It’s the ROI that Matters when Migrating to the Cloud

Many organizations are still in the early stages of moving their analytics ecosystems (and business applications built on top of that ecosystem) to the cloud. We, at Teradata, know that agility and innovation are the primary benefits enabled by a move to cloud architectures, but often the initial focus is only on reducing Total Cost of Ownership (TCO). We believe that this is only the first stage of the cloud journey. The initial drive to reduce TCO is fine, but it then needs to quickly pivot to optimizing TCO (spend the “right” amount) and then transition to increasing Return on Investment (ROI) for the future.

TCO is an important metric, but it’s not the only one. We don't incur the cost of owning something unless it does something for us (the mountain of toys in my garage that I don't have time to play with will disagree with me here) or provides value of some kind. Many organizations today do not have a good understanding of the value created by their analytics ecosystem, but they do have a good understanding of how much they pay for it. So, cost becomes the major factor in conversations around cloud... as it's the metric they understand best.  But value is ignored, assumed or addressed in some abstract concept as “not important” or “not material” in influencing the cloud journey. 

The drive to migrate to cloud often starts with an objective to reduce TCO. For best results, we need to keep in mind that the TCO discussion should be on the analytics ecosystem as a whole, thinking about the total analytics spend, not just that part of it that is spent on the data platform(s) (such as Vantage, which we naturally talk about quite a lot).  

Based on our experience, the data platform is often around 5% of total IT spend. If you carve out analytics spend from the total IT spend, generously, the data platform represents 20% of that (typically our customers run 10’s to 100’s of business applications on their data and analytics platform, creating extremely high value compared to cost, so they are rarely an issue in themselves). Where is the other 80% of that analytics spend going? On premises data lakes? Data marts? Multiple warehouses? Shadow IT? What is the value created for the business by that 80% of the spend? What's the Return on Investment (ROI), the value created versus the cost of doing so? 

We often find that there will be many systems/platforms/solutions that provide little value compared to their cost or TCO. TCO itself is often not well understood and only partially evaluated. For example, what is the people cost? The lost opportunity cost? The data center costs? The cost of Technical Debt? Doing an initial cleanup and consolidation (as part of moving to the cloud) will often deliver the reduction in TCO desired for the initial cloud migration. But buyer beware, the same governance challenges organizations have on-premises now have increased agility and innovation to thrive anew in the cloud; hence, bill shock can occur if not mitigated. It is also worth recognizing that the transparency of cloud costs means that for many organizations it might be the first time that they can clearly understand the cost of operating the environments they have. 

It does make sense to move to the cloud to reduce TCO if organizations take the holistic approach. But it will be one off and temporary. Organizations then need to move quickly to the next phase: optimize TCO (to modernize). This is where they look at their analytics ecosystem (newly lifted and shifted to the cloud, the lowest risk to keep the business applications and business value creation running) and refactor/re-engineer parts of it to take advantage of the cloud services available, establish a connected data store, remove duplicated data, redundant workloads, establish governance, etc. It's not a complete rebuild (lots of cost, no new business value), more of a tidy up and establishment of the key architecture components of the ecosystem to build onto in the future.  The objective of the optimize TCO phase is to spend the “right amount” for the analytics ecosystem, to set a baseline of value creation for the investment required.

The third stage is focused on increasing the ROI which happens as the ecosystem expands. With a functioning analytics ecosystem in the cloud, organizations can validate the value received for the analytics and data spend. They can leverage the agility and innovation to implement new business applications, using new data products and creating new business value. The ROI discussion is a very different one. It's all about growth. How much does an organization like to earn? The level of investment is directly related to the value created. More investment, more value. Keep in mind that organizations don't have to "wait" to start building the future state, they can start now while planning the migration of the existing workloads and ecosystem and start establishing the future state architecture that it will fit into. 

What's the incremental value from being able to bring forward the business case by several weeks/months, without having to wait for infrastructure? Is the organization willing to pay more, on the assumption that it is bringing forward or unlocking value by using cloud capabilities that it didn't have before?  And what pieces of the new solutions are reusable, and which are not? Clearly understanding the answers to these questions enables decision makers to make informed, value-creating-based decisions when planning how the ecosystem evolves and how they will continue to deliver innovation and increased analytics capability.

Teradata can accelerate the cloud journey and help customers focus on what really matters for them long term...which is increasing ROI. It's important that Teradata supports organizations’ goals of reducing TCO, but we also need to show them that it's only part of the story. Organizations need to modernize to ensure the right amount of spend, to optimize TCO, leverage the cloud for new business use cases and data products, to increase the ROI of the analytics ecosystem, and to make informed decisions around what technologies to retire. We have been enabling the largest organizations in the world to solve the hardest analytics problems, at scale, for a long time. We have all of that capability, and more, available in the Cloud, and we can accelerate any organization through the cloud journey from TCO to ROI.