Infrastructure Transition to the Cloud
Rehosting of your own Corporate IT
120 years ago, a disruption gripped all Western economies: Decentralized power grids were gradually created and made available. Until then, many industrial companies had to produce their own electricity. For example, numerous beer breweries operated their own steam engines to ensure the power supply for the brew kettles and bottling plants. Employees hired specifically for this purpose were entrusted with operating these steam engines.
Since the processes of power generation in many companies had been well established for decades, company leaders found it difficult to switch to decentralized power supply from the newly created power grid. It was often only subsequent younger generations that succeeded in implementing the decentralized power supply in the business process.
Today, the economy is again facing a major disruption
This time, however, the power is not coming from the socket, but data will in future be stored and processed in the cloud instead of on the company's own server systems. And just like back then, this time too the changeover is causing numerous complications in companies.
For many IT managers, the question arises - as it did back then - as to why they should outsource access to the most valuable corporate asset of the present day to third parties. The fact that customer data will in future be stored and analyzed on systems that are not located in the company itself or controlled by its own employees is still a scenario that is difficult to imagine for many company managers.
The trend can no longer be stopped
Current forecasts assume that the market for Cloud-Offers in the area of Infrastructure Transition will grow almost threefold by 2025.
The analyst firm Gartner refers to the process of migrating a company's own IT to the cloud as "rehosting". This refers to the shutdown of the company's own data center and the transfer of all IT systems to the cloud. The new hardware environment can be controlled via the Internet. This hardware infrastructure ("Infrastructure as a Service") is provided by the major cloud providers Amazon (AWS), Microsoft (Azure) and Google Cloud Platform. However, the major providers from China AliBaba and Tencent have now also established themselves on the market.
However, a 1:1 transfer of systems to the cloud makes sense in very few cases. Rather, it makes sense to think about optimizing the entire IT infrastructure in the case of an upcoming rehost. Among other things, these optimizations concern the company's storage and network systems. But also backup mechanisms and IT security concepts.
The different scenarios for rehosting depend on whether the company decides to transfer the enterprise application to the private cloud or to the public cloud. Or whether the company chooses a hybrid between private and public cloud.
The difference between private cloud and public cloud lies in the different usage scenarios that result for companies from both solutions.
The private cloud is a solution that is provided exclusively for the company's own employees to carry out business processes. These cloud solutions are usually operated by the company itself. For example, an internal company network could be made available as a "private cloud". This enables all employees of the company to participate in the various discussion forums within the company via the Internet - for example via smartphone.
A distinction can be made between two forms of private cloud: Either the company operates the private cloud on its own servers, or it uses the option of hosting private cloud solutions with an external cloud provider (e.g. Arvato Systems).
The public cloud, on the other hand, refers to the use of services and software services that are offered by publicly accessible providers via the Internet. Major providers in the area of the public cloud include Amazon with Amazon Web Services (AWS), Microsoft with its Azure offering and Google with Google Cloud. But other companies such as Ali Baba and Tencent are also getting involved in the public cloud provider market.
In many companies, mixed forms of the two different application scenarios have formed over the course of time. A combination of public and private cloud solutions or the use of several cloud providers is referred to as multi-cloud integration. This form of combined use is now the standard in German companies. According to a study by the consulting firm KPMG from 2020, 87% of companies with 2000 or more employees are already using multi-cloud systems. In most cases, 80% of the workloads are operated on one platform.*
*source (german): KPMG in Deutschland, 2020, Nutzung und Planung von Multi-Cloud-Computing
The Advantages of Using the Infrastructure Transition
There are numerous advantages for companies: Low market entry barriers, better scalability, try before you buy, a faster time-to-market, simple control processes and a decrease in the overall costs of the company.
Lower market entry barriers
"Try before you buy"
Higher Speed & Time-To-Market
OPEX instead of CAPEX
Simple control processes
Before the start of a new project, market success is usually difficult to estimate. Nevertheless, in the "old world", numerous investments have to be made in hardware solutions before the project starts: Network connections, data storage, processors - in short, the entire hardware IT stack must be provided. This raises the question for those responsible for the project of what workloads the systems will have to cope with in the future.
These calculations at the beginning of a project are no longer necessary in the cloud. The cost-per-use method in the cloud means that only the performance of the systems that are actually used is billed.
The cost-per-use system of the cloud additionally enables companies to adapt system services to market demand in real time. For example, if the number of accesses to a company's own servers increases exponentially on the most popular American shopping day, "Black Friday", these peak loads often cannot be handled by in-house IT systems, as they were designed for lower utilization levels. The consequences are often overload and temporary collapse of local server systems.
The shift of corporate IT to the cloud helps solve this problem. Using modern software solutions and automation, the capacity of corporate IT can be adjusted in real time to actual demand. And this can be done without the need for intervention by a corporate IT staff member.
However, the scalability of hosted IT also works in the other direction: if a project does not have the desired success and the utilization figures fall short of expectations, the purchased server capacity is adjusted downwards in a matter of seconds. In the end, only the performance that was actually used is paid for. Especially companies with fluctuating server utilization or seasonal business models benefit from the cost savings of virtual servers from the cloud.
To minimize the risk of a bad investment, all major cloud providers offer trial months during which the new virtual hardware can be tested free of charge before it is put into use. This minimizes the risk of burning your fingers financially as an IT manager with a major purchase.
Higher Speed & Time-To-Market
Another advantage of using IaaS services from the cloud is the speed with which these systems can be put into operation. For example, configuring virtual machines (VMs) on the user interfaces of the various cloud providers takes only a few minutes.
The technical and organizational efforts behind the commissioning of new server systems are incomparably greater: the devices must first be ordered, delivered, connected, configured and started up. Weeks or even months thus pass before a new OnPrem server system is successfully deployed. This is the time that companies lack when carrying out a successful market launch.
Another advantage resulting from a rehost is the capital resources freed up for the company. The keyword for this context is "OPEX instead of CAPEX".
CAPEX is the accounting expenditure for the expansion of a company's business areas. For example, the purchase of machinery, real estate or servers is attributed to CAPEX. Expenditures in this area lead to a strong capital commitment, since the invested capital is no longer available to other areas.
OPEX, on the other hand, refers to the ongoing operating costs required to carry out business processes. These costs are incurred regularly and are therefore billed monthly, semi-annually or annually. Operating costs include, among other things, the costs of operating virtual machines or servers in the cloud.
By transferring IT systems to the cloud, companies can convert costs in the CAPEX area into costs in the OPEX area. This results in financial benefits for the company. This is because the investment capital spent on the server systems can now be used for the further development of the business models.
This relationship can be illustrated as follows: What is the point of an expensive Porsche for a private individual if it is only driven once a year? It makes far more sense to rent the Porsche once a year and use the capital thus freed up to buy your own property.
The virtual machines provided by the cloud provider are used via intuitively controllable user interfaces. With the move to the cloud, it is possible, for example, for specialist departments to order, administer and use the required hardware independently. After all, this is where the employees know best what requirements the market places on the systems.
In this way, the switch to cloud solutions creates the prerequisite for establishing modern forms of enterprise such as "Agile" and "DevOps" structures.