The Total Economic Impact™ Of Microsoft Azure For Cloud-Native Applications

BUSINESS GROWTH

Evidence and data. Scaling limitations and stability challenges impacted the interviewees’ organizations’ ability to attract, retain, and grow customer bases and revenue. By moving to AKS and Functions and adopting cloud-native development practices, they were able to focus on improving app offerings and creating new ones. They could also scale rapidly to meet any demand. Interviewees reported significant growth in their organizations’ revenue tied to their new technologies and capabilities.

• The head of technology for the grocery retail organization explained: “[We were] absolutely not able to meet the growth on the previous platform. [With AKS], we were able to stay online for the entire first few months of COVID. Our customers increased because we were able to service our customers whereas [competitors] weren’t. … That definitely was attributed to our move to Kubernetes because we were able to scale to several hundred nodes very quickly.” They elaborated: “We were targeting 20% growth, but we actually saw 30% growth. And a lot of that we attribute to our capabilities of being able to deliver these services in a faster, reliable way.” They also noted that they have been able to retain their increased market share since the COVID-19 pandemic.

• The chief data architect for the IT services organization said that better stability and faster velocity had “led to more customer retention, and also being able to get the features out quicker has led to more adoption.”

• The CEO of the AI solution company discussed how, previously, their organization had lost out on a large percentage of business opportunities due to inefficient processes and scaling challenges. With AKS, they said, “We are able to scale everything inside our platform.” In the past year, their revenue grew by 40%, and they attributed “more than 25%” to AKS and Functions.

Modeling and assumptions. For the composite organization, Forrester assumes:

• The composite organization is experiencing a period of high growth.

• Twenty-five percent of this growth is attributed to the agility, scalability, reliability, and innovation provided by AKS and Functions over the previous environment.

• The organization’s profit margin is 15%.

Risks. An organization’s realization of benefits related to business growth will depend upon a variety of factors, including:

• Their industry, organic growth rate, revenue model, and how closely tied their revenue is to their apps.

• The organization’s previous app offerings, stability, release cycles, and customer experiences.

• Economic conditions, industry trends, and other external influences.

Results. To account for these risks, Forrester adjusted this benefit downward by 20%, yielding a three-year, risk-adjusted total PV of $29.3 million.

DECREASED OPERATIONAL OVERHEAD

Evidence and data. Interviewees experienced significant labor costs associated with infrastructure management in their organizations’ previous environments. This included managing data centers, provisioning infrastructure, forecasting and planning for scaling, and other management and maintenance activities. After moving to a cloud-native approach with Azure, they could reallocate resources to other parts of the organization or other, more valuable work.

• The head of technology for the grocery retail shared, “What we saw is there was about a three-month lead time for provisioning and designing infrastructure in their previous environment. After adopting AKS and Functions, they noted: “We reduced that to a couple of weeks of architectural discussions and diagramming, where we simply talked about which services we’re leveraging and how they’re going to be utilized by these new services we’re building.” They also observed that patching cycles previously took five days per month, but with container-based workloads, node patching was done automatically, and upgrades were completed quarterly.

• The chief data architect for the IT services organization estimated they were able to reduce their data center footprint and associated service requirements by 80%. They shared, “All those employees [previously managing infrastructure] were retrained to manage Azure in our cloud environments.” They also estimated that the administrative burden on their developer teams related to provisioning infrastructure decreased by 30 to 50%.

• The senior vice president for the professional sports organization said: “On the operations side, the physical infrastructure management, those people have been redeployed into other services and workloads. People don’t have to change memory and change disks and reboot switches anymore.”

Modeling and assumptions. For the composite organization, Forrester assumes:

• It is experiencing a period of high growth, and its infrastructure management resources are increasing at 5% to support this.

• As a result of using AKS and Functions, 70% of resources supporting infrastructure are reallocated to other parts of the business and other value-added work for the organization.

• The average fully burdened labor cost for the reallocated resources is $156,000 per year.

Risks. An organization’s realization of benefits related to operations labor savings will vary depending upon several factors, including:

• Their legacy environment, including whether it is on-premise, hybrid, or cloud, and the resources required to manage it.

• Their ability to reallocate or retrain resources to be deployed elsewhere in the organization.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV of $5.1 million.

INCREASED DEVELOPER PRODUCTIVITY

Evidence and data. Interviewees noted that their organizations previously faced inconsistent and cumbersome development processes, which slowed their development and deployment cycles. Moving to a cloud-native approach allowed them to move to a DevOps approach, as well as standardize and automate nonvalue-added work so developers could focus on smaller, faster releases.

• The solutions architect for the government agency explained the development teams are at least 50% faster with AKS and Functions. They can stand things up quickly, create new projects from skeletons, nearly eliminate initial ramp-up time to set up pipelines and create templates, and reduce wait times between handoffs. Additionally, “[developers aren’t] treading on each other’s toes, meaning they can be productive the whole time, and they’re not in a situation where they have broken environments.” They shared that teams could be productive immediately, compared to the prior four-week wait time to get projects started.

• The CTO for the AI company estimated that their developers required 50% less time to complete work with AKS compared to their previous environment, including development, configuration, and maintenance. They noted: “We can build new services in a faster way. … Our developers need less effort to maintain our services. Azure provides us a better way to maintain and understand how our clusters are working … so developers are spending less time.”

• The head of technology for the grocery retail company said their delivery time to deploy a new service decreased from six weeks to two weeks with Azure, and their release frequency decreased from two weeks to one day or less.

• The chief data architect for the IT services organization shared: “[Previously,] we were almost sort of stuck in a maintenance-type cycle, still delivering new features but not at the pace we are today. If I had to ballpark the estimate, I would say [our developers are] 1.5 times more efficient. … [As a result,] we’ve been able to deliver a lot more features.”

• The solutions architect for the government agency explained: “There were many development teams previously … and one of the challenges we saw were handoffs between these teams, and teams blocking each other in their delivery. [It] was really holding back the potential of the program. Doing things cloud-natively opened up the possibility to do things in a proper DevOps way … so that was a huge accelerator, and it unblocked the potential of these big programs.”

Modeling and assumptions. For the composite organization, Forrester assumes:

• It is experiencing a period of high growth, and its pool of developers grows by 10% to support this.

• Developer productivity increases by 50% with AKS and Functions. A productivity recapture rate of 50% is applied, with the assumption that not all recovered time will be used for productive or value-added activities.

• The average fully burdened labor cost for developers is $156,000 per year.

Risks. An organization’s realization of benefits related to developer productivity will depend upon a variety of factors, including:

• The number and types of developers they have and their labor costs.

• Legacy development systems and processes.

• Their ability to retrain developers to use AKS, Functions, and cloud-native app development practices.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV of $9.6 million.

LEGACY ENVIRONMENT SAVINGS

Evidence and data. Interviewees’ organizations had different legacy environments, as well as varied types and scales of retired legacy costs. Those with on-prem environments saw savings related to physical hardware retirement as well as associated power, cooling, and space-related costs. Others migrated from alternate cloud development environments and saw savings from lower fees or more efficiencies with AKS and Functions versus previous environments.

• The chief data architect for the IT services organization shared that they were able to retire 80% of their data centers and associated costs for power, bandwidth, and physical equipment after moving to AKS and Functions for cloud-native app development.

• The CTO for the AI solution company said that their compute, storage, traffic, and managed services costs were approximately 10% lower with Azure than they were in their previous environment.

• The senior vice president for the professional sports organization said that they had decommissioned three data centers after moving to AKS and functions — thus retiring hardware, and reducing real estate, energy, and other maintenance costs.

• The grocery retail organization and government agency both moved from on-prem environments to virtual environments before finally switching to a cloud-native approach with AKS and Functions. They saw savings related to physical infrastructure in the initial move, but they also emphasized the significant savings of AKS and Functions over their virtual environments. For the grocery retail organization, it was around 70% less expensive to use AKS and Functions for the same amount of infrastructure and capacity.

Modeling and assumptions. For the composite organization, Forrester assumes:

• The legacy environment included a mix of on-premises systems and virtual environments.

• Seventy percent of legacy environment costs are retired through decommissioning and migration after implementing AKS and Functions.

Risks. An organization’s realization of benefits related to legacy environment savings will depend upon a variety of factors, including:

• The systems and technologies the legacy environment comprises and their associated costs.

• The extent of the migration from legacy environments to AKS and Functions for cloud-native apps.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV of $1.6 million.

IMPROVED STABILITY

Evidence and data. Stability and downtime in their legacy environments were common challenges cited by interviewees. Moving to cloud-native app development with AKS and Functions improved standardization, enabled more and better testing, decoupled services to reduce the risk of larger impacts, and provided AI, scaling, and self-healing capabilities. The overall impact was fewer outages that could be resolved faster than in previous environments, reducing impacts to customers and, ultimately, the organization’s financials.

• The head of technology for the grocery retail organization explained: “[The move to AKS and cloud-native app development] allows our engineering teams to move with pace and agility while working within a framework that provides consistency across our environment. As a result … our DORA metrics are generally better for applications that are built on this stack than they are for any applications that have been built outside of it. And the critical one for us is mean time to recovery and the … percentage of changes that cause incidents. We definitely find that those are lower for these applications.” When outages did still occur, the recovery time decreased from 4 to 6 hours in the previous environment to 1 hour with AKS and Functions. Their organization measured the cost of an outage at approximately $650,000 per hour.

• The CTO for the government agency described their new, standard pipelines with comprehensive testing enabled by adopting AKS and Functions: “When code is pushed to production, you’re very unlikely to see outages through new code pushes. … Because it’s so fast and code changes should be small … the experience of the end user is less downtime through maintenance and also less downtime through things broken when people push things that are broken.”

• The CTO for the AI solution company estimated their downtime had decreased by 25% to 30% since adopting AKS and Functions for their cloud-native app development.

• The senior vice president for the professional sports organization shared, “We have not had a full outage since launch.” They described AI and self-healing capabilities with AKS and Functions for “autoscaling, auto-failover, identification of potential outage situations” that allowed them to “automatically restart or failover service” to reduce customer impact.

• The chief data architect for the IT services organization said: “[After moving to AKS and Functions for cloud-native apps], it has decreased the number of product issues that we’ve had because we’re able to scale much, much faster. … Using this technology, we’re able to adjust instantly and add hundreds of servers.”

Modeling and assumptions. For the composite organization, Forrester assumes:

• The organization previously experienced an average of four unplanned outages per year, lasting an average of 4 hours each.

• After moving to AKS and Functions, the number, duration, and severity of outages decreases by a total of 65%.

• The cost of an outage to the organization is calculated as the organization’s hourly profit rate plus additional labor costs to resolve the outage.

Risks. An organization’s realization of benefits related to improved stability will depend upon a variety of factors, including:

• Stability challenges and downtime in legacy environments, including the cause and duration of outages.

• The organization’s revenue and profit model and how much of their revenue is impacted by stability challenges or downtime.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV of $539,000.

REDUCED DEVELOPER CHURN AND ONBOARDING TIME

Evidence and data. With onerous legacy systems and company-specific technologies and processes, interviewees’ organizations found it challenging to retain talent and onboard new developers. By adopting AKS and Functions, as well as a cloud-native approach to app development, they could standardize environments and leverage well-known technologies and best practices, thus reducing developer turnover and helping new employees become productive much more quickly.

• The head of technology for the grocery retail organization said that previously, it took at least three months for a developer to become productive, while it only takes a month with AKS and Functions. They also noted that they previously struggled to attract and retain developer talent. However: “We have a relatively low attrition rate [now]. I think it is around 15% … when the industry average is closer to 25%.”

• The senior vice president for the professional sports organization said, “The actual onboarding of a new engineer into a development workspace takes no more than giving them their new machine, as opposed to having to build out a dev environment for them previously.”

• The chief data architect for the IT services organization shared, “I think we’ve definitely seen [developer retention rate] improve.” They explained: “Developers like working on things that are differentiators, and I think they get frustrated when they have to keep doing things that aren’t super interesting to them. To them, working on stuff like AKS and Serverless [Functions] … gets them more interested than having to go and figure out why a hard drive failed. … That’s definitely made people happier — not having to deal with all those things and being able to actually focus on the product and focus on newer tech.”

Modeling and assumptions. For the composite organization, Forrester assumes:

• The composite organization is experiencing a period of high growth, and their developer requirements grow accordingly.

• The normal attrition rate is 20%. This decreases by 30% with AKS and Functions, as developers are more engaged and satisfied with their work.

• The time to onboard a new developer is reduced by 65% as new environments do not need to be built out and they don’t need to train on company-specific technologies.

Risks. An organization’s realization of benefits related to developer onboarding savings will depend upon a variety of factors, including:

• Their company’s and industry’s average employee turnover rate for developers.

• Current technologies and processes available to developers and employee satisfaction.

• Special training or knowledge required to work in legacy environments and existing onboarding processes.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV of $313,000.

UNQUANTIFIED BENEFITS

Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:

• Improved ability to attract developers. Interviewees shared that previously, they struggled to attract talent when they needed to hire developers. By adopting AKS and Functions for cloud-native apps, they demonstrate their commitment to the latest technologies and innovations and find hiring developers much easier.

  The head of technology for the grocery retail organization explained: “We had a lot of issues attracting and retaining staff previously because that level of flexibility and ability to respond and be involved in your environment was quite low. It was very much a hand-off to an operations team type of experience. The type of talent that we were trying to attract and keep in the business was a lot more dynamic, and we wanted to be able to regularly release and have much more involvement in the end-to-end experience of building and delivering software. Once we enabled our teams to do this, we were able to attract more talent by simply saying in our interviews or by demonstrating in user groups the way we work and what the experience is like for our developers.”

• Security features and best practices. Interviewees noted that the Azure ecosystem provided security features and best practices that made it easier to secure and test their environment.

  The chief data architect for the IT services organization said: “Being able to use stuff like MSI [managed service identity] for authentication and not have to worry about, ‘Hey, did employee X just leave? Do they have the secrets to be able to get into any services?’ That sort of stuff was really nice to be able to utilize, and it was one of the things I wasn’t expecting. … Some of those best practices and the extra security measures that Azure provides have been a nice thing that was not part of the decision-making process.”

  The CTO for the AI solutions company explained, “AKS provides some security measures that we can use by just clicking some buttons, and other network stuff that we can build and do it in a safer way than we were [in our previous environment].”

  The head of platform operations for the government agency explained that moving to Azure allowed them to consolidate and streamline their security perimeter, improve testing, and implement automations for security bug fixes, among other improvements.

• Support and innovation from Microsoft. Microsoft was seen as a business partner that provided excellent support and resources, and also gave interviewees’ organizations access to innovative technology.

  The head of technology for the grocery retail organization said, “We’ve had a lot of good experiences working with Microsoft on the base platform. We’ve had the opportunity to provide all the feedback around products and see a lot of that feedback be acted on. As a result, we’ve been able to even further streamline our processes or reduce our maintenance overhead on this infrastructure.”

FLEXIBILITY

The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement cloud-native apps and later realize additional uses and business opportunities, including:

• Greater business agility. Interviewees noted that moving to cloud-native with AKS and Functions enabled greater flexibility and agility, allowing them to innovate and adapt more easily to change.

  The chief data architect for the IT services organization said, “If we want to spin up a new region, it’s so much easier than having to go out and get equipment, find a data center, [or] get bandwidth. … Setting up a region definitely used to take months, and now within weeks, we can have a region spun up for some of our products. It also makes it so that our investment for spinning up a new region is not nearly as much because we don’t have to worry about [whether] we have enough capacity there, so we can start off small and grow as demand grows. It makes it a lot less intimidating to go to a new region.”

  The CEO for the AI solutions company shared, “Microsoft, because its partnership with OpenAI, gives more features; we can see the future of what we can do with natural language processing. This, for us, is really important because we need to move fast ... When you see everything that we can do with all the services, the features, the products that Microsoft can offer … this is our goal for a partner that we use to build our platform. After we moved to Microsoft, we changed a lot. … We changed something inside our team. … The way that we look at our roadmap, we can say that now, it's more possible than in the past.”

Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).