AEC Industry Cloud Transition Cost Management: Part 5/7, Value Engineering and Quality vs. Cost

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, 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.

AEC Industry Cloud Transition Cost Management: Part 4/7, Evaluating Cloud IT Costs

Most of the hard work was actually done in the previous post of the series entitled “AEC Industry Cloud Transition Cost Management: Part 3/7 Baselining Traditional IT Costs".  As a refresher, in part 3 we gathered and tagged/categorized our current costs of IT in groups of Software, Platform, Infrastructure (parallel to the 3 Delivery Methods noted in the NIST Cloud Definition) and optionally Human Resources.  Then we amortized the annual (or greater) spends into a “Monthilized” number so we have a periodic basis that runs in line with most “Cloud” offerings.  This put our current house in order and gave us the current facts required to create relevant comparisons to 3rd party offerings. Moving on, most “Cloud” vendors present their pricing in monthly increments.  They also generally classify their offerings as Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) which come from the NIST Cloud Definition [Click Here].  There are also some nice diagrams we use to explain these layers visually on our company website [Click Here].

Once you digest that, you can see this fits very nicely in line with all the legwork we already did in the first 3 parts of this series.  From here it’s just an exercise of getting the information from Vendors you are considering and plugging it into your Cost Model Matrix.  Below are 3 examples based on a make believe Project Management application.  These will help you understand how to classify an offering as you will typically run across them in the market. It does not matter whether is is Accounting, BIM, etc…the same applies across the board.

A Software Only Subscription License for Project Management (PM) Software that is $100/User/Mo.  

This is software only.  In this model you are only getting the software, you will still have to install and mange the application.  This should not be confused with a Software as a Service (SaaS) offering.  Essentially the vendor provides the customer the products on a subscription license instead of the traditional perpetual model where you pay a bunch up front and then 20% Annual Maintenance/year.

This may seem incomplete at first, but it’s actually a nice model because the vendor is saying hey, we just want to offer a subscription model, we don’t want to dictate where you put it.  This type of licensing is becoming more prevalent for any type of product because it simplifies the sale while providing a recurring revenue model without getting into all the details of where it is hosted.  Vendors that

AECCloud Slump Test>

This fits nicely into the NIST Cloud Definition as you can license the product and then proceed with using it in a Public, Private, or Hybrid cloud deployment model without the software Vendor being involved or dictating how you manage your solution.  Also because the pricing is Elastic, meaning you can adjust your usage from month to month.

Cost Modeling>

Simply plug the monthly cost into the cell where the Software Layer and PM Column meet.  You will then need to fill in a cost for the Resources used in the Software Layer/PM Column as well as the Platform Layer/PM Column and Infrastructure Layer/PM Column to get a complete picture for your BIM Application

A Managed Host Offering for Project Management (PM) Software that is $75/Named User/Month

This example is the opposite or the other half of the solution building on the 1st example.  The Vendor in this case is providing hosting only, not the PM software.  You would not be getting any licenses of the Line of Business (LOB) Project Management Application.  However Managed Hosting will typically include the Services to manage the Software Layer/PM and Platform Layer/PM Software + Services and Infrastructure Layer/PM Software + Services.  You would combine this with the first example to get a complete solution including Software + Services at each of the Software, Platform and Infrastructure Layers.  Microsoft was an early proponent of this model dating at least back to 2003 when My Company was involved with the beta program.

AECCloud Slump Test>

This fits nicely into the NIST Cloud Definition for the same reasons as Example 1.  The only downside here is if you are not looking for a hosted/off premise solution, then you would not have much use for this.  You could still have a “Cloud” based deployment, but it would be managed by your own In House IT/Human Resources vs. leveraging a Managed Host offering.  That is a different topic altogether, but the same cost modeling can be applied either way.

Cost Modeling>

Once you have confirmed that the offering (or your own in house IT) is providing you the correct Software, Platform, and Infrastructure Layer requirements to run your PM application, simply plug the monthly cost for the hosting into the cells for Software Layer/PM Humans and for Platform Layer/PM Product+Services and Infrastructure Layer/PM Product+Services.

A SaaS offering for Project Management (PM) Software that is $150/User/Mo.

This example is a combination of Example 1 & 2.  So the first question you may ask is why bother with example 1 or 2?  Generally (but there are exceptions) this is example is offered a SaaS, and SaaS only.  This means there is no other way to buy this offering than to have the software + service provided by this vendor.  This may work for you, but be clear that unless the vendor also offers a Software only model, where you could choose the deployment option that works best for you, you are embarking on a nearly inseparable relationship.

AECCloud Slump Test>

If it is a Pure SaaS offering then the Slump Test should score high on the NIST Cloud Definition Delivery Models since it is SaaS and Essential Characteristics.  If there is no option for deployment models, then it will score low here as you can only deploy it in a Public Cloud.
Cost Modeling>

If the offing is SaaS only then you will likely have no insight into the Product/Service cost breakout in the Software, Platform and Infrastructure layers.  You will have a lump sum cost for the end result at the Software Layer.  From a modeling perspective just drop that number into the Software Layer/PM cell and then enter a $0 in the Software Layer/Humans and $0’s in the Platform Layer/PM and Infrastructure Layer/PM cells.

You can continue down the line of your Cost Model putting various Line of Business (LOB) application columns across your matrix and combine them with various Platform and Infrastructure offerings.  This can get crazy, but just remember, you are simply looking at the 3 layers of Software, Platform and Infrastructure, and then listing out all of your Business need categories and then filling in options or blanks until you reach a cohesive solution at the price that is right for you.

Until part 5/7 where I break into Value Engineering and Quality vs. Cost, enjoy your AEC Industry Cloud Transition Cost Management efforts.

AECCloud Slump Test | Broad Access & Marketing Websites

Before I start to benchmark specific applications against the full NIST Cloud Definition, let me give a feel for how this will work using the Essential Characteristic of Broad Access and the marketing websites of a range of vendors.  I picked marketing websites because they are anonymously accessible and there are no complicated debates over offline access or other intensive use cases. Visit any of the following sites (including our own) on a PC, Mac, Surface Tablet, iPad, Android or iPhone and you will see it determines the device you are on and appropriately displays the information in a digestible format.  You do not need an App, you can use any of the major operating systems or OS based browsers, and it just works.   No distracting downloads or need to think of what device you are using, you simply get work done.  That's Broad Access.

Visit these sites and you will get an array of results depending on your device.  You may have to download an app, get a plugin that may or may not work on your device, or be required to zoom and pinch around, all of which is inefficient to use and/or for them to build.

This should clearly illustrate what Broad Access means.  From here you can start to think about what the pros/cons might be if this was your daily operational software.  In the future I will use a broader spectrum of the NIST Cloud definition and also roll out a basic ranking indicator.  Stay tuned.