How Azure could impact your organization

We have already been in conversations with clients about their options – explaining how they can negotiate more efficient contracts in the short term.

Many of our clients are reconsidering their current cloud strategy. A lift and shift cloud migration to Azure or AWS is likely to decrease your TCO, but it can also have a significant long-term financial impact, which might not be immediately apparent.

For example, one of our clients in the retail industry started with a freemium offer from Microsoft in June 2019, having received a $5k monthly Azure credit offer. It seemed like a valuable deal.

By September that year, their consumption had reached $15k per month, and they decided to further adopt the Azure technology for their digital transformation. Three months later, their consumption had increased to $50k per month. Now, early in 2020, that figure has already doubled.

Their current Azure consumption – a mere 9 months after their $5k credit offer – has rocketed to $100k per month.

A lack of governance

Microsoft knows this is likely to happen. Their sales team deals predominantly with the business and IT stakeholders in a company – often leaving the procurement team unaware of the sales activity. This lack of governance can lead to a rapid increase in consumption, and therefore cost.

Microsoft states that consumption is the new currency, and is placing a strong focus on growing the Azure environment. But governance is absolutely fundamental. If your consumption costs are rising with the introduction of Azure, your existing hardware and maintenance costs should reduce. If you don’t phase out your legacy IT environment in parallel, your consumption and costs can spiral exponentially.

How to negotiate contracts successfully

I have been helping our retail client over the past couple of weeks to set up a governance framework and procurement strategy. This is the first step in defining a multi-cloud procurement strategy and setting up a successful negotiation with the cloud vendors.

The result for the company will be substantial savings in the next few years. For me personally, this case underlined that while Azure migration might be top of mind for many companies, the contractual impact is often still unclear. 

Can I identify any cost savings at your organization? For a complimentary scan of your current IT environment, please contact me at erik.hollander@licenseq.com