By 2018, at least half of IT spending* will be cloud-based. Ready or not, hybrid IT has arrived.

Unfortunately, hybrid IT environments don't come with operating instructions. CIO at AOL and manager of $200+M in hybrid IT spend, James LaPlaine cautions, "Not everything is going to be perfect when it moves over into public cloud. And not everything is going to be less expensive. Monitoring that pulse each month, seeing units of consumption of public cloud and how that compares to usage of our own captive services, seeing where in the business that's happening, is all critical to making informed decisions about scale in the public cloud."

This challenge to manage migration with the right tools is the focus of a new executive brief co-authored by LaPlaine and Sunny Gupta, CEO of Apptio, “Embracing a Hybrid IT Mindset: How Successful CIOs Leverage Public Cloud to Capitalize on Opportunities."  

Apptio executive brief

How you manage public cloud determines your success

Cloud adoption isn’t just growing—it’s upending business models, creating new opportunities for cost optimization and digital transformation. From better utilization to faster innovation, new fluidity to improved security governance, there’s little question cloud outperforms internal infrastructure for certain types of workloads and services (scalable web apps, batch processing, and disaster recovery are a few examples.)

As a result, cloud adoption is rising. Fast. In fact, by 2020, more than $1 trillion in IT spending will be impacted by cloud. (Source: Gartner newsroom

But for every successful cloud migration story, there’s also a moral: cloud has to be thoughtfully managed. Deploying cloud and getting value back are often very different activities. Given the variety of legacy systems, vendors, and technical debt associated with on-prem and cloud infrastructure, ongoing decisions related to planning and optimization of cloud can be complex.

A new model for managing today's IT environment

Cloud services are one of the most valuable and disruptive forces in the modern enterprise IT organization. Channeling that force requires a persistent model that allows the consistent capture, measurement, and evaluation of cloud performance.

In "Embracing a Hybrid IT Mindset," Gupta and LaPlaine describe four key steps IT leaders must cycle through to successfully manage cloud environments: transparency, planning, engagement, and optimization.

Apptio Hybrid IT model

1. Transparency

Cloud can change the way IT funds and delivers projects and services to the business. But to achieve objectives, you have to know a) where cloud can have the most impact, b) where to prioritize migration, and c) how to quantify the impact of cloud investments on the business. This requires IT leaders to improve transparency around both unique aspects of each workload (average utilization, ability to batch process, etc.) and the fully loaded costs of a hybrid environment. 

Analyses of multiple alternatives and apples-to-apples comparisons of public cloud to legacy systems help IT leaders understand the TCO of investments and make more informed investment decisions. The more cost transparency is applied to the blended IT environment, the better this gets. That’s because having an accurate assessment of total IT spend provides valuable insights into what is driving demand. And this, in turn, informs your migration strategies. 

[Understanding TCO] is critical to promoting an understanding of hybrid IT and building trust as you deploy cloud solutions across the organization. This system of record becomes a place to make economically sound decisions for cloud adoption. James LaPlaine and Sunny Gupta

2. Planning

Cloud spend can be volatile, which makes planning for demand a key success factor. IT leaders can measure cloud spending against the IT plan, running scenarios to understand and forecast the impact of cloud decisions. This drives alignment and guides the prioritization of IT resources, projects, and services. 

The brief describes a unified view of the IT financial plan that:

  • captures hidden costs like labor, security, and disaster recovery
  • reflects contract terms like renewals or rate changes
  • aligns capacity spend with business demand
  • incorporates opex cloud costs into project budgets during build and run phases
  • enables “what if” scenarios such as migration delays or alternate vendors
  • forecasts the impact of demand or consumption changes on a monthly basis 

3. Engagement

When you can demonstrate the value of cloud services compared with other options, you open new opportunities to increase performance and agility in project and service delivery. This transparency helps line of business owners and other partners better understand the benefits of cloud migration and make informed, cost-effective decisions about how and when to embrace cloud-based infrastructure and applications.

Automated showback and/or chargeback of fully loaded costs, including labor, help shape demand for on-prem and cloud solutions. Business units can influence consumption and mitigate sprawl and shadow IT when they have a consistent, trusted view of cloud’s TCO.

4. Optimization

Auditing your ongoing spend and consumption to identify inefficiencies and harvest savings is critical to effectiveness. According to LaPlaine and Gupta, “if you’ve made good cloud decisions at the beginning of this journey, you’ve already achieved cost savings and gained agility. But most likely, it’s not as good yet as it could be.”

Optimization is about ongoing refinement of your IT environment. To fine tune your cloud investments, you’ll need to dive deeply into billing, utilization, and consumption data to uncover optimization opportunities. These opportunities allow you to:

  • refactor applications to leverage cloud characteristics such as ephemeral instances, serverless services, etc.
  • consolidate multiple accounts across the business for better pricing or terms
  • mitigate fragmentation across multiple vendors offering the same service
  • inspect SaaS licenses for underutilization

Economically sound decision-making

It’s a simple equation: when IT leaders understand costs, they make better decisions. The hybrid IT model provides a framework for communicating TCO and managing cloud consumption to ensure teams capitalize on cloud’s opportunities.

With public cloud, CIOs have the potential to significantly change the way they fund and deliver projects and services. But to succeed, they must have an accurate view of IT costs and value across the IT landscape. To harness cloud and truly improve business agility, cost transparency is an essential ingredient. Sunny Gupta CEO, Apptio

Where does Apptio fit in?

Apptio has developed deep relationships with leading cloud IaaS providers to make data acquisition and modeling as simple as possible. For example, Apptio and Amazon Web Services (AWS) have worked closely together to provide new product capabilities within Apptio's applications that allow customers to further understand and optimize their usage of AWS, including a rich integration with AWS Trusted Advisor. 

Because Apptio’s SaaS-based applications enable a financial view across on-premises, private cloud, and public cloud services, they are tailor-made for hybrid IT analysis:

  • Apptio Cost Transparency automates the calculation of fully loaded cloud and legacy IT costs, leveraging industry standards to marry cloud billing, financial, and operational data into a unified cost model.
  • Apptio IT Planning helps IT leaders model the financial impact of cloud migration by tracking spend and accurately forecasting on a monthly basis.
  • Apptio Vendor Insights provides actionable data related to SaaS license usage, adoption, and cost for the most commonly used enterprise SaaS applications (like Office 365 and Salesforce) to inform investments, drive greater efficiency, and influence contract negotiations.

Cloud services provide an unmatched level of flexibility, but organizations must adopt new approaches to cost and resource management to fully reap the benefits. Apptio's economic framework ingests and models these costs, from multiple vendors alongside all technology spend for the most comprehensive view of IT spending possible. Sunny Gupta CEO, Apptio

To learn how you can apply hybrid IT thinking to public cloud decisions, download the executive brief “Embracing the Hybrid IT Mindset.”

*IDC FutureScape: Worldwide IT Industry 2016 Predictions — Leading Digital Transformation to Scale