Part 1 – Establishing your Cloud Business Management Practice 

By Khalid Hakim, Charlie McVeigh

History, particularly IT history, sure does have a way of repeating itself.

Think back to the 80’s and the advent of mini computers.   Mini computers were widely adopted by business units because of the perceived difficulty and cost of having the IT organization implement business solutions on the corporate mainframe.   In the 1990’s it was the PC.  Again, Corporate IT was seen as too slow and too expensive for the business solutions that were needed.  In the  2000’s  it is the advent of 2^nd and 3^rd generation Internet applications followed quickly by  the mobile computing revolution.  Like a broken record, corporate IT organizations were perceived as being slow and expensive to react to these new business demands.   Now that we are  in 2015, IT organizations are fighting the proliferation of public cloud offerings that business units cannot seem to drink up quickly enough.

What is common to each of the historical phases that are described above?  Business units that consume IT services perceived that they could procure IT services and applications more quickly and at a lower cost than corporate IT organizations could provide them.

What does this mean for the CIO in the modern era of IT?  It means that CIO’s must adapt or run the risk of being rendered irrelevant in relation to the way IT is consumed today and into the future.  It means that  CIO’s must now get on board with the concept of “running IT like a business.”  It means that CIOS’s must evolve such they are arbiters of technology and understand economically where is the best place for IT workloads to run.  Is it private cloud?  Public cloud?  Hybrid?  Outsourced?  Insourced? SaaS?  Iaas?  PaaS?  The choices are nearly endless – and you get it – todays CIO must be versed in all of these capabilities.

Todays effective CIO is asking and seeking answers most of the following questions:  Can you tell me on the spot what your total cloud spend is, and, what that spend is comprised of?  What’s the cost for you to deliver a unit of cloud service (IaaS for instance)? And what about your consumers: Who consumes what service and at what cost?

Can you identify the services used and the cost allocation for each service? How is your cost efficiency compared to that of other public cloud infrastructures? How can you use that type of information to optimize the cost of your existing and future operations? How can you create a showback report to each of your stakeholders?

Let’s say that you’re the VP of Cloud — think through how you would justify your data center investments. Have you proactively analyzed demand vs. capacity and how this is impacting your forecasting/budgeting exercises?  How can you scale dynamically to fulfill your consumer needs? Have you thought about your goal to optimize the cost of delivering cloud services? “What if” scenarios, benchmarking, and the reduction and optimization cost and price of your cloud services should be considered as well. Don’t you need closer monitoring to the quality of your delivery, such as continuous analysis and improvement? Have you thought of aligning your efforts with the corporate marketing and promoting your cloud services value?

(I can hear you thinking, enough with the questions already…)

What I would like to share with you today is a 6-month program (shown in the diagram below) to transform your cloud initiative into a successful robust cloud business management practice. The goal of the Cloud Business Management (CBM) service is to set up a cloud business management practice to enable effective, efficient, and agile business management of your cloud services.

The following components are addressed in the full cloud business lifecycle service.

• Cloud Business Manager Workshop – Educate the cloud service delivery teams on the foundations of cloud business and financial management aspects including costing, pricing, showback/chargeback, budgeting, forecasting, and cost optimization.
• Cloud Business Strategy Assessment – Evaluate the IT business operational maturity of an organization and compare with VMware recommended practices. VMware will recommend possible strategies and propose a plan that best fits the organization IT and business models.
• Cloud Services Definition – A comprehensive methodology to define cloud services and their constituent components end-to-end.
• Cloud Services Costing – Understand Customer’s cloud services cost end-to-end and create a service-based cost allocation and classification strategy for Customer’s cloud services.
• Cloud Services Pricing – Help Customer set a cloud pricing strategy and propose rates for the various components and offerings. This includes showback, cost recovery, investment funds, and driving particular behavior.
• Cloud Services Marketing – Set up the cloud services marketing strategy including branding, marketing objectives, cloud service positioning, communications plan, value measurement, cultural considerations, and catalyst of change. Also, identify types of promotions and drivers of cloud services consumption and behavior impact.
• Consumption and Showback / Chargeback – Help Customer develop a process for reporting on cloud service consumption and billing for cost recovery using VMware vRealize™ Business Advanced. In addition, determine the required people roles and dashboards.
• Cloud SLM and Contracts Management – A comprehensive Cloud Service Level Management process including SLA and OLA templates between Cloud Infrastructure and Tenant Operations teams and the consumer. Additionally, basic vendor contract management process is provided.
• Cost Optimization – Develop and execute a cloud cost optimization repeatable process that includes competitive analysis, benchmarking, public cloud comparison, and cost savings realization.
• Cloud Services Budgeting and Forecasting – Develop a cloud-service-based budgeting and forecasting process to enable a more efficient demand and supply chain supported by the vRealize Business Advance cost model.

So, how is this valuable to your organization?

1. Help your business consumers be accountable for better management of their cloud spend  rate cards, showback, chargeback, service tier options, and fair recovery of IT costs
2. Help you make informed decisions for hybrid cloud, cost takeout, application rationalization, intelligent workload placement and bill of cloud
3. Empower your IT to deliver on cloud promises for the desired quality, at the right cost by creating tighter alignment and accountability between IT, Business, and Finance
4. Present you a comprehensive cloud business management practice within your IT organization leveraging your investment on vRealize Business and enabling you to run your cloud like a business
5. Accelerate your transformation journey to an IT organization that is more consumption and cloud-service based

In our next blogs, we’ll cover the cloud business management components in greater details to help you plan for your Cloud Business Management (CBM) practice within your organization.

And if you’re heading to VMworld, don’t miss this session!

Using vRealize Business for Cloud Business Management

IT services and applications gradually rely on cloud services that provide more flexibility and agility for IT providers to supply the value to the business on demand. However this change also introduce new challenges to manage a dynamic environment that needs to scale economically per consumer’s demand. The cloud model can facilitate the shift to a business focus for the entire IT hierarchy—from the top to the technical teams managing and delivering the cloud. But to achieve the full business value of the cloud, companies need to put in place a more specialized and robust Cloud Business Management (CBM) practice. The CBM practice addresses the key business aspects of cloud operations.  Khalid Hakim, global operations financial and business management architect, and Kobi Katzir – Senior Product Line Manager at VMware will shed light on this new business practice using VMware vRealize Business to move your cloud management to the next level in maturity and position it as a strategic partner to your business consumers and line of businesses.

==========
Khalid Hakim is an operations architect with the VMware Operations Transformation global practice. You can follow him on Twitter @KhalidHakim47.

Charlie McVeigh is an IT business management strategic advisor, and you can follow him on Twitter @cbmcveigh