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Blue Chip Cloud

The savings made from a migration to the cloud

One of the biggest factors in moving from on-premise hardware to the cloud is the huge financial saving that can be made for your business. To make the cloud migration case in a simple and easy-to-understand way, Blue Chip's Major Account Director James King sketches out the costs of hardware and cloud services.

James King

Major Account Director, Blue Chip

Making the economic case for cloud migration is easy. A simple-to-understand guide is brought to life in this video.

I'm here today to talk to you about the considerations that need to be undertaken when deciding whether or not an on-premise upgrade or replacement is the right solution for you for the next three to five years or whether or not you should be looking at a cloud base solution.

From a Blue Chip perspective, out of our 700 customers, we've had 140 that have migrated or transformed out of on-premise into our cloud.

That means that there's another 560 customers that'll be a point in the next two to three years where they'll either have to understand whether they refresh their existing infrastructure or whether they might on their journey to migrate to the cloud.

During my 15 years at Blue Chip, I've helped hundreds of customers understand the impact, the implications and the technicalities about what is required to refresh their technology.

So, in the next minute or so, hopefully we'll be able to share some of these details to provide you with some sound advice that you can use to make an informed decision about what you do over the next three to five years.

Before we get into the different options and all the considerations, I thought we would just take a moment just to reflect what a standard technology or server infrastructure looks like and that will form the basis for the considerations that we need to use moving forwards.

Here we have a very high-level basic computing infrastructure.

This can be the same for your smartphones, your PCs, your laptops, your tablets, or enterprise-class servers.

So, at the top here, we have the CPU, the Central Processing Unit. In 'IBM Land', the latest and greatest is POWER9.

The next thing we have, slightly further down the chain, is RAM. Then we move onto storage, these are the hard drives, so from traditional, old-fashioned 'spinny' SCSI disks, we now have SAS, we have solid state drives and IBM's latest and greatest enterprise-class flash storage units.

So we'll refer to this as storage. And at the very bottom, we have the back-up units, traditionally this was tape, there are other products out there such as Virtual Tape Libraries at the moment.

So, this is the technology stack. So, the reality is, what is the impact and what does this mean?

So, from a performance perspective, items at the top - the fastest...

...where the items at the bottom, are the slowest.

And actually, when you talk commercially, what does that really mean?

It means the slow items are the lowest price. And the items at the top such as the processor, are the highest priced units that you'll find in your computer systems today.

So we will work with you to understand, what is the right performance and functionality that you need, but also delivering something at the right price point.

So, you don't want to find yourself in a situation where you've bought the fastest and the latest and greatest, you've overspent lots of money, on infrastructure and performance that you don't really need, but the worst case scenario is that you design a solution that isn't performing, doesn't meet your needs and after three to six months, you have to go back to the business and ask for additional funding for another upgrade.

So, many of our customers will find themselves at that point, what do they do? Do they upgrade or replace existing? Or, you know, do they move to the cloud? What really is the right solution for them? So, what prompts them on this journey?

Typically, most customers get to this point because they have a problem. And of course, when people have a problem, this is what they look like. The problems can manifest themselves in multiple forms.

We're going to cover three items today. So, an example of this would be, a technical type issue, where features or functionality, either in the infrastructure, the operating system or even the application, aren't available to deliver the requirements and the needs of the business or their customers.

You can have a risk or a compliance type issue. An example of this would be ensuring that you're running the latest release of operating system, which means patches are available to keep safe and secure your data and your end users. So where we spend most of the time today, is actually talk about how technology refreshes can help you increase the value of your organisation, get customers onto the system, ultimately increasing the value of your bottom line.

So the options that we'll talk through today is, we'll give an example of a customer where they refreshed their technology that actually increased their profitability, but we'll also provide an ROI example which is a return on nvestment, how saving money over a period of time can work to the benefit of your organisation and also not just save you money, but increase your profitability.

The commercial options that we'll look at next, we'll do the ROI, which is a case over a period of time, the customer will save X amounts of money. But probably the better option will be to talk about how a customer invested in technology that actually increased productivity, resulting in increased profits and happier customers.

We'll talk through the example of where an investment in technology actually increased productivity and profits for one of our customers.

Blue Chip have many high street retailers. However, we had one specific retailer with a technology challenge. Now, this challenge was a job or a process that took 12 hours, to complete. And what did this mean, to that retailer?

Effectively, it meant that online orders couldn't be taken, the warehouse couldn't pick stock and also the lorries had no stock to deliver, so they were backed up, in the yards, waiting for the system to come back online.

So we worked with the customer to understand where the challenges were and actually from a technical perspective, what the bottleneck was.

So after some pre-sales and consultancy, we actually managed to reduce that 12 hours of process and lost productivity, into, just a 2-hour window. Now, what did that mean for the customer?

It basically meant profits were up. It meant productivity was up. And also, an increase of customers to the website and an improved customer experience.

So the table here will show a typical Return On Investment table. I'm going to list out what the charges are, per annum, for the services that are listed in the description.

So, a license charge, an example of this will be £100K. So the software maintenance charge, for the systems, £100K per annum.

Hardware maintenance, £50K. Hosting charges, £50K.

So, the total for the services that the customer will be receiving today is a nice round £300K.

What does that mean?

Over a five year period, that's £1.5m pounds. The typical run costs for that customer is £1.5m pounds a year.

If we play that forward and talk about an ROI, about what can we do to improve the challenges, both technically and regulatory, for this customer, and is there a way we can save the money?

The short answer to that question is yes. So we'll talk about a one-time charge, you know, the upgrade cost.

How much does that cost the customer?

Let's say £600K. So, then we move onto the next thing.

It's the licensing. But as you can see, 8 cores on their old system, with the changes in technology and the improved performance that we helped understand and define and agree with the customer.

We reduce that down to 4 cores, so the annual charge now for the customer's license fee reduced by £50K, to £50K.

Software maintenance and hardware maintenance. We'll provide these as part of a five-year bundled cost, so those charges no longer exist.

One of the benefits of doing technology refreshes is you improve the performance, but also you can reduce the footprint of the space taken up and your electrical requirements to run these systems.

So from a hosting perspective, we can actually reduce the customer's hosting charge, by half, by reducing the footprint and the electrical draw required.

So, the result of this is the customer needs to pay £600K, for the upgrade. Their annual charge has now dropped down to £75K per annum.

The result of that over a five-year period is the actual running costs for the ongoing services is £375K.

So the total cost of ownership is at £375K, plus the £600K, which is £975K. That is a saving of £525K, per annum, compared to their current costs, which equates to an annual saving of £105K.

So that's how you can demonstrate a saving, which in turn, should improve productivity or profitability for that customer. But not only have we helped with some financial challenges, we've overcome the technical issues, we've actually met the compliance requirements and from a commercial perspective, we've saved some money but we've improved performance which in turn should increase sales and attract new customers to the environment.

So, in summary, not only have we reduced the cost by half a million pounds over five year for the customer, we've met the technical requirements to improve functionality and improve availability of the systems.

We've met the regulatory requirements to ensure the data on there is kept safe. All of this enables the business to provide a better service to its end users and attract customers to their organisation.

So the result here, it's not about cost saving, it's about efficiencies and increasing profitability of your company. We're going to summarise now and go through what some of these considerations are. So I think one of the first considerations we talk about, is how do we pay for it?

When you talk about on-premise upgrades, typically you're talking about capital expenditure, that'll be taking money out of your business to buy products and services which typically will be written off over a five-year period.

I think maybe one of the other considerations that we need to talk about here, is utilisation.

This is twofold. And what do we mean by utilisation?

So, from a utilisation perspective, we would have designed the system to last a period of three to five years.

What that typically means, in years one and two, you'll be using less than 50% of that system and only after years three to five, will you be getting the return on the money that you've spent on it?

On the flipside, if you have some significant changes in your organisation, which could be an increase in business, could be an acquisition, where an additional workload needs to come onto those systems.

You'll be stuck in the traditional cycle of how do I upgrade, or how do I increase the performance of those systems, which typically, from design to point of order, has got a 6-12 week lead time. And the final consideration, as I see it, is our responsibilities around the BAU tasks.

So typical on-prem solutions still require the customer to be responsible for the operation of the box, making sure replication's in sync,
taking the back-ups and ensuring that that system is available for use of the business.

Thank you, everybody, for listening. Hopefully, there are some insightful parts in there. Any questions, you know where we are. We look forward to hearing from you soon.