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One of the key advantages of the cloud is cost savings, and yet cloud costs are on the rise and overspending by as much as 70% is commonplace, according to Gartner. Much like gyms make their money off members who never actually use the equipment, cloud providers profit from those who underutilize their resources. That’s a problem for financial leaders and IT leaders trying to govern digital transformation costs and tighten their budgets in response to economic pressures. With cloud spending doubling every four to five years, it pays to cut cloud costs.

But how do you get a handle on your corporate cloud spending?

From Infrastructure as a Service (IaaS) to Software as a Service (SaaS) and Unified Communications as a Service (UCaaS), here are four leading strategies for cutting cloud costs.

1. Eliminate redundant cloud applications

This advice sounds basic, but it’s easier said than done. Getting the visibility to see both sanctioned and unsanctioned applications can be a challenge. Technology is key. Cloud expense management platforms help establish a centralized inventory of all cloud applications and infrastructure services currently in use. Cloud Access Security Broker (CASB) security technologies can also be helpful. Gaining deep visibility is the first step in reducing app redundancy and improving cloud security.

Those who do it best plan a cross-functional project tapping into data from Single Sign On systems, as well as financial expense systems. You’ll want to identify the most cost-effective app consolidations and rank your apps based on cybersecurity risk. This helps teams prioritize response efforts around app elimination and security polices for acceptable cloud use.

2. Reduce cloud infrastructure waste

With a centralized inventory, the next step is to reconcile infrastructure usage against ownership. The key is to know what you already pay for and how efficiently you’re using it. All too often, companies overestimate their needs and resources go underutilized. There are many examples, whether it’s an ambitious IT engineer wanting a big piece of infrastructure so he can sleep at night, data transfers triggering unnecessary charges, or virtual servers forgotten after their owner left the company. In some cases, servers will run for no reason at all.

Cost analysis efforts take on exercises in:

Evaluating your IT environment over periods of time, creating usage benchmarks aiding the analysis of traffic charges and storage forecastingUnderstanding how and when to use pausing features to ensure you’re paying for IaaS services only when you need themKnowing when to remove or downgrade infrastructure — the same way you downgrade a phone plan from unlimited data to a lower tierOptimizing costs for direct network connections to cloud providers, as the provider’s service is not always the best optionExploring spikes in IaaS usage and knowing when retention plans create unnecessary backups burning a hole in your pocket

Software powered by artificial intelligence can “see” these types of inefficiencies instantly, bringing forward misappropriated tags and cost savings recommendations informed by normalized data and pricing information updated in near real time. Beware: Default dashboards from cloud providers will not deliver cost optimization insights. Nonetheless, the data is available. Simply plug in analytics tools to reveal savings. It’s not uncommon to immediately find 20% in savings and achieve a triple-digit ROI in the first year.

3. Improve cloud management productivity

When cloud innovation can mean the difference between winning and losing in the market, IT teams should be spending more time transforming and less time worrying about how their cloud resources are being used and managed, how expenses are reconciled or allocated to business units, and how needs are forecasted. IT staff efficiencies are cited as one of the most important benefits of moving workloads to the cloud, but those productivity gains can be undermined by manual vendor management tasks.

Outsourced services can offload the manual work of IaaS usage audits, application optimization, and expense management. They’re also helpful in bill pay, contract renewals, and integration projects following mergers and acquisitions.

4. Put checks and balances in place

Give a leader or team the authority to govern the cloud. Create initiatives to reassess assets with cost top of mind, understanding that the long-term strategy is to create thoughtful usage that allows room for more meaningful cloud adoption as innovation evolves. Allow this team to work beyond defined perimeters and identify cloud usage policies in addition to key risks in the areas of finance, IT, and security. If you have more than 50 applications and more than two cloud infrastructure providers, consider a dedicated resource or ongoing partner program. 

The cloud triggers other reasons for oversight. Challenges include cloud application performance and reliable connectivity issues when increased cloud usage demands more of the IT network. With a team experienced in effective cloud expense management, companies are better guided through modernization initiatives, deploying SD-WAN solutions designed to manage 5G and internet service providers cost-effectively.  

Payouts worth the investment

In the end, don’t expect to tackle all four steps at once. Prioritization is key. Investments in cloud cost management have a high likelihood of paying for themselves, as benefits materialize in dollar savings, productivity gains, and security. If companies spend 2023 evaluating cloud costs and ensuring their spending aligns with needs, efficiency, and innovation are sure to follow. Now, is the time to inventory and reconcile cloud assets. Right-sizing will help avoid cloud investment hangovers and empower companies to effectively govern the past three years of innovation run amok.

To learn more about cloud cost optimization, visit us here.

Cloud Management, Cloud Security, Endpoint Protection

Posted on Posted in Digital transformation, General topics Tagged with , , , , , , , , ,

IBM reported net income  of $2.9 billion in the fourth quarter of 2022 and year-on-year increases in revenue across all three of its business segments.

That’s an increase in net income of 9% compared to the total reported for the corresponding quarter of 2021, or 17% comparing only continuing operations: IBM spun off most its infrastructure management division as a new business, Kyndryl, in November 2021, and sold some assets of its Watson Health business in January 2022.

On a conference call with analysts to discuss the results, CFO Jim Kavanaugh alluded vaguely to this leaving IBM with some stranded costs in its business, saying, “We expect to address these remaining stranded costs early in the year and anticipate a charge of about $300 million in the first quarter.”

Later that day, in an interview with Bloomberg, Kavanaugh explained that eliminating those stranded costs — staff left with nothing to do following the asset disposals —  would result in IBM cutting about 3,900 jobs, or 1.5% of its workforce. An IBM representative said the company had “nothing further to add.”

IBM CEO Arvind Krishna said on the call with analysts that the company’s fourth quarter and full year results demonstrate the successful execution of its hybrid cloud and AI strategy.

He noted that IBM was continuing to invest in large language and foundation models — the technologies behind tools like ChatGPT — and is infusing these capabilities across the company’s AI portfolio. In addition, Krishna said that business with strategic partners, including SAP, Microsoft and AWS, had generated over $1 billion in revenue for the year.

“I’m confident in our ability to leverage hybrid cloud and AI to help clients turn business challenges into opportunities,” he said.

Growth across all lines of business

Krishna told analysts that IBM had delivered strong revenue growth across its business, with results “broad-based” across its software, consulting, and infrastructure segments as well as across geographies.

Software sales for the fourth quarter rose 2.8% from a year earlier, to $7.3 billion, while infrastructure sales rose 1.6% to of $4.5B.

Consulting revenue also grew, but by just 0.5%, to $4.8 billion. If it continues at that rate, it will fall behind the market: Gartner forecast that global spending on consulting will grow 6.7% this year to $264.9 billion.

IBM’s software segment was boosted by sales of its hybrid platform and solutions, up 5%, while automation, data and AI, and security all contributed growth of 4%; transaction processing revenue was down by 3%. Revenue generated by Red Hat accounted for the biggest area of growth in this segment, up 10% from a year earlier.

The biggest driver in the infrastructure segment was the zSystems line of mainframe computers, up 16% after the z16 model became generally available in May. However, distributed infrastructure revenue remained flat and infrastructure support was down by 8% year on year.

Kavanaugh said on the conference call that he hopes to squeeze another $200 million profit from the infrastructure segment in 2023 by extending the period over which it amortizes the cost of its IT assets. “Due to advances in technology, we are making an accounting change to extend the useful life of our server and networking equipment,” he said. “Given this is a change to the depreciation, there’s no benefit to cash.”

IT Consulting Services, Multi Cloud

Posted on Posted in Digital transformation, General topics Tagged with , , , , , , , ,

Almost two months after cloud-based CRM software provider Salesforce announced it would be cutting around 950 jobs, the company has announced it will lay off about 10% of its workforce, roughly 8,000 employees, and close some offices as part of a restructuring plan.

Salesforce had nearly 80,000 global employees as of February 2022, up from more than 49,000 employees as of January 2020.

In a filing with the Securities and Exchange Commission on Wednesday, the company disclosed that its restructuring plan calls for the company to incur charges between $1.4 billion and $2.1 billion, with up to $1 billion of those costs being shouldered by the company in the fourth quarter of 2023.

Salesforce said these costs consist of up to $1.4 billion in charges related to employee transition, severance payments, employee benefits, and share-based compensation; while up to $650 million will be spent on exit charges associated with the office space reductions.

In a letter sent by Salesforce’s co-CEO Marc Benioff and attached to Wednesday’s SEC filing, he told employees “the environment remains challenging, and our customers are taking a more measured approach to their purchasing decisions. With this in mind, we’ve made the very difficult decision to reduce our workforce by about 10 percent, mostly over the coming weeks.”

Salesforce over-hired during the pandemic

He added that as Salesforce’s revenue accelerated through the pandemic, the company over-hired and can no longer sustain its current workforce size due to the ongoing economic downturn. “I take responsibility for that,” Benioff said in his letter.

The company said it expects to complete most of the employee restructuring plan by the end of fiscal year 2024, and to finish its real-estate restructuring in fiscal 2026. According to Benioff’s letter, US-based employees affected by the layoffs will receive a minimum of nearly five months of pay, health insurance, career resources, and other benefits to help with their transition. Those outside the US will receive a similar level of support, with Salesforce confirming that local processes will align with employment laws in each country.

Despite having a relatively successful financial 2022, the year’s last quarter saw the company grapple with several high-profile executive departures, including co-CEO Bret Taylor and Stewart Butterfield, the chief executive and co-founder of Slack, both of whom announced they would be leaving the company in the same week. Salesforce acquired Slack in 2020 for $27 billion, in a deal where Taylor played a key role.

The news comes as the WSJ reported that, based on estimates from Layoffs.fyi, employers in the tech sector collectively cut more than 150,000 jobs in 2022. In comparison, according to data compiled by the site, there were only about 80,000 layoffs in March-December 2020 and 15,000 during the whole of 2021, meaning that technology companies have been laying off workers at the fastest pace since the Covid-19 pandemic began.

CRM Systems, Technology Industry

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It’s the 1960s, and you live in Turkey. You just bought a pair of beautiful shoes — the latest pair from one of the finest shoemakers in Turkey. But for some reason, the shoes are not quite right. Such things happen even with the best products.

A problem with one of the heels, you think. So, you return to the Gaziantep workshop, where you’re greeted by owner Ahmet Ziylan. He inspects the shoes and agrees there’s an issue. Then, he accepts your return and provides you with a refund, which you use to purchase another pair. The whole transaction takes only a short time. You leave happy with your replacement and with Ahmet’s service.

Fast forward to the 21st century. That 50-square-meter workshop in Gaziantep has grown into an international retail business, FLO. Today, FLO is the largest footwear retailer in Turkey. Not only does the company continue to make high-quality shoes, but it also sells footwear from other manufacturers. Brands include Lumberjack, Polaris, and Kinetix, Turkey’s No. 1 sports shoe brand in terms of sales volume. FLO has more than 650 stores in 21 countries, producing around 3.5 million pairs of shoes and selling around 35 million pairs every year.

Ensuring happy returns

Product returns are still part of the business. With millions of shoes purchased from FLO stores each and every year, even the small percentage of returns represents a significant number — around 500,000 annually.

As the business grew, handling the returns became a challenge, affecting FLO’s customer satisfaction, operational efficiency, and bottom line. Until recently, the return process involved shoes being shipped from the stores to a FLO facility, where the company’s team of quality control experts inspected the shoes by hand. If a defect was noted, a customer was given a refund — but not immediately. 

Because of the return volume and centralized inspection, the wait time to get an answer about a refund was up to three weeks. Needless to say, this created some undelighted customers.

It became clearly evident to FLO that they needed to find a way to satisfy their customers and contain costs by providing its patrons with an instant solution at the stores in case of a defective product. But how?

The shoe (application) fits

To meet the challenge, the company took “a leap into the future,” turning to digital transformation and a machine learning (ML) solution. FLO created an application powered by SAP HANA Cloud Services in the SAP Business Technology Platform, leveraging the advantages of cloud computing, big data analytics, and real-time replications.

The application can predict if a returned item is defective by taking into account attributes such as suppliers, product family, customer behavior, and season. A defective product can be identified by ML in 80% of the cases. As a result, only complex issues are now handled by human inspectors in the centralized facility.

With the application predicting the inspection result at the time of return, customers have only to wait seconds, not weeks, at checkout for an answer, increasing their satisfaction and ongoing loyalty. The application also helps FLO avoid a related challenge of the past: products being accepted incorrectly.

After walking that proverbial mile in their customers’ shoes, FLO reduced human errors related to the return process by 35% — equal to €500,000 annually — and lowered inspection workload by 50%. At the same time, the footwear maker has been able to bring down costs such as cargo and SMS by 50% and increase brand value.

All those wins have given FLO a leg or foot up in the market, being even more successful and a customer favorite, as well as being named a Winner at the 2022 SAP Innovation Awards.

To get the technical details behind Flo’s amazing accomplishment, check out their Innovation Awards pitch deck.

Artificial Intelligence, Machine Learning