When Should You Not Go To The Cloud?

This post is in response to a question posed on LinkedIn by Paul Calento Chief Executive Officer at TriVu Media Top:

Disclosure:  I work for Dell - we sell data centre products and services to end user organisations and to cloud / service provider organisations.

There are many factors in the decision to use or not use cloud.  For the purposes of responding to your question, I'm going to assume you are questioning the use of public cloud vs internal provision.

Scale / Cost:
If you are very large enterprise, there is every reason for you to be capable of delivering an internal cloud that rivals or betters an external cloud in terms of performance, cost and security.  So if you have the scale, with the skills, then the potential is there to do something better within your organisation.
We should also consider the scale of individual projects.  For the dev, test, and small scale production, external cloud can make sense. Pay as you grow models at the lower end of the scale are attractive.  However, the "$ per GB" model (as an example) of quick to deploy commodity compute environments are initially very attractive - but because costs scale linearly with consumption, there is the real chance that, at some point, the multiples of unit cost are going to gross up to a total cost that exceeds the costs of providing the service in a more traditional way.  So it makes sense to fully understand what you expect a service to consume in 18 months or 3 years time, when deciding to go external cloud or more traditional route.  You also need to consider that, over time, the cost / benefit model will change through growth, or shrinking of the scale of the service.  So what originally made sense internally might become smaller over time, or less critical to the business and should eventually be farmed out to a commodity cloud provider.  And vice-versa, what initially might've been an experimental service to "see how it goes" could grow into something large scale and upon which you are now spending more than you could provide that service internally.  Typically I don't see much reference to this kind of change over time in the cloud discussion, which is a high risk strategy.
For those organisations with a large investment in existing systems, the business case for ANY change (whether it involves cloud or not) must take into account the value of the existing service provision.  For example, it's likely to be difficult to justify the business case for migrating a service to the cloud, if you've just made a multi-million dollar investment in the existing platform, and that needs to be depreciated over 4 or 5 years.  Similarly, if you have a very large data centre facility - as you migrate services out to the cloud, the unit cost per square metre of data centre space becomes significantly larger for each of those services that remain in the data centre.  So if team A move their service out to the cloud to save 25% on their costs, but it increases the running costs of teams B and C that stay behind by 30% then the holistic business case doesn't stack up.  So be careful about the big picture, not just the individual services.

Control and Risk:
For some, control and security of data is paramount to their business - particularly in heavily regulated environments.  Whilst many public cloud offerings now offer the potential for good security, for some this just isn't enough, as any compromise is potentially ruinous to their business, including the risk of hosting customer data outside appropriate geographic boundaries.  The more a company needs to have an iron-grip on who accesses data, where that data lives, how they can have audit rights to that data and when they need to guarantee physical separation, all of that heavily weighs against a public cloud service.  The economics of cookie-cutter services, shared infrastructure etc. of the public cloud don't stack up as soon as you start to add customization.
I would also suggest, for many companies, that if they put something into an external cloud service then it may be wise to use more than one provider, if that is practical.  This has the benefit of keeping the providers in competition with each other, and provides a measure of protection in the event that one provider ceases to exist, under-performs, over-charges or removes that service from their offerings.

Integration Complexity:
Some organisations are struggling to cope with the complexity of their internal systems and how they all interact with each other, often not having full documentation.  This means they struggle to understand what service impacts will occur when they un-pick old systems, or add in new functionality.  If you then add to that the need to include external connectivity and industry standard APIs, then its not easy.  The cost of change may well exceed the benefits of hooking existing services to new external services.  Requirements such as single customer view, which are required for some regulations, encourages organisations to keep services internal to ensure that the data remains under control and accurate, moving large volumes of data up and down external connections doesn't always make much sense in these situations.

Management:
Many larger companies who have outsourced services (including management of on-premises services) such as networks, data / storage management, some commodity processing applications, have found managing the interfaces to these providers to be complex and onerous.  Getting all these providers to work together for the benefit of the company who is buying the services can be something that needs a great deal of management time and rigorous processes, and that's just when everything is going smoothly.  When there are service issues and those issues cross boundaries then who is at fault and who needs to rectify the issues can be complex to identify and resolve at best, and can end up with long and expensive legal disputes at worst.  Add the potential for multiple cloud service vendors into that mix and you can see how quickly the costs of managing such an environment (and by that I don't just mean the operational costs, but also the risk / cost to customer services and regulatory compliance) could outweigh the expected benefits.

Some of the above issues can be mitigate with a rigorous management approach (which is not happening in the grey IT economy) and/or the right tooling (such as Dell Boomi or Dell Multi-Cloud Manager).  This is why internal IT needs to become the conduit for IT services - so control to meet the organisation's objectives can be maintained whilst ensuring that IT services are provided in the most effective way - internally, private cloud or public cloud.  The correctly balanced mix will be the best solution for many organisations.  One size fits all is not likely to lead to a good res