Dante Shows an Artist Some Unusual Clouds, by Ivan Aivazovsky, 1883
Ideas for Leaders #465

Six Imperatives for Companies to Embrace Cloud Computing

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Key Concept

Cloud computing can offer companies more cost-effective and agile IT capabilities than many traditional in-house IT services and functions. Based on an extensive study of a company successfully expanding its cloud computing capabilities, as well as on interviews with 45 other companies, a research team from the MIT’s Center for Information Systems Research lays out the imperatives that help companies prepare for and manage the shift to cloud computing.

Idea Summary

Since 2005, the business units of California-based health care company Allergan has used cloud computing for a wide range of functions, from field sales effectiveness and travel and expense processing to HR performance planning and identity management. In 2010, the company adopted a ‘Cloud First’ policy, looking for cloud computing options before buying or building any additional IT system. Before this time, cloud computing was restricted to business competencies not related to the core and involving low-risk data. Starting in 2010, cloud computing was expanded to support non-core competencies with low-risk data, and was even expanded to include some core competencies. Eventually, half of Allergan’s application portfolio may be cloud-based.

To successfully expand its cloud computing capabilities, Allergan’s IT executives faced three challenges:

Careful management of data, especially customer data. The question is not just one of security. Who owns the data? Does sales and marketing own the marketing data? Should the finance data be restricted to the finance function? In the words of Allergan CIO Sue-Jean Lin, the data needs to be “democratized” — that is, the enterprise, and not just separate functions, owns the data.

Reskilling IT professionals. As more and more IT services are outsourced, the capabilities of in-house IT professionals must shift from a technical emphasis to an emphasis on structuring, brokering, coordinating and integrating services.

Governance. The focus here is on aligning the cloud offerings with the needs of the business units. A new position, Business Relationship Manager, was created to ensure that business units received the functionality they needed. Business Relationship Managers have the responsibility for working with business units to develop the parameters of the need then sourcing the IT services required, whether in-house or through the cloud.

The entire IT strategy is guided by an executive, 11-person Technology Steering Committee (on which IT has just two votes, although the CIO does have veto power).

The benefits of Allergan’s large scale integration of cloud computing extend beyond cost-efficiency and IT functionality, including the speed with which it can now upgrade its capabilities and respond to new IT needs. Through the cloud, the company can also do a much better job of predicting its IT expenses, in essence shifting IT costs from capital expenditure to operating expenditure.

Business Application

In a 2012 research briefing, CISR researchers John Mooney, Jeanne Ross (director of the centre), and Jarrod Phipps described the Allergan initiative and offered six imperatives for companies integrating cloud computing. In a 2014 Computerworld article, Moody and Ross slightly refined their list, offering the following five imperatives:

  1. Rethink the value proposition. Technology adoption is traditionally driven by a cost-saving mission. At first, cloud computing may seem the more expensive approach because of its implementation costs; the savings in the long run make it more cost-efficient — as long as IT is driven by a long-term perspective and not short-term cost-cutting.
  2. Re-architect digitized platforms. Cloud solutions will be coming from different sources. There is the temptation to think of solutions individually, believing that any integration issues can be attended to later. By then it may be too late. Think in terms of platforms, not individual solutions, and look to resolve connection and interface issues from the beginning.
  3. Redesign your IT governance. The key decision here is deciding which services are local and which services are global. Global services imply a single enterprise solution and rigorous governance.
  4. Redevelop the IT organization. As explained above, a shift to cloud computing requires reskilling your IT professionals from technicians to brokers and coordinators of IT services. New IT roles also have to be developed (e.g., Allergan’s Business Relationship Managers) to help the organization make the right IT decisions.
  5. Reset your clock. When it comes to information technology, any lag time is no longer acceptable. IT responses to changes in the market must be as immediate as possible, making speed, flexibility and agility the core competencies of your IT function — one of the main motivations for the shift to the cloud. The age of relying on building, running and maintaining internal software is passed: there is not enough time.
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Authors

Institutions

Source

Idea conceived

  • January 2014

Idea posted

  • December 2014

DOI number

10.13007/465

Subject

Real Time Analytics