Don't Shortchange Your ROI Evaluation Of Mission-Critical Applications In The Cloud

Allan Adler

In the age of digital disruption, you don’t just want to survive. You want to thrive. Change comes fast in today’s business world. Go-to-market timelines are shorter than ever. New competitors appear out of nowhere and threaten your market share. Disruption is likely redefining everything from your business model to how your teams plan, collaborate and execute on business strategy. Amid this shifting landscape, it’s essential to evolve – and a heightened focus on your company’s agility, innovation, and speed are critical.

In this climate, the risks around cloud are the opportunity costs of not leveraging its benefits, particularly for your application landscape. However, deciding how to leverage cloud must be based on balancing value against the total costs of doing so.  The benefits include making critical business information accessible more quickly and reliably throughout your organization, enabling better collaboration and decision making, enhancing business processes, and accelerating innovation. You don’t want to shortcut this analysis.

It’s not if you move to cloud, but when and how fast

Let’s say you’ve already decided to shift your SAP business application landscape to the cloud, and now are evaluating how to do it efficiently and quickly. You’re living in the real world, focusing on time to value. Software as a service (SaaS) is an option for some, but if you decide that SaaS doesn’t meet your requirements, you have three broad deployment options to choose from:

  1. Raw infrastructure as a service (IaaS) + in-house management
  2. IaaS + leveraging a system integrator for technical and/or application management
  3. Private managed cloud – A complete environment for managing your SAP application landscape

Avoid comparing apples to oranges

Private managed cloud has many additional benefits compared to IaaS – so many, in fact, that using a basic cost-focused TCO analysis to evaluate your cloud options turns out to be problematic at best. A TCO-focused analysis often ignores the differences on the value side of the equation. It’s like comparing apples to oranges. You want to avoid this trap, as it will end up shortchanging you on the value side of the equation.

With that in mind, how should we compare and evaluate these options?

Leverage an ROI-based evaluation framework with an emphasis on value

First and foremost, focus on benefits, value, and ROI – where cost and value are considered together – not just on cost or TCO. If all you consider is how much money you might save, you’ll miss something critical, because it’s more about capturing new value and doing so quickly with cloud-enabled capabilities that drive innovation, speed to action, and bottom-line results. Therefore, in evaluating your cloud options, keep your focus on time to value and the total business value that’s being generated.

IaaS provides basic cloud benefits

With IaaS, you get the cloud benefits of not owning and maintaining hardware, but don’t underestimate the management burden and the scarce IT skills still required for success. You – or your systems integrator (SI) – will be responsible for landscape sizing and design and will need to install, configure, maintain, patch, and update both the OS and all applications. Often these IaaS “exceptions and overruns” drive up costs unexpectedly and significantly.

Beware of the ping-pong escalation dynamic

IaaS relieves some IT management burden and provides a shift from CapEx to OpEx, but application-level management and critical service-level agreement (SLA) problems remain. Namely, how important is your business continuity and your ability to quickly pinpoint and correct serious problems when they arise? With IaaS – whether using in-house staff or an SI – you’re left with unconsolidated SLAs and no guarantees. When a problem hits, you get stuck with an escalation between partners or teams, each pointing a finger at another. This is called the ping-pong escalation dynamic. It’s painful, expensive, and should be avoided. It can compromise much of the value that business stakeholders expect from their move to cloud.

The private managed cloud option

As with IaaS, private managed cloud delivers basic cloud benefits, but it also delivers a more comprehensive solution that coordinates and manages multiple levels of your solution. This eliminates a significant technical and application management burden beyond what IaaS delivers. And you get it all from one provider with one SLA. Don’t underestimate the value of this in today’s resource-restrained – yet speed-to-value oriented – environment.

An ROI, value-focused perspective leads many to the private managed cloud option. Then the question turns to what offering is best for your environment?

Learn more about how to best evaluate your private managed cloud options

Watch the webinar to learn how organizations like yours are making the right choice.


Allan Adler

About Allan Adler

Allan Adler is managing partner of Digital Bridge Partners, where he develops and executes digital business innovation, value networks and ecosystems, and go-to-market strategies for leading industrial and technology companies including SAP. Allan’s work and thought leadership help clients refine their innovation cultures and practices, build profitable business ecosystems, and develop winning go-to-market strategies.