Cloud Computing Benefits: The Top line or Bottom line?
Cloud computing can help companies shrink time-to-market, thereby transforming business.
S. Raghuna Reddy
UTI Mutual Fund, SVP-IT
We expect cloud computing to cut capex costs by 50 percent and opex costs by 60 percent
Abbraham Ittyipe
Harrisons Malayalam, Head-IT
At UTI Mutual Funds, we’ve been using a hybrid cloud model that has brought in agility and scalability to our business. As one of India’s oldest and largest mutual fund companies, we manage the assets of over 10 million customers.
Our affair with the cloud began when we faced challenges supporting our international businesses unit; we extend IT services and support to three overseas offices, including their e-mail. We were hosting their e-mail on a server at our Mumbai datacenter and chiefly because they were operating from different time zones, they saw some downtime.
E-mail is a very critical business application for us. Unlike other applications, we can’t afford our mail server to go down for even 30 minutes because it’s UTI’s main vehicle for communication and business approvals. So, we decided to move it to the cloud, despite it’s high criticality, and we haven’t regretted that decision. The move allowed us to raise e-mail availability to three 9s.
I believe that the cloud is the single biggest business enabler available to CIOs today. It enables CIOs to provide any IT service or resource to the business on the fly—and in an automated and measurable fashion. This allows business users to envision and deliver high-paced performance and growth like never before. Also, deploying applications like CRM and BI on a public cloud is much faster. And once time-to-market has shrunk, it’s easier to acquire customers faster.
At UTI, I have been providing IT resources to business users using a private cloud delivery model. Our internal cloud initiative began which a virtualization exercise. Today, we run on an 80 percent virtualized environment that extends across our servers and applications. We haven’t started chargebacks yet, but since the costs that are incurred are measurable, they are allocated to the respective business unit at the end of the year.
But more importantly, the move resolved all the manageability issues we faced with the 45-odd servers we had to maintain—not to mention that lowered the costs of power and cooling. Today, I can provision and provide for whatever extra resources my business users need in order to scale.
Cloud computing is particularly useful in our industry because it is subject to fluctuations in load. Mutual funds are sold by intermediaries, or independent financial advisors. At UTI we have between 30,000 and 40,000 of them. These agents are not employees of the company but they need access to data regarding funds they sell, which they do by accessing an application on our server. This app witnesses a spike once or twice in a month. Maintaining an infrastructure which provisions for that spike is a wasteful effort. We’re looking at hosting this on the public cloud so that we can rid ourselves of this hassle and still provide for the sales force.
The cloud has opened a new world of options that will transform the way business is done. It’s not a technology, but a super power that can drive businesses into new dimensions.
I think the biggest driver to move to the cloud is the tremendous cost advantage it offers my enterprise. Harrison Malayalam is one of India’s largest producers of rubber and a major processor of other agricultural produce.
Today, we spend Rs 45 lakh a year just to maintain hardware that Harrison Malayalam doesn’t even own. We have seven blade servers on lease from IBM, which bleeds our books by Rs 34 lakh a year in annual maintenance. This doesn’t take into account the initial capital expenditure of Rs 56 lakh in software costs.
By the end of the year, we’ll have to consider upgrading our infrastructure, which will further increase my costs. This can’t be avoided or postponed because we’re planning to migrate our Microsoft Dynamic ERP licenses from AX4 to the 2011 version. To ensure the high availability of the upgraded ERP, I will have to upgrade my servers. To top off all of this is the cost and the hassle of maintaining a datacenter and the expense outgo for power, cooling and real estate.
In 2011, we plan to expand our business significantly and cutting costs is one of the company’s top priorities. I believe moving my infrastructure to a completely outsourced public cloud platform will help achieve that aim. I expect to save at least 60 percent in operating costs and 50 percent in capex if I move to an infrastructure-as-a-service model. My capex would shrink to to maintaining a minimum networking infrastructure to support user end-points.
I would also like to move my entire IT stack, including business applications like ERP, to a public cloud.
With respect to different cloud pricing models, I would prefer a subscription-based model, since it’s more cost-effective. That said, because of the lack of clarity on pricing, and the consequent skepticism that’s built up within the organization, our management has yet to give us a go-ahead.
Currently, we are in discussions to move our e-mail sever to the cloud. Our Lotus Notes licenses costs us Rs 1,400 per mailbox annually on maintenance. By hosting this outside, I hope to save Rs 200 per mailbox. Apart from a reduction in annual licensing fees, our mail would be hosted outside, increasing its availability.
To those who fear vendor lock-in with a cloud service provider, I say that in today’s world, where technology is constantly changing, running a long-term capex model isn’t a more prudent choice. The cloud offers us the option of moving to an opex model, while reducing our cost liability.
But here’s a strange challenge: Vendor apathy! Since we are headquartered in Cochin, which is a Tier-II city, cloud vendors haven’t been very forthcoming with their solutions!
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