Send in The Cloud

It’s hard for a CIO to go 10 minutes without hearing about how cloud computing is going to transform IT sooner rather than later. Online user groups and blogs are afire with talk of the cloud and its implications. Business news outlets can’t seem to write enough about the cloud’s potential impact. And employees are putting it to use one way or another–with or without the company’s blessing.

But no matter how much hype is behind it, or how transformative its potential, cloud computing–in which a company pays for access to a service provider’s infrastructure or application as if it were a utility–today carries with it a perception of risk. In fact, there’s enough perceived risk that CIOs who adopt even the cloud’s most common incarnation, software as a service (SaaS), qualify as pioneers who have a lot to teach other CIOs.

We set out to ask IT executives why and how they decided to jump into the cloud. In some cases, the decision was forced by a deadline for switching to new IT systems. Some companies insisted on certain concessions from vendors before they’d entrust them with their data. Others were driven by the fact that SaaS lets them respond faster to changes in the market.

While cloud computing is several years away from becoming a widely adopted IT strategy, it’s starting to shed its novelty status and is becoming an increasingly accepted alternative to traditional IT architectures. What follows are examples of five organizations that use cloud computing to varying degrees, and how they went about taking the plunge or, in one case, how they have attempted to correct a premature commitment to cloud computing.

Inteva Products

For Dennis Hodges, adopting a cloud-intensive IT strategy was a matter of timing and simple math. Hodges took over the CIO post at Delphi Corp.’s Global Interiors and Closures unit in September 2007, just six months before the business was to be spun off as an independent private company. The resulting concern, Inteva Products LLC (a $1 billion-a-year maker of instrument panels, cockpits, latches and other automotive interior components), was given 15 months to extract itself from Delphi’s IT environment–a very tall order.

The first concern was e-mail communication, which proved to be the easy part. Hodges contracted with USA.NET to establish a cloud-based e-mail service for the new company’s 3,400 worldwide employees, and within a week after the spinoff occurred last March, the system was up and running. USA.NET provides all the storage, guarantees a minimum uptime and handles all software updates.

The decision allowed Hodges to turn his attention to the larger matter of choosing a new ERP system. It’s also saving Inteva a lot of money, though he wouldn’t specify how much. “It’s been perfect for us,” says Hodges. “We’re trying to keep our IT staff as small as possible, and I want the people we do have to work on business support issues, not infrastructure.”

Though many CIOs could imagine outsourcing their e-mail system to a service provider, most would probably wince at the thought of entrusting their ERP environment to a third party. And, in fact, Hodges evaluated several ERP products–both cloud-based and on-premises–before settling on Plexus Systems’ on-demand ERP service.

Like any CIO considering cloud technologies, Hodges entered his ERP evaluation with overriding concerns about whether an SaaS offering could deliver the level of security and availability needed for a mission-critical environment that would manage everything from product development to the supply chain. He asked the competing vendors hard questions: How did they get their first customer over the security hump? What were their schemes for addressing security, storage, availability and disaster recovery? Essentially, they were the same questions Hodges said he’d have asked himself and his IT staff had they chosen to deploy something themselves.

Once he was convinced Plexus could address his concerns better than Inteva ever could in supporting access from remote locations, he started crunching the numbers, and the case for the cloud became more compelling. He estimated Plexus’ system would cost Inteva 75 percent less than something comparable to the SAP ERP system Delphi runs, and it would drive Inteva’s IT costs down from 2.5 percent to 1 percent of revenue–a figure that would provide competitive advantage by outpacing the company’s rivals.

Then there was the matter of timing: Plexus would allow him to get Inteva running on its own ERP system well within the 15-month timeframe Delphi laid out. Hodges expects to have Inteva’s European Plexus site up by the end of the year, and employees in the rest of the world will get access by May 1, 2009.

And that won’t be the end of Inteva’s foray into the cloud. Hodges is so encouraged by the success of the e-mail migration and the progress on the ERP front that he sounds ready to make the cloud a de facto standard for the company.

“Let’s get rid of everything we don’t have to do and focus on making a better business,” he says. “You can provide value as an IT organization by working as a business transformation organization and becoming business process owners.”

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