Cloud Strategy: What Every CIO Needs to Know

By Roger Camrass & Suhel Bidani  |  Posted 03-22-2011

Cloud Strategy: What Every CIO Needs to Know

Perhaps more than any other executive in the C-suite, as CIO you understand transformative technology - from the birth of the microprocessor in 1974 (and the associated birth of the digital world) to the current e-commerce revolution. IT has always been in the forefront of significant change, and cloud is no exception. It bears many of the hallmarks of a new IT mega-trend - lots of hype, plenty of misunderstanding and a time span of 10 years before its full effects are felt.

Unlike previous mega-trends, cloud looks like it will be more than just another strategic advance -- it could well be as profoundly game changing as the printing press was to Western Civilization. Cloud is the key that will unlock corporate change at a level that greatly exceeds all earlier strategies, including outsourcing (1980s), off-shoring (1990s) and web-based market channels (2000s). Cloud presents a unique opportunity to virtualize almost every aspect of corporate activity - starting with IT. That presents you with the rare opportunity to reinvent your role as CIO and have a dramatic impact on your organization's value-creating abilities. 

Using cloud, you now have the potential to expand your responsibilities into broad shared services and, ultimately, into architecting the entire business structure.  To make that happen, you must be proactive in adopting cloud, although timing remains the biggest challenge. To navigate these uncertainties, you will need to adopt a sense-and-respond approach by establishing an incubator model within your IT organization that senses demand and links to emerging capabilities on the supply side.

A number of forces are now converging to accelerate the adoption of external services based in the cloud. For example, there's the web and the growing adoption of open standards and utility platforms for more practical sharing of resources and facilities. 

Against this backdrop, as CIO you can take one of two approaches in re-inventing your IT environment. You can manage the whole of shared services (including IT, finance, procurement and HR). Or, you can focus on transforming the business as a whole as a 'business architect' or 'chief optimization officer' -- helping the CEO fashion streamlined organizations that exploit the tools of digital business and consider their impact on strategy, structure and process. It's a huge opportunity for the CIO who can grasp it.

The CIO as Gateway for Innovation

CIOs are at the heart of the business because you are the gateway for innovation. Initially, cloud will primarily affect your IT organization; but cloud's impact will race from infrastructure to software, then envelope an organization's business process and its key value-creating elements.

Agility and flexibility are two of the key values of Wipro Consulting's vision for the 21st Century Virtual Corporation. The adoption of these attributes assumes the externalization of all non-core related activities to utility operators. Cloud provides the perfect platform for such development. Using private/public cloud-based models to provide the majority of business processes, we can imagine a virtual corporation that does little more than develop brand, define product and orchestrate external alliances. Sound familiar? That's exactly what Coca-Cola, Dell and Cisco have been doing for years.

Cloud providers fall into roughly four groupings:

  1. Consumer-based utilities such as Google and Amazon, who, with surplus compute power, are looking for new sources of shareholder value;
  2. Traditional IT vendors such as IBM, HP, Microsoft and AT&T;
  3. Service integrators, who are going to orchestrate this new environment; and
  4. Niche players, who see many new opportunities in areas such as security and service brokerage.

In our experience, few companies demonstrate a comprehensive cloud response to internal IT needs even at basic compute, storage and desktop levels. CIOs are concerned about security, technical integration, acceptable service levels and data protection regulation. With the exception of a few well-published success stories, most CIOs merely see cloud as a means of converting CAPEX (associated with fixed IT assets) into OPEX (pay as you go). Current cloud expenditure remains minimal.

We recently surveyed CIOs about their IT expenses on cloud-related services. Only 20 percent reported that they allocated more than 10 percent of their budget to cloud. Almost half have designated less than 2 percent.* What will change your mind about adopting cloud? Ramped-up deployment of business initiatives topped the list of drivers in our informal survey. CIOs we surveyed are also intrigued by the conversion of IT capital expenditures to operational expenses. They embrace infinite scalability for storage and computing as well as IT agility. Collaboration ability is seen as an asset, as are the large-scale benefits achieved by combining cloud with mobility. Most CIOs expect cloud penetration to rise to 40 to 50 percent within the next five years.**

Cloud Strategy: Sense and Respond

The challenge confronting IT suppliers and corporate IT customers alike is how to make a smooth transition into the new 'virtual' environment and prove tangible benefits.

We recommend an adaptive approach based on a sense-and-respond philosophy that originated with Stephen Parry in his book Sense and Respond. It includes the creation of business analyst teams who stimulate and capture demand as it arises.  We define this approach as a 'cloud incubator' that can sense and respond to interest both at the demand (business customer) and supply (cloud vendor) extremes.

We also see a proactive but carefully measured cloud strategy that includes:

  • virtualizing servers and data centers in anticipation of computing and storage "on demand" through new vendor arrangements; and
  • testing public cloud services in non-core IT areas, such as general office and support processes.

This cloud strategy requires a tactical approach in which you apply three distinct layers that test and refine a broad range of new cloud tactics in a rapidly developing environment and establish a stable future operating pattern. These layers are:

  1. Business Engagement -- providing skills, methods and tools to enable business customers to assess, quantify and prioritize cloud-based service opportunities.
  2. Solutions Architecting -- offering multi-disciplinary teams who can transpose business requirements into cloud services by testing and validating new operating models.
  3. Industrialization -- scaling up the new Cloud-based operating models into full-fledged service platforms.

Smart CIOs will meet this historic challenge head on, building now.  Those who will succeed are those who effectively apply the sense-and-respond approach and construct the right ecosystem for their cloud transformation.

* Between October and December last year (2010) we surveyed more than 50 CIOs and IT Directors, almost 90% of them from global organizations about their IT expenses on cloud-related services.  Only 20 percent reported that they allocated more than 10 percent of their budget to cloud.  Almost half have designated less than 2 percent.

** In our 2010 survey of IT executives, most CIOs said they expect cloud penetration to rise to 40 to 50 percent within the next five years.  The challenge confronting IT suppliers and corporate IT customers alike is how to make a smooth transition into the new 'virtual' environment and prove tangible benefits. 

About the Authors

Roger Camrass is Senior Practice Partner for Business Transformation at Wipro Consulting Services, Europe, and the author of "Atomic: Reforming the Business Landscape Into the New Structures of Tomorrow."  Suhel Bidan, is Senior Manager, Wipro Consulting's Business Transformation Practice, Europe.