In my recent post Planning for Better Operating Margin, I explored alternative methods of predictive analytics. In this post, we'll explore the economics of choice - and how predictive analytics can be used to navigate a route to the cloud.
In his recent blog post, Larry Walsh explored the idea that service providers will become the arbitrators of cloud services. This idea rests on the fact that service agreements with cloud providers are relatively fixed and inflexible. Empirical evidence would support this - the quality of service you experience from the public cloud provider is mostly non-negotiable. This is simply another reason why enterprise organisations turn to private clouds for their mission critical systems. However, the world is a little more complex than that. Service Providers often fulfil a key role in integrating cloud offerings to deliver a quality of service that can be negotiated and agreed. I would assert this act of choosing is key to a well-functioning market economy. We don't all expect the same level of performance from our cars - some of us would happily pay extra for higher horse-power, whilst others are looking for the cheapest cost of ownership. Choosing from the array of cloud providers and offerings gives us the ability to trade-off cost and quality of service. This is where Larry Walsh asserts that the Service Provider fits the gap.
However, as Levitt and Dubner assert in Freakonomics, beware the motivations of the expert. They observed that real-estate agents selling their own home left it on the market for 10 days longer than average, and achieved 2% higher price. What incentive does the Solution Provider have? When you move away from the cloud model, you lose the agility, flexibility and elasticity that goes with it. So address the key topics: how are you engaging with cloud providers? what are your contract terms with your Solution Provider? And crucially, how do you benefit from the elasticity of the cloud?
In order to guide you through your decision making, you can either rely on a Solution Provider to do all the heavy lifting (although, as noted above - you cannot completely absolve yourself of choice), or apply your own governance. This is where predictive analytics comes in. With the right tools, you can evaluate alternative choices before making a decision. This 'what if' scenario analysis is key to ensure that the risk of your choice is mitigated, and you have an informed idea of the alternatives in case things do change. After all, change is a world we all live in....