Cloud Computing:  Optimizing Corporate IT Spending in a Time of Crisis

Amy Larsen DeCarlo – Principal Analyst, Security and Data Center Services

Geopolitical events and financial instability have placed intense pressure on enterprises worldwide to reassess their investments. Organizations are questioning the efficacy of their information technology spending, with a particular focus on cloud.

In Latin America, businesses are contending with the combination of high inflation and interest rates, exchange rate issues, supply chain challenges, geopolitical risk, and skills gaps. In 2022, inflation was off the charts in key countries in the region – e.g., with Argentina spiking to an astonishing 94.8%. Other Latin American countries dealt with less severe but still extraordinary rates including Brazil (9.2%), Chile (11.7%), Colombia (10.1%), and Mexico (8%).

Concerns are high that the confluence of negative factors will result in a slowdown in revenue growth. The United Nations regional commission projects that growth across all subregions within Latin America will decline in 2023.The commission estimates South America will see 0.6% expansion this year compared to 3.8% in 2022. Central America and Mexico are expected to grow 2% versus last year’s 3.5%. The commission predicts the Caribbean (minus Guyana) will record 3.5% growth, down from 5.8% in 2022.

With these factors under consideration, Latin American organizations are reassessing their IT strategies and carefully scrutinizing budgets. Not only are they looking to cut costs, but enterprises also want to improve overall efficiency and productivity. To this end, GlobalData found that 55% of organizations in Brazil have increased their cloud spend significantly in 2022 by 6% or more over the previous year.

The cloud, and making sure costs and capacity is managed effectively, are crucial elements of enterprise investment. Long identified as a key to helping organizations eliminate capital expenditures and reduce operating costs, cloud computing is front and center in keeping corporate IT spending in line during a time of significant economic challenges.

Unfortunately, many organizations built out their cloud estates in an ad hoc fashion with individual lines of business and discrete projects driving a hodge-podge of cloud deployments across multiple cloud environments. The result was often an inefficient and costly spend.

More enterprises in the region are aiming to discover how business value and cloud financial management intersect so they can derive the maximum benefit through all phases of a deployment from migration through production.

One of the biggest misconceptions about cloud benefits is that its primary payoff comes from lower cost of ownership of cloud versus traditional on-premises environments. While lower IT infrastructure costs are certainly part of the cloud value equation, TCO improvement represents only a fraction of the value to the business. Many of the most significant returns come from the increased flexibility a cloud environment provides. Organizations get faster access to the latest technology updates, helping drive better productivity, risk mitigation, faster time to market, and sustainability.

Effective cloud financial management actually starts in advance of an implementation with pre-migration planning. Addressing the question of how to manage cost and usage starts before workloads are migrated to the cloud. Customers use cloud financial management toolkits including a pricing calculator and migration evaluator to determine the best deployment option. Having really good governance is an essential element.

There are different challenges at different phases. During the early discover phase, IT decision makers need to ask the fundamental questions of how and where the cloud can help their organization. What is the value each provider brings to the table? What support does the cloud provider offer through migration, post deployment and ongoing evolutionary processes? During the evaluation stage, IT personnel should look at multiple options and ask what differentiates one cloud provider from another. How do different pricing plans work? And how can the team create a cost-aware deployment to deliver business value?

After the organization selects and starts to use a cloud solution, it needs to find ways to accelerate value and maintain cost efficiencies. The final step in this process is expand and renew. In this phase, IT identifies new opportunities and assesses its strategies in managing its vendors. Beyond managing its cloud service providers, this work across teams enhances collaboration across IT, business, and finance so they can align on purpose and expansion targets.

At all phases and stages, IT needs the tools to demonstrate why cloud is a most effective investment. And IT also needs to understand the equation must include both the cost of the investment but also the value delivered to the business.

A cloud value framework is needed that the entire organization can continuously apply to their own specific situation to identify where and how a payoff is being realized from the cloud investment. This framework would consider a range of benefits from business agility to accelerated time to market. It would also look at factors like staff productivity, operational resilience, sustainability, and total cost savings.

For cloud financial management to be really successful an element that needs to be in place is strong cooperation between and among IT, procurement, supply chain, operations, and c-level management.

While cloud environments often entirely replace the data center, they cannot be run in the siloed fashion of a traditional facility. Instead, the cloud environment needs to be administered with cost and benefit always firmly defined. Enterprises also need to understand this is journey which is not linear in nature but a continuous cycle. How can the organization reduce unit costs? Successful cloud financial ownership is really about partnership across the organization. How should costs be allocated? Does the organization have clear visibility into costs? And how are they optimizing operations with respect to costs?

Cloud financial management best practices require clear ownership of individual elements and leadership sponsorship. The team needs to measure key performance indicators in order to quantify cloud business value and to have a consolidated planning across the entire IT estate. Organizations should also have distributed model of governance, and require user accountability to achieve continuous improvement.

What is key to a successful cloud implementation, is always keeping in mind that the value to the business needs to be part of every phase of the deployment. Particularly in times of great economic turbulence, the cloud is the technology answer to supporting efficient and effective business operations. Solid cloud financial management is essential to maximize returns and support an ongoing collaborative across teams.

Measuring Mobile User Activity During the Coronation and Beyond

R. Pritchard

Summary Bullets:

• Movers Index gives quarterly UK movement data collected by O2 Motion and by polling users to provide insight into behavior of the British public and businesses.

• More than 114,000 people visited central London (England) to be part of the Coronation parade, delivering a boost to business, matched by similar behavior nationwide.

Virgin Media O2 Business’s new Movers Index combines aggregated and anonymized UK movement data collected from its O2 Motion proposition (Virgin Media O2 Business O2 Motion may have been too much of a tongue twister), combined with polling of businesses and consumers ‘to provide quarterly trends and insights into the behavior’ of the British public and UK businesses.

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KubeCon EU: Modernizing IT Operations Through GenAI

C. Dunlap
Research Director

Summary Bullets:
• Intelligent automation solutions will serve as an initial app platform that provides enterprises with access to generative AI (GenAI)
• Security firms will leverage GenAI as a means for enhancing cloud security posture management and attack path analysis

Last month’s KubeCon EU was a big hit in terms of record-breaking attendance and new blood seeking guidance on easing tasks associated across the Kubernetes stack. Many were also looking for answers on GenAI’s new role in app modernization and operational provisioning.
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Telecom Wholesalers will Require an Underlying Strategy for AI

R. Muru

Summary Bullets:

• The telecom wholesale segment is behind the AI implementation curve, and companies need to do more by embracing innovation – i.e., exploiting opportunities for generative AI.

• Success for telecom wholesalers will entail developing an underlying AI strategy across the portfolio and company in a connected manner.

Telecom Wholesale Trends in 2023
GlobalData’s discussions over the last year with global leading telecom wholesale providers highlights a commonality in strategy among telecom providers selling wholesale connectivity, both in terms of strategic vision and in the products and services they offer. Where companies differ is influenced by the nature of the core networks that support products and services, global geographical reach, and strength of product/service brand (e.g., antifraud solutions, mobile roaming), and lastly partnerships.

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The Enterprise Customer Segmentation Matrix

R. Pritchard

Summary Bullets:

• Since customer databases are available for mass business markets alongside providers’ existing major enterprise knowledge, service providers have traditionally segmented target markets by number of employees.

• Service providers are realizing they need to be more sophisticated and are trying to identify factors like digital maturity and proportion of knowledge workers.

More often than not, enterprise telecoms service providers segment the market in terms of employee numbers. Typically, they divide the market into SOHO/micro (0-5 employees: owner-managers don’t count as employees), SME/SMB (from 6-250 employees), and corporate/enterprise (250+ employees). Of course, these definitions vary from one service provider to the next, and often, specialist markets such as the MNC segment and public sector are addressed outside of the employee count model. The main drivers behind this are: (1) ‘this is how we’ve always done it,’ (2) ‘we can get databases of the target market by employee numbers,’ (3) and ‘any other approach is too difficult.’

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Turning Sysadmins into Python Programmers

C. Dunlap
Research Director

Summary Bullets:

• New vendor training programs make high-value digitization roles more accessible to IT workers.

• Red Hat, Cisco, and Google report progress in training and education.

The tech industry has undergone a sea change in how software and technology resources are created and consumed. Now enterprises are hard-pressed to fulfill new skillsets for implementing business transformations. This dearth in skilled workers poses a grave danger to the global economy by threatening to stall the implementation of important technological innovations which will advance corporate progress.

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Does Broadcom’s Acquisition of VMware Create an Unfair Playing Field?

R. Muru

Summary Bullets:

• The proposed Broadcom and VMware deal could create a conglomerate effect in the server virtualization market.

• The uncertainty of the deal will impact customers on their decisions on current and future VMware investments, resulting in some customers switching to competitors.

Broadcom has a Checkered M&A History
GlobalData previously provided commentary questioning if Broadcom had the right profile, but more importantly, the right pedigree to be the company acquiring VMware. After all this is one of the largest potential acquisitions resulting in VMware being acquired by Broadcom for approximately $61 billion in a cash-and-stock transaction, together with VMware’s net debt of $8 billion.

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European Telcos: Which Future Operating Model?

R. Pritchard

Summary Bullets:

• Europe’s rumor mill is running at high capacity, but it’s becoming ever clearer that – despite the EU – in telecoms, the region remains a series of national markets.

• Activist investors, workforce reductions, fast-changing technology, hyper-competition, multiple layers of regulation, socio-economic changes, and the digitization of everything have got C-suite heads spinning.

Unsubstantiated reports in the press of BT seeking to replace its CEO, Philip Jansen, are typical of a market that is not entirely sure where it is going. Activist investors, cross-shareholdings, and in-country consolidation are confusing enough for the telco C-suite. Add to that, the complications of national and EU regulation, growing ESG requirements, employee ‘rightsizing,’ broad socio-economic and workplace changes, rapidly evolving technologies, the key role of digitization across all aspects of home and work life, plus the need to invest in both infrastructure and systems – it is no wonder that heads are spinning.

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AWS Cloud Day Malaysia – New Region and Diverse Vertical Capabilities to Drive Malaysia’s Digital Ecosystem

A. Amir

Summary Bullets:
• AWS’ new Malaysia region and diverse industrial capabilities will strengthen its market position.
• Industry collaborations will be the key to capturing growing business-led cloud opportunities.

AWS held Malaysia Cloud Day earlier this month and shared its latest plans in the country including a plan to invest $6 billion in the country by 2037. The investment will include a new local region to address the increasing adoption of cloud services in the country as well as various programs to upskill workforce in the country (for more, please see AWS Malaysia Region Will Address Malaysian Cloud Demand but Could Lose Early Market Opportunities to Competitors, March 6, 2023). At the event, AWS also shared various success stories with a number of enterprises across different industries including key players such as Petronas, Pos Malaysia, Bank Islam, Carsome, Axiata, and Astro. This is crucial to showcase AWS’ capabilities not only to offer basic cloud services, but also to work closely with enterprises on their cloud-led digital transformation and help them address business challenges through a wide range of solutions.

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‘Copilot in Microsoft Dynamics 365 Customer Service’ Marks a Big Step Forward for Microsoft’s Contact Center AI Capabilities

G. Willsky

Summary Bullets:

• Microsoft is capitalizing on two key contact center trends: the pivot from a multi-channel orientation to an omni-channel orientation and the emergence of AI.

• Microsoft must rationalize its contact center portfolio and establish integration with Teams.

This month Microsoft launched a limited preview of ‘Microsoft Dynamics 365 Copilot’. The offer features Microsoft’s new Copilot generative AI and natural language processing (NLP) engine built natively into various Microsoft Dynamics 365 CRM and ERP apps. Employees in functions such as sales, customer service, marketing, operations, and supply chain leverage the Copilot capabilities in the apps to create content faster, complete complex tasks, and gain insights into their work.

Continue reading “‘Copilot in Microsoft Dynamics 365 Customer Service’ Marks a Big Step Forward for Microsoft’s Contact Center AI Capabilities”