A red wind vane against a blue cloudy sky

Five ways companies are measuring cloud returns

Authors

  • Amr Ahmed

    EY Americas Infrastructure, Cloud & Service Resiliency Practice Leader

  • Bart Gourley

    Managing Director, Infrastructure & Service Resiliency Consulting, Ernst & Young LLP

6 minute read 04 May 2023

Highly effective strategies for increasing cloud ROI that boost bottom lines.

In brief
  • Companies can monetize cloud savings by modernizing workloads, optimizing spend, improving resiliency, transforming operations and enabling green IT initiatives.
  • CIOs following these strategies can reap cost savings to reinvest in strategic programs that drive revenue and innovation.

Highly effective strategies for increasing cloud ROI that boost bottom lines.

As more companies forego local on-premises models in favor of cloud solutions, they are becoming increasingly focused on driving cost savings and finding innovative strategies to increase cloud return on investment (ROI). While some of these IT decisions may come with an initial higher price tag, chief information officers (CIOs) can mitigate many of these expenses, quickly realize savings and measure ROI through these five practical tactics.

Practical cloud tactics to drive ROI

The following strategies highlight leading methods to measure and realize the value of cloud services.

How EY can help

1. Modernizing with cloud-based workloads

 

Companies today are increasingly focusing on driving cloud ROI through the modernization of workloads. A cloud workload could be an application, service, capability or any specific process that is run on the cloud. While many companies start with a “lift and shift” approach when migrating workloads to the cloud – simply taking their on-premises system and moving it “as is” to the cloud – they quickly find that this usually ends up costing more due to ineffective resource allocation. Instead, cloud-based workloads need to be rewritten or refactored to optimize their usage of and spend for cloud resources. For example, a modernization may entail decomposing a legacy workload into a specific cloud service component like storage and then applying programmatic changes to better support resource auto scaling, auto management, lower cost and/or dynamic storage options, as well as many financially optimized capabilities. Modernizing workloads to be cloud-native saves money, and ultimately creates workflows that are streamlined and dynamically scalable for the entire enterprise.

 

2. Optimizing IT spend with cloud FinOps

 

While one area of potential IT savings is cloud workload modernization, another area of focus is optimizing the cloud spend itself. As a company’s assets increase in the cloud, the financial management of those resources becomes increasingly important. Cloud financial management/operations (FinOps) is a rapidly evolving industry discipline that focuses on adjusting and optimizing cloud resources and spend through levers such as contracting, reporting, waste identifications and various trend analyses. Additional common levers include methods such as provider contract and reserve unit management, elimination of idle, stopped and deprecated resources, and instantiation of cost optimized enterprise and solution architecture patterns for application development.

Further, companies are investing in FinOps tooling to gain monitored insights into spending. This helps manage cloud costs daily vs. monthly or annually. Selected FinOps tooling integrates with cloud platforms and provides 360° perspectives on spend and opportunities for optimization. By deploying these tools, they can yield significant cost savings without compromising service delivery. There is frequently more than one FinOps tool deployed within companies given the diversity of analysis that are performed to optimize spend.

 

3. Improving business resiliency via well architected cloud environments

 

While you can plan for some costs, many are unexpected. However, well architected cloud environments improve resiliency and reduce expenses associated with unplanned outages, cyber events and other ecosystem disruptions. As a result, cloud-friendly organizations are adopting more stringent standards that include evidenced programmatic restoration (Recovery Time Objective and Recovery Point Objective) capabilities, mandatory auto scaling, vaulting for keys, immutability of their data stores and more robust policy automation.

 

One of the key drivers in resiliency improvement is the growing frequency of cybersecurity incidents. Destructive attacks such as ransomware are on the rise and can frequently cause an interruption of two to three weeks with significant productivity and reputation loss. In 2022, more than 60% of on-premises model outages cost companies more than $100,000; a sharp increase from 2019, when 39% of outages cost that much. Also notable is that 15% of those with an on-premises outage will cost a company more than $1 million.¹

In 2022
of on-premises model outages cost companies more than $100,000.
of these outages cost more than $1 million.

Cloud capabilities can help by offering programmatic platform native data protection, cybersecurity controls and capabilities. This allows organizations to improve their proactive and reactive postures while reducing business impacts.

Another way organizations are improving resiliency is by adopting new business and technical operations support postures. One example is a Software-as-a-service (SaaS) before Platform-as-a-service (PaaS) before Infrastructure-as-a-service (IaaS) approach. Failure to patch and/or maintain fleet servers exposes an organization to greater cyber risk. Moving away from self-managed on-premises or IaaS fleets to more cloud-native PaaS and/or third-party cloud-hosted solutions can reduce support costs and improve security posture depending on the organization’s current state.

We have helped 12 companies over the last 16 months in rebuilding environments from scratch due to ransomware attacks. Neither cloud nor on-premises environments are immune to ransomware attacks. However, cloud provides significant protection advantages and recovery options. Also, the speed of rebuilding and recovering in the cloud is easier and faster, especially if organizations don’t have the right level of infrastructure technology and security resources and tools.

Amr Ahmed

EY Americas Infrastructure, Cloud & Service Resiliency Practice Leader

4. Transforming operations with AI Ops and cloud-based observability

The cloud was built on automation and has numerous programmatic interaction capabilities. Organizations can leverage these interaction capabilities to drive significant operations savings and value with the adoption of Artificial Intelligence Operations or AI Ops built around their cloud observable estate. AI Ops and observability have the potential to transform business operations through predictive and reactive workflow maintenance automation that proactively avoids system outages, improves system availability and reliability, and decreases an organization’s reliance on maintenance personnel.

In addition to AI Ops, organizations are also leveraging cloud native, custom and commercial tooling to automate their platform service/governance operations and software delivery pipelines. Some of these tools integrate with AI Ops platforms and/or are extended by them. These tools seek to automate governance, policy and procedure decision-making and help IT teams avoid, find and fix issues faster, as well as gain actionable insights, increase response time and make more informed decisions.

The ease and level of automation with which an organization’s internal IT staff operates its cloud directly impacts its cloud ROI. Employing cloud-connected managed services to accelerate, manage and operate cloud capabilities is another lever being employed to improve ROI. These managed services are increasingly being designed to focus on disciplines with high skill gaps like cybersecurity and consumer data regulatory compliance. Having a managed service pre-equipped with these and other hot skills can be a significant time savings.

Lastly, given the complexity of technology environments and the extreme number of endpoints, apps, compute, workload, data and interactions, it is more important than ever for automation solutions to run on large, observable data sets. Organizations are investing in observability of “the estate” to generate the data to allow both deeper predictability, cross-app data sharing and self-healing. Answering the collective question of “how do I know what is happening in my technology environment” is driving significant strategic change and ROI within the industry. Having the answer to the question can translate into resolving outages long before they are impactful.

5. Enabling green IT initiatives

As the market and company boards are increasingly focused on environmental, social and governance (ESG) initiatives, cloud attributed impacts to green IT are increasingly being tracked. Organizations are finding that cloud services can provide accretive benefits to carbon footprint reduction through means such as reduced e-waste, greener electrical consumption and more efficient water usage. All these sustainability factors add another layer to cloud ROI.

Another key ESG benefit of cloud services is its ability to help companies reduce their electricity usage. There is a one-to-one ratio when a company runs on the cloud, meaning there is zero wasted electricity. An Ernst & Young LLP client even reduced their energy consumption equivalent to 800 homes. Certain cloud providers can also help businesses be more transparent and track information such as their carbon footprint using cloud data exports that track direct and indirect emissions.


Summary

With many companies now well entrenched in the cloud, an ROI focus will only become more important to CIOs and CXOs. Focusing on workload modernization, spend optimization, resiliency, operation transformation and green IT initiatives will continue well into the future as these leaders are tasked with demonstrating more return from their cloud investments. CIOs can play an important strategic role tying budget savings to IT spend to in turn boost their bottom line.

About this article

Authors

  • Amr Ahmed
    EY Americas Infrastructure, Cloud & Service Resiliency Practice Leader
  • Bart Gourley
    Managing Director, Infrastructure & Service Resiliency Consulting, Ernst & Young LLP
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Technology

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