Cloud

The ROI of Private Cloud: Driving Down Operational Costs

Norman Dee By Norman Dee Principal Consultant, Cloud Transformation March 6, 2017

This blog is part of The ROI of Private Cloud series which discusses key concepts in projecting ROI, as well as the detailed analyses of three organizations looking to move to private cloud.

Dell EMC Services has performed ROI analyses for dozens of organizations looking to move to private cloud, each with varying transformation scope and objectives.  Let’s take a look at one example: a global insurance organization looking to move to private cloud to reduce operational costs.

Scenario

The main transformation objective of this global insurance organization was to reduce overall costs of their production environment. They wanted to modernize and automate as much of their IT environment as they could, and to improve operational efficiencies. They already had a high degree of virtualization and standardized service offerings. However, they had no online service catalog, and no self service capability. It typically took six to eight weeks to provision a service. Key service management processes were not in place.

IT realized they needed to improve their overall service management competence. They wanted self service capabilities and automated provisioning to drive provisioning time down to one week. They were also looking for greater elasticity, shared workloads with pooled capacity, and metered consumption of services.

To address this, the IT organization was looking to implement a private cloud with Enterprise Hybrid Cloud deployed on multiple mirrored Vblock systems for two sites. Key characteristics of the platform included:

  • Self-service and automated provisioning to increase the speed of delivering IT services at lower cost
  • Multi-tenancy to support heterogeneous environments
  • Resource elasticity to optimize the utilization of IT resources
  • Metering and chargeback to inform the business of their service utilization
  • Automated monitoring to proactively manage services and increase availability
  • Backup and recovery for Data Protection
  • Replication and recovery for Disaster Recovery

Current and Target Environments

This organization had over a 100 sites total; however, production ran in two main data centers. Virtualization was clustered with varying degrees of utilization and density. The target environment consisted of consolidated clusters in the two main data centers using VCE Vblock systems running VMware vRealize automation software.

For this implementation, 500 existing applications would be migrated to the new environment. An initial IaaS service catalog of Windows and Linux servers would be deployed. The transformation would include creating 15 new service management processes spanning the entire service management lifecycle, as well as realigning the IT organization, roles and skills to manage the new processes.

Table Capture

ROI Analysis

This organization wanted to understand the advantages of converged architectures for their major production sites. The cost of services for operating model transformation was included in the analysis to understand the total benefit. The metrics used to determine the ROI included the run rate savings, total investment, and net savings over five years.

Private Cloud
The projected Net Savings for this transformation is $14.2M (17% cost savings) with an NPV of $12.0M. Investment costs are $14.1M, with an NPV of $13.1M. The ROI is 101%, reflecting the moderate level of investment relative to the run rate savings. The Payback Period is 3.3 years.

Private Cloud

Key benefits of the transformation include:

  • Improved agility and efficiency through automation
  • Increased scalability through increased server virtualization and utilization
  • Time to provision production services reduced from  eight weeks to less than one week through self-service and automated provisioning
  • 33% of IT staff time reallocated to new initiatives

In conclusion, the analysis shows how this organization could substantially decrease operational costs, cover the costs of transitional services, increase efficiency, and gain support from both management and the lines of business to move forward with their transformation.

Learn more about the typical savings that can be achieved and see the detailed ROI analyses of other organizations in The ROI of Private Cloud: Quantifying the Cost Savings and Benefits of Moving to a Private Cloud.

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Norman Dee

About Norman Dee


Principal Consultant, Cloud Transformation

Norman is the practice lead for Infrastructure Transformation, IT Financial Management and Capacity Planning within the Americas Consulting Services Delivery organization within Dell EMC Services. In his role, he helps enterprises fully understand both the technical and financial benefits of operating model, infrastructure and application transformations. Norman speaks frequently to customers about how to determine, track and allocate service costs based on usage, as well as understanding service demand to optimize operations and drive more effective use of resources. Norman’s career has spanned various roles from directing worldwide projects to CTO/CIO, across multiple industries including financial services, publishing and online retail.

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