The Hidden Costs of the Cloud

I am over in the UK this week visiting the Axceler London team, and participating in another AIIM.org Executive Leadership Council (ELC) event. I have some great notes from the session, but one of the conversations that came out of this assembly of ECM and collaboration customers and vendors from across EMEA was around the hidden costs of the cloud, and I thought I’d share some of my notes and personal thoughts on this topic.

We started off the discussion with data from a recent AIIM survey that highlighted the reasons why enterprises are adopting the cloud, with the top 6 items being:

1. Scalability of their IT resources
2. Business agility
3. Reduced IT costs
4. Moving expenditure from CAPEX to OPEX
5. Mobility of data and capability
6. Increasing the speed of innovation

Honestly, no surprises here. If you follow cloud as a category, most analysts have data that pretty much mirrors this list. I am going back through my notes from the Chicago event earlier this month, and will compare perspectives between US and EMEA participants to see if anything stands out. But what was interesting was the dialog that came from this slide re: the “actual” costs of moving to and supporting the cloud model.

The main premise discussed was that until all of your cloud-based solutions have parity with on premises, there *may* be additional costs, such as

• increased management / governance overhead
• reduction in capability
• migration / upgrade / move costs
• additional training / education costs
• business process management adaptation

To be clear, the majority of participants agreed that the move to the cloud is inevitable, and that most barriers will be reduced or removed over time. But the road toward the cloud is just not as turn key as many vendors would have you believe. Too often the cloud story (especially the Software-as-a-Service aspect of the cloud) focuses on the pure cloud experience, ignoring the reality that not every work load is yet mature enough for the cloud. The reality is that on prem solutions, and hybrid solutions that include both on prem and cloud components, will exist for some time (my guess is for the next 7 to 10 years, at least).

The message conveyed was to plan for it, but go in with eyes wide open. Organizations that do not take the time to properly plan their move to the cloud will likely get bitten in the rear by one or more of these issues. Especially for hybrid environments, which may sound like a logical, phased approach to moving systems and resources to cloud-based platforms could further complicate already complex issues. For example, you are accustomed to certain reports and controls of your SharePoint environment on prem, however those same reports and governance controls may not be available in Office365. You may need to rebuild your dashboards, and in some cases manually input data that cannot be automated, making it more time consuming to report on certain KPIs across both.

A great example of the management impacts to be mitigated was a fictional organization’s changes to their procurement process – which is a key process that will need to be changed as we move into the cloud (if it hasn’t already changed). The example company budgeted approximately $2 million on IT spread over a 2-year cycle, historically spending about 70% of their budget in the first year, with the remaining funds spent on upgrades and maintenance over the remaining year. Moving to a predominantly cloud-based model, their first-year budget is projected to drop down to almost 10% focusing mostly on freemium tools and OS infrastructure, with the remaining 90% of funds to be spent on micro-transactions (apps) for specialized and targeted solutions, most by the end users themselves. The management impact that the organization needs to be prepared for (and budgeted for) includes governance, reporting, and security/compliance/auditing-related costs. The danger with a rapid ascent into the cloud without proper planning is that IT can become too fragmented, which, ultimately, could impact a company’s ability to innovate.

Of course, one of the problems here – and which we recognized and discussed – was that many of the issues are due to the fact that we are still trying to duplicate current models, current ways of thinking, within the cloud paradigm. That’s why hybrid will be around for a while yet, because people and companies need time to change the way that they think about their technology. People have a difficult time seeing how they will do what they need in the cloud because they’re still thinking in terms of how they work today. It’s an important distinction. During one of the roundtable activities, I drew up a small diagram to help illustrate the point that while IT decisions are cyclical (centralize content and people, then move to teams, then to individuals, then when things get chaotic – everything is centralized again) we do learn from our experiences and change does, in fact, happen. I think this is an important point to remember as we, as technologists and leaders, do a bit of thrashing in the wake of these changes.

Change is never easy. Just remember to ask questions, and realize that nothing is ever as simple and as easy as it may appear.