If you are an IT decision maker, then cloud computing will change your role and your relevance to your organization, but in ways that you probably don’t expect. By too many, cloud is still perceived as an IT infrastructural matter that is best left to the technicians. This observation was one of the important reasons for writing this book. Cloud must be used as a much more strategic opportunity, and right now is the best time to start doing so. In your organization, you can now position cloud computing in such a way that it will help you outcompete and outperform your competitors. Your active role in this transformation will be crucial and personally rewarding.
You probably know how cloud can help you lower cost, reduce overhead capacity and how that will make you achieve your ever present cost-cutting goals. You may even be thinking about using cloud computing to improve “agility” and time to market: faster response to business demands. But that’s not it. That is not the big impact of cloud. These are undoubtedly great goals to pursue, and cloud will help you achieve them. But in a couple of years we’ll have seen a much bigger impact of cloud; an impact that transforms the business reality.
In today’s business environment, it seems that unpredictability and highly dynamic markets have become the norm. In their book Chaotics, Philip Kotler and John Caslione (Kotler and Caslione 2009) state that the world of commerce and business is in a state of transition and will never be the same again. The latest recession marked a clear paradigm shift. The economy is moving from a pattern of predictable cycles of prosperity and recession into a much more turbulent world where highs and lows appear with greater frequency, which is to some extent an effect of ongoing globalization. This has become the new world of business: international, connected and chaotic.
In this context, cloud computing is not simply changing the way we do technology; it is changing the way we do business. In much the same way that social media has completely changed marketing, advertising and even news and public opinion, cloud computing is changing business, changing products and services, changing markets and even changing innovation itself.
It’s hard to overemphasize the potential effect of the transformation to cloud computing. Nicholas Carr is quoted everywhere in this regard. He wrote the book The Big Switch (Carr 2009). In this book he predicts that in the coming decade or so corporate IT will be more or less “switched off” in favor of cloud resources. In this scenario, the time and attention currently required to maintain the commodity components of your business would decrease dramatically. You could start to focus on what creates real value for the organization: the innovation process (and culture) itself, where technology is no longer a barrier.
Another effect of cloud computing is that the products we use and create turn into services. Here a new vendor-client relationship comes into view: one based on continuity, recurrence and trust. Just try to sell a service that doesn’t do what you promise: the client will simply stop using it. We also talk about services in a different way than we talk about products: services are generally marketed in terms of what they do rather than what they are: we make the decision at a higher level of abstraction. In reality, this move to cloud computing will result in a more dynamic set of partners that will need to be managed, or better, kept engaged. And the services you use will become an integral part of the services you offer to your own clients. The shared responsibility demands shared goals, shared risks and shared benefits. This introduces a new kind of market where pricing can continually fluctuate, and price may be based less on the size of a solution and more on the value provided and how many competing offerings there are to choose from. In this market, an IT manager could become something similar to a corporate venture capitalist.
When we view IT as a business, it may be managed in the model of a venture capitalist striving for the best return on investment while at the same time exploiting market opportunities. Cloud computing makes it possible to invest in a vast set of business solutions (services) and rely on the law of averages, which says it’s better to invest in a broad series of initiatives than to pour all the capital into one. The returns on those initiatives that prove successful are more than enough to pay for the losses on those initiatives that fail.
The overall return on invested capital will surpass the expected return from traditional, slower and less broad business solution development.
Another investment approach that cloud computing makes possible is a bootstrap approach: a small initial investment may get your business going, then reinvesting the profits from each sale will enable you to grow your business. Especially for smaller companies, this approach can be very attractive.
With technology and processes already spreading inside and outside the organization, we’ve reached a point where truly we need to start thinking in systems of systems. And since every business activity is taking place in this connected ecosystem, we need to rethink our business concept itself. We need to start thinking in businesses built from other businesses.
Seen in this light, it is clear that cloud computing is not a goal in itself: it enables your company to be part of the ecosystem. Clearly, you cannot afford to ignore cloud computing. In an ecosystem of connected companies, the ones that do not participate cannot win. If your systems are not suited for transactional interaction, you will not get the business. If your organization is not capable of maintaining good service relationships (keeping your partners and customers happy enough to stay with you), then you will lose your market share.
When your company is part of this ecosystem, it is not a one-way street. You could just as easily become a service provider instead of only being a service consumer. You can open up parts of your business to the partners in your ecosystem: if you have data that is attractive to others or if you have unique expertise in performing certain calculations, you could make these available through commercially viable services and extend your business.
Finally there is the impact of technology on the business itself. With tech-savvy users, clients and management, business decisions are increasingly becoming technology decisions. Many business processes are so technologically enhanced that we are in fact running Cyborg businesses: business and technology are interwoven. We have moved from information technology to business technology. Technological innovation and business innovation are synonymous, and technology brings direct business opportunities. And there are lots of opportunities here: at the moment there are many innovations available that have not yet been fully embraced by organizations or society. We have yet to realize the opportunities they present.
It may sound a bit far-fetched or futuristic, but most of this is happening today: people and companies are becoming smarter in using technology. Marketing technologies, for example, are almost completely in the hands of the business decision-makers, not IT (Woods 2010). There are even companies who have no internal IT anymore. It does not make business sense to fight this inevitable shift; your company size, industry or even how innovative you are today cannot keep you immune from this change.
Some examples:
| • | Compete in a global “low price” market, with high volume and low margin. |
| • | Speed up innovation by engaging customers and partners, and be the first to market a hot item. |
| • | Monetize all parts of your business. Any system, resource or process that is valuable for someone else can be sold as a service (B2B or B2C). |
| • | Monetize your data. Turn existing data into usable information and identify new business opportunities for yourself or sell the information to others. |
| • | Simplify the on-boarding of new customers. Use a payment structure that attracts new customers, for example through free trials and free services that can be upgraded. |
| • | Win in “turns.” Increase responsiveness to quickly adapt in downturns (and upturns) to get ahead of the competition. |
In recent years, the role of the CIO has been a subject of much discussion. About how he could be an innovator or a catalyst for change. In reality, not much of that has materialized: most often the CIO is still perceived as the person keeping IT in order while trying to reduce costs. This will not change overnight. The most realistic scenario is a slow shift towards the innovator role, which would ultimately be rewarding both for the company (since technological innovation is business innovation) and for the CIO personally (expanding opportunities rather than just operations).
Now is the perfect time to start that shift. There is still time to develop an IT department that is trained and ready for its new role, that adapts quickly with the business side and becomes a department famous for saying “Yes” instead of saying “No.” Then replace whatever makes sense with a cloud alternative, and aggressively start connecting with others.
The most important focus from the start must be a process oriented one. Create the right processes that enable quick responses while preventing future spaghetti resulting from a series of quick solutions. Design your governance and enterprise architecture not from the perspective of risk management, but from the perspective of enabling best-in-class customer service. Keep it lightweight and dynamic. Start comparing yourself to external service providers and make sure that you win the comparison every time. In simple terms, start applying what you know already. You may cautiously want to wait, thinking there will be a better time, but that is false hope. There is no reason to wait. The world will not become less volatile. Budget pressures will remain and technology will keep on evolving. The sooner you start experimenting, the sooner you will climb the learning curve and develop a full appreciation of how cloud computing will change your business, your role and your future.
The rest of this book will introduce you to everything you need to get started. “Chapter 2: A Dozen Bold Statements on Cloud Computing” will give you more food for thought, while covering the basic concepts of cloud computing. “Chapter 3: Business Innovation Through Cloud Computing” will make the case for embracing business technology and the effect it has on IT as we know it. Then we will dive into the economic model, describing the parties and interactions of cloud computing in “Chapter 4: Cloud Economics,” followed by how business and IT work together and the impact of cloud computing on the internal IT department in “Chapter 5: The New IT Constitution.”
Since integration and reducing enterprise risk will be essential in anything related to cloud, “Chapter 6: Enterprise Architecture for Cloud’s Sake” details how enterprise architecture plays a role, and how you can employ it while remaining pragmatic and nimble. “Chapter 7: Overcoming the Barriers” will put some supposed barriers in perspective and counter any unrealistic hype or negativity that may still surround cloud.
“Chapter 8: Data: The New Frontier” is giving you insight into the question of what happens next, when cloud is omnipresent and data is more openly shared. And finally “Chapter 9: Creating Your Roadmap” will help you put together your own journey to the cloud, with some concrete steps and pointers on how to advance.
In between these chapters you will find case studies based on interviews with CIO’s from companies that have started to embrace cloud computing. In these tales of the real experiences of a wide range of companies, you will read how they solved their issues, found value, and became satisfied (or not) with cloud. With this combination of vision, approach and real-life experiences, we give you a strong foundation for seizing the opportunity that is the cloud.