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Energy & Commodities

Five Considerations for Cloud Migration

Energy companies have rightly invested heavily in digitalization. Data indicates that 20 to 30 percent of oil and gas companies are adopting cloud as part of their objectives, and some have experienced exceptional performance gains as a result, according to Gartner trends. The move toward cloud isn’t as simple as unplugging from old processes and plugging into the new. Energy organizations must learn to navigate the cloud ecosystem to maximize digital opportunities. Here are five things to consider when migrating to the cloud.

Martin Davy
Martin Davy

Calculate Costs: Capex Versus Opex

To achieve business objectives that lie behind a digital transformation, energy organizations must consider financial shifts. Capital expenditures (CAPEX), longterm expenses, operating expenses (OPEX) and day-to-day expenses have shifted. In the past, building an in-house data center demanded significant upfront expenses, and companies amortized this cost over time. Conversely, the financial dynamics of cloud infrastructure require little or no upfront capital expenditure for data center construction.

It’s not uncommon to find huge data centers being used at only 25 percent capacity.

The elasticity of cloud native applications can contribute significant cost savings. But many energy companies have not taken advantage of this. After lifting and shifting existing systems to the cloud, companies are finding that operational costs can skyrocket. Data centers from the pre-cloud era needed to be sized for peak load to avoid performance issues at peak times. It’s not uncommon to find huge data centers being used at only 25 percent capacity. When an energy company moves functionality to a cloud-native solution, it is now only paying for actual usage in a pay-as-you-go model. Organizations often overlook this critical difference – until they get the cloud bill. “Lift and shift” applications not built for the cloud but hosted there in an IaaS (Infrastructure as a Service) model can be costly, effectively running continually at peak load 24 hours a day.

Organizations can avoid this high usage cost by choosing the right technology strategy. A cloud native solution automatically provisions what it needs to run as load increases and when usage diminishes. This is known as elasticity and is one of the key cost advantages of cloud native solutions. Choosing the right solutions enables the company to achieve maximum cost efficiency and is discussed in more detail below.

Organizations can avoid this high usage cost by choosing the right technology strategy.

Make a Decision

There are many moving parts and decision points navigating the cloud ecosystem. The Publicis Sapient 6Rs of Cloud Migration is one framework that analyzes the moving parts of the business and helps to collaborate with stakeholders on decision points. The 6R framework helps companies decide what to do with their application portfolio and to choose the best strategy on an application by application basis.

Consider retaining an application. For example, it may be old but inexpensive to run. It may be functionally valuable with a low risk profile and not out of line with the company’s technology strategy or end of life.

Assess phasing out an old application and whether it can be decommissioned. Is the capability still needed? What is the utilization rate? It is not uncommon to find applications with very low utilization rates often due to changing business needs.

Consider re-hosting via Infrastructure as a Service (IaaS), but keep a close eye on post-migration runtime costs. This could be part of a larger initiative to eventually re-architect to cloud native or as part of a whole data center migration strategy.

Reimagine applications as cloud native. Although initially this approach carries a higher upfront cost, there are opportunities to greatly reduce runtime costs, improve scalability, improve reliability and enhance customer experience.

Examine how to upgrade the existing infrastructure by replacing key back-end components and employing DevOps. This can enable cost benefits both in terms of system runtime and maintenance overhead, such as smaller maintenance teams.

Consider software as a service (SaaS) to replace an application by licensing a new product or online application to do the job. This approach can yield improved experience and runtime costs, but consider ability to customize, ease of integration and need to change existing business processes to match the new system.

Improve the Experience

Consumers have come to expect software to be intuitive and to require no explicit learning curve. Enterprise software still has a long way to go in this respect. As a result, experience technology and modern design thinking techniques are essential and integral to the digital transformation process. The concept of a “single pane of glass” – a common, intuitive digital experience across the energy technology landscape – is being discussed by technologists and designers at energy companies today. It’s an area with great potential for value creation.

The Publicis Sapient LEAD framework embodies this concept. Energy users expect great experiences, and great experiences evoke four qualities: Light, Ethical, Accessible and Dataful. This integration progresses the speed, timeliness and responsiveness of energy organizations to their clients and customers.

Choose the Right Tools

Cloud providers now offer a far more powerful toolset for building software than what is available on premise and at a fraction of the cost. In particular, powerful AI-driven technologies, such as Azure Cognitive Services, bring AI within reach of developers without requiring machine-learning expertise. Examples include tools like Form Recognizer which uses advanced image recognition that can retrieve data from images of invoices or other business forms, and natural language processing and speech recognition for building chat bots or analyzing sentiment in text. Cloud infrastructure also provides greater storage and computing capabilities.

Energy and commodity groups that lift and shift existing software to the cloud are using Infrastructure-as-Service (IaaS). They are replacing their data centers with other data centers that belong to Microsoft, Amazon or Google. On the other hand, organizations building software applications from the ground up or reimagining existing applications, can take advantage of powerful cloud-native capabilities and fall into the Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) categories.

All cloud deployment models – IaaS, PaaS or SaaS – provide utility-style pay-as-you-go billing. IaaS deals with servers, storage and networking. Although these resources work just like their physical equivalents in a traditional data center, they are provided by cloud software and billed per use. PaaS works at a higher level, providing software services aimed primarily at software developers, providing powerful cloud-based capabilities used to build cloud-native applications. Both can provide cost efficiencies for companies. PaaS allows for greater capabilities to build intuitive, efficient, robust, scalable in-house applications, and many companies find that this approach can quickly pay for the initial development costs. A SaaS model provides cloud-based applications targeting end users directly. An energy company typically licenses them from software providers, which could include the company’s own IT organization where the company’s developers use PaaS services to create internal SaaS offerings.

Involve the Right Mindset

There is a mindset associated with modern software development at odds with the thinking of traditional incumbents. Energy companies are experts at building and managing large physical assets such as refineries. They frequently operate as if the cloud is a data center run by a third party. This kind of outsourced thinking misses the fact that “infrastructure as code” provides the ability to materialize an enterprise-class data center simply by running a script using tools such as Terraform and Ansible. IT processes often remain unchanged after a data center migration. Development teams accessing cloud resources continue to file tickets to the IT operations group, causing unnecessary delays. This is no longer needed with cloud, as what was once a physical device – such as a disk array or CPU rack – is now a piece of software and can quickly be provisioned by the team themselves, provided that appropriate governance is in place. Instead of focusing on tickets, IT organizations can use machine-enforced cloud policies to provide guard rails for development teams and ensure compliance with corporate standards and practices.

To change the mindset and make the most of cloud capabilities, organizations must think like digital natives.

To change the mindset and make the most of cloud capabilities, organizations must think like digital natives. There are new ways of working emerging that can have a profound impact on the traditional operating processes and company culture. For example, going from idea to production in days rather than months; focusing on speed quality and value; and working in small, autonomous multi-disciplinary teams. Having a good cloud technology strategy will also help attract top tech talent. It will allow engineers and data professionals to improve skills and keep the business at the forefront of tech capability.

Martin Davy
Martin Davy
Senior Vice President Engineering