A business “consumes” IT through the applications it uses and insights derived from the data processed by those applications. IT essentially strives to provide a stronger decision support system to help the company make the right decisions at the right time to make more profits. Simple...yes?
While this summarizes at a very high level what happens between IT and business, there’s a lot that happens in between. So much so that IT needs a CxO of its own – a Chief Information Officer who leads the Information Technology mandate in his or her organization. A large part of the CIO’s focus is to track IT trends as IT is always changing. In the last 50 years, some changes in the IT space turned out to be watershed moments, but only in hindsight. The reason for this is that most changes come with lofty promises and it is often not easy to figure which ones will become game changers.
In 1943, Thomas J. Watson, the CEO of IBM, famously said, “I think there is a world market for maybe five computers.”
In 1995, Robert Metcalfe, the founder of 3Com, which sold networking products globally, suggested that:
“Almost all of the many predictions now being made about 1996 hinge on the Internet's continuing exponential growth. But I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse."
So, it is not easy for any CIO to put a finger on the newer technologies with a definitive view of how they will transform IT. In fact, when it comes to IT, the crystal ball just never existed. To add to the complexity, while technology doesn’t come cheap, obsolescence of technologies is very common. This predicament runs through all IT services outsourcing
contracts too. Most contracts now have a provision to handle obsolescence but the dilemma is that the chosen provider five years back may not be the best provider to deliver those services based on newer technologies.
In recent years, cloud computing has promised to fundamentally transform the way enterprises compute and manage apps, and change how businesses consume IT services. The three key cloud models include:
- IaaS (Infrastructure as a Service): provides bare bones computing infrastructure along with storage and networking.
- PaaS (Platform as a Service): enables an enterprise to utilize a third party provider’s infrastructure and IT services, thereby simplifying the development and deployment of applications.
- SaaS (Software as a Service): provides applications that can be directly consumed without needing to maintain environments or develop applications.
With cloud computing, CIOs had the dilemma in the early years of figuring out whether it would really change the enterprise IT landscape, and if so to what extent. While it held promise as a candidate to change IT architecture, enterprises couldn’t junk existing technology roadmaps because of past investments in real estate, IT services contracts, hardware, software and other technologies. There were also concerns on the security of data, issues around regulatory compliance, the possibility of major outages, challenges of re-architecting the application landscape, etc.
In recent years, while cloud computing has started seeping into enterprises (many with “cloud first” mandates), private data centers and hosting services still exist. So, as CIOs draw their roadmaps and business cases, they need to factor cloud computing technologies into areas where they can take advantage of cost efficiency, agility and simplification of IT services.
Below are seven areas that need to be cautiously treaded as organizations now look at moving to cloud in a more significant manner:
- Data Security, IT Governance and Controls: Data security and concerns on data privacy are rated as one of the top challenges to adoption of the cloud by most mid- to large-sized enterprises. Any continued investment through outsourced contracts (or internally) in the areas of data security, data privacy, IT governance, controls, audits, regulatory compliance, etc., should include how these would be covered for new or additional cloud adoption.
- Staffing and Skills Management: One of the key areas for success of cloud transformed IT is the availability of the right skill mix. IT team members need to have experience in the cloud, managing applications in a cloud or hybrid environment, optimizing cloud spend and using new technologies for developing, deploying and managing applications and infrastructure.
- IT Infrastructure Support Services: With the cloud, a lot of IT tasks related to caring for and feeding the IT infrastructure are simplified or eliminated. Outsourcing contracts to manage such infrastructure should incorporate the idea that these components are set to be eliminated as cloud adoption increases. New contracts should factor in cloud solutions (opportunistically or with an enterprise cloud strategy) or ensure clauses that reduce traditional IT support when cloud solutions are evaluated during the term of an existing IT contract.
Application Development and Architecture Strategies: With DevOps already on the horizon for some time, the focus is further on leveraging containerization and using microservices frameworks to do away with monolithic application architectures. Any new application development outsourcing program (or in-house program) should keep this in mind. Adoption to the cloud is severely inhibited if the application architecture does not support taking full advantage of cloud technologies.
Alternatives to Application Enablement: Several areas exist where the market has reached maturity to offer SaaS-based application services on a subscription model. Some of these areas include CRM, HR, supply chain, etc., in which the SaaS solutions are fairly mature in the marketplace with large-scale adoption. This eliminates the need to develop, run and manage applications and associated infrastructure. Most organizations are already evaluating this new bucket of alternatives before embarking on a new application development outsourcing program.
Innovation: This is one the biggest buckets by its sheer power to transform and the varied set of opportunities that can be unleashed. The cloud is democratizing new technologies like artificial intelligence (AI), machine learning and the Internet of Things (IoT) to the extent that they can completely change the paradigm of innovation at enterprises beyond IT. All efforts around innovation should be made cloud-aware as they will eventually get cloud-transformed.
Continuing Commitments on Licensing Fees: Not just IT infrastructure or application development outsourcing contracts, but any licensing commitments that run over multi-years should be looked into before renewal so that these don’t present technical or commercial lock-ins when evaluating cloud services in the future. This can cover areas like virtualization, databases and collaboration platforms.
These present some of the key, high-level areas for enterprises that are either trailing the adoption curve or have had a wait-and-watch strategy on cloud services for the last few years. This group of enterprises continues to diminish, with most starting on some cloud-based service with or without an enterprise cloud strategy.
Like with most emerging technologies, a big bang change rarely happens. For large enterprises with legacy applications and infrastructure, cloud-enabled services will coexist with traditional services as they start their cloud adoption journey. A strong business case on the back of a solid enterprise-wise cloud strategy would help ensure objectives and success criteria are defined. The enterprise cloud strategy should define standardized decision criteria to move to the cloud. Covering initiation and operational aspects will go a long way in ensuring the CIO and the CFO see the same level of value with the opportunities that cloud computing services bring.