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Transforming infrastructure operations for a hybrid-cloud world

McKinsey 09 Oct 2019 12:00

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Public-cloud adoption is gathering momentum. By 2021, about 35 percent of all enterprise workloads will be on the public cloud, and 40 percent of companies will use two or more infrastructure-as-a-service (IaaS) and software-as-a-service (SaaS) providers, according to McKinsey’s 2018 IT as a Service (ITaaS) Survey. Despite the growing interest, however, a good number of workloads will not be moving to the public cloud anytime soon.

In total, about 65 percent of workloads will continue to be hosted in private data centers and managed by internal-infrastructure teams over the next several years. There are a variety of reasons for this, including better total cost of ownership (TCO) in certain cases, the need to safeguard sensitive intellectual property, the absence of viable public-cloud providers in some countries, that skill-set enterprises have been built up around managing legacy systems, and the perceived need for control over security and regulatory needs.

These factors, combined with the growing use of edge computing, mean that a hybrid, multicloud infrastructure will become the de facto way of operating. The problem is that too few companies have adequately prepared for that reality. Many IT-infrastructure organizations lack a comprehensive strategy. Partly as a result, they have struggled to evolve their service. As public-cloud innovators offer attractive features, such as pay per use, high resiliency, and the ability to scale use with demand, the gaps are becoming all the more glaring. Instead of receiving a seamless hybrid-cloud experience, internal and external customers often face a discordant one. Moreover, companies across the industry face a strategic imperative to build faster and more effective delivery platforms to jump-start growth, speed time to market, and foster innovation—and technology is the keystone in enabling that capability. 1 1. See Oliver Bossert and Driek Desmet, “The platform play: How to operate like a tech company,” February 2019.

By playing to these strengths and making relevant changes to skill sets, processes, and policies, internal-infrastructure teams can deliver significant value—and even increase the share of workloads managed—becoming indispensable partners to their organizations.

To achieve these gains, internal-infrastructure teams should follow four best practices.

Based on our experience, a handful of common configurations can cover more than 90 percent of demand in most organizations. Standardizing configurations around that core number enables infrastructure teams to move to a make-to-forecast model, rationalize demand around a select number of suppliers, negotiate more favorable inventory terms, and shorten lead times with a high degree of confidence. These changes have allowed internal-infrastructure teams to shrink order-to-delivery time to four weeks or less.

In addition, infrastructure teams should consider whether it makes sense for them to move to an original-design-manufacturing (ODM) model, in which the team designs the machines and procures parts in house and then outsources the build. That shift requires scale and solid in-house design, as well as supply-chain and maintenance capabilities, but it can give teams more control over their sourcing and inventory. In addition, it can allow them to cut out the high-end features and components they don’t need, unlocking potential savings of 20 to 40 percent of total equipment costs. Finally, infrastructure teams should take a similarly strategic approach to their sourcing arrangements with hyperscalers (see sidebar, “‘Hyperscaler’ optimization”).

Hyperscalers are getting a lot of attention these days, and for good reason. They can deliver above-average speed, scale, service, and efficiency. But no matter how good they are, public-cloud providers won’t be able to displace the essential role that internal-infrastructure teams play. From achieving superior TCO in some instances to satisfying very specific use-case needs, internal-infrastructure teams are in a position to add unique value and maintain their critical role in a multicloud environment. To do so, however, they’ll need to improve demand and capacity planning, rationalize configurations, embrace digital service operations, and take a more strategic approach to sourcing.

About the author(s)

Aykut Atali is an associate partner in McKinsey’s Silicon Valley office, where Chandra Gnanasambandam is a senior partner and Bhargs Srivathsan is a consultant.

The authors wish to thank Tara Balakrishnan, Sumit Dutta, Neha Jindal, Scott McArthur, Stefan Roggenhofer, and Matthias Winter for their contributions to this article.

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