TL;DR Congratulations on surviving the first wave of COVID-19! Now we need to be sure your cloud bill isn’t the second wave that finishes you off.
For most of us, 2020 started off like any other year: celebrating the ball drop with family and friends, swearing to really keep this new year’s resolutions, a new virus coming out of Asia… But, in all seriousness, most of us entered into 2020 with the expectation that we had a handle for whatever the year could throw at us… Enter the COVID-19 pandemic.
As the virus quickly spread from country to country, it brought significant disruption in its wake. We would need to go back to the dot-com boom to find such disruption that parallels what we are experiencing today across the business spectrum. As outlined in this McKinsey report, the onset of COVID-19 affected some critical shifts in our business behaviors:
- Zero-Contact Commerce
- Drastic redefinition of an “Essential Worker”
- Remote Work Force becomes the only workforce
- Tsunami of Digital Demand across channels, products, and services
- How consumers spend their time
Only a few businesses were truly prepared for what befell the global economy. At best, most companies were caught flat-footed and unprepared. And some companies ceased to exist in 30 days.
Businesses entered “Crisis Mode” and began to take drastic actions. While some businesses accelerated their cloud strategy, many “cloud averse” organizations now found themselves jumping in with both feet. Most notably to me was the 180 degree by some of the most “legacy” Federal government agencies.
So, as IT leaders, we went to the old “Storming” playbook and enacted either one of these two actions (possibly both):
- Hasty “adoption” of new cloud technologies
- Rapid increase in cloud spend
And this is backed up by this worthwhile IDC study. Some interesting tidbits I pulled from the study:
- Worldwide IT spending is down 5%
- Worldwide Infrastructure spending is up 3.8% in telecom and business
- CapEx spend is down overall
So, if WW IT spend and CapEx spend is down, but Infrastructure spend is up, that leads me to conclude that there is a significant shift to OpEx infrastructure spend, i.e., “Cloud.”
Surging was 100% the right call, but a surge implies that the new force is temporary, and then things will eventually return to normal. “The blip” seems to be intent on staying with us a while, and indeed has some long-lasting and permanent results. A prime example is that we can expect a permanent rise to the Digital Demand baseline, which is fueled not only by the way consumers spend but also by the expectations of employees to be able “Work from Anywhere.”
With “Crisis Mode” we entered into a simplified hierarchy of needs decision-making process akin to the following (YMMV):
Crisis Prioritization = capabilities > speed > security > cost
In short, the survival instinct kicked in for many companies and they made the conscious decision to forgo normal due diligence such as product/service comparisons, aggregate/bulk pricing negotiations, and vendor differentiation.
Now we must exit “panic mode,” and do two things:
- Normalize — recalculate anticipated baseline and peak demand
- Optimize — Eliminate waste and improve efficiency
In doing so, we take a more balanced approach that looks something more like this:
where A, B, C, &D are well-understood business constraints that allow us to make the best decisions on a case-by-case basis. This applies all aspects of cloud: Infrastructure, Services, Applications, and even Data.
The pandemic isn’t over yet. The additional demands it will make of our businesses are unknown, yet all but promised. It is going to be critical for us to be able to normalize and optimize our digital portfolios on a continual basis. We can’t even afford to wait until a crisis peaks. Just like with mountain climbing, what we observe on the horizon can actually a false peak. And that can have devastating effects on, perhaps even destroying, our business.
I’ve learned a lot of hard lessons through this pandemic, so far. While the future is uncertain, the one thing that is clear to me is that this will not be the last time we have to weather such events, though I hope it isn’t any time soon. It is critical for businesses to be able to “digitally surge”, but it is also imperative that they are able to continuously rebaseline/normalize in order to behave in a well-balanced and strategic manner, vs. catapulting themselves over the walls of crisis.
If you have questions about how to “New Normalize” your cloud spend and get it under control, I’d be happy to see if I can help. Feel free to reach out to me here.
Be well. Be safe