Cloud economics

License to kill

Using commercial software and paying expensive licenses is old school and no longer necessary. Cloud provide you with flexibility and you only need to pay for what you use. No investments necessary.

In May I’m sure many of you, including myself, was looking forward to the release of the new James Bond film, with the famous slogan – License To Kill.

Unfortunately, due to Covid-19, this film premier has been postponed but the reality of License to Kill within IT-licenses and infrastructure has never been more important than now.

We are in contact with roughly 150 companies across Sweden every month, mainly to understand where the market is at this point of time and how we need to align to be able to meet the market with their challenges.

In the past few months the market has really changed, most companies are “pulling the handbrake” and cutting down their variable costs, freezing new initiatives etc. What comes to a surprise is the number of licenses many companies have, everything from Office365, different on-premise & cloud platforms which are based on traditional license models which are core based and very expensive.

When buying licenses, with a traditional license model, you buy a capacity up-front which you are planning to use during a longer term, usually between 1-5 years. Of course, during this period, you are able to “scale up” and purchase more cores. But overall you will always be paying for more than you need at the point of time of the purchase.

Traditional on-premise platforms when scaling will have the following effects:

  • Additional cores
  • Additional servers
  • Not fully utilized 
  • Generate additional costs

This is costing companies across the globe huge amounts of money which could be spent on better things or even in these uncertain times also saved.

Here are a few examples:

  • On-Prem infrastructure
  • Integration platforms, Enterprise Service Bus
  • API-Platforms
  • Identity & Access Management platforms
  • Service & Assessment Platforms

The list is long and most likely you are running one or several at your workplace today.

So what’s the solution?

Both from a license and an infrastructure perspective the Cloud is the obvious choice this enables you to both scale up and down. At TIQQE we purely focus on AWS and the capabilities to scaling, not paying up-front license costs, pay for what you need at this point of time are all the key points to moving to the cloud.

Ask yourself if you need to renew your licenses anytime soon. Do you want to buy more licenses or do you want a second opinion?

We have all the tools in place to quickly identify your costs today and what the costs would be if you would instead operate in the cloud.

This blog is mainly focused on a cost saving perspective but there are many more examples what the cloud provides you with.

I really recommend checking the following blogs out:

4 ways of reducing cost and increase liquidity

Tiqqe Talk

TIQQE TALK: State of the cloud

Where are Swedish organizations in terms of cloud adoption? How far have they come and are anything holding them back? Listen to Malin Andersson and Anders Eriksson giving their view of where the market is today.

The talk is in Swedish.

Cloud strategy

We all need a CFS – you too!

My own datacenter or move to the cloud? That’s the question. A “close call” some say. A “slam dunk” for the cloud I say. The question was perhaps relevant five years ago, but not today. Today the question should be; Why not in the cloud? The first step is a Cloud First Strategy. No more excuses. You have the recipe here.

There is much that suggests that a Cloud First Strategy – a CFS in TIQQE language – is the best for all companies and organizations. But what does a Cloud First Strategy actually mean?

For us at TIQQE, it simply means that if there is an opportunity to use the cloud and there are no barriers of the type of legal, technical or unreasonable customer requirements, then it is the cloud that rules. Pronto. Period. Basta! When you five years ago had to argue repeatedly to move something in to the cloud and often got a NO. Today it should be just as difficult to get a YES to stay in your own data center without overwhelming evidence that it benefits the business and facilitates the customer experience.

Classic arguments against the cloud that it is expensive and that the cloud is not secure are today arguments that should be heavily questioned when presented. TIQQE has covered these two arguments, opinions or myths into two blog posts; Is The Cloud Secure? and The Cloud is Expensive.

If we go back to the question posed above; What does a Cloud First Strategy actually mean? In this blog post I will sketch the foundations of a Cloud First Strategy (CFS). All a result learned together with our customers over the years.

The CFS (and for the last time – Cloud First Strategy) is by nature something to follow when creating some new systems or services or when refactoring older legacy systems or services. It’s an important strategy to have when moving away from an on premise IT environment, to a cloud-based one. It helps to manifest ambition and direction and give guidelines in decision making. But it also stands entirely on its own for new development of systems and services. Whatever the case, it is an important tool for establishing a Cloud First mindset and point out the direction.

When creating your CFS, it is basically one question that must be answered first. It is about the degree to which the new service or system has the potential to differentiate you (give you competitive advantages) in the marketplace vis-à-vis competitors and other industry players.

In a CFS, there are two principles that will guide you in finding the answer on that question. If the service or system you consider to develop or want to refactor:

  • does not differentiate you in the marketplace, you should choose to BUY SERVICES IN THE CLOUD to solve the task (so-called SaaS – Software-as-a-Service)
  • differentiates you in the marketplace you should choose to BUILD IN THE CLOUD to create your own ability to focus on the business benefit and the power of innovation in your business that the cloud provides

As stated above, there are two different ways to answer the question. But both paths lead to the cloud. A true CFS. But a CFS cannot work in a vacuum. It must also work for companies older than ten years and who were not cloud native when founded. To supplement, some type of guidance is needed in order to help making the right decisions. This priority staircase can look like this. It is listed in the order you should consider the different options when making decisions.

  1. SaaS (Software-as-a-Service) – Always start with this option and choose a SaaS solution for the system or solution you are considering if it has no potential to differentiate you in the marketplace. The SaaS option is the preferred alternative for non-market differentiating applications. Can be about internal support systems for standardized processes as well as parts of solutions that are close to customer experience but which have no potential to make the customer experience unique.
  2. Greenfield – This is the preferred alternative in the CFS when you considering systems and solutions where building unique customer experiences has a potential to differentiate you in the marketplace. Best done by building directly for the cloud with agile development methods and self-sufficient DevOps team. All in order to maximize the innovation speed and utilize all the benefits of building for the cloud and create agility and resilience towards market changes.
  3. Data Center Expansion – Applications developed by teams that need operational support or where close integration with on-premises is needed. The expansion in to the cloud is the preferred choice in this alternative.
  4. On Premises – Only an option that shall be considered if there are legal, technical or customer requirements that makes it impossible to utilize the cloud. An advice is to see this alternative as the last resort. Requirements can be discussed with the other parties in general.

By basing a CFS on the above principles and priorities, we capture not only the appealing features of the cloud that Cloud Native companies benefit from all ready from start, but also the complexity that every organization has that was not founded when Cloud Native was the tune.

For me, it is obvious that every organization that wants to be relevant in their marketplace in three to five years must have a CFS established. Why not do it now and take the lead in your market today. Instead of standing left behind when the train leaves the platform! No excuses. You have the recipe above!

Customers

Welcome NEVS to TIQQE!

NEVS, or National Electric Vehicle Sweden, is dedicated to fight climate change by not only providing electrical vehicles to the global market but also reducing the number of vehicles on the planet, e.g. by shared autonomous taxi pods. TIQQE will provide expertise in how to design and set up the cloud architecture for an end-to-end solution to connect the taxi pods with the user interface. We’re looking forward to work with top engineers in Trollhättan for the purpose of a better world for everyone.

Everyone in Sweden knows about the bankruptcy estate of Saab which was acquired by NEVS in 2012. NEVS is part of the Evergrande Group, ranked as number 138 on the Fortune 500 list of top global companies. The reason why NEVS exists is to fight air pollution, congestion and climate change according to NEVS vision – shape mobility for a more sustainable future.

NEVS is now executing a plan to bring the vision to life by building shared autonomous electrical vehicles which will be introduced to the market within the next few years.

TIQQE will develop and build a scalable and well-architected cloud infrastructure based on state-of-the-art serverless technologies and high-level cloud services. The infrastructure will serve as the backbone when monitoring, controlling and connecting the physical vehicles and the end-customers mobile apps as well as third party service providers in a groundbreaking consumer service.

Cloud economics

“Cloud is expensive”

This is a common opinion among IT managers today. In this post, we will discuss and compare on-prem costs vs. cloud from a more holistic perspective.

We talk with a lot of customers in our outbound sales activities and two of the most common opinions about the cloud is that it is not secure and it is more expensive. We will cover the security aspect in another post and focus this one on the cost part of cloud vs. on-prem.

Is cloud more expensive than running a datacenter on prem? It is not a simple question to answer and there are no generic answers, it depends on a number of factors and the comparison is not a simple task. Several factors needs to be taken into consideration. However, the fact that the majority of the IT managers we talk to consider cloud more expensive shows that the market is still in its early phase.

When asking a couple of follow up questions, it turns out that the comparison often consists of comparing the cost of a server with a similar specified workload in the cloud. That is a too simplistic comparison and the cost of a server needs to be put in a wider context of IT cost structures. When buying a workload from a public cloud provider, a lot of things are included in the cost such as:

  • Facilities
  • Electricity
  • Cooling
  • Support team
  • Insurances (business interruption)
  • Decommissioning, migration and disposals
  • Capacity planning headroom
  • Inflation
  • Discount rate (Internal Rate of Return)

A typical comparison of server costs (red) vs. cloud workloads (yellow). Cloud turns out to be much more expensive

Source: AWS Cloud Economics

A full cost comparison between a datacenter and cloud shows a different picture. Cloud is usually between 30-50% less expensive.

Source: AWS Cloud Economics

Even if a server is cheaper than a similar specified cloud workload, cloud is still more cost efficient than running a datacenter when considering all related IT costs.

Besides lower costs, there are other financial benefits for an organization to move to cloud, for example tied up capital and cashflow.

Cloud providers practice a subscription based business model which means that customers do not need to invest in infrastructure. Almost every organization today have infrastructure which is treated as inventories and an asset in the company balance sheet. The capital tied up in infrastructure could be used for more revenue generating capital investments instead of taking on more debt. There are also rumours around the accounted value of infrastructure assets. Some argue that as cloud providers continue to gain market share, infrastructure in datacenters will be valued less in an event of a financial audit. I can’t find evidence that proves that such a valuation is in practice but it doesn’t seem unrealistic in the future, outdated technology are simply valued less.

From a cashflow perspective, cloud services do not require any upfront investments such as refreshments of infrastructure or software which will have a positive impact on cashflow.

To summarize; yes, a single server is usually cheaper than a similar workload in the cloud but from a holistic perspective, taking all costs into consideration, cloud is much more cost efficient. According to our own experience when engaged with customers, we find potential savings of around 30-50%. Combined with capital and cashflow benefits, all companies should evaluate a transition to cloud.

Besides costs, another common opinion about The Cloud is that it’s not secure. Read Kennet Wahlbergs blog post “Is The Cloud secure?”.