Demystify Cloud

Economics to Build a
Strong Business Case
Agenda Cloud economics overview
Technical considerations for cloud migration
Financial considerations for cloud migration
Building a business case
Cloud economics overview
Cloud business value extends beyond cost

“It’s hard to put a number
on high availability and
increased security…you can’t
put a number on a feeling,
but it is a strong driver…”
“It's about spinning up and down. Flexibility. Speed
to market. If you get it wrong, you can just chuck it
away, and there's no capex on your books. That
flexibility that gives you justification for cloud,
not just financial benefits.“
“Agility, integration, skills etc. more
important than economics. But if you look at
the agility, integration, the it's a better sales
pitch. It's about the other landscape that is
there. And indeed ability to scale up, down,
etc.”

“Economics is just one part of justifying our cloud investments. We have “The real benefits we see are flexibility,
several guidelines. Includes time to value, agility, security. Much harder to not having to manage physical data
measure those in financial terms. We take a risk-based approach. When we centers, faster time to market, i.e. not
look at steps, it's not just about economics for us or financial value. There are waiting on physical devices to arrive and
also hard to measure things like time to market, agility.” be installed."
 Technical benefits
Core benefits of Elasticity and on-
Scalability

cloud migration demand are a huge

shift
Availability

Improves how you

How you consume manage, maintain and Security and compliance
cloud is different, but pay for your cloud
drives substantial Capacity optimization
benefits in key areas

Financial benefits OPEX pricing models

Cloud = flexibility
Get more out of what you Reduced datacenter footprint
pay for
+ move away from fixed
Staff productivity
and upfront spend

Sustainability
Azure customers are achieving substantive
business value through cloud migration

“We're now saving about 30 percent a year on infrastructure costs just by moving to Azure,
with more flexibility, better servers, greater customization, and more freedom to do what we
want.“
—Darren Gourley, Chief Technology Officer, CYTI

“Scalability is one of the big benefits we get from Azure. In the past, it might have taken us
months to procure and configure servers and get them into production. Now, we can scale up
on demand in Azure in a matter of minutes." 
—Musaddique Alatoor, Head of Equipment Innovation, A.P. Moller - Maersk

"We wanted to eliminate $3 million (USD) in capital costs over about three years, and to reduce
our operating costs by approximately the same amount. At the same time, we wanted to
improve our quality of service. With Azure, we're confident about meeting these goals."
—Jim Slattery, Chief Financial Officer, Capstone Mining

With automated machine learning in Azure Machine Learning service, we can focus our testing
on the most accurate models and avoid testing a large range of less valuable models, because
it retains only the ones we want. That saves months of time for us. 
—Matthieu Boujonnier, Analytics Application Architect and Data Scientist, Schneider Electric
 Scalability

Availability

Technical considerations
Security and compliance

Capacity optimization
Basic differences between on-premises and cloud

On-premises Cloud

You buy servers Cloud shifts model towards dynamic allocation of capacity
typically for worst
case / highest levels
Infrastructure-as-a-Service
of usage
• Virtual machines
• Storage offerings –
managed disks, blob
storage
Platforms-as-a-Service Software-as-a-Service
• Containerization and • Can even shift on-
workload portability premises
• Databases infrastructure over to
direct SaaS offerings
• Analytics like O365 or other

Technical benefits
cloud SaaS offerings
How your current workloads
translate to the cloud
How to spin up or deprovision resources to build
your budgetary allocation
Deploy and deprovision quickly, fail fast
Modular components leveraged across multiple applications

Further optimize your investment with cloud billing

models and offers
Azure Hybrid Benefit
Dedicated host

Technical benefits
Reservations
Azure spot pricing
Scalability and time to deploy in the cloud
meaningfully improve
Traditional IT Cloud supported

Time to Weeks/months to Minutes/hours to provision resources

provision provision resources
via self-service access

Hardware
1 CPU for 100 hours 100 CPUs for 1 hour
usage

Technical benefits
Location Location dependent Accessible everywhere
Case study: Walgreens Boots Alliance

Global pharmacy retail giant Walgreens Boots Alliance (WBA) is on a

digital transformation journey that involves moving the company’s
massive 100-terabyte SAP landscape to the cloud. After thorough
planning with Microsoft and WBA’s implementation partners, the SAP
migration to Azure went smoothly in less than a day.

“One of the key reasons for moving to Azure was so that we

could take advantage of the scalability that SAP HANA is
capable of. …Instead of using extremely big SAP HANA Large
Instances, we can start using smaller VMs and then scale out.
That’s a big advantage of Azure.”

Technical benefits
Key result:
Completed SAP migration to Azure in less than a day.
Security insights at extreme scale:
Shared threat
Microsoft Intelligent Security Graph data from
partners,
Unique insights, informed by trillions of signals OneDrive researchers, and
law enforcement
Outlook 5B worldwide
threats
detected on
devices every
month
400B
emails 6.5B
analyzed threat signals
analyzed daily 200+ Botnet data
global cloud consumer from Microsoft
and commercial Digital Crimes
Windows
services Unit
Azure

Microsoft
accounts
Enterprise security Bing

90%

Technical benefits
for of 18B+ Bing
Fortune 500
web pages
scanned
450B
monthly
1B+ Xbox Live authentications
Azure user
accounts
Case study: Cerner
Working at the intersection of healthcare and information technology,
Cerner turned to multifactor authentication in Azure Active Directory,
which provides additional authentication for on-premises applications
and applications running in Azure, to further improve its security profile -
and simplify associates’ work lives.

“Security and compliance is never a destination, it’s always a

journey. We believe that Microsoft tools and cloud services offer
great assistance as we travel down that path of continuous
improvement.”

Key result:

Technical benefits
“Multifactor authentication has made one of the biggest positive
impacts to our security controls so far.”
Capacity usage can be optimized in
a cloud native environment
100% on-premises capacity
Unused capacity – Extra usage
C which is rarely if ever used Right sizing/elimination
Immediate savings

70% Peak utilization

Fluctuations on top of base
B workloads – seasonal patterns
or occasional bursts
Pay-as-you-go
Hourly pricing for the hours
or days needed

Base workloads – steady

Technical benefits
30% Avg utilization
A
state, typically covers all day
everyday use.
Reserved Instances
Use reserved instances
End-to-end aim of cloud is to help you do more in your
environment, whether that is on-premises or in cloud
Implementation

Private cloud: Public cloud: off-premises

on-premises

Workloads Existing Modern apps Commodity

Monetize existing gear IaaS PaaS SaaS

Retaining non-end of life Azure Virtual Azure App Service, Dynamics, Office,
or under depreciated gear Machines, Azure Azure Kubernetes Power BI, etc.
VMware Solution, etc. Service, etc.

Technical benefits
Achieving more with every $ invested
 OPEX pricing models

Reduced datacenter
footprint
Financial considerations
Staff productivity

Sustainability
Unlock financial value in
the cloud

A digital transformation goes hand-in-hand

with a financial transformation

When shifting to the cloud, it is important to

understand how Azure will impact:

Financial Accounting Processes

Financial benefits
position KPI
How does cloud pricing work?
On-premises spend results in a fixed cost structure
On-premises
On-premises IT costs
are often upfront
and require
Regardless of underlying
demand, you are committed
to your initial fixed capacity
Due to expectations for
growth you have to pre-buy
for expected demand and
growth
Cloud
Cloud costs allow you
to take advantage of a
variable cost model
Elastic workloads can spin
pay-for-what you use
For more fixed workloads cloud
also has reserved instance
pricing to take advantage of
Financial benefits
lower price points for static
workloads
Cloud shifts how you pay for capacity

CAPEX to OPEX
Meaningful improvements in financial statements, with improved cash flow timing and reduced
need to acquire assets resulting in a fixed cost structure

Requires shift in budgets Cloud provides more EBITDA, a financial KPI, is

from “capital” budgets to predictability and better also impacted from the

Financial benefits
“running” expense budgets cash flow timing CAPEX to OPEX shift
Reductions in datacenter footprint
are possible with cloud
optimizations On-premises cost

Network
On-premises data centers are Headcount
Data center capacity Optimization
frequently overbuilt for peaks, opportunity
resulting in excess capacity and Power
Empty, 2
excess spend. MW

Acquiring on-premises datacenter Building

Server capacity
and server capacity has a
significant lead-time. As a result,
customers frequently invest Idle time;
significantly in advance of Server
Utilized; 3 70%
MW
underlying demand, resulting in

Financial benefits
under-utilized capacity. Utilized
time, MW = Megawatts
30%
Case study: Tenthline
Tenthline secures a modern financial services infrastructure on open-source
stack on Azure. The new service modernizes a key business platform while
helping Tenthline’s customers reduce their datacenter footprint.

“Azure met our stringent security and compliance requirements,

enabling us to decommission unneeded datacenters and focus on
what we do best—serve our customers.”
- Zahid Mahmood: President and CEO

Key result:

Financial benefits
Modernizes a key business platform and helping customers reduce
their datacenter footprint.
 Increased productivity
& service delivery Build Deploy
&
People. Process. Products. Test

“DevOps is the union of people, process,

and products to enable continuous
delivery of value to your end users.”

High performance DevOps Develop Continuous Operate

companies achieve… Delivery

46x deployment 2,555x faster lead

frequency time for changes

Plan Monitor

Financial benefits
Faster time to market Increased revenue
& &
Track Learn
7x lower change 2,604x faster mean
failure rate time to recover

Source: 2018 Accelerate: State of DevOps: Strategies for a New Economy." N. Forsgren, J. Humble, G. Kim. DevOps Research and Assessment (DORA)
Case study: Academy of Motion
Picture Arts and Sciences
Using Microsoft development tools on Azure, the Academy of Motion
Picture Arts and Sciences now delivers a rich, responsive online
experience to its members across a range of devices.

“Azure helped us keep going during COVID-19. If we had still

been on-premises, it would have been more difficult. We’ve
managed to increase our ability to respond to member needs
because we’re a lot more agile and flexible.”

Key result:

Financial benefits
“We’re twice as productive now as we were before, and the reason is
that we can focus fully on development instead of getting pulled
into infrastructure issues.”
Takeaways from Microsoft’s sustainability journey 

Migrating to the cloud Carbon tax funded innovation Smart buildings helped
reduces carbon emissions and drove the right behavior reduce energy consumption
by as much as 20%

Financial benefits
Smart water approaches Remote work accelerates
reduce water usage carbon reductions
Case study: Bühler Group
Bühler Group is a global market leader in food processing equipment
dedicated to improving food safety and sustainability. In order to
provide critical food safety and performance data, it leveraged Bühler
Insights, powered by Microsoft Azure IoT.

"The key thing is sustainability—AI is a gamechanger, and we are

embedding it in innovative, groundbreaking digital solutions that
help our customers meet their sustainability targets as well as
deliver real business value."

Key result:

Financial benefits
Powered by Azure IoT Hub, the Bühler Insights IoT platform
generates vital data to help producers optimize safety, sustainability,
and transparency.
Building a business case
Considering Environment scope (technical and financial)
your business
case Baseline financial data: Cost to run today

Projections: On-premises costs in on-prem scenario

What are the key
components of a Projections: On-premises costs in Azure scenario
business case?
Projections: Migration timeline and Azure costs (optimized)
As you shift to cloud, you reduce your spend over-time and
create a cloud migration plan

100% 10%
On-premises cost
Network On-premises
Headcount
On-premises

Power
Income statement

Building

On-premises op-
Server erating costs
(server depreciation,
datacenter costs, li-
censes, management,
etc.)

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Once on-premises workloads and cost structure have been identified, you can
then build out your optimized Azure consumption plan

On-premises
Azure On-premises

On-prem OPEX
Cash flow

Azure costs
Microsoft
Invest- Status
Migra-
ments $95M
Quo
Capex tion
$63M
Azure Transformation Value
P&L

$63M Azure
Azure
Costs Case
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
In our final step we want to assess any one-time items and
compare with an “on-premises” scenario

Microsoft Status quo (on-

Investments premises)

Azure Transformation Value

Migration
Cash flow

On-prem OPEX
Azure case
Microsoft
Invest- Status
Azure costs
Migra-
ments $95M
Quo
tion
Capex $63M
Azure Transformation Value
P&L

$63M Azure
Azure
Case
Y0 Y1 Y2 Y3 Y4 Y5 Costs Y6 Y7 Y8 Y9 Y10

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Cloud billing models and offers differ from on-premises
but create meaningful savings opportunities

Azure Hybrid Azure Dev/Test Offer & Spot

Benefit Reservations Azure Dev/Test Labs Virtual Machines

A licensing benefit that helps Save up to 72%3 Quickly provision and Scale compute at deep
you to significantly reduce compared to pay as deploy. Discounted rates discounts, up to 90% vs.
the costs of running your you go pricing on popular services4 pay as you go pricing5
workloads in the cloud.

(1) https://azure.microsoft.com/en-us/pricing/hybrid-benefit/
(2) https://azure.microsoft.com/en-us/reservations/ (For SLES and REHL)
(3) https://azure.microsoft.com/en-us/reservations/ 
(4) https://azure.microsoft.com/en-us/pricing/dev-test/
(5) https://azure.microsoft.com/en-us/pricing/spot/#overview
(6) https://visualstudio.microsoft.com/vs/pricing-details/
Case study: Allscripts
Allscripts realized big savings by taking advantage of the Azure Hybrid
Benefit to move 600 on-premises Windows Server and SQL Server
virtual machines to Azure.

"Azure Hybrid Benefit is very important to us for controlling our cost for
our long-running, 24/7/365 applications. Through the use of Azure
Hybrid Benefit, we'll be able to reduce our overall costs by up to 82%."
— Jeff Brady, Sr. Program Manager, Allscripts

Key result:
82% overall reduced costs by utilizing Azure Hybrid Benefit
 Reduced on-premises asset acquisition
When
implementing a Initial clean-up, right-sizing, and optimization

business case, Continuous cost optimization

continuous focus
on optimization Resource tagging and spend categorization

is critical Taking advantage of cloud native billing models

Azure Hybrid Benefit

Microsoft provides solutions to help you
continually optimize your environment

Understand and forecast Cost optimize Control

your costs your workloads your costs

Monitor your bill, set budgets,
and allocate spending to teams
and projects with Azure Cost
Management + Billing
Optimize your resources and
architecture with Azure best practices
from Azure Advisor and the
Microsoft Azure Well-Architected
Framework
Save with Azure offers and licensing
terms like the Azure Hybrid Benefit
and Azure Reservations for your
Windows and Linux workloads
Establish spending objectives and
policies with guidance from the
Microsoft Cloud Adoption
Framework for Azure
Implement cost controls with
Azure Policy so your teams can go
fast while complying with policy
Case study: Dentsu Aegis Network

By migrating its entire infrastructure to Microsoft Azure, Dentsu Aegis Network

can now provision and scale services quickly and cost-effectively. And by using
the Microsoft Cloud Adoption Framework for Azure, the company has accelerated
the agility, governance, and cost benefits of its Azure investment.

“We’ve accelerated the benefits of Azure by using the Cloud Adoption

Framework… We’re already seeing significant cost savings from automation,
standardization, and retiring around 20 percent of our existing apps.”

Key result:
Accelerated the agility, governance, and cost benefits of its Azure investment
 Visit the cloud economics
website to learn more:
azure.com/cloudeconomics

What’s next?
Simplify your cloud
migration journey with the
Azure Migration Program:
Join free
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