So You’ve Decided to Manage Your IT in the Cloud? 4 Key Preparation Tips You Need to Know
If you’ve made the decision to move your business’ IT to the cloud — congratulations! That’s a big decision. Now get ready for the actual deployment process, which requires preparation and research. As Director of Business IT services at RingCentral, I learned a great deal from our IT migration to the cloud. Below are my four main tips for a successful roll-out.
1. OpEx vs CapEx. Make sure you understand this.
The big financial question for businesses boils down to capital expenditures (CapEx) versus operational expenditures (OpEx): CapEx are business expenses to acquire or upgrade assets, e.g., buying IT equipment, and OpEx are the ongoing costs of running a business, e.g., employees, facility costs, and other expenses. There is much debate about which model costs more in the long run. But here’s the reality: IT infrastructure depreciates over time; depreciation is the natural life cycle for most technologies. Those days are long gone when businesses had deep pockets and wanted to own the infrastructure for longer-term returns. Nowadays, CFOs love moving numbers from the CapEx to the OpEx side of the balance sheet because they can control the OpEx spending based on business growth. CIOs like this, as well, because OpEx is seen as the cost of running a business — not an IT investment. It’s a lot easier for a CIO to get funding when it’s an expense for generating additional revenue. A few years ago, it was very hard for a CIO to do that since there were not many options available for renting infrastructure/services. But now, cloud/SaaS/IaaS/ASP are so readily available that it has merely become a matter of vendor selection and extensive research.
2. Cloud vendor evaluations and negotiations. It’s “really” different.
Do you have an experienced vendor management team savvy enough to handle SaaS pricing structures, contracts, overage, flex-up pricing, etc.? If not, it’s going to be your responsibility to know all this. Better get your pencils sharpened.
Make sure you go through vendor evaluation and due-diligence with multiple vendors. A service provider that works for your friend’s company doesn’t necessarily mean a good fit for your company. Take your time before locking yourself in with a vendor for a multi-year contract. Unless you are more than 150% sure that your usage/seats are going to grow in the coming years, do not sign a multi-year contract. But if you are sure about your growth, you can get very heavy discounts upfront by signing contracts. Check if the vendor is including premium support that you don’t need. If it’s a mature vendor and their solution is flawless, they shouldn’t have to sell premium support to their customers. Most of the time, standard support is enough and free. If you want to play it safe, try to negotiate premium support upfront in seat pricing. They may give it for free for the first year. Lock your flex-up pricing for the future growth in usage. Service providers mostly have tiered pricing structures based on volume. Don’t forget to negotiate flex-down percentage without penalty. Make sure you understand auto-renewal implications and note the requirements for termination. Annual pre-payments are very common in a subscription-based business model. Try to get the maximum discount if you are paying upfront for the whole year. Sales people love to take payments upfront and are always ready to throw in heavy discounts. They have their own personal interest indoing so, if you understand how sales commissions work.
3. Integrations of Cloud Services:
SaaS vendors add tremendous value to the business upfront with a short implementation cycle and minimum effort. Over time, when you have too many vendors, you — “the IT guy” – will start losing sleep. Your information is scattered across multiple systems, data integrity is at risk, your users can’t make any sense of the data since you lost that “single source of truth.” And when you start thinking of SOX and PCI compliance, you almost want to go back to on-premises based solutions. But wait, you haven’t realized the power of the cloud yet. There are vendors who provide integration platforms that sit between SaaS applications and provide you SOA-based integrations. They just multiply the value-add that was already provided by individual providers. These integration services vendors have out-of-box adaptors for many SaaS applications and they provide you flexibility to customize them well. There are numerous ESB (Enterprise Services Bus) open source platforms in the market, as well, that you can implement on your premises to connect multiple cloud-based applications. So, as long as you have your data models defined between systems, you don’t have to worry about a single source of truth.
4. Does your IT team see the cloud as a threat?
This is the most talked about topic since on-premises systems started moving to cloud. You probably have read enough about this already but read further because you want to make sure you and your teams are successful.
It all starts with you as the IT leader. Do you think of it as a threat to your own job? You don’t know? Better get an answer to that before you shift the whole team mentally towards cloud services. You have to be a big proponent of the cloud and be the “why not” person on the team. Build the cloud vision for your team and bring it up as often as you can. They need to see your three-year roadmap to understand why on-premises systems should be moved to cloud and why you still need your team’s help to make that happen.
Align with individual business units more tightly and understand where they are headed. In a few years (and this is already happening), each department is going to have their own little IT team. Remember, if it’s OpEx, it comes out of each individual department’s budget. Make sure you are on that bus or else you will be left behind. I am not saying there will not be a job function for CIOs in future. All I am saying is, CIOs will be more like a business services provider than a technology owner. Business teams do not understand how to enable processes cross-functionally, integrate all the cloud-based applications, make them single sign-on, provide business metrics out of multiple systems, get SOX or PCI compliant,or how to secure their data. I can keep going with the long list of business requirements where IT plays a very critical function in a company. It’s just the approach and perspective that need to be changed.