The T in Total Cost of Ownership (TCO)

- Optimize expenses to meet real needs. The public cloud offers fine-grained configurations, resource elasticity, and innovations such as serverless, which brings consumption and resource requirements closer together. The more a cloud-native approach is used, the better the adjustment.
- Implement smarter availability management. A large proportion of the expenses is, in fact, spent on the infrastructure for the disaster recovery plans; these costs can be streamlined through the intelligent use of the infrastructures made available by public cloud providers.
- Achieve productivity gains in operational and development tasks by automating and facilitating the implementation of DevOps, which reduces the unit cost of maintaining and operating applications.
Transforming the Nature of IT Costs
Transforming a CAPEX model to an OPEX model avoids upstream investments and smooths the cash out. However, we must look beyond the investment phase. Elasticity and on-demand consumption create the conditions to transform IT spending into variable cost – especially if IT spending is directly linked to product and service lines, and can keep up with the changes in the activity.The move towards a product-oriented organization, beyond but including IT, represents the true long-term impact of the cloud economy – the transformation of IT spending becomes a variable cost.Top-Line, Top-Line
Let’s go even further in the search for additional sources of value. These are more difficult to quantify in a business case, but become obvious when we compare the companies that have fully embraced the cloud with those that have not:- Given the autonomy that product managers and development teams may have with respect to a cloud approach, the speed of launching features and services is increasing rapidly. This is a key differentiator especially in the digital space.
- The cost of experimentation decreases dramatically – a cloud approach removes most of the initial hardware and software expenditure to try new products, services, and applications. Expenditure stops immediately at the end of the experimentation when the consumption of services stops.
- This increase in speed to market and the reduction in experimentation costs are accelerated by the investment in innovation by cloud providers. The constant flow of advanced services around data, artificial intelligence, IoT, etc., is accessible at very fine price levels allowing more experimentation and innovation at the same cost.
- It is becoming clear that the return on investment is greater in the cloud.
The Cloud Economy: A Dynamic Balance
The nature of cloud self-service and on-demand consumption, especially in product-oriented organizations, implies a more distributed and diversified model of purchasing IT resources. Application resource requirements fluctuate, the cloud service provider changes, new services are adopted – all in very short cycles, making it difficult for current purchasing processes to keep pace, especially when speed to market is a key factor.This is where the notion of FinOps – a continuous process of governance and optimization of cloud consumption practices – becomes legitimate so that expenses are as cost-effective as possible considering the needs. To maintain the balance of costs related to the cloud, all levers are taken into account:Operational models and policies- Architectural models and design choices
- Contractual arrangements with cloud providers.
cloud center of excellence and custom software development practice. Read more contributed blogs from Capgemini here.