Opportunity Cost: The Cost Of Not Moving To The Cloud
In this post, Cloud Strategist, Jeff DeVerter, addresses the commonly asked question: How much will it cost me to move to the Cloud? Jeff suggests it will cost you more if you don't move to the Cloud.
I have the unique opportunity to talk to companies almost every day about moving to the Cloud and among the first questions always asked is: “How much will it cost to move to the Cloud?” That’s when I usually say: “You’re already doing it wrong. Let’s have a chat about the cost of NOT moving to the Cloud!"
I’ll be the first person to admit, I’m not an expert in economic theory… but I’ve been reading! I’ve been trying to put into words what a company misses out on when they chose either to stay in their current owned or rented data center as opposed to adopting cloud technologies. What I’ve come up with is that the best way to express this loss is through the microeconomic theory of Opportunity Cost.
So before we go any further, you should understand what Opportunity Cost is in strict reference to microeconomic theory. The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen”. Think of it this way: the opportunity cost of choosing “Job A” is the loss of potential higher income from not choosing “Job B”. So, in the context of Cloud computing, the opportunity cost of continuing to utilize traditional on-premises technologies for your business is the lack of gain to your business by utilizing Cloud-based technology.
Wait, did I just say “gain” when referring to consuming the Cloud? I know what you’re thinking - all the articles you’ve read are about how the Cloud can save you money. This exposes one of the things that the Cloud providers have been doing so very wrong - talking to technology and business leaders about saving money. Who here gets really excited about just saving money? Well if you are a fiscally responsible person, this should part of your day to day - but it’s not what is exciting, it’s not what’s going to propel your business forward ahead of your competitors and even ahead of your own business plans for next year.
Would you rather save money or make money?
Let’s draw a little line in the sand here, the line where we only think about how we utilize the Cloud, and optimize our IT purely to save a few shekels. Now we are going to think bigger and focus on the Cloud as a serious business disrupter that’s going to unlock brand new possibilities for your own business with the same level of promise that the Univac Computer held over the abacus.
I know you think I’ve gone too far. Everything you’ve heard until now has been about how the Cloud saves you money - now this pesky technologist comes along and makes the audacious claim that the Cloud can actually make you money. Well when properly applied, it can. Therein lies the opportunity cost of not moving to the Cloud.
Here are some areas where I’ve seen companies transform their business utilizing technology to not only save money - but to seize an opportunity:
- There’s a healthcare company who provides healthcare workers to a percentage of the hospitals and urgent care facilities in the US. Their billing data aggregated in the Cloud and stripped of PII (personally identifiable information) can now report live and predict future specific healthcare issues that may be bound to geography, time of year, disease, or other demographic. This gives them the ability to skill more appropriately, provide just-in-time training to their staff, as well as provide this data as a service to other companies. That is a whole new revenue stream.
- I’m aware of a state in the US that tends to receive a fair amount of snowfall each year and is challenged to get the right equipment out to the right locations to deal with actual snow and ice accumulation as well as communicate this information to its citizens. By deploying IoT sensors into what is now a smart road, live accumulation information and conditions are transmitted to the cloud where it’s displayed/mapped in realtime as well as using artificial intelligence and machine learning to effectively route road clearing machines to remediate the issue as well as forecast where they will be needed next.
- Think about a retail manufacturer who is trying to modernize their decades-old IT infrastructure to deal with demand and opportunity based not only on live global sales of their goods but also to forecast demand based on social media exposure from influencers. The Cloud can be enabled to ingest not only social media streams but video content to proactively interrogate it using machine learning to identify where their brands are showing up and who’s wearing them.
These are just three examples from recent memory where organizations can now play “what if” and dream up, test a solution, and tear it down in a matter of days and a few hundred dollars on a credit card. Therein lies the real opportunity cost of not adopting Cloud technology and staying rooted in servers and virtualization.
(By the way, servers and virtualization still have their place - but we will talk about hybrid solutions in a later article.)
So how do you get started? That will be covered in the next article but here is the teaser:
- Envision a strategy (my favorite part)
- Identify a governance plan (governance is the instruction booklet in the box of Cloud legos (™))
- Inventory your assets and applications (no, you really don’t know what you have)
- Begin a migration/transformation journey
- Learn to operate your apps in the Cloud
- Go back to step 1 and repeat (an infinite loop by design)