Banks, insurers, universities, hospitals, retailers and government agencies as well as their IT service providers are rapidly transforming into ‘digital businesses’ based on the four converging forces: social, mobile, cloud and information. ~Gartner, Feb. 2014
Cloud, simply, is a commune of scalable IT infrastructure (hardware and software) that allows multiple users access to storage and applications. It is no different than having a system that is outsourced to third party vendor like CRM or ERP where the users pay cost of ongoing support. The difference is that you are sharing it with a lot of other entities thus, reducing overall cost of operations. And, as cloud is available 24/7, it allows any user to access the content of Cloud at any time, any place and with any device.
Depending on business needs, you can build any type of technology within the Cloud including Software, Platform and Infrastructure. Here is a snapshot that shows different Cloud technology market values.
Software simply means any application that helps complete a business process, example, annual strategic and business planning process. A Platform is more complex and can include multiple applications running on infrastructure. An example might be a CRM system which may include a real-time database, data storage, campaign build application and analytics software. In a Platform, all components of the system are connected thus allowing applications to use data and process to produce the right information for business. Infrastructure usage can include delivering basic desktop services (aka client/master from old school), network services and even communications services like VOIP telecom. Fact is, Cloud services allow users to build whatever they need for a meagre monthly fee based on usage.
Because Cloud is shared, users can leverage economies of scale to reduce operational costs and eliminate capital investment in technology for their business.
*The total capitalized IT spending for the fiscal year (i.e., the full value of capitalized assets acquired in the fiscal year). This includes investments in new application development and IT infrastructure.
^The total day-to-day operations and maintenance expenses for this fiscal year that have not been capitalized. These do not include any amortization and depreciation expenses.
Building and deploying various technologies can be far more efficient than trying to maintain in-house systems. Keep in mind that all the best practices for developing, deploying new changes and maintenance of applications still apply even in the Cloud.
Cloud service providers have built optimized systems that allow users to share the innovation that providers are using themselves. Users can take advantage of this scale and complexity regardless of size of their business.
There is greater onus on service providers to ensure that the service is available and reliable. So service levels for Cloud is considerably robust compared to in-house infrastructure.
Cloud service is easy to scale as business needs grow compared to the existing enterprise. Depending on the provider, there can be significant diversity in types of applications that can be built in Cloud.
Source: Of That Blog
Before Entering the Cloud
Working in the Cloud is no different from building a new system in-house or when outsourced to third party. CIOs should set aside time with the organization to plan out a business roadmap that outlines a long-term vision, strategies for growth, tactics and resource requirements. Here is a high level guide on where to start:
Review Tech Portfolio and Costs
A technology portfolio is a complete inventory of your current technologies including infrastructure, platforms, and applications. In completing this effort, managers may find that significant number of applications are old, customized and serving only a small group of users at any given time. They are also not generally mission critical and can easily be transitioned to ERP technologies or the Cloud. This action alone can sometimes save considerable support costs for the company.
For Cloud transition look for the “sweet spot” where application costs are low and criticality to business is minimum. Generally this is the best way to dip your toes into the Cloud.
Financial savings benchmarks from in-house IT to Cloud have not yet been thoroughly researched but here are some numbers from Betchel, a giant construction firm (Sales $27B in 2007), that benchmarked its costs for number of IT resources against costs using cloud providers.
Cost structure for Bechtel in-house IT were higher than the best of breed cloud providers:
Define Service Levels
This is a very important step in making sure that your business needs are being met. Define the service levels based on what you need. So for Desktop-as-a-Service, you will require almost 24/7 availability, especially if the company is global and multiple users can access the Service from anywhere in the world. Here is a very high-level guide to Service Level Agreement that help develop Long Term Strategic Partnerships. Everything is negotiable.
Craft Data and IT Policies
CIOs need to be very clear about Data and IT Policies like data archiving and critical business continuity requirements. Ensure that data archiving policies are defined and enforced in the Cloud, for example, all transaction data will be accessible for 7 years. These policies should be automated to ensure further cost savings in data storage and usage is realized on an ongoing basis. Also, keep archiving policies up to date as new data are collected like social media communications, mobile data, etc.
Business continuity is imperative for CIOs when they are thinking of moving into the Cloud. Regardless of whether the application is low cost and not business critical, business continuity must be in place in case there is an outage. A site called cloutage.org keeps tabs on which Cloud service has experienced an outage and when. But regardless of this information, it is important that your business is ready for any disaster recovery if an incident does impact the service provider.
IT is one of the biggest culprits when it comes to not documenting original build and ongoing changes. Moving into the Cloud demands that you document what you are building in the Cloud and how. Document data flows, work flows, architecture, application lists, service levels, business rules, and even simple programming documentation are a must. Simple reason for this is that if the business decides to move out of the Cloud or switch to another service provider, you will have the details to ensure that the transition is smooth. This will also ensure that you do not get locked into a provider. Not knowing what you own is the greatest sin in technology and it can cost the business money and intelligence.
Knowing your Cloud Provider
Having a relationship with your Cloud Provider is a necessity not a nice-to-have. Here are some key facets to look out for when selecting a provider:
Optimization & Transparency
Most of the larger providers already have a highly optimized Cloud service simply because their own business services rely on it. But make sure you can monitor and manage your piece of the pie because your business depends on it. Ensure there is a dashboard that continuously shows capacity and costs. Amazon Web Services uses Splunk Cloud as a way for users to manage their activities and costs.
Managing the Contract
Where possible, ensure that you have control over the terms of contract especially if you are thinking of moving business critical applications into the Cloud. Smaller start ups may have to accept the terms and be agile enough to move to another provider if the Cloud service restricts any part of your business. For larger enterprises, it is critical to manage the contract on an ongoing basis because this is the only way you can ensure that you build a long term partnership with your Cloud provider that serves your business.
Redundancy and Service Info
Although it is important for the business to clean unwanted data, transactions and applications prior to moving to the Cloud, ensure that you are also able to do this after transition to the Cloud. Having transparency into your costs for Cloud usage is only useful if you can take action to manage it.
Cloud service providers should also be able to provide information on:
- Where your data resides
- Who controls the data
- When data is moved to another location
Strategic Planning For CIOs
In 2014, CIOs and IT leaders want to know how to deliver converging solutions using the four converging forces: social, mobile, cloud and information. Gartner, Feb. 2014
Given the “convergence of social, mobile, cloud and information”; it is imperative for CIOs to define a clear vision and roadmap for the future of their business using these technologies. CIOs should not only deliver a Technology Roadmap but also a Strategic Plan that clearly outlines how the organization will build and conduct business for the next 5 years in the context of these technologies. The Strategic Plan should be renewed on annual basis to consider new technological market forces that will impact the business. The business is no longer in competition with only the immediate competitors in the same industry but also business disruptors who will do it for less using Cloud.
Fact is Cloud is an equalizer of small businesses to large enterprises. It provides smaller businesses with the same technological power that larger organizations have already invested in for decades. And more Cloud providers are popping up every day in the market. Bottom line is that Cloud is a cost saver based on economies of scale and organizations should not ignore this phenomenon but figure out how they can use it to their own advantage in their business.
Cloud is the foundation that will lay out the future of Information Technology:
Kiran Sohi’s career has focused on leading companies to success by enabling strategic decision making. While her passion is strategy and technology, her work spans a number of disciplines including IT, marketing, finance and operations.
OPEN WRX Consulting Inc. is committed to helping companies improve competitiveness through effective decision making. Services include structuring, facilitating and implementing strategic planning process and strategic solutions for businesses, functional departments and/or channels.
Visit openwrxconsulting.com for more info.