independently of their department.
• Proof of Concept (PoC) or Pilot Projects: Cloud services may be employed in testing their suitability for running pilot projects; they undergo further and broader adoption on condition of passing the trial period.
• Departmental Initiatives: Within a company, separate units or departments may address their needs by adopting cloud-based features outside a full-fledged migration plan.
• Vendor-led Adoption: In partnership with a vendor, which is also a cloud provider, organizations may experience gradual cloud adoption by using services across different departments.

Despite the advantages of organic cloud adoption, primarily enhanced agility and facilitated innovation, this model tends to burden teams with obstacles in security, governance and coordination. Ad hoc natural adoption of the cloud can create a fragmented cloud environment supplied by varying cloud vendors and bring about data isolation, inconsistent security measures, and decentralized cost management. In order to prevent these and many more emergent issues, generated as a result of organic adoption, businesses still acknowledge the importance of a structured cloud adoption strategy. With the specifically designed policies and guidelines to govern the organic adoption of cloud-based services implemented, organizations can begin to address data security and compliance, optimize cost allocation, and foster cloud computing migration.

Reluctant acceptance

Cloud adoption models also encompass one more cautious and gradual approach, which is reluctant acceptance. Its name stems from the level of resistance and hesitation before embracing new technology, and they are grounded in an organization or department’s reservations about data security and compliance, as well as the assumed limitation on the customization, monitoring, or overall governance of the underlying infrastructure. Reluctant acceptance is typically revealed through the following:

• Initial Resistance: Reluctance in embracing cloud technology may originate from stakeholders’ apprehensions regarding the risks of introducing cloud services to sensitive information, or crucial aspects of their apps, such as compliance or vendor dependence.
• Cultural Barriers: For businesses with a long-standing tradition of legacy IT practices, outdated as they might have become, reasons for cloud adoption may not outweigh the opposition that their working culture currently causes to entrusting their infrastructure to external vendors.
• Compliance and Regulatory Concerns: Rigorous regulations in such spheres as healthcare or finance may halt cloud adoption and migration since companies within the said industries are primarily concerned about regulations compliance and data sovereignty.
• Lack of Understanding: The decision-makers in some businesses may have formed an incomplete picture of the cloud adoption risk and benefits. The skewed perception of the change that the cloud can introduce to the infrastructure and operation fails to give way to the advantages that their competitors may already boast of.

Initial expansion

This cloud adoption model, also known as incremental expansion, signifies the limited scale of migration, which could involve transferring only a small portion of IT infrastructure to the cloud while retaining its majority on-premises.

Similarly to the previously described models, incremental expansion may be held back by resistance from some stakeholders, and their reluctance may be motivated by various factors, including:

• Change Management Challenges: Employees, rooted in the legacy on-premises working processes, may show resistance to new technologies associated with their incompetence, uncertainty and job security concerns.
• Security and Compliance Concerns: Quite expectedly, security and compliance may bother many businesses, especially while handling sensitive data. Those may often opt for keeping private information in-house.
• Lack of Awareness and Understanding: Embracing change may be challenging in case the widespread misconceptions and insufficient knowledge of cloud technologies outweigh the factual information.
• Integration Challenges: The prospects of data migration and compatibility issues, which may emerge when integrating the complex systems of on-premises and cloud environments, drive reluctance to migrate among many stakeholders.

Miscalculations

As is apparent from the name, this phase involves facing various problems and difficulties stemming from miscalculations at the initial stages of planning and early execution. Throughout this phase, the mistakes that are inherently possible at the dawn of cloud adoption may generate migration reluctance, which is based on the following hesitations:

• Technical Concerns: For many stakeholders, compliance and sensitive data security are so crucial that miscalculations may undermine the trust placed in the cloud provider.
• Perception of Loss of Control: Used to authority over their on-premises system, stakeholders may be bothered by dependence on providers and the loss of control over issue resolution, or service disruptions.
• Uncertainty about Cost and ROI: Reluctance to adopt cloud services may be fuelled by doubts about cloud technology cost-efficiency and the expected return on investment.
• Organizational Politics: If cloud technology practices come against some internal policies, stakeholders may perceive this as a jeopardy to their pivotal established processes and halt cloud adoption.

Initial challenges

This cloud adoption phase signifies the stage of cloud technology adoption which features challenges and issues in the process of cloud services introduction and incorporation. As they are referred to as initial challenges, this phase brings out the problems that arise early on in the cloud migration and call for attention to be resolved; some of the most common initial challenges are presented below.

• Integration Complexity: In attempts to arrive at a hybrid system of blended legacy infrastructure and cloud platform, teams may encounter difficulties in tech compatibility and data transfer.
• Performance and Latency: With a significant amount of data being migrated, or poorly configured network infrastructure, a system is bound to lose in performance and gain in response delay.
• Scalability and Resource Management: Facing fluctuating demand poses quite a challenge for ensuring scalability and reasonable resource allocation since failing to achieve high adjustability of the infrastructure brings on overspending and compromised performance.
• Governance and Compliance: For the reasons of strict regulations and policies within each organization, despite all the time and effort it may take to establish compliance and governance in the cloud, organizations may still fail to do so.
• Cost Management: Though the cloud offers substantial cost optimization as compared to the legacy systems, allocating resources and managing the cloud costs effectively demands some competencies, or external provider’s assistance.

Business case

Functioning as a formal justification for undertaking cloud adoption and migration, a business case is presupposed as a comprehensive analysis of the benefits an organization is to gain from the shift, well-balanced against the cost and associated risks. While it is a frequent complaint that forming a persuasive business case can be both demanding and resource-consuming, with no guarantee of ROI, we suggest designing and employing a decision-making framework along with a phased approach to make the business case creation more manageable. That being implemented, organizations can detect and cease unpromising options; at the same time, the phased approach ensures that the efforts invested in the business case compilation correspond to or exceed the expected return: there is no point in investing in a thorough evaluation of obviously unappealing scenarios when one can allocate the resources into a deep assessment of the most promising scenario as proved in the decision-making framework.

Cloud adoption differentiators

Cloud adoption has become prevalent as so many organizations seek to harness the numerous benefits offered by cloud technologies. One journey, same destination, different purposes.

Among the key drivers, there are increased scalability and flexibility, allowing easy resource adjustment to changeable demand. A major consideration is the cost-efficiency of the pay-per-use billing approach. Productivity is enhanced by the smoother collaboration among teams and accessibility across various locations offered by the cloud. Last but not least, the robust security measures and data protection protocols offered by reputable cloud providers instill confidence in organizations to safeguard their valuable information.

Individual cloud journeys are rather diverse, though the majority of businesses prioritize the two primary investment and development directions: one is optimizing for speed and cost reductions, and the other is aiming for complete transformation. For such organizations, it is handy to group their differentiators into three categories: platform enablement, innovation acceleration through configuration over code, and differentiating their technologies within customer interactions.

Unanticipated cloud adoption benefits

During the process of adopting cloud technology, organizations typically have predetermined goals and expectations: in the previous section, we have already disclosed the most common drivers for cloud adoption. However, while adopting, businesses often encounter numerous unforeseen advantages that go beyond their initial projections. These unexpected benefits can have a profound impact on various aspects of their operations, fostering innovation and providing lasting value. One way or the other, the unanticipated advantages that lie beneath the surface also expose organizations to transformative potential. Keep on reading to discover the less obvious advantages that cloud services can introduce to businesses.

Organizational transformation

Cloud adoption serves as a catalyst for organizational transformation, particularly when leveraging the native services provided by AWS. As organizations begin to embrace these services, they witness a remarkable acceleration in their cycle of innovation, leading them to question the effectiveness of traditional waterfall project management approaches. In the meantime, teams naturally transition towards more iterative development processes, embracing agile methodologies such as the scaled agile framework, extreme programming, and other adaptable practices. This shift reflects the recognition that cloud adoption not only revolutionizes technology infrastructure but also drives fundamental changes in the way organizations operate and deliver value.

Talent upskilling

The adoption of cloud platforms, particularly advanced platforms like AWS, necessitates two important changes in human resources. Firstly, as teams migrate to cloud environments, training becomes essential to enhance their capabilities. So far, the most effective upskilling is hands-on training, where individuals learn while actively working on cloud-related tasks. Simultaneously with upskilling, the need for new hires arises to complement the existing workforce and bring in fresh expertise aligned with the cloud technology landscape. This combination of upscaling existing talent and strategic hiring ensures that organizations have a skilled workforce capable of maximizing the benefits of cloud adoption.

Reinvestment opportunities

Cost optimization, one of the most common cloud adoption and migration drivers, goes hand-in-hand with a less apparent by-product of cloud technology application. As organizations enjoy both smooth app performance and the cost-efficiency of cloud services, the resources, which are saved up, can be strategically reinvested into other prioritized business areas, such as optimization and automation, staff training and upskilling, customer engagement, and innovation.

Improved customer experience

While the enhancement of the customer experience is one of the crucial business tasks, as an advantage rendered by cloud technology adoption, it is often overlooked. For this reason, we are presenting to you what cloud services have to offer for delivering an exceptional customer experience.

• Cloud supplies organizations with the most scalable resources and infrastructure, in order to provide seamless and reliable customer experiences even during high demand.
• Cloud-native apps boast of ubiquitous accessibility, allowing companies to engage with their customers, irrespective of their location or preferred devices.
• The cloud hosts more agile and responsive solutions, ensuring that customers are not bothered by latency.
• Cloud-inherent data analytics and machine learning capabilities provide valuable insights into customer behavior and patterns to help businesses deliver the most personalized services and offerings.
• Cloud-native customer relationship management (CRM) systems allow customer data consolidation, communication streamlining, and tailoring of user interactions so as to foster customer-business relationships.
• Minor cloud services, such as chatbots or voice assistants, can be leveraged to serve your customers with real-time support and assistance, as well as the opportunity to seamlessly find information and resolve issues.

Put shortly, cloud adoption enhances the customer experience by offering accessibility, promptness, customization, and effortless interactions across multiple channels. By leveraging cloud technologies, businesses can create a seamless customer journey, leading to increased satisfaction and loyalty.

Cost of doing nothing with cloud adoption

It is worth highlighting the significant cost savings achieved as an outcome of commencing the cloud adoption journey at the example of Marriott International. While the cloud adoption commitment is still ongoing, Aaron Rallo claims the company has already realized an impressive annual run rate reduction of $10 million, showcasing the financial benefits of cloud technologies.

In the year 2022, with 80% of compute resources being effectively utilized in the Marriott cloud journey, as Aaron pointed out, the traditional approach of building systems to cater to peak demands became obsolete. Thus, cloud adoption revolutionized the operational approach by enabling the company to focus on the minimum required capacity, at the same time allowing rapid scaling as per the dynamic needs of a business.

With scalable cloud services, we can circumvent the need to invest in idle peak capacity that remains underutilized for most of the year. At Marriott, the calculations proved a $10 million worth of reduction in the run rate. This represents a reinvestment opportunity of $50 million over five years that can be allocated towards innovative products and services which would set the company apart from competitors.

With Marriott’s pace of opening one hotel every 14 hours during its peak, they leveraged turnkey cloud solutions located closer to their properties on various continents, so that they could accelerate the pace of launching new initiatives. The organization also prioritized resiliency to minimize downtime and ensure uninterrupted services: every second that their systems are inaccessible results in potential reservation failures with an estimated loss of $8,000. With such financial implications, ensuring the resilience and security of the systems is of utmost importance when launching solutions in the cloud.

As a rule, traditional disaster recovery approaches involve duplicating infrastructure that brings about additional costs for maintaining the secondary environment, just to provide for the disaster which may or may not happen. In contrast, with the AWS DR service, organizations can leverage automated mechanisms for disaster recovery: ceaseless data sync-up and the cloud’s flexibility allow for quick activation of the DR environment when needed, providing a cost-efficient solution for ensuring data protection and business continuity.

The potential consequences of idleness in the matter of cloud adoption and migration can be diverse and manyfold, depending on the individual cloud journey patterns. Though, in the further subsections, we will delve deeper into the areas of common interest to give you a more comprehensive understanding of the missed opportunities and the cost of not moving to the cloud.

Financial aspect

Admittedly, the financial aspect of cloud adoption is a primary consideration for businesses. The possibility to shift from a capital expense model to a variable expense model is a powerful drive for migrating to the cloud. So are the cost savings that can only be achieved when delegating infrastructure maintenance to AWS’s economies of scale.

To be added, with AWS, customers have the ability to easily provision and scale resources according to their current demands, which eliminates the need for manual processes such as ordering, procuring, and physically setting up hardware. Apart from resource savings from provisioning, leveraging AWS infrastructure also enables savings from managing the environment during peak demand. These measures allow more efficient resource allocation based on business priorities.

AWS provide such provision and de-provision capabilities that organizations reclaim time which would have otherwise been spent on manual infrastructure management. That valuable time can be invested in innovative initiatives that bring tangible value to customers. What also contributes to a more efficient resource allocation is the minimization of the common drawbacks of the legacy systems, such as over-provisioning idle “zombie servers”.

Business agility

Although cost is often the initial focus of discussions around cloud migration, the biggest benefit that customers experience with AWS is agility. This level of agility, amounting to the deployment of thousands of servers within minutes, empowers customers to accelerate their application development and swiftly bring new applications to market.

AWS’s portfolio, enlisting over 200 services, offers customers to not only accelerate the deployment of new applications but also conduct experiments with reduced risk and increased frequency. Cloud infrastructure scalability promotes cost-efficiency, as failed experiments can be easily de-provisioned without ongoing expenses. These inherent cloud technology characteristics drive continuous improvement and faster time-to-market.

Our analysis of successful migrations revealed an improvement in development and deployment efficiency for organizations that migrated to AWS. Compared to their on-premises setups, these businesses experienced a 50% reduction in development time, while employing 39% fewer personnel, indicating a significant reduction both in time and in human effort.

Resiliency

One of the significant advantages of AWS is the ability for customers to achieve high levels of resiliency and global deployment within minutes since AWS operates a vast infrastructure with clusters of logical data centers called availability zones. Currently, AWS spans across 96 availability zones distributed across 30 geographic regions. AWS plans to release 15 additional availability zones and five more areas worldwide to further expand its global infrastructure and provide customers with even more options for deploying their applications and services.

Resilient applications are difficult to realize on-premises, though the impact they have on both their brand reputation and financial performance is significant. With the extensive global network of availability zones and regions offered by AWS, businesses can design their systems to be highly available and fault-tolerant, minimizing the risk of downtime and service disruptions. This, in turn, enhances the brand’s reliability and customer trust.

Security

At AWS, security is of utmost importance. The AWS cloud computing environment is aimed to offer the highest level of flexibility and security to businesses across locations and spheres, including such industries as the military, healthcare and global banks that, quite expectedly, have rigorous security requirements.

Unlike running on-premises where you have sole responsibility for the security model, AWS operates on a shared responsibility model. AWS takes care of the security aspects related to the host hardware, virtualization layer, and physical facility where the service operates. On the other hand, customers also bear responsibility for ensuring the security of their applications and information. To aid customers in this, AWS provides a range of tools, best practices, and guidance to assist customers in building secure applications: in total over 300 tools and features that address various security needs such as data encryption, governance, and controls. This shared responsibility approach ensures a comprehensive security framework for AWS customers by combining the expertise and resources of AWS with the active involvement of customers in securing their applications.

Not starting or starting late

The speed at which business operations are performed has a significant impact on various aspects of an organization. Let’s consider the example of a customer with a thousand servers and compare the outcomes between running on-premises and adopting the cloud with AWS.

When running on-premises, the cost savings may appear to be minimal or non-existent. As to the speed execution, data suggest that on average legacy systems with a thousand servers release 29 projects a year with each one calling for 31 people hours. Contrary to this, after migration with AWS, a company with a thousand servers can spend only 8 person-hours per each of the average number of 112 releases a year, whereas the cost savings amount to 1.2 million per year.

It allows organizations to respond quickly to market changes, deliver new features to customers at a faster pace, and allocate resources more efficiently.

The cost of migrating to cloud slowly

The visualization below represents a vast amount of data from various customer migrations and includes approximately 1.5 billion data points, with dots to represent migrations of different scales. The visualization was drawn to examine whether the size of migration impacts its speed: basically, if small migrations can be as fast as large ones, and vice versa. As we can see, the distribution of data points shows that the size of the migration does not necessarily determine its velocity: there are instances of both small and large migrations being completed quickly.

Now, so as to the contrast between slow migration and no migration at all. In conversations with customers who migrated from on-premises environments to AWS, we observed that their deployment cycles went slower when they were still operating on-premises compared to the new AWS environment.

Given these findings, one may wonder, what, if not the initial scale of the organization with its servers, determines the speed of cloud adoption. In fact, conducting a migration assessment plays a crucial role. A migration assessment involves performing a thorough analysis of the existing infrastructure, evaluating the associated costs of running workloads on-premises, and estimating the potential migration cost savings and benefits of cloud adoption.

Data supports the conclusion that customers who did conduct a migration assessment tended to develop fast or medium migration velocity. The good news is, AWS not only offers free tooling, such as Migration Evaluator, which assists in performing these assessments, but also provides professional services offerings, including Migration Readiness Assessments, to support customers in evaluating their migration readiness.

Another factor that notably contributed to the cloud migration speed is the utilization of more than one AWS service. Accelerated migration happened to those organizations which incorporated additional services such as EKS, ECS, Lambda, and Amazon Connect as compared to those that solely migrated to EC2.

The final observation reveals that customers who achieved the fastest migration speeds either utilized AWS training resources to educate their teams or engaged in professional services provided by AWS-certified partners. This highlights the importance of acquiring the necessary knowledge and expertise either through training or professional support to facilitate a smooth and expedited migration process.