Wednesday, 22 September 2010

The Answer Is the Cloud – Now What’s the Question?

In Lewis Carroll's classic story "Through the Looking Glass," Humpty Dumpty remarked: "When I use a word, it means just what I choose it to mean - neither more nor less." It seems that the same principle applies to almost any industry expert and IT vendor when they talk about Cloud Computing. So, in an effort not to fall into the same trap as Humpty Dumpty, let's start with the obvious first question:

What exactly is Cloud Computing?
The most authoritative definition is from the National Institute of Science and Technology (NIST), the U.S. federal technology agency that works with industry to develop and apply technology, measurements, and standards. The latest version of the "NIST Definition of Cloud Computing" is available online, but it can be summarized as shown in Figure 1.

What's driving Cloud Computing today?
As the world gradually pulls itself out of recession, companies are starting to implement "return to growth" strategies, which means growing revenue rather than trying to cut their way to profitability. An essential part of this is to re-connect with customers by aligning their marketing and sales channels with the ways that their customers want to evaluate and purchase their products. As they do this, an undeniable truth emerges: The way that customers expect to interact with them has undergone a fundamental and permanent change, and on a scale and pace that has never been seen before. Businesses find a whole new generation of customers who are impatient, unencumbered with antiquated notions such as brand loyalty, and who expect things to work the way that they want them work. Customers now demand speed, immediacy, and ease-of-use. They expect to be able to do business with you wherever and whenever they want, and on whatever device they choose. The new customer experience benchmarks are Facebook, YouTube and iTunes, and if you can't provide that quality of experience, they'll simply find someone who can.

So when businesses turn their attention from survival mode to growth mode, they quickly realize that "reconnecting with the customer" is not a return to business as usual, but something that requires a complete rethink of the way they work, both externally and internally.

The new business imperatives for customer interaction are agility to meet rapidly changing market conditions, flexibility in the way that they do business and rapid time-to-value as trends are increasingly measured in days and weeks - not months and years. Inside organizations, new tools and business processes are needed to manage new ways to create demand, manage new distribution channels, communicate value to customers and provide visibility on rapidly changing customer trends.

Given the huge amount of publicity, it is inevitable that the CEO will hear or read the pitch that "Cloud provides agility, flexibility, and quicker time-to-value," and get hooked. What's keeping them awake at night is the need for a fundamental change in the way that they interact with customers, and the answer is right there in front of them - Cloud Computing. It's exactly what they need to immediately start challenging the IT department to develop a cloud strategy. As proof of this, a recent survey conducted by the 451 Group in June 2010 confirms that it is CEOs, not CIOs, who are driving Cloud Computing initiatives in most organizations.

The answer to the question - what's driving cloud computing - is very clear: Business Needs. Led by the CEO, the primary driver of cloud computing inside most organizations today is the line of business, where it's seen as an essential component of a "return to growth" strategy. Reducing cost, the primary focus for the last few years, is still important, but it's no longer one of the top priority items in an increasing number of company budgets today.

What does this mean to IT?
IT's traditional reaction to pressures from the business and customers, especially in larger enterprises, is to comprehend new requirements in the rolling three-year or five-year strategic IT plan. After all, building a new sales force automation or customer relationship management solution takes time - there are the RFI and RFQ processes to go through, detailed ROI calculations, budget approval cycles and extensive/detailed vendor contract negotiations. Once that's all done, the lengthy implementation phase can begin, where the chosen solution is customized (sometimes extensively) to fit the company's systems.

For most businesses, this process is a frustrating "take it or leave it" approach driven by IT, executed at IT's pace, and riddled with delays and cost overruns. What's more, it's completely inconsistent with the customer-facing and internally facing imperatives that the CEO and business leaders are now grappling with, in a fashion that IT cannot continue to operate in.

Cloud Computing offers a compelling alternative to the old way of providing IT services. Instead of internally developed monolithic systems, with lengthy and costly implementations of customized third-party business solutions, Cloud Computing provides an agile and flexible environment with shorter solution implementation cycles at a much lower cost. It represents a fundamental shift in the way that enterprises acquire and implement new IT functionality (computing power, storage, software, etc.) to support customer and organizational needs. In short, Cloud Computing offers IT a new way of implementing the functionality that the business units are demanding, and at a speed and cost that meets their expectations.

What this means to IT is that they are facing a critical choice that has to be made soon - either "Do nothing" or "Lead from the front." If they do nothing, business units have a choice now and they'll turn to any of the hundreds of SaaS vendors that can deliver 95 percent of the new functionality they need. These "fly under the corporate IT radar" solutions can be delivered as fast as it takes them to enter their credit card information, so they can have a great Salesforce Automation solution today with no commitment, no delay, and no IT.

"Leading from the front" is the only right course. IT owns IT, regardless of whether it comes from inside or outside the organization. Along with delivering completely new applications to the business, Cloud Computing will allow IT to enhance the functionality of existing applications by leveraging content and services from third-party providers. These "borderless" applications offer a best-of-both-worlds approach - the existing investments in legacy applications and the "systems of record" are protected, and new functionality to meet new needs can be delivered quickly and at a low initial cost.

What are the risks, and how can IT mitigate them?
From a line-of-business perspective, Cloud Computing is raising expectations on how quickly and cost-effectively new IT functionality can be made available to them. More important, even though the delivery chain for these "borderless applications" now crosses organizational and geographic boundaries, users will still expect the applications to perform well, and will hold IT accountable if they don't.

The bottom line is that IT has to meet the business' expectation of faster delivery of new functionality and good performance, while at the same time addressing two key risks: ensuring that sensitive data remains protected in compliance with company policy and state/federal legislation; and maintaining end-to-end visibility and control of service performance and availability of borderless applications.

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1 comment:

jodie said...

With all the options for Cloud Computing, you definitely have choices in finding the right vendor. Keep in mind Microsoft’s SaaS offerings – one benefit is that you have the choice to put all your services in the Cloud or keep some on-site. Here’s a link with some of MS solutions:

Jodi E.
Microsoft SMB Outreach