Cloud computing is a game changer! The purpose of this article is to help you to determine where to focus your company’s resources to achieve the competitive advantage you need to succeed in today’s global marketplace.
Is your IT department able to keep up with business requests? Is your firm one of the top 3 in speed to market in your industry? Might your firm be vulnerable to disruption by a more agile enterprise- a firm that has figured out how to balance governance and responsiveness to customer demands?
As a technology leader, every year you are being asked to do more with less. You have probably been through exercises to identify your core competencies, along with activities and skill sets that could reasonably be outsourced. To understand what your true core competencies are, you need to know how value is created in your business unit. While technology is often set up as a cost center and treated as a support role, it can provide competitive advantage with respect to cost position or product differentiation if you understand your firm’s value chain.
First, determine if IT is performing solely in a support role, or if IT is enabling a cost benefit or significant market differentiation. If IT is neither causing a cost benefit or product differentiation in this value chain process, the IT support required may be a candidate for outsourcing, or cloud sourcing.
The question isn’t whether your company should be making use of cloud technologies, but which if any cloud service delivery model makes sense and how to approach moving in that direction. In order to determine what may make sense one needs to understand the various cloud service delivery models available today.
At the lowest level, we have infrastructure as a service (IAAS). Amazon provides one of the most well-known IAAS offerings, but there are numerous other firms also in this space. Basically, Infrastructure As A Service companies will provide hardware and operating systems hosted in their data centers, relieving you from the financial burden of procuring and provisioning new hardware. A key benefit of IAAS is the elasticity these firms bring to the table that makes overinvesting in anticipation of peak or un-forecast demand unnecessary. On Amazon EC2, for example, the time it takes to obtain and provision a new server instance is measured in minutes, not hours or days. Few companies can actually claim that infrastructure management is part of their core competency, so if regulatory issues don’t prohibit the use of IAAS, it seems like a no-brainer that this should be considered as an option for many IT workloads.
The next level up the cloud service stack is Platform As A Service (PAAS). The Google Application Engine is one well-known example of Platform As A Service. Pivotal offers an open sourced PAAS called, ”Cloud Foundry”, which is built on top of Rackspace’s open sourced IAAS called, ”OpenStack”. PAAS is a level of abstraction that sits on top of the IAAS. Platform As A Service allows application developers to develop applications without thinking about the details of the middleware and databases that make up the platform. If you are not currently using a PAAS, your company probably employs people for the care and feeding of databases, web servers and application servers. If you are not working for a technology company, you can be pretty sure that these functions are not part of your core competencies.
At the highest level of the cloud stack is the Software As A Service model. This is a way of delivering applications over the Internet as a complete service. Instead of procuring servers and software licenses, companies can pay by the transaction or by subscription with a service provider. The subscription provides a service level agreement with respect to management of authentication and authorization for use of the application, as well as its availability and performance specifications. Salesforce.com and Workday are two well-known SAAS companies. Benefits of using SAAS include no up-front investment, instant scalability, security and reliability. A disadvantage of the SAAS model is that the ability to customize in the SAAS environment is often limited. One must carefully consider how these desired customizations of the SAAS platform currently add value to make sure that these features are still truly utilized and valuable.
While I am not suggesting that everyone should just throw everything they have away and run for the cloud, I am suggesting that the cloud opportunity should be carefully evaluated. Prior to reinvesting in new servers and/or additional data center space, the following questions should be answered:
– Is there is a legal or regulatory reason preventing consideration of cloud based services?
-Is the business process being supported by this technology investment strategic and part of the company’s core competency?
If the answers to the preceding questions are both negative, then you would look at the application architecture to see if it is a services based application. If it is, the application could be a candidate to be moved to the cloud.
Over the past 10 years, many firms have undergone application and server rationalization exercises while moving to their own virtual server farms. Prior to the server rationalization efforts, many servers were running at less then 30% of actual capacity while continuing to consume electricity and rack space just as if they were fully utilized. Managers would procure servers to handle estimated peak loads that might only occur on an annual or possibly quarterly basis. This resulted in over-spend as an insurance policy against future demand that often never materialized. The virtual server farms allowed for pooling the extra capacity. Assuming that not all application servers would require peak processing at the same intervals, total numbers of servers were substantially reduced, freeing space in the data center and reducing the amount of electricity consumed. Most would agree that their server rationalization efforts were a success. The cloud, however, offers another order of magnitude in strategic optimizations when implemented with realistic goals.
Is speed to market important? How long does it take your firm to procure and provision new computing resources? Are you able to provision quickly for short amounts of time? How many resources do you have applied to activities that are not part of your firm’s core competency? A thoughtful approach to cloud computing can help position your firm as an agile enterprise, giving you the competitive advantage to succeed and profit in today’s marketplace.