Will Cloud computing really transform your business model?

By Pete Deacon, Director of Technology and Strategy, SaintGroup Group

There is so much hype in Britain’s IT industry over Cloud computing that the model is frequently being “oversold” to UK companies that are looking to streamline their IT systems.  However the emergence of cloud computing is such a ‘breakthrough’ opportunity for firms to transform their competitiveness with more responsive IT that it would be a shame if firms lost out by failing to take some sensible measures to manage the risks around it.  If they can get their Cloud thinking right, UK businesses can tailor their IT provision and its billing to better suit computing needs far more effectively than before.

Control and innovation

It’s generally accepted that adopting an effective cloud infrastructure is a key component of business transformation and it increases an organisation’s speed to market, especially new ones. In the past, companies were more or less forced to put sizeable resources into maintaining their existing business applications. Take a CRM system: IT teams regularly used to upgrade all of the equipment and software on the network individually which was a wasteful process in terms of both time and IT resources.  In a Cloud deployment, this type of business tool (and the associated software upgrades) can be centralised, streamlined and automated. New applications can be added more easily on a shared platform. Migrating to a hosted exchange platform will allow the business to scale up or down the number of service users paying on a usage basis only. If the company had retained the exchange environment on site, they would need to be considering licensing, storage and back up requirements as well as manage operational tasks required to ensure system performance - and could be supported through its life cycle. With a carefully planned Cloud model, vital company IT resources are freed for strategic capacity planning or driving service innovations elsewhere.

Companies should always exercise caution before adopting Cloud computing as their existing operations might not be suited to this model.  CIOs need to look at their core processes and network operations and determine which of them could be operated as cloud services whether as shared or dedicated versions.  In these cases, an independent expert can examine the business’ needs, conduct an end-to-end audit of the organisation’s processes and the underlying networking infrastructure before making recommendations. 

This rigorous risk management will help determine if key business applications can be transferred to the Cloud and what the business case and return on investment (ROI) might be. A thorough discovery process of this sort will help the CIO understand the Cloud provider’s planned delivery model and its limitations. This approach will also examine longer-term service deployment questions: could a service-based company’s infrastructure facilitate card payments? Where will transactional data will be stored?

The three fundamentals

In an economy making a slow and patchy recovery from recession, Cloud computing is sometimes marketed by some vendors as being a low cost computing resource, a simple “subscription” model for corporate users. Many company board members, operating in demanding and volatile markets, could be desperate for opportunities to drive complexity out of operations. 

This understandably cost-led thinking ignores the point that most Cloud providers’ model comprises three fundamental elements - the on-premises infrastructure, Internet or private connection via carrier, and the intelligent core in the data centre - all of which need to be integrated and risk managed to deliver on the Cloud promise. Correctly handled, these building blocks may well provide opportunities for driving down costs streamlining operations but this is only possible if these three foundations are suited to your operations.

Managing risk

With these elements in mind, CIOs need to look at the following points to manage risk around their Cloud computing model:

• Does their service provider guarantee that current overheads and complexity of on-site IT resources will be reduced?
  Many organisations may be so attracted by the apparent simplicity of Cloud that they may not adequately examine the resources needed to manage the office infrastructure under the new Cloud provider’s agreement. The new model needs to free the IT department’s team resource for innovation, otherwise the lower service cost may represent a false economy with team resources drained towards maintenance of existing systems

• Will a move to Cloud improve connectivity and reduce net connection costs?
  With C-level executives pushing for IT cost reductions, CIOs need to be sure that a new connection for the business mean a better, more resilient service. Will the contract and billing aspects be more advantageous but also simpler and less time-consuming to deal with? Are there adequate SLAs in place covering the Cloud service that genuinely reduce the risk to the business’ daily operations?

• Does the company gain access to a more agile and responsive data centre by using Cloud?
  Businesses that are devoting their efforts to meeting customers’ daily needs may assume Cloud equals agility but CIOs should look closely to see if the new Cloud provider’s service genuinely adds value in meeting commercial objectives and secures their company reputation for reliability. For a UK business planning system expansion after the recession, are there adequate performance guarantees when moving to this new service model?

• Will any elements of the Cloud solution – such as security - be federated out to partners?
  There is always potential for risk surrounding Cloud migration in relation to aspects like corporate and customer data. If the cloud vendor intends to federate some aspects of the Cloud to third parties, will the security risk actually be worsened rather than contained?  As well as gaining assurances over likely costs, the CIO will need end-to-end SLAs in line with their particular industry’s compliance needs. For risk to be contained, the Cloud provider should deliver a plan of phased implementation with its implications for the business, together with detailed migration phases and technical support.

Risk manage Cloud for transformation

For Cloud computing to fulfil its undoubted transformational potential, businesses’ CIOs need to satisfy these risk management criteria. For those that can’t answer these questions or decide to pursue a narrow focus on Cloud as a cost cutter, adopting this strategy – like many other technology innovations - could actually pose additional risks to those it was originally intended to manage. Like any system migration, Cloud computing models need to be closely risk managed and the longer term business case and Cloud provider’s capabilities rigorously tested before it is adopted.