Cloud

The ROI of Private Cloud: Reducing Outsourced Operations Management Costs

Norman Dee By Norman Dee Principal Consultant, Cloud Transformation March 13, 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 premier energy company looking to move to private cloud to reduce the data center footprint as well as the cost of outsourced operations management.

Scenario

This premier energy company had 15 data centers. An external provider managed the day-to-day operations such as monitoring services and systems, patching software, and racking and stacking equipment. In order to reduce the cost of the outsourced operations, as well as overall production costs, the organization wanted to consolidate their data centers running 400 specific applications from 15 to 7.

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

  • Self-service and automated provisioning to increase the speed in which IT is able to deliver services
  • Resource elasticity to optimize resource utilization delaying the purchases of additional capacity
  • Automated monitoring to improve availability as well as reduce the IT staff FTE effort
  • Backup and recovery for data protection
  • Replication and recovery for disaster recovery

Current and Target Environments

The 400 in-scope applications were hosted on 1,900 servers across the 15 sites. These applications would be migrated to seven VCE Vblock systems across seven sites.

Development of an online service catalog, and modifying IT roles and processes were not in scope for the initial deployment. The focus was on infrastructure standardization, consolidation and automation, as well as the migration of the 400 applications.

Capture Table 2

ROI Analysis

This organization was focused on the hardware and software savings, as well as reduced contract costs for outsourced operations management, that could be achieved through modernization and consolidation. There were parallel programs in place affecting the operating model and catalog services that were not included in the analysis. The metrics used to determine the ROI included run rate savings, total investment, and net savings.

Private Cloud

The projected Net Savings is $23M (38% cost savings) with an NPV of $20M. Investment costs are $18.6M, with an NPV of $17.5M. The resulting ROI is 123%, reflecting the low level of investment relative to the high run rate savings. The Payback Period is 2.4 years.

Private Cloud

Key benefits of the transformation include:

  • Consolidation of 15 data centers to seven for the in-scope applications
  • Improved efficiency through automation
  • Increased scalability with 100% server virtualization
  • 25% reduction in the contract cost for outsourced operations management

In conclusion, this organization can not only reduce their outsourced operations costs by 25%, but can achieve 38% overall operating savings. The transformation can enable them to be more flexible with data center utilization as well as be able to provide more rapid and agile services.

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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