Welcome to part 5/7.  Once you start to flush out your model with products you have or want to use, you will likely start to see a few trends.  After some option analysis, if you end up with costs being the same, you will be left with analysis of quality.  This Cost vs. Quality ratio may not be a new issue for the seasoned buyer but the model we developed will help anyone make more seamless parallels between traditional and cloud offerings. To better illustrate, let’s park Quality for a minute and use 3 scenarios to paint a spectrum of what the cost allocations of your IT solution might look like today.  For organizational purposes I will use the Deployment Models (Public, Private, Hybrid, Community) from the NIST Cloud Definition to line out the options.  Remember the NIST Deployment Models are referring to how many entities the solution is provisioned for (across all 3 layers of Software, Platform, and Infrastructure) vs. where they are located.  So whether your solutions are on or off premise is not relevant at this time.  Hybrid is simply a hybrid and Community is just a limited number of entities somewhere in between so we will leave it out for now.  I have also put a ratio of Human:Non-Human costs.

Scenario 1: Private

Let’s assume all your solutions are managed by your staff and you own/license/manage all the products used.  For example you pay for Software Layer licenses of Microsoft SharePoint, Oracle JD Edwards, Oracle Primavera Unifier, Autodesk Revit and Microsoft Dynamics CRM.  You also pay for/maintain all the Platform Layer licenses of Windows or Java Servers  and perhaps you use VMware products for Infrastructure.  This is fairly traditional, and while not the definition of NIST Private Cloud, it is a private solution.  Your ratio of Human:Non-Human costs may be something like 3:1, 4:1 or higher.

Scenario 2: Hybrid

Let’s assume 50% of your solutions are owned/licensed/managed by your staff and 50% by a 3rd Party.  For example you pay for Software Layer licenses of a financial application like Viewpoint V6 and enterprise content software like Viewpoint Construction Imaging as well as all the Platform and Infrastructure required to run the solution.  This is the Private half. Then for example you pay for some other Software Layer solution like eBuilder for Project Management and Aconex for collaboration.  These are SaaS offerings so they also include the Platform and Infrastructure layers.  This is fairly common and again, while it does not define NIST Hybrid Cloud, it is a hybrid solution.  Your ratio of Human:Non-Human costs may be 1:1.

Scenario 3: Public

Let’s assume 100% of your solutions are managed by a 3rd party and you do not own/license any products.  Basically you are using 100% SaaS only offerings.  For example you pay for Software Layer solutions like Quickbooks Online, Salesforce CRM, Box.com and Office 365 all of which include the Platform and Infrastructure costs as well.   This is not very common yet in the AEC Industry, but of the 3 scenarios is more likely to be synonymous with the NIST Public Cloud definition as these solutions are generally not provisioned for your organization’s exclusive use.  Your ratio of Human:Non-Human costs may be the opposite, say 1:5.

With all likelihood Scenario 1 will be least expensive, Scenario 2 in the middle, and Scenario 3 the most expensive.  When this is the case, the Private solutions generally lack some expertise/breadth or meeting NIST Cloud Essential Characteristics but make better use of Resource Pooling across the solution layers.  The Public offerings may be better automated, but they are generally not sharing the Platform and Infrastructure layer costs across the entire solution.  And so the fun begins.

If you are an in house IT team gunning for Scenario 1 you might cross your arms and say I told you so.  If you are a Consultant or Managed Services provider (like my company is) then you may lean toward Scenario 2 and say but let me give you the best of both worlds. If you are are a SaaS provider fitting into Scenario 3 you may say sure, but there’s no IT headaches, we take care of all that.  Perhaps this is all true, but it can be extremely confusing and the reality is until you get the Software, Platform, Infrastructure and related Human Resource costs organized in a way that you can actually make an intelligent comparison between past, current, and future options, decision making is a fairly futile endeavor.

So you may ask, what has this got to do with the Cloud Transition Cost Management again?  Well the model we have developed here makes all the costs transparent, at each layer of the solution.  There is no more guess work unless Vendors will not provide you the information for comparison.  This is rapidly changing with more Software Only licensing models being offered which enable you use a deployment model (Public, Private, Hybrid) of your choice.  With the right information plugged into the model, you can understand exactly why one solution cost differs from the other.  With costs uncovered, you can spend more time on analysis of quality, features, and value engineering the right mix with a very modular model that can be used throughout your organization, not just for IT.

Stay tuned for Part 6: Lab Exercises and Tools where I will provide some visuals that embody what has been discussed in order to get you moving if you have not already taken off down the run way.