Send in The CloudBy Tony Kontzer | Posted 01-11-2009
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.
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."
As rapidly as Inteva has adopted the cloud, Author Solutions moved even quicker. Granted, the online book self-publishing company has the advantage of being about one-twentieth the size of Inteva, but, even so, its decision to replace a mishmash of disparate systems with a single on-demand environment built on Salesforce.com's Force.com SaaS platform was aggressive by any standard.
The company's move toward the cloud began when Kevin Weiss assumed the CEO post last December. Having come from an IT background that featured multiple large-scale deployments of Siebel Systems' mammoth CRM application, Weiss started his tenure by taking stock of his IT environment, which was a mess.
Despite being a company of just 400 employees, it was relying on two databases, two e-commerce systems and three workflow systems to support its three brands. Weiss decreed that the company, which depends on technology for its existence, would consolidate on one platform.
Naturally, the IT department saw that as an invitation to roll up its sleeves, and it diagrammed a home-grown solution that was doomed from the get-go. "I didn't doubt that they could do it, but we're a company that wanted to move very quickly," Weiss says.
He and the IT leadership evaluated Salesforce.com and a handful of other software-as-a-service options before Weiss determined--despite IT's desire to take a crack at building a platform--that Salesforce.com made the most sense. His decision was immediately, and eerily, validated. "The morning we made our decision, our IT system went down for four hours," Weiss recalls. "Somebody was telling me we were doing the right thing."
In truth, several factors swayed Weiss toward SaaS. He wanted to establish an IT platform that would last, and he believed that the ability to constantly reconfigure apps built on Salesforce.com, as well as benefiting from the service's constant improvements, made it the better long-term choice. That config-urability would also give Author Solutions the much-needed ability to make quick workflow changes or add new services, such as letting authors tap into marketing services from third-party partners. Additionally, by going with SaaS, the company did not have to seek out new IT talent, which can be a challenge for a company located in Bloomington, Minn.
And, like just about every company that turns to cloud computing, Author Solutions was drawn to the cost savings that come from not having to maintain and manage a data center and application environment. The company estimates savings of up to 75 percent. For instance, workflow modifications that once took 30 to 120 hours (and cost between $1,500 and $6,000) now take just one-fourth the time. Also, with the old system, adding a new product for authors required 120 to 240 hours ($6,000 to $12,000); that has been reduced by 75 percent.
Weiss reached his decision in March, and by late August, the company was running on what is effectively a new publishing ERP system. Almost everything moves through that system--lead tracking, handling of editorial submissions, management of manuscripts, corrections and even applying XML tags.
Of course, the migration to the Salesforce.com platform wasn't without issues. For instance, a snag occurred when the structure of the company's existing data didn't match up with Salesforce.com as expected. However, in its first weeks of use, the platform was handling 30 percent more work volume than the old disparate environment, and the system provides the company's author-clients with greater visibility into the handling of their manuscripts than ever before.
Essentially, Author Solutions processes more work with the same number of people, so the company realizes substantial efficiency gains. It can schedule work more proficiently, lets authors be more self-sufficient and will eventually yield a bottom-line impact by making it easier to do business with them.
ESPN Digital Medias
ESPN Digital Media
Use of the cloud at ESPN Digital Media started as it has at so many other large companies: small. In fact, it's been championed by one man, Ed Davis, vice president of product development for ESPN Digital Media's community unit, a fast-growing ESPN arm that's responsible for development of ESPN.com's popular Fan Profiles app, its exhaustive inventory of widgets and a handful of Facebook apps.
After Davis learned about cloud computing last year, he saw an opportunity to experiment with using it to host ESPN's online communities and evaluate the impact on performance, usage and a host of other measurable indicators. He also deduced that relying on cloud computing resources would allow his group to become more entrepreneurial, because their efforts wouldn't create drag on the performance of other systems.
"You may have a real good handle on your users," Davis says, "but the one time you don't anticipate the adoption of your product, it's nice to be able to create support instances to react to unexpected traffic."
Davis also figured that because ESPN's community offerings are all relatively new, venturing into the cloud wouldn't require a big migration project. But before he could take the plunge, Davis had to be certain the cloud--in this case, Amazon Web Services' Elastic Compute Cloud (EC2) and Simple Storage Service (S3) offerings, which provide metered, on-demand computing power and data storage, respectively--would conform to ESPN's culture of "responsible risk-taking."
That meant a healthy dose of due diligence. Davis talked with a lot of people who had worked with cloud-based environments and felt comfortable with the security and availability they'd experienced. He also grilled Amazon about its backup strategy in an effort to effectively mitigate the risk of data loss.
Once his concerns were adequately addressed, Davis' team moved ESPN's community products to the Amazon environment. Development, quality assurance and production environments started running on EC2, and static content was stored in S3.
While using Amazon brought the customary efficiencies cloud computing is revered for--such as hardware cost savings, reduced complexity and anytime, anywhere access--the biggest benefit was one that no one had mentioned to Davis: Development and quality assurance shared the same environment as production. As a result, new products don't have to be migrated from one environment to another once they've been tested adequately.
"Your engineers can develop and actually deploy code in an environment that is exactly how it will be when you eventually offer it to users," he says. That ability to develop, test and run apps in a single environment has Davis planning to use Amazon's platform to host additional apps, though he couldn't provide any details at press time.
Make no mistake: Not everyone has a good early experience with the cloud. The most common problems CIOs encounter come when they discover that they've entrusted the maintenance and management of their software to people who lack the industry expertise needed to run a mission-critical application. This is precisely the realization Jerry Batt has come to about the software-as-a-service arena, and now he wishes he'd had a clearer idea of what factors to consider before he leapt into the cloud.
The CIO of homebuilder Pulte Homes entered the SaaS fray several years ago, when he started moving some of his company's less important systems to on-demand alternatives. Initial experiences with cloud-based applications for managing payroll, human resources, treasury and bond holdings, and third-party legal expenses provided no indication of the minefield he would walk into two years ago, when Batt opted for a large-scale subscription to a well-known customer-service-relationship automation service to manage its relationships with potential home buyers and those in contract. (Batt asked that the vendor's identity not be disclosed.)
At first, everything seemed to go as expected. All the needed features and functions were in place, and those that weren't often were added by the vendor at Batt's request. But Batt says he fell into the same trap he sees other CIOs falling into: He focused too much on those features and functions and how they matched up with business needs, when he should have been looking more closely at how the system would perform during periods of high demand or when the vendor was updating the application.
What resulted were occasional outages that Batt found maddening. "When I have a two-hour outage in a mission-critical application, I can't accept an answer from the provider that's an 'oops,'" he says. "If I ran my shop the way they run this application, I would have been fired."
Batt was so disturbed by this performance that he showed up at the vendor's annual user group conference for some reconnaissance. That's typically the kind of mission CIOs assign to underlings, but he needed to hear first-hand if other customers were having the same issues. They were, but, oddly, they weren't voicing their complaints.
"I said, 'Why aren't you squealing your heads off?'" Batt recalls. "To which they said, 'Well, we haven't put it in front of revenue-producing people.' That told me I might be the only dummy on the block putting a mission-critical application on software as a service."
To make matters worse, Batt's team had built integrations with several in-house applications, including Pulte's contact management system. Subsequently, any downtime in the salesforce automation service also brought down whatever apps were tied to it.
Batt couldn't find anyone to commiserate with on that front. All the customers he talked to said they wouldn't trust the vendor's technology enough to undertake any integration efforts for fear of their in-house applications being held hostage by outages.
Ultimately, Batt decided to have his staff deploy a sort of light switch for its integrations that lets them be decoupled temporarily when the vendor is making changes to its service or Pulte has peak processing needs, such as when it's heavily promoting a group of properties over a weekend. But when it comes to Batt's view of the cloud, the damage has been done. "I've lost confidence in software as a service," he says, "and it's going to take something [major] for me to get it back."
Batt has some words of advice that he hopes will prevent other CIOs from duplicating his experience. Beyond looking at a vendor's functionality match, he says, look under the covers and make sure you're confident they can run the application to your standards. Other tips: Visit the vendor's data center, and talk to other customers to find out what the real service experience has been.
Florida Department of Management Services
Florida Department of Management Services
Unlike Batt, some IT executives who have their first taste of cloud computing can't get enough. Count
Joe Wright, CIO of the Florida Department of Management Services, among that group.
Wright came to the cloud more by happenstance than by design. He never made a decision to adopt a cloud strategy; rather, he simply started looking at SaaS alternatives whenever his staff had processing needs that his existing resources couldn't accommodate, or if he saw an opportunity to significantly cut application-related costs.
More often than not, the SaaS option made more sense than any other choice. "If anything," Wright says, "speed to market drove it initially, and then the recognition of the much more manageable costs has driven it further."
Whereas a company like Author Solutions chose to standardize on a SaaS platform, Wright is taking a best-of-breed approach, finding niche service offerings that meet specific needs. So far, he's adopted two such offerings: A knowledge base and customer service tool from RightNow Technologies is powering the "Get Answers" application on the state's MyFlorida.com portal, and another service, Chrome Systems' Carbook Fleet Edition, manages the state's vehicle procurement.
Wright is looking into SaaS options for a variety of other processes, too, such as citizen request-and-response tracking, e-mail and calendaring, learning management and asset management.
"As we talk about vendors that have systems available," Wright says, "the first question I ask is, 'Do you have a hosted version available?' We're not making large investments in software if we don't have to." Wright also is interested in cloud infrastructure offerings, such as Amazon's EC2 and S3 services.
Once Wright identifies a service he's interested in, he performs some due diligence. He works with the vendor to verify that the security of data--at rest and in transfer--is sufficient.
Wright looks for services that have built-in redundancy and strong disaster recovery processes, an important consideration in hurricane country. He also makes sure access to data is guaranteed around the clock, and he checks on the location of data storage to make sure citizen records don't end up on overseas servers.
"It first has to meet the criteria of the business," Wright says. "Once it does, it's a matter of making sure it meets our other criteria and that we're comfortable with the solution."
No system under Wright's purview is safe. Even if it's working fine, if it's associated with higher costs, it's fair game. Given that his evaluations have shown that the cost of an SaaS product can be as little as one-fortieth the cost of an internally deployed application, his strategy appears to make sense.
Not surprisingly, Wright believes any CIO who hasn't taken a hard look at cloud computing should. He suggests following the example of ESPN's Davis and talking to other IT execs who have used SaaS products to find out what challenges have arisen for them. He also strongly urges CIOs to shift their focus from infrastructure and application management to future needs and evolving business strategy.
Wright believes that all CIOs will eventually come to the same conclusion he has: that by freeing themselves from the shackles of data center management and staff oversight, they'll find themselves spending a lot more time on automation and business process enablement.