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What to factor into strategy when considering cloud

Before taking the leap into cloud, executive teams need to have a firm understanding of how the business is positioned in the market.
Ethan Searle
By Ethan Searle, Business development director, LanDynamix.
Johannesburg, 23 May 2024
Ethan Searle, business development director, LanDynamix.
Ethan Searle, business development director, LanDynamix.

Ask yourself a question: what is the biggest risk to the sustainability of your business? The answer is customer satisfaction, driven by superior and consistent customer experience (CX).

People and systems are the two most important contributing factors in any drive to ensure customers choose you over competitors. This is especially true in an age of multiple supplier options, where customers will switch to another vendor and never look back.

So, before considering if cloud is the appropriate technology, the company’s executive team first needs to have a firm understanding of how the business is positioned in the market.

If systems are down or slow, will that impact CX, the brand's equity and the lifetime value of customers? The exact cost of downtime or slow business systems is difficult to calculate; however, industry reports indicate the financial impact can be substantial, ranging from thousands to millions. This is mostly dependent on staff numbers, annual turnover and the dependency of the business on digitised business processes.

In considerations on cloud, it must be noted that focusing solely on costs is a shortsighted approach.

Globally, what are the forecasts for cloud computing? Long-term, IDC predicts spending on cloud infrastructure to have a compound annual growth rate of 11.3% over the 2022-2027 period, reaching $156.7 billion in 2027 and accounting for 69.4% of total compute and storage infrastructure spend. So, it appears the business world is vigorously moving to the cloud.

On the cloud front, the IDC urges enterprises to keep downtime to a minimum and notes public cloud or on-premises mission-critical applications and environments need to be supported differently than they have been in the past.

It confirms workloads may reside on infrastructure that runs many different workloads from test/development to mission-critical, and highlights advanced services from vendors and cloud providers play a critical role in keeping these systems up and running properly.

I certainly agree with IDC’s recommendation that evaluating which services are right for your enterprise should be of utmost importance.

In considerations on cloud, it must be noted that focusing solely on costs is a shortsighted approach. Let's bring in the ever-present threat of cyber breaches and the role cloud can play in saving the day.

There are many ways in which a successful cyber breach can impact businesses, starting with financial forfeiture through direct theft of funds, or disruption of operations leading to revenue losses, legal liabilities, regulatory penalties and reputational damage. The financial impact of a cyber incident can far outweigh the initial investment required to implement effective security measures.

How quickly the company gets up and running afterwards will be key to the sustainability of the organisation.

Cyber breaches can cause significant disruptions to business operations, resulting in downtime, loss of productivity and delays in delivering products or services. These disruptions can have ripple effects, including customer dissatisfaction, breach of contractual obligations and serious damage to the sustainability of the organisation.

These are just some of the things to consider when calculating an accurate cost of downtime to the business. The right advice from technology specialists who take a business approach to these issues is essential in these calculations and in formulating a strategy on what to put into the cloud versus what is best retained on private servers.

When it comes to downtime costs, there are two types of rand per hour to consider, namely human cost and profitability. Let's break that down.

The human cost is relevant because the business is essentially paying the employee for idle time during IT failures. To be conservative, one could argue that employees in an office could do other tasks during an outage and are in fact not entirely redundant. For example, end-users might still be able to send mails or perform administrative tasks. To cater for this, the employee's hourly cost to the business could be halved.

When a team responsible for generating revenue is impacted by an IT failure, the loss of hourly profitability can be measured. For example, a sales team that generates R90 000 a day in profit would lose R10 000 for every hour of the IT failure − that's a frightening proposition for businesses of any size.

The cost of the server going down halfway through a workday with one day to bring the services live again could cost a business of 50 employees approximately R202 500.

No two businesses are the same, but this guide can provide any company with a first step towards understanding what a technology failure looks like in hard cash.

Getting business stakeholders to move their thinking to the real business issue − the cost of downtime − is the next big step. Without a shift in mindset, you may not be able to acquire the budget necessary to implement a strategy for cloud and cyber security measures which will guard against downtime.

Make no mistake, providing an exact cost of downtime is no mean feat because all businesses are unique, as are cyber breach incidents. While the costs associated with implementing robust cyber security measures can be significant, they should be viewed as an essential investment rather than a mere expense.

Some stats from global research guru Gartner and its valuable peer review community may help with cloud considerations:

  • 30% reported cloud computing can be less secure than on-premises computing since data is stored off-site.
  • 44% noted cloud computing can be less reliable than on-premises computing since it can be subject to outages.
  • 16% said cloud computing can be more complex than on-premises computing since businesses need to manage multiple vendors.

Does the above throw more mud into the water for you? Then speak to an expert. The right IT partner will take a holistic view of the business and advise you on what is right for the 'business' − and not just what tech tools should be invested in.

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