Cloud Helps Reduce Labor Costs While Increasing Staff

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The cloud can be a difficult concept for many people to understand both inside and outside the tech industry. There are some who know the cloud simply as their Apple iCloud or Dropbox account, or maybe they don’t even realize it’s actually the mysterious cloud that’s storing all their baby photos.

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While the technology of the cloud is difficult for the average consumer to understand, it is similarly challenging for businesses to establish cloud operating environments. Establishing a cloud environment means shifting from manual to automated, from reactionary to as-a-Service, and that strategy shift is reliant on the people and processes behind the technology.

New skills are required and employees must adopt these new skills that align more to an IT-as-a-Service model. Overall, employees roles are evolving, but do all the new skills and increased IT automation mean less IT staff?

On the surface, the answer is ‘Yes,’ but that is not necessarily true. Let’s consider the following scenario: I’m the CTO of a company who employs contractors and consultants along with my internal IT staff in order to manage my data centers. This includes many traditional IT functions such as a significant amount of manual updating, configuring, and troubleshooting. If you look at my total labor costs in year 1, they look like this: a total of about 200 full-time employees, but 85% of my total labor costs are spent on outsourcing and consulting services. Not a good mix.

My end goal is to transform the IT organization to an IT-as-a-Service model, rapidly delivering services to the business, so we can become an enabler of new revenue. So what is my plan? I know the business needed to invest in my vision in order for me to be successful, so I had to build my case. I start by showing my cost savings in the data center like software license cost reduction and hardware maintenance cost reduction. Additionally, I know with an as-a-Service approach I no longer need to spend a large portion of my budget on outsourcing and consulting services. I can then use those savings to hire more internal staff to provide services to the business and play a more strategic, hands-on role. This labor shift and strategy helps me and IT develop more services that the business actually demands and needs.

cloud_graphs.jpgEvery year, I take this strategy to the books and show my progress. I started with 200 full time employees running a standard IT shop. After one year, I have automated my data center, thereby reducing the total labor I need to operate. However, to make this new automated data center possible I need to bring in new skills, so I increase my full-time head count to 280 employees, an increase of 40%, and reduce my contractor and consultant head count by 25%. After two years, I have 342 employees on my internal IT staff and reduced my outsourced resources by another 15%. Come year 3, our evolution continues, with the similar staff increases, but labor costs continuing to drop as we only need a few contractors and consultants for legacy apps that simply can’t operate in a cloud model. Overall, I reduced total labor costs by 25% because the expensive outside labor I was contracting is simply no longer needed – but I simultaneously increased internal employee headcount by over 60%. By decreasing my reliance on outsourced labor, I was able to build out my new IT organization with better employees who deliver better services at a lower cost. All enabled by the IT-as-a-Service model.

So, due to some careful planning and strategic thinking, the shift to delivering IT-as-a-Service did not result hybridcloud.jpgin pink slips and low morale. It resulted in a new strategic, business-enabling IT organization that was poised to help make my company compete in the next-generation of their industry.

I would like to hear your thoughts and experiences about the transformation to IT-as-a-Service. Post your comment below and start a conversation.

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