Based on analysis from 100 companies globally, it is expected that the vast majority of IT organisations will have – if they haven’t already – adopted SaaS-based HR and CRM solutions by the end of 2013. By the end of 2014, many will have a share of their development environments and data in the cloud, with providers like Amazon Web Services and Rackspace. All this means that cloud computing is in every CIOs' future, if not present.
But the journey to the cloud can be painful, especially when expectations and assumptions are inconsistent among IT leaders, their business partners and the cloud provider. The risk of inconsistency is acute – as recently as a few years ago, we catalogued more than 50 separate definitions for the term 'cloud computing', and the various information sources around the cloud could fill several virtual libraries.
So what are the risks?
- CIOs haven’t educated their business partners sufficiently around their solution alternatives. The typical response to the cloud has been to tighten governance, without first understanding business partners’ views of risk and reward. Companies that do it correctly can cut their sales cycle time by half and increase their contract value by 50% or more if they go directly to business leaders, rather than through IT. Additionally, organisations can keep actual implementation and support spend within IT budget targets and keep implementations effectively integrated with the company’s larger technology architecture.
- Organisations haven’t clearly distinguished vendor screening criteria from proof-of-concept criteria. IT organisations cite many concerns with the cloud, spanning service quality, risk, or cost. Many fail to separate concerns that are solely a matter of the provider’s responsibility from those for which the customer also has responsibility. Those that are within the vendor’s remit (for example, how they guard against staff misconduct with customer data) should be clear and consistent screening criteria. Those that depend to some extent on the customer should be considered test-and-learn opportunities before pushing cloud to scale. IT organisations can identify low-risk data and applications that can be ported to cloud providers as experiments to help CIOs identify, for instance, measures or investments IT might need to make to guard against performance degradation, or to ensure that data is not “locked in” with the provider. Survey analysis points to several potential focus areas for proofs-of-concept, from performance and service-level agreements to governance of security protocols, availability risk.
- CIOs haven’t integrated business partners in a test-and-learn strategy. Survey data we collected from nearly 200 business executives last year indicated that 70% of them are willing to take on more responsibility within applications projects. Yet many IT organisations see this as a risk, and keep them at bay. A more effective engagement model involves business partners in developing test-and-learn opportunities with cloud providers, analysing lessons learned, and defining the 'big rules' for cloud adoption in the enterprise. Early, effective engagement at the experimentation phase drive a more consistent enterprise approach to the cloud, and reduce change-management costs with partners during implementation.
- IT organisations haven’t harnessed their objectives to their providers’ self-interest. Arguably, cloud providers are learning as much about this rapidly emerging technology (and how to provision it) as customers are, and they have as much interest in resolving obstacles to effective use. In looking to avoid risk, many IT organisations have not given thought to where they can enhance their potential partnership and collaboration with their providers by identifying and offering non-obvious sources of value like process expertise or market intelligence. IT teams that can build this level of collaboration are more likely to leverage the potential benefits from cloud services faster, while drawing greater vendor attention to key risks.
Over the next few years, the cloud will become part of the new normal. CIOs can reposition themselves and their teams as effective brokers for cloud technologies, reducing the risk of inconsistent, poorly governed decisions that threaten higher implementation costs and wayward enterprise technology architectures. CIOs can leverage their technical expertise to educate business partners in finding the right cloud solutions, and engage them in a disciplined, test-and-learn approach that develops high-return, high-satisfaction opportunities for both the enterprise and the cloud provider. The ability to align the IT organisation, business partners, and vendors around a single, consistent set of strategic expectations is the key to figuring out the new normal earlier. This way, businesses can capture its advantages without having to suffer a trial-and-error approach.
Mark Tonsetic is practice manager at the business advisory group CEB