Kurt Wiener, Director of Business Development at Lemongrass examines the tipping point that many businesses now find themselves upon amid spiralling global inflation. With so much major change happening across the world right now, what role does the Cloud play in terms of serving and facilitating the enterprise software platforms and applications that we need to drive business success?
Rising inflation and soaring energy prices are taking their toll on all of us – businesses and consumers alike. With world inflation rates approaching a double-digit percentage mark, more businesses are now tasked with an operational analysis that may alter their go-to-market position for the rest of the decade.
As many firms now undertake a rationalization process that also sees them increase their own prices amid rising operational costs, everyone wants to know the answer to one central question: what happens next?
Cloud’s Core Capacity Control
For organizations in the process of transitioning their SAP estate into the Cloud, there are undeniable advantages in terms of services scope, functionality and control. At the same time, there are new costs to be aware of, so understanding the scope within which any given enterprise IT stack works is fundamentally important.
Let’s look more closely at the true cost of living in the Cloud and the primary considerations for businesses planning their migration strategy.
Inflation Nation Disruption
Worldwide inflation has a massively disruptive effect on supply chain delivery mechanisms around the globe. Organizations now need to take stock of their internal resources, their supply chain network and connections, and, of course, also contend with increased operational costs at the basic utilities level, from heating and electricity, etc.
As we stand in 2022, companies that have already transitioned to Cloud operations have the ability to better meet these challenges and move, redirect and re-purpose resources, people, teams, or entire departments. Cloud has agility and flexibility at its heart and, right now, these characteristics are more important than they have ever been before.
But for those companies that have only made their initial steps (or perhaps none at all) to Cloud-centricity, there is some good news – all major hyperscaler Cloud Services Providers (CPSs) have migration program initiatives in place which enable companies to get funding of up to 80-100% of the migration cost. It’s in their interest to help you move to the Cloud, so this incentive makes sense.
Cloud Means (Positive) Operational Change
Companies looking to migrate and run their complex SAP systems in a hyperscale Cloud need to think about their business models, the way they structure their operational frameworks, and the way they build their total commercial market-facing proposition with a Cloud backbone in place.
There are also extensive and exhaustive DevOps for SAP assets that can be deployed to enable customers to create prototypes and experiment with new services in order to bring Cloud deployment agility to bear upon real operational models.
Let’s think about the reality of enterprise computing today. If a customer has on-premises systems in place, then they’re typically required to plan on a three-year cycle in terms of hardware and related resources. In these scenarios, we generally see firms procure on the basis of forward-looking workload expansion, which naturally means they frequently buy more resources than they initially require at the outset.
In terms of basic economics, this is clearly not the most prudent way to approach Capital Expenditure (CapEx), but this is the standard that many firms still consider normal.
From CapEx to OpEx
In the Cloud, we can bring in three-year shaped and sized CapEx moves at the press of a button or the click of a mouse. We can also implement a much higher level of automation.
Furthermore, there are native services from AWS, Microsoft Azure and Google Cloud that can drive IT systems to only be scheduled for availability in specific time windows (for example, nine to five), in a customer’s own world time zone and deliver savings as a result. Cloud also enables firms to ramp up and scale down when a lower number of total instances are needed. Again, in terms of basic economics, this clearly represents a shift from CapEx-heavy investment to Operational Expenditure (OpEx)-centric strategy and tactics.
We should also say that once a customer has their backend SAP systems in the Cloud, they are able to add-in and add-on new digital services (such as big data analytics functions as a key example) and then be able to drive new innovation much faster than would ever be possible in any on-premises environment, where resource requirements would eat up costs very quickly.
Longer-term Cost Intelligence
Thinking on a slightly longer-term strategic basis, Cloud computing also enables companies to be more cost-intelligent about data storage. Highly business-critical workload data storage can be moved to a more immediately served Cloud storage area with lower latency. Less important historical data can be moved at a slower pace to Cloud services with higher latency. This can reduce costs significantly, especially where large data workloads are involved.
Cloud computing can appear to be a vast new world of virtualized abstraction-state resources populated by massive hyperscaler Cloud providers with a seemingly limitless number of toolsets, components, software agents, functions and services. In some sense, it is, but the keyword is abstraction. Customers can abstract themselves from both technical complexity and cost complexity by working with a Cloud implementation and management partner with Cloud-centric Financial Operation (FinOps) built into its DNA.
Pulling it All Together
Driving business success is at the heart of all past, ongoing, and future projects. Having to factor in the additional costs of rising inflation is an additional challenge but shouldn’t get in the way of the overall business goal. Organizations on their Cloud migration journey must stay focused on the benefits of operating in the Cloud amid times of inflation, which are as follows:
- Taking advantage of Cloud savings to avoid price increase for customers
- Increasing flexibility with on-demand contracts and ‘pay as you go’ payment models
- Greater Cloud scalability to match price reduction with a growing amount of users
- Hyperscaler migration funding as cash upfront can avoid cash dilution
- Stabilise employee satisfaction without raising wages by applying agile and more meaningful ways of working
High levels of inflation undoubtedly take their toll on all involved, and it can scare businesses into taking a step back rather than pressing forwards with ongoing projects. But as we’ve established, there’s genuine cause for businesses to push towards operating in the Cloud.