Cloud Computing from a Business Viewpoint (part 1)

Cloud Computing from a Business Viewpoint (part 1)

Original posted by Robert Koornneef on Tue, Oct 16, 2012

Based on a recent presentation that I gave at an IT executive seminar entitled Cloud Computing, When the Mist Has Disappeared,  I had discussions with several CIOs and CTOs on their experiences and views on cloud computing. What was noticed from those discussions was that cloud computing is still being seen as a pure IT topic, regardless if it is an Infrastructure as a Service (IaaS) or a Software as a Service (SaaS) solution. My view is that if an organization really wants to benefit from a cloud solution, such an implementation must be performed as a business project. This as most of the times the implementation will have a change on the business model, especially with implementing a SaaS solution.

Cloud- make-buy

A different approach
It is strange to see that “regular” outsourcing deals are being performed with a lot of control mechanisms and yet the same approach is not always performed for selecting and implementing a cloud solution. The technology part is given much attention but the impact on the business is often overlooked. My first question, likewise for any outsourcing deal, to a cloud vendor is always, “What is your exit strategy?” This as it’s easy to get into a cloud relationship, but it can be very difficult to leave.

Business perspective on cloud computing
Does this mean that cloud solutions are a no-go area? No, as mentioned in one of my previous blogs, cloud computing provides a wide range of opportunities that will help to leverage eCommerce services.

As the current business climate is still unpredictable, business organizations like to gain agility with variable, volume-based costing models. It allows them to be more flexible than ever before.
The benefits of cloud computing are obvious and can be grouped into three categories.

IT on demand- This category emphasizes the IT functionality available “at a finger click.” These characteristics are improved:

  • Flexibility and scalability
  • Availability and manageability
  • Time to market
  • IT resource independency

Service portfolio- This category underlines the ability to quickly add business functionality; the key features are:

  • New (reliable) functionality
  • Responsiveness to market
  • Location independence

Cost optimization- This category contains the benefits that come with the new financial models of cloud computing like:

  • No or less CAPEX
  • Costs aligned with usage
  • “Pay as you grow” 

So, what is new?

There is a lot of fuss about cloud computing. Is it a revolution? No not really, many cloud computing services have been available in the market for many years. Is it about new technology? No, the IT systems are being used for many years. Is cloud computing the next step in the IT as commodity evolution? That’s the most reasonable answer. Based on the increased network capacity, IT services/solutions have become available through the internet.  IT services have become location independent, and due to virtualization, the services can be used in almost any business format. Is it a new flavor? If we put cloud computing in the business perspective it can be seen as a new service model. Until now we had two service options: make or buy. With the introduction of cloud computing services, we have an additional option: rental, also known now as cloud computing.

Control demand management and IT roadmap
As described in my blog Increasing Complexity of Managing a Global e-Commerce Function, it is essential to channel the demand from multiple directions of the organization. The need to channel these demands is increasing to avoid conflicting directions which will jeopardize the ability to manage the IT (internal/external/cloud) solutions in an effective way.  If not managed well, the change for creating sub-optimized solutions is plausible.

The tool used to map available cloud computing solutions in the overall IT roadmap is not critical, as long as the process is being followed.  During the mapping, a validity check needs to be performed on the fundamentals: architecture validity, economic validity and business risk containment.

Beneath a graphic overview of how this can be done:

Transformation roadmap

If such an IT Transformation roadmap has been created it has to be maintained. As cloud solutions in the market mature and many new solutions are being offered rapidly, the need to perform a periodic review and map the available services/solutions into a roadmap is more needed than ever. If a SaaS (Software as a Service) solution has been implemented it becomes an integrated part of the application portfolio.  Be aware that probably not all applications in your portfolio are cloud ready (can be virtualized) and therefore can put boundaries on your ability to migrate solutions to the cloud.