3 Cloud-related funding priorities while preparing your 2022 IT Budgets

Anil Mudumbi
October 11, 2023
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It is important to set the context that organisations will likely be operating under 2 key trends bear capturing:

End of the Pandemic:

There are differing opinions about the end of the pandemic. According to a poll of Senior Executives by McKinsey, due to the availability and effectiveness of vaccines, the peak probability of herd immunity is by the 2021 year-end. This optimism is reflected in a recent EY survey with an expectation that some western countries such as the UK are ‘set to grow at the fastest rate on record’ 1 with a return to its pre-pandemic size by Q2 2022 – three months earlier than forecast.

However, many other experts 3 are less optimistic with expectations of another wave in the winter of 2021. These tempered down expectations are based on current information of variants as there are lots we don’t know about them. For instance, we don’t know if the Brazilian variant will be a summer variant throughout the northern hemisphere; how much reinfection might occur post-vaccination; and the pattern of waning immunity that might arise in the winter of 2022.

The University of Washington has published some projections taking into account some assumptions on these unknown factors. If their assumptions hold true, the end of the pandemic is later than currently assumed by many Executives. For details see the graphs below.

The emergence of the ‘new normal’The emergence of the ‘new normal’

The ‘new normal’ for IT appears to be hybrid in every sense. This can be broken down into the following aspects:

Hybrid Working: While the CIOs and CTOs of most organisations have become attuned to managing global teams operating from multiple centres of excellence, they’ve had to further extend this model by rapidly adjusting to remote working on a full-time basis. While a return to the office for some staff is expected imminently as government restrictions ease, many firms are ramping up for a significant return of their workforce to the office. However, recent surveys reveal that nearly 65% of the workforce expect to have more flexibility in their work location and work hours even after the pandemic – with some organisations planning to accommodate such flexibility. 6

“There was a time when I could see all my staff and everything we owned. Now, I’m lucky if I even see every 10% of the staff that works for me or 10% of the infrastructure we supposedly run” – Global CTO, PE firm

Hybrid Technology Architectures: While there was a steady adoption of Cloud-based technologies pre-pandemic, this accelerated during the pandemic. As organisations grow increasingly comfortable with the Cloud, as per Gartner’s research, most enterprises are expected to have a hybrid architecture as the norm – with a combination of on-premises and cloud-based deployments; and a multi-vendor cloud approach increasingly becoming the norm. However, there are 2 challenges with the hybrid technology architectures that the C-level need to be aware off 4

  • Over 50% of Cloud spend is wasted or exceeds budget as per an
  • Over 50% of the Cloud’s value is derived from IT & Business Operations Cost Savings

What can CIOs do?

Given the uncertainties on the exact timing of the return to normalcy and what this ‘new normal’ looks like, CIOs need to prioritise funding for a few initiatives:

1. Improve agility by adopting a new Business-Technology Operating Model 5

The pandemic demonstrated how agile businesses were able to respond quickly and effectively to market conditions. Companies need to take this a step further by organising groupings that unite business, technology, governance, process, and people management. These agile, quickly moving modular platforms should be run by a platform owner who takes end-to-end responsibility for providing a solution and operating the platform as a service – clearly, this involves more than moving development teams to agile product models.

This cohesive unit embeds Cloud-based digital technologies with agile operational capabilities in an integrated approach to rapidly accelerate digital strategy and transformation.

2. Budget for containerisation/re-platforming of applications

Moving applications to the Cloud through a simple lift and shift exercise rarely results in cost savings. There is a simplistic assumption in most Cloud business cases that migration applications to the Cloud results in Infrastructure cost savings – however, most enterprises tend to ignore the fact that any cost savings derived is offset by the additional security and networking costs involved in connectivity to the IaaS vendor that otherwise wouldn’t have incurred.

To achieve the promised savings that the Cloud offers, traditional applications need to be re-engineered to become more like Cloud-native applications that take advantage of Cloud technologies such as elasticity and scalability through improved deployment architectures.

A high-level overview of Kubernetes deployments 7

3. Cost Control for hybrid IT

The current toolset available in most organisations is either quite rudimentary in their measures as Financial Ledgers measure IT costs at the cost-centre level or provides in-depth (and sometimes biased) metrics of just the Cloud-related spend.

CIOs and CFOs need a holistic view of IT costs to better manage their costbase in this hybrid future – as myopic, isolated views will result in cost increases that could easily be avoided.

1 https://www.bbc.co.uk/news/business-56885457

2 https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/when-will-the-covid-19-pandemic-end

3 https://joshuagans.substack.com/p/the-worst-may-be-in-2021-22

4 https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/five-fifty-cloudy-with-a-chance-of-billions?cid=fivefifty-eml-alt-mkq-mck&hlkid=8e64b1f8fb2345aa913f0b4b189e6b15&hctky=2968703&hdpid=1c22f8a9-527e-4806-9a45-1971dd5bf039

5 https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/three-actions-ceos-can-take-to-get-value-from-cloud-computing

6 https://www.consultancy.uk/news/27520/pwcs-flexible-working-strategy-a-step-in-the-right-direction

7 https://kubernetes.io/docs/concepts/overview/what-is-kubernetes/

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