The Enterprise Guide to Cloud Modernization – Strategy, Costs & Roadmap
Most enterprise organizations are already in the cloud. Only some have modernized it. The challenges between these two different approaches to cloud computing are what lead to budget misallocations, application underperformance, and years of technical debt. The following text explores what cloud modernization is, what costs are associated with it, and how an enterprise can develop a cloud modernization roadmap that its finance executives and development organization will support.
What Is Cloud Modernization?
The term cloud modernization describes the process of updating applications, data, and infrastructure to fully realize the benefits of the cloud. It includes application modernization, which focuses on refactoring legacy applications to be cloud-native, and the process of retiring or replacing legacy systems, otherwise known as legacy system modernization. Finally, cloud modernization involves optimizing the use of cloud infrastructure.
Cloud Migration vs. Cloud Modernization
These two terms are often confusing for one another, and the conflation between them leads many organizations to spend excessively on cloud services without seeing the benefits. Migration is the process of moving workloads to the cloud, typically in a lift-and-shift manner. Modernization is the process of rethinking the development lifecycle of applications to ensure that they fully utilize the features of the cloud environment. The difference between these two processes is significant, and the most common pitfall is to confuse the two. At the end of the day, organizations that only migrate do see reduced capital expenditures and expenses. However, the lack of transformation often fails to deliver on the promise of increased agility.
Why Modernization Matters (And Why Legacy Systems Are Costly)
Legacy systems accrue a technical debt that comes with an opportunity cost. Reduction of this technical debt is often the most powerful justification for cloud modernization, as the amount of resources that enterprises have to dedicate to maintaining legacy applications directly impact the amount of time that software developers can spend working on other applications. This opportunity cost is compounded by other financial pressures that organizations face when maintaining legacy systems, including increased licensing costs, security liabilities, and slower time-to-market. The financial risk is significant, and the cost-benefit analysis quickly tilts toward modernization as the preferred option.
How To Build a Cloud Modernization Strategy
The first key step towards cloud modernization is a cloud assessment. This assessment can take a number of forms but generally revolves around evaluating the strategic importance of a given application, its technical debt, the complexity associated with migrating it to the cloud, and the costs of migration and support in the cloud. This information is often used to inform some variation of the six pillars of cloud modernization that form the basis of a cloud migration strategy. These pillars include rehosting, replatforming, refactoring, replacement, retirement, and retention.
A cloud modernization framework helps organizations to ensure that the work that enters production on a regular basis is a mix of quick wins and big transformations. This approach allows organizations to fund future projects by first identifying the most valuable applications to migrate and optimize the cloud investment. It also helps to maintain executive support for the cloud modernization initiative by ensuring that progress remains visible throughout the process.
Cloud Modernization Cost Breakdown
The most common question that business executives ask when considering cloud modernization is how much it costs. There is no agreed-upon answer since costs vary depending on the organization’s needs. However, there is a general understanding of what elements contribute to the final costs associated with cloud modernization. These elements include:
A cloud modernization cost breakdown usually consists of the following elements:
Assessment and Planning: discovery, application portfolio analysis, and roadmap design.
Engineering: the biggest chunk usually comes down to code refactoring, re-architecture, and data migration.
Platform and tooling: landing zones, automation, and observability.
Run and optimize: consumption, managed services, and support
Change and training: making sure the team will be able to operate the new estate.
Cloud modernization pricing usually depends on the size of the portfolio, the complexity of the application stack, and a certain balance between refactoring and retirement that has to be struck at any stage. The cloud modernization cost should not be considered in a vacuum, because enterprises usually fail to take into account the benefits that cloud costs help them achieve. In other words, reduced OPEX, faster time-to-market, fewer production incidents, and more engineering efficiency.
Controlling Spend with FinOps
FinOps for cloud modernization refers to bringing finance, engineering, and business operations together to understand where the cloud money goes in practice. Combined with cost-saving cloud operations (rightsizing, autoscaling, reserved instances, reducing idle consumption), FinOps makes it possible to save 20–30% on cloud bills that would otherwise be inaccessible to cost control. In this respect, cloud modernization without FinOps usually leads to some forms of wasted expenditure.
How to build a cloud modernization roadmap
The cloud modernization roadmap is a tangible expression of the strategic intent that allows breaking down a monolithic vision into realistic funding chunks on a yearly basis. Enterprise cloud modernization programs typically focus on achieving transformation outcomes in distinct cloud modernization phases.
Assessment: application portfolio discovery and prioritization, target architecture design
Planning: determining the appropriate cloud modernization approach for each application, designing a business case, budgeting the program
Foundation: cloud-native platform enabling, automation, and governance
Modernization: migrating/refactoring/applying cloud-native patterns in iterative waves
Optimization: FinOps-enabled ongoing cloud operations and performance improvement
An enterprise cloud modernization timeline typically spans 12–24 months, with some value delivered within the first three months, depending upon the approach and scope. A cloud modernization program needs to have concrete milestones within each of the stages listed above, because the longer the timeline stretches, the more important it becomes to keep teams focused on the end goal. In practice, it means defining value streams that can be improved within the given portfolio, and budgeting cloud costs accordingly.
Cloud modernization best practices
- In general, there are several cloud modernization best practices that can be applied to achieve better results with less risk and expenditure.
- Prioritize business outcomes over technology-specific choices
- Modernize iteratively to reduce risk surface
- Automate everything that can be automated to reduce OPEX
- Apply FinOps and security operations throughout the program, as foundational enablers.
- Retire applications when appropriate to unlock budget, because the cheapest application to modernize is the one that is turned off
Choosing an enterprise cloud modernization partner
Very few companies have the capability to manage a comprehensive enterprise cloud transformation while also being able to sustain day-to-day operations. Choosing the right cloud modernization partner usually boils down to selecting a company that has an established set of enterprise cloud modernization playbooks, cloud transformation expertise, and operational capabilities to operate cloud-native applications as managed services.
Teceze offers cloud modernization services and solutions to enterprises in India, the US, the UK, and beyond, which allows us to provide end-to-end support for application modernization, and continuous 24/7 cloud operations under a single roof. We help our enterprise clients get the most value out of their cloud investments.