IT a Service Broker: Driving Efficiencies across the Cloud Supply Chain

     IT is under pressure from the business to provide  capability and capacity they need on demand. With Cloud Providers providing the capabilities and capacity faster without an initial large expenditure is appealing to the business units compared to traditional IT which has led to Business units purchasing IT as service – IaaS, PaaS and SaaS  from external providers and bypassing IT , leaving IT  to react after the fact.

IT organization have realized that to stay relevant with the demands of the business they must serve as the Service servicebrokerbroker between their internal customers (lines of business) and all IT services whether consumed by Private  or Public Clouds. By being the broker for IT services, IT organizations can offer the lines of business the capability and capacity they need on demand, along with metered price, while managing sla’s, governance, risk, and compliance the company requires and in the process drive efficiencies across the supply chain.

In the blog we will look at various factors from an efficiency perspective as to how IT as a broker can help the Enterprise drive efficiencies across the cloud supply chain.

  • Optimization of Cost vs. Utilization: The first factor has been explained pretty well in Daanish’s blog on  cost optimization vs. utilization.  He showed that in a role of a broker by understanding the patterns and utilization of the workloads, IT can guide the business on turning off unused re-sources they could easily save money.  He uses an example of an Enterprise who has 10K separate AWS accounts and what the cost would be from a developer on the LOB consuming AWS and never turning of the resource even if it is not utilized compared to  turning off underutilized resources roughly came up with a saving of   $4,567,320 per year.
  • Vendor Management: Lets say if each Line of business (LOB) is negotiating with the external Cloud Service Provider (CSP)  independently they are not going to get the right value both from pricing and SLA. To illustrate lets say  each Line of Business are consuming 100k  worth of service per year say and if they are 15 Line of Business (LOBs) that is 1.5 Million dollars so question is would a CSP provide better pricing and SLA for 100K or 1.5 Million. With IT being the intermediary broker,  IT’s vendor management team can negotiate better pricing and procure better SLAs with the Cloud Providers for 1.5 million collectively rather than each LOB doing it individually for 100K.  The additional key element is that IT can monitor the SLAs and can also negotiate better pricing the year after , if  some SLAs  are not met.
  • Operational Cost: Taking the Line of business (LOB) example again, lets say the LOB starts with a few servers on CSP (ex:AWS ) and over time it grows to 100s  of server,  so now from managing a few server the LOBs have to manages 100s and they start looking for a dedicated operational person to manage the servers and that is now an Opex Cost increment as that expertise does not come cheap. Let’s say the LOBs hire an Operator for 100K  and Enterprise have 15 LOBs each having their own operators that is 1.5 million dollars. IT was built to manage and operate the applications which run the business and so as a Service Broker they can build a better opex model where they will be able to manage the entire system with 2 dedicated operators specializing in AWS  (2*100K =200K) which in turn saves the Enterprise roughly a saving of 1.2 million dollars per year.
  • Utilization Patterns : IT with good monitoring and metering tools will be able to understand the capabilities and utilization patterns from all the LOBs can provide better guidance for example lets take  AWS and capabilities they provide:
    • Based in utilization patterns , they they can look at further savings by looking atreserved instances rather than just on demand instances and negotiate better pricing.Reserved Instances provide you with a significant discount (up to 75%) compared to On-Demand Instance pricing
    • IT can guide the business that utilization does not justify the cost from a scale up perspective but rather build for base utilization and use principles of elasticity using AWS services like LB + AutoScale Policies which provides the capability. This drives a lot of efficiency over time and helps change the mindset.
    • Over time by understanding the patterns of consumption and operating an external cloud IT can build a Private Cloud and start making placement decisions based on performance vs. cost vs. risk and drive overall efficiencies.
  • Risk Management: This is something, which is not quantifiable, but as we have seen with critical data leak there can be major consequences.  With IT as a Service Broker they can Manage Risk better as they have better visibility tools, and can audit periodically and provide better  guidance to the internal business customers from security, risk and governance compared to Line of Business doing it themselves.

These are a few of the factors that lends itself to IT being in the Service Broker role to drive efficiencies across the cloud supply chain and in time be in front of the business units aligning and enabling strategic decisions to be executed .  They key element being that IT should not start with “no cannot do”, but more of “lets work together and bring you the capability faster” in a true Service Provider model.

We at EMC have been helping enterprise IT organizations transition to a broker of services as part of the transformation journey to  IT as a Service provider. EMC provides advisory services, engineered solutions and consulting across the cloud supply chain.

About the Author: Mo Khalid