Rethinking Strategy: High vLicense Renewal Fees Have Healthcare Providers Questioning How, Where to Host Workloads

As healthcare organizations face mounting pressure to modernize infrastructure while managing budget constraints, the rising costs of on-premises infrastructure licensing and support services present a significant challenge to operating expense (OpEx) budgets. This also presents an opportunity to pivot strategy. Now may be the perfect time for IT leaders to reconsider their approach to hosting virtual server and application workloads.

While many organizations still show a preference for on-premises server infrastructure for application hosting, the volatile market and shifting strategies of key vendors raise concerns about the financial implications of maintaining such systems. CIOs and tech infrastructure chiefs are particularly wary of trends like the move from perpetual to subscription-based licensing, the uncertain future of ancillary products after they are divested from parent platforms and how relationships with software vendors might change as these companies increasingly cater to large-scale cloud providers. Those facing license renewals in 2024 are being blindsided by unexpectedly steep price hikes for virtual infrastructure software — sometimes to the tune of two to three times their previous costs. This instability is prompting IT decision-makers to reassess their commitment to on-prem solutions by exploring different vendor options, consolidating resources where possible and considering the financial and operational ramifications of transitioning services to public cloud environments.

In today’s healthcare technology ecosystem, there is a solid case for a hybrid approach. While some workloads serving patient and provider needs will continue to be a ‘best-fit’ for on-premises deployment due to latency, vendor supportability and/or data privacy concerns, many workloads serving needs at the periphery of the practice may be good candidates for re-platforming on public cloud services or may be replaced with leading SaaS options. Relocation or replacement of the applications and associated systems can reduce the impact of licensing cost increases by shrinking the on-premises infrastructure footprint. To reap additional financial benefits, ‘right-sizing’ the on-premises infrastructure can be conducted concurrently alongside a lift-and-shift replacement of core infrastructure software.

As on-premises OpEx rises, the push against cloud for OpEx reasons is dissipating. This is another reason to take the rising renewal costs as a signal to move to a cloud-first model. Cloud adoption empowers organizations to pay only for the resources they consume, eliminating the need for upfront capital expenditures and minimizing operational overhead. Public cloud providers also offer attractive discount terms in exchange for a commitment to migrate a certain quantity of workloads to the cloud platform. A strategic shift towards a preference for cloud solutions also serves as an opportunity to modernize and enhance the security and resilience of the enterprise network and systems, as the leading cloud providers offer robust security features and disaster recovery capabilities, mitigating the risk of data breaches and offering SLAs around high availability of critical healthcare services.

Cloud-native technologies enable healthcare providers to accelerate innovation cycles, leveraging advanced analytics, artificial intelligence and machine learning to improve patient outcomes and streamline administrative processes. A recent trend to move Electronic Health Record (EHR) systems to the cloud proves that large data sets can be migrated, and providers and technology companies have their eyes on additional large workloads, like imaging data.

Aside from technical factors, additional considerations should be weighed when responding to licensing cost increases. Healthcare organizations considering changes in the on-premises infrastructure footprint and associated software solutions must also address concerns such as:

  • Data migration and interoperability: Healthcare organizations must carefully define and execute data migration strategies that ensure seamless integration between on-premises and cloud environments while ensuring that standards for system performance and availability are maintained or improved.
  • Regulatory compliance and data privacy: Transitioning to hybrid or cloud solutions requires meticulous adherence to regulatory frameworks such as HIPAA, necessitating thorough risk assessments, expert configuration of platform identity management and access controls and updates to compliance audit processes.
  • Cultural shift and stakeholder buy-in: Successful adoption of hybrid or cloud architectures entails fostering a culture of innovation and collaboration across a diverse set of stakeholders, including IT teams, developers, clinicians and executive leadership. In cases where changes to the core systems’ architecture or workload placement directly impact day-to-day operational processes, supporting resources should receive expert guidance to assist with updates to procedures and supplementary education and training to ensure familiarity with the platforms and services being introduced.

As healthcare providers navigate the complexities of rising on-premises renewal costs, the transition towards hybrid or cloud-based solutions emerges as a compelling solution. By embracing hybrid architectures or migrating to the cloud, healthcare organizations can unlock cost efficiencies, enhance agility and catalyze innovation while ensuring compliance with regulatory requirements and safeguarding patient data. Embracing this paradigm shift promises to empower healthcare providers to deliver patient-centered care in an increasingly digital landscape.

To learn more about our cloud solutions for healthcare or other industries, contact us.

Jody Casey

Managing Director
Technology Strategy and Architecture

Brandon Wardlaw

Associate Director
Technology Strategy and Architecture

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