Cloud Computing: Analyzing Business Expectations

A lot of people have their heads in the clouds about the value–and cost–of cloud computing.

In the past month, I’ve heard quirky stories about the unrealistic expectations:

• One company director told his CFO the board wouldn’t approve any additional capital since IT services would be coming from “the cloud.”

• A healthcare industry CIO was told by a senior stakeholder that “the cloud” is the answer to America’s healthcare crisis. 

• A few have suggested data backups will no longer be needed once corporations embrace “the cloud.”

The old saying goes that a little knowledge is a dangerous thing. They might be talking about cloud computing today. 

CIOs must take responsibility for maneuvering the hype and providing their organizations with realistic and honest information about cloud computing. And it’s important they do so quickly, before hype overtakes reality among stakeholders or executives.

How cloud computing benefits a company or organization will depend heavily on how it delivers IT services to stakeholders. IT operating models range from decentralized to shared-service approaches that leverage external services; they can employ a simple staff augmentation or rely heavily on managed services. 

The mix of approaches and sources of service have traditionally been driven by how technology enables a business, the cost of service, the company’s tolerance of risk and the professional judgment of senior leaders. Cloud computing is simply another option to consider in the mix.

To be clear, however, cloud computing is not just a new form of outsourcing. Rather, cloud services offer CIOs a new option to balance cost, speed and capability in ways other external services have yet to deliver. It has the potential to revolutionize IT operations. 

But it comes at a price. Companies that want to take advantage of the power of cloud computing must assess their willingness to tolerate some risk, and they must standardize and simplify supporting infrastructure. Just consider:

• Will the enterprise begin adopting a best of breed approach to software as a service (SaaS) offerings?  Doing so poses the risk of creating application silos that limit the ability to integrate business processes across services. That may be acceptable for some applications, but not others.

• Does an enterprise have all the skills needed to manage both internal applications and SaaS offerings? 
• What is the impact on the enterprise’s network infrastructure?

The emergence of cloud computing is forcing CIOs to shift away from thinking about “how to deliver IT service” to instead consider “where to place IT work.” This shift makes it critical to embrace portable technology so the IT operating model can become more flexible. To prepare, CIOs need to start taking some key steps to begin their journey towards the clouds:

• Eliminate redundant or underutilized applications. It’s easier to embrace SaaS for one payroll system rather than four.

• Standardize and simplify supporting infrastructure. Running multiple versions of UNIX in your environment significantly limits your ability to move service from one source to another. 

• Virtualize the server environment. It saves money and acclimates a company to sharing computing resources. They will save even more in the long term by sharing in a cloud environment.

These tactical steps will require support from the CEO and other enterprise leaders. Let’s be honest–a lot of these stakeholders may react strongly if their favorite applications are changed. Fortunately, a lot of business people already have their heads firmly in the clouds–and look forward to the promise it offers.

Kevin Smilie is a partner with the CIO Services division of consulting firm TPI.  

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