FinOps counters the ‘Crazy’ cost of cloud

cloud graphic

As Cloud FinOps experts, we are always interested in articles discussing the cost of cloud. We wanted to share an interesting viewpoint presented in The Cost of Cloud, a Trillion Dollar Paradox. “You’re crazy if you don’t start in the cloud; you’re crazy if you stay on it”. We’ll explore the ideas behind this, and what they mean in practical terms to support you in using technology efficiently.

Crazy not to start in the cloud

The article describes how well the cloud supports innovation and growth. It accepts the opportunity for flexibility and agility. It appreciates the barrier to entry that building infrastructure from the ground up presents to time to market. As well as the need for large capex investments. This is the “crazy if you don’t start in the cloud” end of the spectrum.

Crazy to stay in the cloud

At the “crazy if you stay on it” end, it illustrates how much more expensive it can be to operate in the cloud. Using detailed examples of software as a service companies, it shows how cloud compares to “build and host your own” style solutions. The result is that, despite the time, effort and money, the return can make migration out of cloud the best choice for those with well-defined, larger-scale infrastructure needs.

Understand your tipping point

Although the crazy start/stay tipping point varies by organisation, the warning is clear. Reacting only when revenue growth stops outpacing the cost of cloud is often too late. Its conclusion is that organisations need to fully embed an awareness of the cost of cloud into their technical architecture and optimisation activities. Technical architecture being important to understand the impact on future migration choices, and optimisation to maximise the value of every dollar spent on cloud.

The wider value of optimisation

Cloud can become an expensive infrastructure choice. Any savings carry an immediate benefit but the article also explores a less obvious longer-term value. It argues that a multiple of 24-25 times gross profit is often used to value high growth, cash-hungry, software companies. Exactly the type of organisation, “crazy if they don’t start in the cloud”. But these gross profit multipliers mean that every dollar wasted has a pronounced impact on overall valuation with all the knock-on effects that entails.

Equip your teams

At Strategic Blue, we focus on providing clear insight into cloud spend. This can be used to inform technical architecture and optimisation activities. Our approach bridges the gap between technical, financial and business stakeholders. It also supports them with a wider range of options to reduce the cost of cloud.

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