Fifty of the world’s largest software vendors are losing $100bn in market value from costs of running their applications on public platforms rather than custom-built or private infrastructure – so says the report co-authored by Sarah Wang, a partner at the famed Silicon Valley VC Andreessen Horowitz, also covered in Reseller News.
The report cites Dropbox as an example of savings possible when workloads are “repatriated” (AKA returned) from the public cloud to custom-built infrastructure. Dropbox saved nearly $75m over two years by shifting most of its workloads from public cloud to “lower cost, custom-built infrastructure in co-location facilities,” the article claimed.
Their analysis adds further weight to a recent argument that public cloud infrastructure is often pricier than custom-built infrastructure.
Yes and no.
The first thing to acknowledge is that few, if any, New Zealand companies operate at the scale of the world’s top-50 software vendors.
The reality is, price economies enjoyed by big hitters, such as Dropbox, simply aren’t available to most local businesses who, in any case, don’t have the luxury of retaining in-house skills and resources necessary to build, deploy and manage custom or on-premise infrastructure.
Plus, let’s not forget that the success of Dropbox today rises on the scale and flexibility of public cloud infrastructure, which was only later scaled back in favour of custom infrastructure as the company’s size made it feasible to do so.
While head-to-head assessments of raw storage unit pricing often favour so-called custom-built infrastructure, such analysis can overlook costs associated with management, upskilling, and continuous modernisation to maintain ‘evergreen’ infrastructure capacity.
In any case, the cost of raw infrastructure is a fraction of overall IT costs. Comparing unit prices alone risks missing the wood for the trees – and the bigger opportunity to scale, flex, develop, and release new products and services to market faster. Sure, tin might be cheaper when it sits on-premise, but when you get to work with an entire stack offering templated workflow and built-in automation per unit costs savings pale in significance when so much value goes begging.
If we dig a little deeper, we see that yes, while cloud repatriation is a growing trend in some contexts, cloud platforming continues to grow itself.
When it comes to cloud usage, there are a lot of different numbers flying around, but this should be contextualised in the Asia Pacific, where reports show public cloud use on the rise – 60% of organisations are already using, or piloting, hybrid cloud, and 31% plan to use it within 12-24 months.
Almost all enterprises have a multi-cloud strategy already in place or in the works, but technical debt and a shortage of skills are also sizeable barriers to the level of movement to public cloud.
Reports from APAC confirm that agility is best delivered with industry collaboration and working with knowledgeable external experts. To overcome barriers in complex environments, organisations must work with the right environment that securely hosts their mission-critical business applications. They’ll need to work with partners who get the industries they’re in to ensure right-sizing and compliance.
Clearly, there are no black and white answers when it comes to running IT or evaluating one delivery model over another. The public cloud is by no means the only option, but ultimately decisions will have to take into account the full business and social picture.
Yes, you may pay slightly more on infrastructure for the privilege if you go public cloud. But the inherent scalability and flexibility of public clouds make it easier to respond to changing priorities, sync critical capacity with fluctuating requirements, access emerging technologies, and try new things. Enabling digital transformations and delivering efficiency in operating model and release cadence is certainly enhanced by the public cloud ecosystem.
Add sustainability targets and security as key factors to consider in today’s business cases, and public cloud should still be very compelling. Equally, when you get to a business or workflow size that produces significant infrastructure workloads, and when you can invest in the capability to run and optimise those workloads, it may be that the public cloud loses its shine from a pure infrastructure economics standpoint.
In this case, ensure the benefits case is based upon more than just infrastructure economics and keep an open mind on the optimal motivation that will guide you towards the best business outcome.
The main point? Any business should be geared towards dynamically right-sizing their different workload elements. Still, unless you have the rare privilege of business scale and investment capability of a global heavyweight, most New Zealand businesses are likely to have a strong business case for the continued adoption of public cloud.
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Mike Walls, Director Cloud Transformation, Leaven