Turning Cloudy Chaos into an IT Strategy Part I

Cross posted from my blog at the SAP Community Network…

Yep, cloud computing is here. In fact, the cloud is probably all over the place if your company is like many.

Now, your CEO sends you an email saying, “I need you to give a presentation to the board about our corporate strategy for moving to the cloud.” You think, “Uhh, Ma’am, we’re kind of already in the cloud. I guess we need a strategy now.”Your CFO is notes a significant rise in employee expense claims for Amazon, “Wow, they sure are reading a lot of books!” Each department head has their favorite software as a service application. You have no idea what server the HR’s department’s new custom employee vacation request application is running on. Already, the marketing department is complaining about out of synch customer data again after you cleaned up the on premise CRM system last year.

Get in front of the cloud mob and turn it into a
parade. [PHOTO SOURCE]

The most confusing thing about cloud computing is the loose way in which the term is applied to a variety of different classes of offerings. These are different kinds of IT services, deployment models, and business relationships. Combined together, they can be an effective IT business strategy allowing companies to bust silosenhance business agility, and facilitate innovation.

I’d like to present to you a framework I call, a “3+4 Cloud IT Strategy for Any Company” – three sets of company capabilities achieved by a combination of four approaches. Of course, the detail you add to this framework is what makes the strategy applicable for your company.

Three Sets of business capabilities achievable with cloud computing

Interplay between benefits of cloud and usage.

Diagram (c) 2012 SAP AG. This work is licensed under
Creative Commons Attribution 3.0 Unported License.

Creative Commons License

Ask business people why they want to move to cloud computing, and what you often hears is, “it lowers costs.” In theory that’s true, and there are no shortageof ROI calculators from cloud vendors to prove this. However, this view sells short more compelling benefits that the different cloud computing approaches can provide.

While I considered focusing on business benefits of cloud computing, it became more interesting to consider “business capabilities.” In a sense, these capabilities characteristics, features, and potential advantages you could give to your business operations that can be translated to typical business benefits: lower costs, higher revenues, and better quality of operations.

Collectively, you can bucket different business capabilities provided by cloud computing into three categories. The different cloud computing approaches provide different advantages to one extent or another, so wielding all approaches allows you to realize this entire list as it makes sense per initiative.

Business Efficiency
Business Capability Example Metrics for Comparison
Automation of technical tasks Reduction of hours spent on previously manual processes
Less reliance on specialized technical skills Number of systems supported per team member, % of cross training
Elasticity – capacity when you need it Performance vs. peak scale achieved
Metered – you pay for what you use Metered cost vs. estimated cost of hardware capacity and administration
Optimization (utilization) of resources Percentage of idle capacity, licenses, users vs. total
Economies of scale Cost per unit per month: user, system, hardware capacity
Certainty – service level agreement Achievable qualities, cost per capacity per month to build capability in house vs. external services
Robustness & availability Monthly amortized cost to achieve required uptime and performance guarantees
Greener – lower waste, energy, and carbon Difference in estimated power consumption, carbon footprint
Conversion of capital to operating costs Calculated monthly costs + opportunity costs + value of flexibility
Business Agility
Business Capability Example Metrics for Comparison
Faster system availability Elapsed time to service business request for additional system
Faster ability to change systems supporting business operations Reduction in time waiting for completion of technical tasks in implementations. Qualitative description of beginning to end roll-out of business relevant changes.
Flexible connection options Range of options for meeting user access and system to system integration requirements
On demand service Elapsed time for business to be able to access systems according to scale needed.
Tailoring of service agreements Range of options for meeting performance requirements
Always up to date Time lag between new version release and production system update. Number of additional updates handled per year, and comparative system downtime for managing updates.
Sharing & collaboration Qualitative description of improved interworking relationships between teams and members.
Quickly leverage new best practices Time to deploy new systems and new business functionality.
Business Innovation
Business Capability Example Metrics for Comparison
Lower barriers to Innovation Reduction in time needed for IT to provide systems for custom development, reduction in cost to administer
Leverage or create a developer ecosystem Increase in number of potential ISV business partners and apps with little comparative increase in administrative or technical management tasks
Realize new business practices Number and average time of successful business initiatives  for plugging gaps in standard on premise and cloud systems
Supporting competitive differentiation Reduction in time for rolling out business innovation supporting company core competencies
Provide standard base to innovate against Qualitative improvement in ability of  IT to roll out standards for SLAs, security, data, business process, usability, access, APIs to existing systems – providing a substrate for creative extension and use of data and functions in new ways.
Encourage invention in the business Increase in business units to experimenting and developing new custom ideas with developres
Propagate  and scale good ideas When applicable, time required for IT to rapidly adopt and enhance custom innovations to wider base while meeting company standards for security, data, business process, usability and access.

What additional business capabilities and metrics would you add to the lists above?
Admittedly, the innovation capabilities are really efficiency and agility capabilities directly aimed at reducing friction of custom innovation. Cloud computing, by definition, is commoditization of IT services. It’s what you do with these services, or build into the service that provides opportunities for business innovation.

To learn more about benefits of cloud computing for business and IT, watch this excerpt from the ASUG 2012 Annual Pre-conference Session on Cloud Computing.

Four Synergistic Approaches to Cloud

Talk to any cloud provider or consultant, and you typically only hear about their one approach: build a private cloud data center, move to public cloud, only take software as a service, etc. The old adage of if you only have a hammer then everything looks like a nail is alive and well in the cloud market today.

Fortunately, cloud computing provides a complete toolbox with a lot of flexibility for IT departments to piece together solutions. However, IT departments do need to develop new competencies and a new way of working with the business to maximize potential business benefits of cloud computing.

Your tool box of cloud approaches can be bucketed in the following four ways:

  • Modernizing on premise systems to leverage cloud computing
  • Taking new business capabilities as a service
  • Connecting and architecting a cloud service architecture
  • Innovating New Possibilities

Plan on using all your potential
cloud computing tools as part
of your strategy. 
[PHOTO SOURCE]

In future blogs in this series, we will examine the variety of approaches available in each of the above categories and how they enable the three sets of business capabilities of efficiency, agility, and innovation.

Trackbacks

  1. […] I’ve commented on these as components of a cloud program extensively in my blog series “Turning Cloudy Chaos into an IT Strategy – Part I.”  Part II, and Part III. For an excellent discussion of IT as a Service, see SAP Mentor Sina […]

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