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Is Your Cloud Leaking Value?

Shift Left Group

Making business and technology better

发布日期: 2024年6月25日

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Author: Maqsud Mohammad

Introduction

Cloud computing has revolutionised business operations by providing unparalleled agility, flexibility, scalability and cost-efficiency. Despite these significant advantages, many organisations struggle to fully capture the value of their Cloud investments. According to a McKinsey survey of CTOs and programme leaders, an astounding 90% of organisations are failing to realise the full potential of their Cloud initiatives, leaving substantial value on the table. This raises a fundamental question, why are organisations embarking on these costly Cloud transformations? One potential theory is mimetic isomorphism where organisations often imitate the practices of successful competitors and peers. Cloud adoption, widely perceived as a route to enhanced efficiency and innovation via agility in operations and faster time to market, has become a trend many organisations follow, hoping to achieve similar success. This phenomenon can be likened to a bandwagon effect, where companies jump on the Cloud bandwagon to not miss out on the perceived “gold rush”. This rush to embrace Cloud technology, driven by the allure of the perceived “gold rush”, often leads to hasty implementations without a well-defined strategy. Without a well-defined strategy, Cloud initiatives can lead to significant value leakage, resulting in unforeseen costs and inefficiencies. This article delves into the common pitfalls that lead to value leakage in Cloud transformation journeys and offers strategies to help organisations maximise the benefits of their Cloud investments. By understanding and addressing these challenges, organisations can ensure they fully harness the transformative power of the Cloud. The following sections explore common pitfalls that lead to value leakage in Cloud transformation journeys and provide insights on how to address them effectively.

Common Pitfalls Leading to Value Leakage

Poor Cloud Strategy: Organisations looking to migrate their workloads to Cloud should do it not because others are doing it but should have a clear vision of what they want to achieve out of their Cloud investment. A well-defined Cloud strategy is crucial for aligning Cloud initiatives with business goals.?According to Urs H?lzle, Google vice president of technical infrastructure, organisations undertaking cloud migration are faced with two choices, either do a lift and shift or do a total rewrite of the application estate. Both are two extremes when migrating complex systems over to cloud.

Unfortunately, studies show that many organisations adopt a "lift-and-shift" approach, simply moving existing applications to the Cloud without re-architecting them to leverage Cloud-native capabilities. This might give them the quick win of onboarding some workloads to Cloud but in the long run leads to inefficiencies and higher costs, as the applications are not optimised for the Cloud environment. The Flexera 2024 State of the Cloud Report highlights that "legacy application modernisation" is a major barrier to capturing Cloud value, with 39% of respondents placing it in their top three concerns. That lift-and-shift can cause disasters is demonstrated in the June 1996, European Space Agency’s (ESA), Ariane 5 rocket disaster. A single line of legacy code has brought down the $370 million rocket. The code in question was developed 10 years prior for Ariane 4 and it worked well for that rocket in that context, the only problem was it no longer was relevant in the Ariane 5’s context causing it to explode just a few seconds into the launch. The point to note here is, in the context of Cloud, simply lifting and shifting legacy applications can be disastrous and can lead to huge costs to manage the complexities of poorly adapted legacy applications. Senior leaders should understand this and invest time and effort to either modernise the legacy applications or rearchitect them to Cloud native applications to fully leverage the capabilities of Cloud.

Studies show that even a total rewrite of an application to make it cloud-ready before migration is fraught with risks. A notable example is the TSB Bank's migration attempt in April 2018. TSB aimed to shift its IT systems from the infrastructure of its former parent company, Lloyds Banking Group, to a new platform under its current parent, Sabadell. Pressured by management to meet an ambitious 18-month deadline, TSB opted for a complete rewrite of its legacy applications before migrating to the new platform. Despite delays, the switch was eventually made to the new system. However, the migration led to severe technical issues, causing widespread outages and service disruptions, it was a disaster. The fiasco cost TSB ￡150 million in customer compensation and severely damaged its reputation. IBM was brought in to fix the technical issues who estimated ￡955 million to fix the mess.

This case highlights the significant risks and complexities associated with large-scale IT migrations involving a total rewrite of existing systems. While the prospect of modernizing applications for the cloud is enticing, it is crucial to recognize that not all workloads are suitable for such a transformation. Instead, a more cautious approach that carefully evaluates and selectively migrates appropriate workloads can mitigate risks and enhance the chances of a successful cloud migration. Ultimately, a thorough assessment of your current systems, combined with a strategic and phased approach to migration, can help ensure a smoother transition to the cloud and avoid costly disruptions.

Unexpectedly high costs are a major driver of Cloud repatriation or abandoning Cloud initiatives. In 2023, the UK Post Office reportedly wasted ￡31 million on a failed cloud migration attempt, accounting for 81% of its total restructuring costs. Though the exact details of the migration strategy are not publicly disclosed, migration involving complex legacy systems and inflexible monolithic architecture was abandoned due to insurmountable financial and technical challenges. Similarly, Dropbox initially embraced Cloud technology but later repatriated a significant portion of its workload back to on-premises infrastructure due to high Cloud costs.

Inefficient Resource Management: One of the recurring themes we have come across with our customers is Cloud sprawl and underutilised resources in Cloud environments due to the on-prem mindset with regards to infrastructure (pets vs cattle). Without proper management, organisations can end up with a proliferation of unused or underutilised resources, leading to wasted spend. As per Flexera ?report, up to 70% of organisations surveyed spend $12 million or more on Cloud and 27% of that Cloud spend is wasted equating to about $3.24 million. This does not factor in the indirect costs associated with managing the wasted resources that add to the complexity of the already complex Cloud infrastructure. Regular audits and automation can help manage resources more effectively, ensuring that they are scaled according to demand.

Inadequate Cost Management: Many organisations lack visibility into their Cloud costs and do not implement effective cost management practices. Tools for monitoring and managing Cloud spend are essential for identifying and eliminating waste. Strategies such as reserved instances, right sizing, and automated shutdowns can help optimise costs and improve financial performance. As per Flexera report, optimising Cloud spend remains the top initiative for organisations, with 71% of respondents prioritising cost savings.

Security and Compliance Risks: Inadequate security measures and non-compliance with regulatory requirements can lead to data breaches, fines, and reputational damage. Organisations need to implement robust security protocols and conduct regular compliance audits to mitigate these risks. Continuous security monitoring and incident response plans are critical components of a strong security posture. The most common breaches and data leaks reported are due to misconfigurations which happen due to gaps in the technical abilities of the resources. As per the Flexera report, security and compliance risks are a major barrier to capturing Cloud value, with 41% of respondents listing them among their top three concerns. This highlights the need for organisations to prioritise robust security measures in the Cloud.

Conclusion

In the journey toward digital transformation, Cloud stands out as a powerful enabler, offering unparalleled agility, flexibility, scalability, and cost-efficiency. However, the promise of the cloud is not without its challenges. As highlighted in various case studies and reports, many organizations fail to realize the full potential of their cloud investments due to a myriad of pitfalls, from poor strategy and inefficient resource management to unexpected costs and security vulnerabilities. ?Poor?Cloud?strategies, such as the lift-and-shift approach, often result in inefficiencies and higher costs, much like the Ariane 5 disaster where?unadopted?legacy code caused catastrophic failure.

The experiences of companies like TSB Bank and the UK Post Office serve as cautionary tales, illustrating the complexities and risks involved in Cloud migrations, especially when legacy systems are involved. These examples underscore the importance of a well-defined Cloud strategy, robust cost management practices, and stringent security measures. Additionally, the Flexera 2024 State of the Cloud Report sheds light on the widespread issues of cloud sprawl, underutilized resources, and the critical need for effective Cloud cost optimization.

To maximise Cloud value, organisations must develop comprehensive Cloud strategies aligned with their business goals, conduct thorough assessment of existing systems, implement cloud-native architectures to fully leverage Cloud capabilities, and addressing the challenges of legacy application modernisation as identified in the Flexera report, selective migration of suitable workloads, and continuous monitoring and optimization of cloud resources, implement effective resource and cost management practices, and prioritise robust security measures. By doing so, they can avoid the pitfalls that lead to value leakage and fully harness the transformative power of Cloud. This proactive approach not only enhances operational efficiency but also drives innovation and long-term business success. In conclusion, while the journey to the cloud is fraught with challenges, with the right strategies and a cautious approach, organizations can avoid value leakage and fully leverage the benefits of Cloud. By learning from the experiences of others and prioritizing strategic planning, resource management, and security, organisations can navigate the complexities of Cloud migration and achieve sustainable success in their digital transformation endeavours.

If you are struggling to capture the value from your Cloud investment, we can help. Our team of experts specialises in optimising Cloud strategies, managing resources efficiently, and ensuring robust security and compliance. Contact us today to learn how we can assist you in maximising your Cloud investment and achieving your business goals. Reach out to us at https://shiftleft.today/contact or Alex Griffin directly at [email protected] to schedule a consultation and start your journey toward a more efficient and valuable Cloud infrastructure.