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A move to the cloud can deliver huge benefits to enterprise IT and your business as a whole. But it also disrupts the dynamics of your organization, requiring a new approach to application development, operations and security as well as a new way of provisioning and financing IT infrastructure.
Your company can overcome many of the challenges of adoption by establishing a Cloud Center of Excellence (CCoE) to manage the transformation. But how do you measure the success of your cloud migration journey?
Key performance indicators (KPIs) provide senior management with useful pointers to the health and progress of a business. And, when used and interpreted in the right way, they can offer a valuable guide to the performance of your CCoE endeavors.
They can demonstrate the value of the cloud, help you counter resistance to change and reduce the amount of effort you need to justify your migration project to the company leadership.
Some KPIs will be specific to your own individual organization. Others will be those you’ve always used to track the performance of your on-premise data center.
However, the cloud will put an end to many of your traditional IT challenges, such as capacity issues, while introducing new ones, such as cost and performance optimization. This will call for new metrics to benchmark your cloud transformation.
In this post, we focus on the KPIs that are directly related to your CCoE performance.
So let’s dive in.
The ultimate goal of your cloud migration journey is to improve the bottom line. But what are your starting points? In other words, what’s the cost of running your on-premise data center?
And what are your financial expectations? Will you be able to lower costs and get a worthwhile return on your cloud investment?
A move to the cloud represents a switch from a CAPEX to OPEX model of financing your IT. So, in order to benchmark your cloud costs against on-premise expenditure, you need to compare them on a like-for-like basis. That means converting the total cost of ownership (TCO) of your data center into an operating cost.
1. Cost of on-premise hardware: How much you’ve spent on servers and networking.
2. Lifespan of hardware: How often you need to upgrade or replace your IT infrastructure. This provides the basis for calculating the monthly or yearly cost of making hardware purchases.
3. Total cost of capital investment: The full cost of paying for your equipment upfront. In other words, you need to account for the interest you’d have earned if you held onto that capital or the interest and fees you paid to take out a loan.
4. Power and facilities: The cost of electricity to run your equipment and providing floor space, such as rent, fire safety equipment and security staff.
5. IT staffing: The cloud can reduce the operational overhead of running your IT, freeing up your workforce to focus more on building and maintaining applications. Are you currently spending more on operations or development? Make sure you have a clear breakdown, so you can assess the impact of the cloud on your workload.
6. IT cost per transaction: If you sell online, you’ll want to know how switching to pay-as-you-go infrastructure will affect your IT cost per sale.
7. IT costs as a proportion of all business spending: As business costs generally increase over time, it’s useful to benchmark IT expenses against spending as a whole.
As with your on-premise calculation, you’ll need to estimate a lifespan figure for each of the following KPIs in order to translate them into cloud operating costs. But it’s also important to bear in mind development, management, training and recruitment costs if you were to continue hosting applications in-house.
8. Cost of rehosting or rearchitecting applications: The cost of redesign and redeployment to get your applications up and running in the cloud. Rehosting basically involves reconfiguring applications to make them work in their new cloud environment. By contrast, rearchitected applications are designed to take advantage of modern cloud features and are more agile and cost-efficient to run. However, rearchitecting comes at a higher initial cost, as it requires significantly more work.
9. Management time: How much time management spends planning and overseeing the migration process.
10. Cost of training: The cost of training staff in new systems and technologies.
11. Cost of hiring new talent: Recruitment costs shouldn’t just include advertising, but also the time spent screening and interviewing candidates, induction training and provision of a desk and computer.
Lower operational expenses will be one of your primary adoption objectives. But that can only come by regularly monitoring, reviewing and optimizing your cloud costs.
12. Monthly cloud bills: Are costs in line with forecasts? Are we identifying cost-saving opportunities that could reduce our bills further? Are our cloud costs going up or down?
13. Ongoing staffing costs: Has cloud adoption affected general staffing expenses? Take, for example, the finance team. Are they spending more time analyzing IT costs or less?
14. IT staffing costs: Has spending gone up or down? In particular, are we spending more on operations or less?
15. Cost of third-party partners and tools: What third-party services and tools are we using to help manage our cloud? How much do they cost? Are they helping us to save money, add value or generate revenue?
16. Energy costs: How much money are we saving on electricity to power servers, storage, cooling and auxiliary systems?
17. IT costs as a proportion of all business spending: Have they gone up or down against our on-premise benchmark?
18. Budget variance: Is our cloud spending aligned to our budgets? Are our budget figures realistic? Do we need to review them?
IT is just one of numerous factors that can affect your profitability. So you’ll need several KPIs to gauge the true financial impact of cloud migration on your business performance.
19. Customer growth: Is our customer base going up or down? Can we demonstrate a correlation between sales growth and our cloud transformation?
20. Revenue: Are our cloud-based applications bringing in more business?
21. Savings: Are they also saving the company money?
22. IT cost per transaction: Has the figure increased or decreased? How does it vary with changing sales patterns?
23. Net profit: Has cloud migration made a positive impact on company profits?
24. Operating cash flow: Has the switch from CAPEX to OPEX improved our cash flow?
In addition to your financial KPIs, you also need to consider the wider benefits of the cloud, such as agility and better application performance, which provide long-term value to your business.
The cloud is a complex, dynamic environment. It’s incredibly easy to spin up new instances. But it’s also equally easy to lose track of them without good cloud governance to keep costs and security under tight control.
25. Cloud visibility: Do we have full visibility over our cloud inventory? Do we know where we’re spending our money? Do we have a complete picture of our security posture?
26. Cost control: Are we making efficient use of our cloud infrastructure? Can we identify unused and underutilized resources?
27. Cost allocation: Can the finance team allocate costs and implement chargeback and showback systems?
28. Reporting accuracy: Is our cost reporting more accurate? How often do we need to fix errors in our reporting?
29. Internal audit cycles: Is it taking longer or shorter to audit our IT costs?
30. Compliance: Does our cloud meet compliance objectives? Are we in a position to host sensitive workloads?
An improved IT service and positive development progress not only show your CCoE is producing tangible results, but is also a clear sign staff are motivated, share your vision and have bought into the concept of the cloud.
31. Project turnaround times: Are our cloud projects on schedule? Do we need to revise deadlines? What are the reasons for delays?
32. Performance targets: What are our IT performance goals? Is application performance in line with expectations? What about incidents, faults and change requests? How often are we rolling out code fixes and application improvements?
33. Service availability: Is our cloud environment more robust? How many service interruptions are we experiencing? And how long do they last?
34. Market responsiveness: What new services have we developed? What do we have in the pipeline? Are we seeing a faster time to market? And are we exploiting new markets?
35. Open source: Are we leveraging open-source technologies? Are they reducing the workload of development and operations teams?
Automated processes reduce the manual workload of managing your infrastructure, help you stay on top of complex, dynamic infrastructure and provide immediate responses to events, such as configuration changes or sudden increases in workload.
36. Resource optimization: Are we buying the right size of instances? Can we scale them with demand? Do we need to run them during off-peak hours? Are we removing old volume snapshots? Can we leverage automation to perform these functions automatically?
37. Bursting: Can we automatically burst on-premise workloads to the cloud?
38. Resource health: Can we automatically replace unhealthy instances with healthy ones?
39. Secure workload automation: Do we have guardrails in place to ensure users provision secure and compliant application environments?
By modernizing your IT, making cost efficiencies and revamping legacy applications, you can pass on the benefits to your customers through a better user experience and more competitive pricing.
40. Application latency: Are our new cloud-based applications working faster?
41. Conversion rate: Is our website converting more traffic into paying customers?
42. Queries to customer support: Are we providing a smooth and efficient buying experience? Is our website content clear? Can we improve our FAQs page? What can we do to reduce the number of calls to customer support?
43. Retention rates: Repeat customers are another indicator of a good buying experience.
44. Customer satisfaction surveys: Do the responses point to any issues in the customer lifecycle?
Staff often feel threatened by new technology and new working practices. So it’s important to demonstrate the positive benefits of the cloud and get everyone on board with your cloud transformation project.
45. Education: What cloud training have we provided? What have we done to raise cloud awareness throughout the organization?
46. Business intelligence: Are decision makers getting more business insights? For example, more visibility into customer behavior or a more granular cost breakdown.
47. Collaboration: Are we sharing the same tools, knowledge and technologies throughout the company?
48. Consolidated billing: Are we consolidating cloud accounts to take full advantage of discount plans and usage thresholds?
49. Influence and engagement: Does our CCoE have a seat at the executive table?
50. Stakeholder feedback: Does the company leadership recognize the full impact of cloud adoption across the organization? Do they see how all our KPIs play a part in the bigger picture?
The complexity of migration and your new dynamic infrastructure shouldn’t be a barrier to measuring the success of your cloud transformation. Leading cloud vendors, such as AWS and Azure, support an extensive ecosystem of third-party tools that make benchmarking easier than ever.
They can track the performance of your applications, monitor your cloud for adherence to compliance frameworks, suggest best practices for maintaining security and cost control, and provide insights to support business decisions.
But, above all, they can make a positive impact on your cloud KPIs by helping you improve the IT performance that underpins them.
Schedule a custom demo to learn how CloudCheckr can help your organization meet its goals in the cloud.