The Financials Behind Moving to Cloud: Boosting Operational Efficiency in a Dynamic Environment
Businesses today must deal with inflation, volatile energy markets, skyrocketing prices, labor issues, and idle servers. Today, CFOs put the most important and wisest investments on top of their list. Annual inflation in September 2022 is 8.2%, the highest since 1982. In Europe, high energy costs are squeezing margins. Industry consolidation has also increased third-party prices. With about 18-40% of on-premises servers idle, companies struggle to retain talent and pay more for work.
As Chief Financial Officer (CFO), it is important to assess whether your organization is ready to tackle the challenges of the present and future. Today, CFOs face a multitude of problems that require attention. These issues range from fixed costs, such as real estate expenses and outdated software licenses and contracts, that cannot be altered based on market conditions. Additionally, relying on multiple vendors increases the risk of price hikes. Security management practices that are not proactive and not regularly patched also pose a significant risk and can result in major security breaches. Furthermore, operational costs are rapidly changing, with increasing energy costs putting a strain on profit margins. CFOs must also consider the operational costs and staff associated with managing data centers, including addressing heating and cooling issues, increased emissions, and other sustainability concerns. Therefore, it is important to take proactive measures to address current challenges and ensure the success of your organization. One way to do this is through vendor consolidation, by transitioning from multiple vendors to a single, strategic one. This not only streamlines processes, but also ensures that cybersecurity is built-in, as the cloud provider's tools have state-of-the-art security protocols. Another important factor to consider is maintaining profit margins, and one way to do this is by having predictable costs in place to handle unpredictable situations, such as energy costs. Additionally, it is important to improve employee skills and focus their attention on creating business value instead of managing infrastructure.
Leveraging the Cloud to Improve Business Operations
Cloud computing has transformed companies of all kinds and sorts. The cloud's capacity to deliver cost savings, flexibility, scalability, and security is one of the ways it is helping enterprises to shift away from possible financial and operational concerns. Cloud providers make significant investments in security and provide a variety of security services and solutions to safeguard data, apps, and infrastructure. Businesses may operate more effectively, cut expenses, and limit operational risks by embracing the cloud.
As customers use the cloud to streamline their business operations from the status quo, three important things happen.
1. Optimizing cash flow means you can reduce your fixed infrastructure costs up front, save a lot of money, and scale up or down as needed. For example, if your organization runs Windows Server and SQL Server in virtual machines and takes advantage of the Azure Hybrid Benefit, you can save up to 85% by using Azure. Energy costs can be controlled and made more predictable, even where energy prices are high.
By moving workloads from on-premises to the cloud, customers can save money and get more done. Moving from CAPEX to his OPEX allows companies to reduce financial risk and be more flexible when macroeconomic conditions change. And by leveraging energy-efficient and sustainable data centres and strategic pricing, you can reduce your carbon footprint by up to 50%. Less CO2 emissions from his IT infrastructure means fewer emission certificates. The average offset price is about $3 to $6 per ton.
2. Operational Efficiency: To improve operational efficiency, companies need to free their teams to focus on creating business value rather than managing infrastructure, and provide them with better tools for controlling costs. I have. This can be achieved by further training employees to create new apps and using cost management tools to track and reduce spending. Expense management tools can save you up to 34% in the first year. Save up to 65% on select compute services with custom savings plans from cloud providers for compute.
This can save you big bucks on some of the most expensive cloud services. Finance leaders use modern finance practices to reduce cloud costs and maximize cloud value. Cloud Expense Management helps customers track cloud spending by analysing data, setting spending limits, and finding cost-saving opportunities. 45% of businesses who simply moved to the cloud without understanding how to cut costs could spend 70% more in the first 18 months. Automated tools like Azure Advisor provide customers with personalized best practices to improve workload efficiency.
The cloud adoption framework and well-architected framework help customers follow cloud best practices to reduce costs across their journey to the cloud. Cross-platform tools like Azure Arc help customers be more productive in hybrid and multi-cloud environments by reducing their spending on third-party tools.
3. Reinvest for Growth: Finance leaders enable their businesses to grow by reinvesting the money they save, improving cash flow and making operations more efficient. You should reinvest in the important things that move your business forward, such as: B. Improve your company's security and resilience, develop new solution ideas, and use your data to unlock new business value.
Enterprise-grade security features help organizations reduce the average cost of a security breach ($4.3 million total). Cloud services and developer tools help bring new products and services to market faster, and data transformation can increase revenue by an average of 61%. By optimizing technology investments, ensuring superior platform performance, leveraging Azure services, and transforming data, finance leaders can grow their businesses and get the most out of their investments.
The Bottom Line
Moving from on-premises to the cloud can reduce IT total cost of ownership (TCO) by an average of 37%. Labor costs are one area where you can cut costs to save money. Managing an entire on-premises IT environment means managing data centers, power, server purchases, staff management, and many vendors with different contracts. Customers can leverage her PaaS/container services with cloud principles to improve employee productivity with cloud her computing. This saves an average of 10% in labor costs by allowing you to focus on value-adding work instead of just keeping your infrastructure up and running.
Eliminating or consolidating most data center contracts can save 16% when migrating from on-premises to the cloud, reducing direct vulnerability to electricity price changes. In addition, the cloud may eliminate the need for some software licenses, saving an average of 2% on licensing costs. Hardware costs decrease as the need for servers disappears or becomes less critical. This reduces the operational risk of purchasing equipment before you need it, and allows you to receive hardware just in time. This optimization can reduce costs by 30% to 21% through flexible billing models, elasticity, and hybrid service offerings in the cloud.
Navigating the Evolving Finance Landscape
In conclusion, the finance industry is undergoing a significant transformation with the advent of technology and changing environment. The cloud has proven to be a powerful tool that can help increase operational efficiency in finance by streamlining processes, reducing costs, and providing access to real-time data. It enables finance leaders to make informed decisions, respond quickly to market changes, and focus on high-value activities such as risk management and strategic planning. As more and more organizations embrace the cloud, we can expect to see a continued rise in operational efficiency, increased competitiveness, and growth in the finance industry.
