Executive Voices 4 mins read

Treat your cloud strategy like an investment portfolio

When asking how to get the cloud done right for your business, just think like a savvy market investor – spread and hedge your dependency risks.

Dr. Stefan Sigg Dr. Stefan Sigg

The digital world is flat, thanks to ubiquitous cloud services.

In his book, The World is Flat, Thomas Friedmann noted that economic globalization has flattened historical, regional, and cultural divisions.

In the digital world, the ubiquity of cloud services promises the same reality. And, just as in the economic world there remain a few dominant players (think China and the US), in the cloud world there is also see a concentration of power in very few places. They are called “hyperscalers.”

This has recently become a source of concern, maybe even fear. Companies are rapidly adopting the cloud by using software-as-a-service (SaaS) offerings and migrate their data centers. Increasingly driven by macroeconomic and political developments, they also see the risk of becoming too dependent.

The notion of data/cloud sovereignty is much discussed on a company, industry, and even country level. But, let’s be clear. According to Wikipedia, sovereignty is the full right and power of a governing body over itself without any interference from outside sources or bodies. 

This is surely not the case in today’s flat world of cloud acceleration. It could be a serious issue in future, because you know that cloud costs can grow dramatically as usage increases. Also, the importance and urgency of data security and privacy have grown dramatically.

Full sovereignty as defined above is not realistic. Only the hyperscalers have the financial power and the skills to provide globally scalable cloud services, at least for infrastructure and big data storage. So, the question is: How companies can avoid the risks of lock-in effects and dependencies that put them into weak (negotiation) positions.

Invest sensibly

What if you were to treat your cloud platform as if it were an investment portfolio? You could use risk avoidance strategies like you do in investment management, applying the principle of diversification and reducing the exposure to any one particular asset or risk. You could spread and hedge dependency risks, working with different types of investments, like you do with stock, real estate, commodities, etc.

Investors also cover multiple markets, regions, and industries and look for long-term returns.

Translated to the world of IT, this would mean:

  • Working with multiple vendors
  • Identifying independent specialists
  • Establishing a strong partner ecosystem

More concretely, you want to prepare for a diverse environment consisting of multi-cloud services, hybrid deployments, and the adoption of edge computing. The key here is to systematically integrate the various systems, applications, and devices, and not hardwire them by custom code. Well-defined de-coupling is an important concept to achieve a higher degree of sovereignty: Avoid hard-coded dependencies contractually and technically.

Achieve platform independence

This leads naturally to the notion of an API-driven enterprise.

You’ll have the flexibility to:

  • Define where and how you want to unplug from a platform
  • Design for the case of a platform migration
  • Use industry standards
  • Avoid proprietary dependencies

There is also a commercial aspect to that. You need to understand APIs as assets and embrace the opportunities of an API economy. All this puts you in a more powerful and self-sufficient position. Switching costs are kept at a minimum, so migrations are realistic in case there is a need to move away from a vendor.

As a byproduct, a clean API-led environment is also creating room for innovation while keeping your core systems secured. On one side of the API, you shelter the mission critical apps that you do not want to touch; and on the other side, enable agile development of new ideas, using cutting-edge technologies.

By doing so, it is certainly wise to invest into value-creating projects and not just reinvent the wheel, i.e. capabilities that already exist on the market. You want to concentrate on the “last mile” that is typically industry or even company specific. Use good independent tech stacks for the “other miles” and don’t get bogged down with building your own “platforms.”

It’s well worth it

Any number of things can go wrong on the Internet as you know; but achieving a level of sovereignty and diversification in the cloud makes for greater autonomy and power – even outside of your domain, because you have pre-thought options in place. Your assets have the best possible protection.

So, when asking the question of how to get the cloud done right for your business…. just think like a savvy investor.

And reach out to one of our experts here at Software AG, of course.