With a “cloud-smart approach,” organizations can take advantage of technology developments that increase agility and decrease cost—and extract full value of the cloud.

The writing is on the wall: Before long, companies will cease to run any IT infrastructure on-premises and instead access computing resources exclusively on the cloud. Before that happens, however, many businesses may need to rethink their cloud approach, especially when it comes to rationalizing and optimizing cloud costs.

This is because—in their haste to meet fast-turn digital transformation mandates and timelines—many CIOs turned to wholesale migrations to public cloud. Without a concrete digital strategy and roadmap, they tried to push every possible workload and application to the hyperscalers. Departmental heads were emboldened to do their own cloud migrations.

But here’s the problem: As cloud costs began to pile up, the ROI picture became unclear. Many technology leaders found their data was essentially locked in at one cloud provider, limiting agility. Security and data governance were often afterthoughts.

Becoming cloud-smart

That’s why it’s time to move from a cloud-first approach, when businesses ported every possible workload to the cloud, to what we’d call “cloud-smart.” Cloud-smart means doing the foundational work of putting in place such critical elements as governance and security first, and then identifying the workloads that should move to public, private or hybrid cloud.

It also means taking advantage of cloud technology developments that increase agility and decrease cost. These include business application improvements and industry cloud options that present complete business capabilities for specific industry verticals.

Doing so means getting past what Gartner vice president Sid Nag calls the “irrational exuberance” phase of cloud migration and moving to a more thoughtful strategy that will drive specific industry, business and technology outcomes with cloud.

Beyond ‘lift and shift’

To be clear, the cloud-first approach can be valid, such as when there is a compelling case for shutting down a data center, or moving off IT equipment that has reached the end of its lifecycle. In these cases, there are clear bottom-line benefits to an immediate move to public cloud, as it shifts the organization away from capital expenditure and the need to maintain IT assets.

However, cloud migrations grow murkier when it comes to moving workloads that have long run on a legacy architecture. Case in point: business applications with a low tolerance for latency or specific data sovereignty requirements governing where data can be stored from an architectural, legal or compliance perspective. This situation calls for a strategy that accounts for these complexities.

In our work with clients, we often see organizations struggling with cloud costs well in excess of what they expected. We’re doing a lot of work in “cloud economics,” helping senior leaders understand why their cloud costs have gotten out of control.

Beyond cost concerns, we’ve also seen workloads being moved back to an on-premises infrastructure, often due to unforeseen application latency issues or concerns over data sovereignty and where business data is being stored.

What ‘cloud-smart’ looks like

These issues can be avoided by creating a comprehensive cloud strategy that generates business outcomes by planning for both application and infrastructure lifecycle replacement.

Take the example of moving a legacy on-premises SAP infrastructure to cloud. Doing so would improve business agility, but even more value is gained when you not only shift the existing SAP infrastructure to cloud but also convert to the S/4HANA cloud application environment. By doing so, businesses also get the benefits of S/4HANA, such as better data management, analytics, reporting and performance. That scenario translates into faster invoicing, better cash flow and increased supply chain efficiency—all of which drive better business outcomes.

A cloud-smart strategy requires IT leadership teams to consider the wider implications and full benefits of successful cloud technology adoption, across people, process, technology, modern sourcing and business interface considerations. For example:

• Agility: Adopting DevOps and containerization at scale will likely require a modified IT operating model, as well as agile development and deployment. The agility these technologies enables means businesses can have an idea on a Monday morning about a new way of doing business and have a working concept up and running by the end of the week.
  
  
• Service management: You also need to consider your overall service management structure, because if you’ve migrated from largely owned assets in data centers to a private or public cloud, for example, the way you manage major incidents also need to change. You’re now contacting your public cloud partner if there are service issues, not your own IT operations teams.
  
  
• Tooling and instrumentation: Tooling also needs to change, because you go from managing physical assets like servers or network devices to applications and data workflows that are using the public cloud providers’ virtualized services. This requires modern tooling and instrumentation to enable you to see the end-to-end IT workflows.
  Tooling products such as application performance management measure a process end-to-end, enabling insight into what is happening in the entire cloud environment. This will become ever more crucial with what Gartner calls the "whole product" approach of industry cloud.

Cloud-smart considerations

The cloud-smart approach is to modernize, retire and replace in a phased way while ensuring short-term success and long-term business value. Here are six things to consider when charting a cloud-smart strategy:

1. Understand the business strategy first, then look for cloud-smart opportunities to leverage new and emerging capabilities to ensure business adoption and acceleration of the strategy.
   
   
2. Think about your timing. Plan for phases 1 and 2 of cloud adoption.
   
   
3. Don’t be tempted to rush in. Carefully assess workloads and needs.
   
   
4. Consider decommissioning and business application replacement programs. For example, would it be better to retire on-prem business applications now and, instead of migrating to infrastructure or platform as a service (IaaS and PaaS), move directly to an industry cloud solution?
   
   
5. Create a plan for all phases, including post-migration optimization (phase 2) and industry cloud adoption.
   
   
6. Account for the carbon footprint reduction benefits that can be gained (public vs. edge/private) and track those as part of corporate ESG reporting.

Shifting to a cloud-smart approach enables organizations to take advantage of cloud technology developments that increase agility and decrease cost. By doing so, businesses will extract the value and the promise of cloud, ensuring their investments stand the test of time.