Recently, CIO UK interviewed JP Rangaswami, chief scientist at about where cloud computing is going. As the former IT boss of BT, he has an extraordinary perspective on the technology trend, both from the customer side and as a vendor.

Unsurprisingly, his view is aligned with his company’s interests, but now that cloud has begun to mature as a service, he has some useful insights into what the next stage is.

Rangaswami is pretty dismissive of proponents of private cloud models, which he sees as a zero-sum game for CIOs. He says private cloud services only make sense if you have lots of business units buying in.

If any unit drops out, the rest have to take up the slack in funding, rendering the model less attractive to each contributor.

In the end, the CIO has to bear the risk themself and private cloud only works in an upturn when individual business units aren’t so concerned with their own bottom line.

For Rangaswami, public cloud, where many different organisations share the investment burden, protects the CIO in a much stronger way.

“As a CIO, I realised it wouldn’t work as a model unless someone else outside the company paid for the scaling risk,” he said. “That risk had to be taken out of my environment.”

Here are some of the trends around cloud services that he identified:

1 The Cloud term will disappear:
For Rangaswami, the term Cloud has become obsolete as user’s perceptions have refined. He said Salesforce itself has moved beyond the mechanics of the model to focus on the benefits it represents.

When they are considering cloud services, companies are buying flexibility and capability for transformation, says Rangaswami.

“We are in the business of transforming our customers’ business by reducing latency between them and their customers,” he says. The next stage of conceptualising cloud services will be in terms of business investment models.

2 Investment models have to change:
As a CIO, Rangaswami thinks the biggest decision will be about what IT needs to own.

“The thinking about cloud will become a mentality about what you need to own. It is about a business’s relationship with its environment.”

Rangaswami believes IT teams are still hooked on the idea of belt and braces investment strategies, where systems are built to cope with extreme situations. He says they need to start applying the decision making processes they use in other parts of their lives.

“You don’t go out and buy a car that is big enough to carry everything you own. If you are moving house, you hire the appropriate vehicle. It’s about owning for average.”

In the same way, IT investment models will have to focus on the normal-day scenario, leaving the spikes for cloud services.

3 The need to launch new products quickly
At the moment, the business drivers for moving into cloud services are around cutting costs. Rangaswami thinks this motivation will change.

He says “Say that to a customer and they will wonder what difference it has made to their lives.”

Business resources, including IT have to be focused on reacting to customers’ changing demands and bring new products into the market to fulfil those demands as quickly as possible.

Rangaswami predicts the remit of the IT department will shift from reducing the cost of the steady state of the business to reducing the cost of change, because businesses will be undergoing constant change.

Up to now, he asserts, many businesses have pared down operational costs by resisting change, but the time it takes for a dominant player to establish itself in the market is growing ever shorter.

“It took IBM 40 years to become [viewed as the market dictator], Microsoft 20, Google 10, Facebook 5, Twitter two and a half. It’s telling you that our acceptance of monolithic behaviour is reducing,” he says.

The obsession with monolithic, vertically aligned business strategies, supported by IT systems that reflect that structure, is holding large companies back because the time to build and test new products is way longer than smaller start-up competitors.

4. Social networking has opened up the market:
Rangaswami points out that no company can afford to ignore what its customers are saying to each other over social media about it. This medium is a key area for measuring the market reaction to its products and services.

What this means is, that as a CIO, you have to go outside the traditional infrastructure to know how your business is doing in the market.

He says: “You can’t control how you find out what the market’s reaction is.”

The same goes for finding out what the market thinks about your competitors. Rangaswami used the recent New iPad launch to illustrate this.

Apple hinted there would be a new product launch and the social networks collectively predicted that this would be a new iPad. Going to Apple’s website would not have yielded this information.

So, if you want to get a good idea about how the market is moving in terms of new product trends, social networking is the best indicator, he says.

This goes against the grain for many business processes around marketing, which have their own internal measuring techniques that give the business a high degree of control over the information flow between itself and its customers.

The new environment is much more aligned to the concept of ecosystem thinking, that Rangaswami mentioned earlier when talking about investment models. The flexibility in IT systems has to be reflected by the same sort of elasticity in business values.

“When thinking about cloud, don’t just stop at infrastructure, you have to think about services and to know how they are doing.”

5 Staff training of IT systems:
If flexibility of scale and speed to market are now the commercial realities, you have to have a highly productive workforce that can cope with the plasticity of the business model.

Businesses with complex and difficult applications supporting them will find that productivity impaired.

Rangaswami says: “I had to go on a course to be able to use my own company’s software and services. This is expensive.”

It makes financial sense for staff to use the devices and applications they already know from outside work, in the business environment.

Whereas office applications were being widely used in the family home ten years ago, teenagers today rarely use local content processing or email applications, in favour of social media alternatives.

Their steep learning curve, when they start work and are expected to use what they might see as retrograde software, is going to have an impact on their productivity.

Many large companies, including Salesforce, are deploying applications modelled on social networking sites like Facebook and Twitter to support or replace traditional ERP architectures.

Rangaswami says: “I can hire anyone today and expect them to know how to use Chatter [Salesforce instant messaging application], because they know how to use Facebook and Twitter. My training costs are very low.”

The same goes for hardware devices. Rangaswami says the keyboard is holding up productivity. Mastering a Qwerty keyboard is a difficult skill and the engagement process was held up.

“Kids know how to use an iPad because they explored Fisher-Price toys. If you make the IT, that employees use, more like the stuff they learned when they were kids, they will be productive from day zero.”

Process automation and the quick and easy deployment of more flexible, easier to use applications frees up the workforce to focus on activities like service and innovation. Rangaswami is sure that business competition will force a growth in the demand to recruit staff with these skills.

“Consumerism, Bring Your Own Device, gamification. These are the things that are all to do with the war for talent. We live in a recessionary time. Businesses are no longer saying I need to manage costs. They are saying I need to do that and still motivate my staff.”

6 Be prepared to pay a premium for anything the market isn’t doing:
Although cloud services are reaching a level of maturity, Rangaswami accepts that the approach is only a part of the whole strategy.

As a volume model, it is strongest when applied to common applications that all businesses use. The more specialised an application is to a particular market or process, the less suitable it is for a cloud model.

Where a business wants to strike out and do something different from the market, it needs to make extra investment run the relevant applications directly, or possibly even spend on R&D to build the systems it needs.

Rangaswami pointed out that this is a key task for the CIO in the future, to define for the business where to draw that line. This will require a skill set that includes insights into business processes as well as the ability to deliver deployments that support this new scalable, plastic, ecocentric business model.

Pic: Jemima G cc2.0