Chasing Those Elusive Cloud Cost Savings

Government organizations, just like many enterprises, have not been immune to the lure of cost savings as a top reason to move to the cloud.

Cloud costs

I’ve worked in federal IT for 10 years, and enterprise IT for nearly 20. In that time, IT has always been expensive; therefore, finding value has always been critical.

But a strange thing happened when cloud became mainstream: cost savings became the de facto justification and impetus for cloud adoption.

This is odd and ironic for a number of reasons, but perhaps the strangest is how unique this pattern is to this industry, and even this specific technology. Never before in my career has the primary rationale for adoption of a new technology been simply, “cuz it’s cheaper!”

In fact, for a large portion of my early career, IT professionals would often shy away from the cheapest option, opting for time-tested brands and technologies, and have no problem paying a premium for them. ‘Nobody ever got fired for buying IBM,’ was more than a catch-phrase, it was a truism.

I have now worked for several small technology companies, and if we actually managed to get in front of the CIO or Director of IT, inevitably the question came up, “How can your wares be any good if you’re so much cheaper than _____?” Costing significantly less than the competition was a red flag.

We’ve been taught this our whole lives. Well beyond IT, it’s a conditioned response for most of western civilization. We all know the adages: Cheaper isn’t always better. You get what you pay for. If something sounds too good to be true, it probably is.

We almost universally accept these as true… but then cloud came along. (For the sake of argument, we’ll avoid the question of whether cloud is really anything new.)

IT is getting so expensive!

Anyone who was in enterprise and/or government IT in the late 2000s and early 2010s can probably remember this time vividly. One day, everything was normal, you were going about your business, buying servers, selling servers or using servers, when you got pulled into a meeting with senior IT management. ‘Why is this stuff so expensive? I just went to Amazon, and I can get almost the same thing for just 20 cents an hour.’

Even at the time, you probably recognized that statement for what it was: a dramatic oversimplification. You likely engaged in a total cost of ownership discussion, agreed it was not quite that simple, and went back to business as usual.

But then a few weeks later, you probably found yourself in an eerily similar meeting, having almost the same exact conversation. But this time there were graphs. Not the high-quality marketing kind, but the Jack-in-accounting-straight-out-of-Excel kind. “Total IT Spend” was up and to the right. “Infrastructure Spend” was up and to the right. More and more money was being spent on technology, and this didn’t sit well with leadership.

A few years ago, I wrote a blog post about how “IT” had become a lie. I argue now that this period of time was actually when “IT” (as a specific discipline) died. The balance of mission and technology flipped. More things were entirely dependent on technology than not. So of course “IT” spend was rapidly increasing year over year; “IT” at that point was no longer an enabling function of some processes, it WAS most processes.

Reduce costs by moving to the cloud!

After several of those meetings I mentioned above, it became clear which direction everyone was heading: we’re going to save a ton of money by moving to the cloud!

Now I don’t know exactly when it happened, or how, but somewhere along the way the talk track diverged significantly from the data. I’ve literally been going back through studies and contemporaneous research, and from everything I can tell, the data was presented fairly and accurately. Every publication, industry analyst and even the cloud vendors themselves were clearly stating that cloud CAN reduce your TCO, IF you do several general things: rationalize what you currently have, reduce dependency on software licenses, reduce staff, increase automation and scale for steady-state instead of peak when you move to the cloud.

Maybe there was a rampant case of selective hearing and reading at the time, because that message was more often than not reduced to:

… reduce your Total Cost of Ownership, IF you do several general things: rationalize what you have currently, reduce dependency on software licenses, reduce staff, increase automation and scale for steady-state instead of peak when you move to the cloud.

When I joined AWS in 2013, it was right when the federal government started to take the whole “cloud first” thing seriously. In every meeting I had with a prospective AWS customer, when asked why they were considering AWS, the answer was without fail to save money.

Where are the savings?

Fast forward five or six years, and most of us now have a number of cloud migrations under our belts, and we’re hearing a lot of grumbling over the smaller than advertised savings in the cloud. In some cases, it’s more than grumbling, because it’s not just smaller than anticipated savings, it’s cost overruns and busted budgets. What went wrong?

Remember the actual promise? No, not the promise we thought we heard. Not the false premise sold to our IT organizations and leadership. The FULL promise: IF you do several general things (rationalize what you have currently, reduce dependency on software licenses, reduce staff, increase automation and scale for steady-state instead of peak) cloud CAN reduce your TCO.

Did we do any of the prerequisite tasks? Did we rationalize our current IT real estate? Did we reduce our software licensing? Did we increase automation and reduce our staff? Did we scale for steady state versus peak? It seems that in just about every government or private sector enterprise cloud scenario I am brought into, the answer to most or all of the above has been the same: no.

Don’t feel too badly. Your organization’s faulty “save a lot on cloud” plan was not unique, it was SOP: let’s move everything we currently have into the cloud, change nothing and reap the rewards.

The reality? Surprise, surprise, your environments in the cloud cost roughly the same as they used to. You took every single server you had in your data center and bit-wise copied them to the cloud. You retained every single commercial license, and in some cases (I’m not naming names), you ended up paying twice as much for the same license. You didn’t automate anything; instead you leveraged the same manual processes you used in your own data center, because [un]fortunately for you, you still have access to 100 percent of the same people doing the exact same jobs.

The good news? It’s never too late. I promise you, cost savings are actually achievable in the cloud. You can adjust course and begin to realize those savings at any time. But you do need to actually do all of those other things in order to realize those savings.

And the truth is, you may need guidance from a new source. The traditional contractors the government has leveraged for years have access to the same finite talent pool. They may not have the expertise on the latest cloud technologies or automation available. Furthermore, they may actually have a vested interest in maintaining headcount, and so are not providing an unbiased perspective on how to best write a truly modernizing cloud contract.

IT Modernization-as-a-Service across leading cloud technologies

If your organization is looking for help, Rackspace can assist. We offer expert guidance within the framework of the Modernizing Government Technology Act. Government organizations are confronting a daunting task: pursuing a “cloud-first” digital transformation in the face of complex, longstanding legacy technology and contract challenges.

By turning to Rackspace, you get a team of unbiased experts across a range of leading cloud and infrastructure technologies — built on a compliance-ready framework and backed by ongoing managed operations, continuous monitoring, security services, living compliance documentation and audit assistance. We are a web-scale managed service provider, delivering 24x7x365 hybrid-cloud management, operational support and security services as a packaged, on-demand, audited and pay-as-you-go service. You get the same commercial services that power the Fortune 100, in a compliance-ready state, with the additional security controls and governance necessary for your unique mission.

With our help, Rackspace customers readily achieve the elusive cloud savings everyone is seeking.

Brad Schulteis is Director of Government Solutions. Previously, he served as Principal Architect and security specialist for Rackspace. He has over 15 years of enterprise IT expertise, across the public and private sector. He previously worked at AWS World Wide Public Sector, supporting some of their largest US federal government customers. Prior to that, he served for many years in a staff position within the Department of Defense, managing all aspects of their private cloud computing platform. Brad's work on this platform earned him a DoD Value Engineering Award, Special Act Award and Joint Meritorious Unit Award. Concurrently, he served on many government IT transformation working groups and study committees. He has a proven track record of working with complex requirements and driving change throughout large IT enterprises. Find Brad on LinkedIn.


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