Friends Don’t Let Friends Build Data Centers Anymore

How cloud can benefit your business

At the Inforum in Paris in November 2015, I heard a quote that made me really think:

“Friends don’t let friends build data centers anymore.”

Charles Phillips, CEO of Infor, whom I met face to face in New York earlier, said this in his keynote speech. I was a bit stunned by his bold statement. What does he mean? He wants to sell his CloudSuite. Fine. But what is really behind this statement? I was filled with curiosity, and I went deep within to understand what he meant. If I look at it today, I have to admit: there is more to it than just advertising their Cloud products. This is the ongoing paradigm shift—the digital transformation—put into simple words.

The Digital Transformation is happening right now. Cloud technology is part of it. The least we can do is understand the opportunities and the risks and then act responsibly.

I’d like to get into one aspect in this article, which is: How can you benefit from the Cloud? I will focus on SMBs here. I consider an SMB ranging from 100 to 1000 employees.

The main question we often hear is, “Is it cheaper to use Cloud systems?” From all the information I’ve gathered so far, I say yes. But in order to really benefit cost-wise, you have to prepare a model that allows you to also get rid of a considerable part of your IT infrastructure. Moving one system to the Cloud is a necessary first step, but that alone won’t cut your IT costs significantly.

Example: An SMB runs 80 virtual machines in their data centers, and only 7 are related to their ERP system. Moving merely the ERP system to the Cloud wouldn’t help too much. In order to benefit largely from the Cloud, the approach must be a bigger one that takes all systems into consideration.

  1. Ongoing Hardware Costs: A data center costs hundreds of thousands to build and maintain. Power, cooling, administration, and the fact that your hardware needs replacement every four to six years add to this, yet, the fallacy of sunk costs often seduces us into throwing good money after bad. Cutting the cord on costly data centers can be a painful decision to make; but in many cases, the money devoted to supporting them can be used more productively.
  2. Fast Response to Disruption, Agility: In today’s world of instant communication and viral markets, it is essential that you are able to respond to unforeseen events. The report “Strategy, not Technology, Drives Digital Transformation – Becoming a Digitally Mature Enterprise” points it out precisely:
    The ability to adapt quickly to change also stands out as an important capability. Perry Hewitt, chief digital officer at Harvard University, says agility is more important than technology skills. Emory professor Konsynski concurs: “The 21st century is about agility, adjustment, adaptation and creating new opportunities.”
  3. Disaster Preparedness: Many of us like to think that disaster won’t happen to us. I will present some examples later, where even small problems caused a major disruption in business. If your premises are in an area where you may expect floods or hurricanes, you better think twice. Even a fire in a data center can provide an irreversible business disruption. Backup won’t help here since it takes too long to repair the damage and rebuild your systems. This risk is next to zero if you have your data in a capable Cloud.
  4. Sustainability: The pressure for our businesses to reduce our environmental footprints is growing, and it’s becoming increasingly difficult for us to justify the cooling, power, space, and resource demands of data centers when their solutions could easily move to the Cloud. Cloud hosts can optimize resource consumption by virtue of greater scale, and then reduce the impact even more by spreading it across hundreds of customers.
  5. Mobility: This is more or less an inherent result of Cloud technologies, if done with capable partners. Mobile access to your data at the airport, in the café, at the customer site is something that will give you the flexibility you need in the future, and will attract the newer generation to your organization.
  6. Competitiveness and Persistence: There are businesses—maybe your competitors—who already work on their Digital Transformation strategy. I predict that the companies who accept the challenge right now will be the ones who win, while those who are not open to change, may fall behind enough to fail. Embracing the Digital Transformation will give you a tremendously competitive advantage.
  7. Concentration on the core business: Running data centers and complex systems also means that you have to have a team of specialists that run, maintain and improve them. These IT specialists need ongoing training which is expensive. Yet they do not contribute directly to your business.

About Alexander

Alexander Buschek is passionate about Digital Transformation and the opportunities it gives businesses—especially MSEs. He is convinced that every business has to embrace Digital Transformation in one way or another in order to survive. The sooner a business begins its Digital Transformation, the better. Alexander was the CIO / CDO of Braunschweiger Flammenfilter and CIO of Cherry GmbH. Prior to that he was an entrepreneur, consulting MSEs about IT strategies, providing external project management, and overseeing various IT projects (e.g. ERP and CAD implementation and migration). Working with many MSEs gave him a deep understanding of this market. Alexander is now Senior Director, Analyst (MSE) at Gartner.