Cloud Adoption Framework

Strategy: Define Business and Expected

Outcomes
EXECUTIVE SUMMARY
Executive Summary
•[Overview of your business priorities,
timelines and milestones in the
upcoming year for successful cloud
adoption. Also include prioritized
projects and criteria for such projects.]
UNDERSTANDING
MOTIVATIONS
Critical Business Event
When a response to critical business events is the highest
priority, it's important to engage early in cloud
implementation, often in parallel with strategy and planning
efforts. Taking this approach requires a growth mindset and a
willingness to iteratively improve processes, based on direct
lessons learned.

Migration
When migration is the highest priority, strategy and
planning will play a vital role early in the process. We
recommend that you implement the first workload in parallel
with planning, to help the team understand and anticipate any
learning curves that are associated with cloud adoption.

Innovation
When innovation is the highest priority, strategy and planning
will require additional investments early in the process to
ensure balance in the portfolio and wise alignment of the
investment made during cloud adoption.
 Critical Business Events Migration Innovation
Datacenter exit Cost savings Preparation for new
UNDERSTAND technical capabilities

MOTIVATIONS Merger, acquisition, or

divestiture
Reduction in vendor or
technical complexity
Building new technical
capabilities
Reduction in capital Optimization of internal Scaling to meet market
expenses operations demands
Why are we moving to
the cloud? End of support for mission- Increase in business agility Scaling to meet
critical technologies geographic demands

Response to regulatory Preparation for new Improved customer

Why do you want to compliance changes technical capabilities experiences and
adopt the cloud? engagements
New data sovereignty Scaling to meet market Transformation of
requirements demands products or services
Reduction of disruptions Scaling to meet Market disruption with
and improvement of IT geographic demands new products or services
stability
BUSINESS OUTCOMES
The most successful transformation journeys start
with a business outcome in mind.

Cloud adoption can be a costly and time-

consuming effort. Fostering the right level of
support from IT and other areas of the business is
crucial to success.
OUTCOME EXAMPLES
Fiscal outcomes:
• Revenue: Will more money come into the business
as a result of the sales of goods or services.
• Cost: Will less money be spent in the creation,
marketing, sales, or delivery of goods or services.
• Profit: Although they're rare, some transformations
can both increase revenue and decrease costs. This
is a profit outcome.
Agility outcomes:
• Time-to-market is a key measure of IT's ability to
address market change.
• Provisioning being able to scale in hours instead of
weeks
OUTCOME EXAMPLES
Global Reach Outcomes:
• New Markets
• Global access
• Data sovereignty

Customer Engagement Outcomes:

• Cycle times (DevOps)

Performance Outcomes

Reliability Outcomes
BUSINESS
JUSTIFICATIONS
Dispelling common myths
Myth 1: The cloud is always cheaper. It's commonly believed that
operating a datacenter in the cloud is always cheaper than operating one
on-premises.
Myth 2: Everything should go into the cloud. In fact, some business
drivers might lead you to choose a hybrid solution.
Myth 3: Mirroring my on-premises environment will help me save money
in the cloud. During digital estate planning, it's not unheard of for
businesses to detect unused capacity of more than 50% of the provisioned
environment.
Myth 4: Server costs drive business cases for cloud migration. Sometimes
this assumption is true. For some companies, it's important to reduce
ongoing capital expenses related to servers. 
Myth 5: An operating expense model is better than a capital expense
model. 
Myth 6: Moving to the cloud is like flipping a switch.
BUILDING BUSINESS
JUSTIFICATION
At the highest level, the formula for business
justification is simple. But the subtle data points
required to populate the formula can be difficult to
align. On a basic level, the business justification
focuses on the return on investment (ROI)
associated with the proposed technical change.

The generic formula for ROI is:

BUILDING FINANCIAL
MODEL - CALCULATE
THE INITIAL
INVESTMENT
Sum of these is initial investment
Capital expense
Operating expense

Examples – Only during the transformation

Software licenses
Cost of cloud services
Professional services
Salaried employees
BUILDING FINANCIAL
MODEL - GAINS FROM
INITIAL INVESTMENT
•Calculating the gain from investment
often requires a second formula that's
specific to the business outcomes and
associated technical changes. Calculating
earnings is harder than calculating cost
reductions.

•To calculate earnings, you need two

variables:
REVENUE DELTAS

Revenue deltas should be forecast in

partnership with business stakeholders.
After the business stakeholders agree on
a revenue impact, it can be used to
improve the earning position.
COST DELTAS

Cost deltas are the amount of increase

or decrease that will be caused by the
transformation.
Independent variables can affect cost
deltas. Earnings are largely based on
hard costs like capital expense
reductions, cost avoidance, operational
cost reductions, and depreciation
reductions.
COST DELTAS -
EXAMPLES
Depreciation reduction or acceleration
• When capital is invested in the acquisition of
an asset, that investment could be used for
financial or tax purposes to produce ongoing
benefits over the expected lifespan of the
asset.

Physical asset recovery

• In some cases, retired assets can be sold as a
source of revenue. This revenue is often
lumped into cost reduction for simplicity. But
it's truly an increase in revenue and can be
taxed as such
 COST DELTAS -
EXAMPLES
Operational cost reductions
Recurring expenses required to operate a business are often called operating
expenses. This is a broad category. In most accounting models, it includes:
• Software licensing
• Hosting expenses
• Electric bills, Cooling expenses, Real estate rentals, Equipment rentals
• Temporary staff required for operations.
• Maintenance contracts, Repair services, Replacement parts
• Business continuity and disaster recovery (BCDR) services.
• Other expenses that don't require capital expense approvals.
This category provides one of the highest earning deltas. When you're
considering a cloud migration, time invested in making this list exhaustive is
rarely wasted.
COST DELTAS -
EXAMPLES
Cost avoidance
• When an operating expenditure is expected but not yet in an
approved budget, it might not fit into a cost reduction category.
For example, if VMware and Microsoft licenses need to be
renegotiated and paid next year, they aren't fully qualified costs
yet. Reductions in those expected costs are treated like
operational costs for the sake of cost-delta calculations.
Informally, however, they should be referred to as "cost
avoidance" until negotiation and budget approval is complete.
Soft-cost reductions
• At some companies, soft costs like reductions in operational
complexity or reductions in full-time staff for operating a
datacenter could also be included in cost deltas. But including
soft costs might not be a good idea. When you include soft-cost
reductions, you insert an undocumented assumption that the
reduction will create tangible cost savings. Technology projects
rarely result in actual soft-cost recovery.
COST DELTAS -
EXAMPLES
Capital expense reductions or avoidance
• Capital expenses are slightly different from
operating expenses. Generally, this category is
driven by refresh cycles or datacenter
expansion. When a refresh cycle hits, IT draws
capital expense to acquire new equipment.
• If a refresh cycle is approved and budgeted,
the cloud transformation could help eliminate
that cost. If a refresh cycle is planned but not
yet approved, the cloud transformation could
avoid a capital expenditure. Both reductions
would be added to the cost delta.
CLOUD ACCOUNTING
MODELS
• Traditional IT accounting (cost center model)
• Central IT accounting (profit center model)
• Chargeback
• Showback or awareness-back (shameback)

The choice of accounting models is crucial in

system design. The choice of accounting model
can affect subscription strategies, naming
standards, tagging standards, and policy and
blueprint designs.
FIRST CLOUD
ADOPTION PROJECT
Starting a first adoption process in parallel with the
development of the plan provides some benefits:

• Establish a growth mindset to encourage learning

and exploration
• Provide an opportunity for the team to develop
necessary skills
• Create situations that encourage new approaches
to collaboration
• Identify skill gaps and potential partnership needs
• Provide tangible inputs to the plan
FIRST CLOUD
ADOPTION PROJECT
First project criteria
Your first adoption project should align with
your motivations for cloud adoption. Whenever possible,
your first project should also demonstrate progress toward
a defined business outcome.
First project expectations
Your team's first adoption project is likely to result in a
production deployment of some kind. But this isn't always
the case. Establish proper expectations early. Here are a
few wise expectations to set:
• This project is a source of learning.
• This project might result in production deployments,
but it will probably require additional effort first.
• The output of this project is a set of clear
requirements to provide a longer-term production
solution.
FIRST CLOUD
ADOPTION PROJECT
To support the preceding criteria, this list
provides an example of a first project for each
motivation category:

• Critical business events

• Migration motivations: When migration
is the primary motivation, it's wise to
start with the migration of a noncritical
workload. 
• Innovation motivations: When
innovation is the primary motivation,
creation of a targeted dev/test
environment can be a great first project.
Q&A
How would you measure success?

Beyond achieving the business outcomes,

are there other indicators for successful
cloud adoption in your organization?