2015 is set to become the breakthrough year for cloud computing. Now the challenge of making the IT department cloud-ready begins.
Cloud can be considered an extension of existing outsourcing. So the usual gambit of service level agreements (SLAs), security accreditation, the scope of the contract and IT due diligence needs to be done as part of signing up to a cloud provider.
CIOs must also assess the skills needed to manage these contracts, and consider how they mitigate the risk of a cloud provider locking them in.
These were among the areas a panel of CIOs discussed at February’s CW500 club meeting in London.
One of the speakers, Gordon McMullan, head of strategy and architecture at Nuffield Health, described the transition as back-to-front IT, says there is now a shift to put more business-critical applications into the cloud. “There is a decisive move from on-premise to off-premise IT, but the important aspect is not just to move non-critical applications but to move truly critical applications to the cloud.”
But as line of business applications move to the cloud, CIOs need to prepare for a clash in culture between traditional IT and agile.
The first challenge CIOs face is that these critical applications have been engineered in a pre-cloud era when, in McMullan’s experience, there was a very traditional division which works on long-term strategies. This approach is heavily procedural with emphasis on due diligence and the waterfall methodology. It is an approach that has matched relatively static organisations in mature markets, where IT supports core business systems.
But he said: “We live in a world of bimodal IT and there are two opposing forces. The opposite approach is agile.” This is the IT division that takes on new jobs every week and takes a fail fast approach to IT projects, according to McMullan. “The mindset is how to use technology to move the business.”
He said: “The challenge is to get both forces to work together. When you start introducing new models of working and the business starts adding new capabilities, how do you ensure your traditional IT operations staff are fully cognisant with the changes?”
Supplier management for cloud computing
While it is quite straightforward switching certain categories of application in the cloud, others can have major business implications.
The second CW500 club speaker, Richard Gough, group IT operations manager, Punter Southall Group, said that, while it makes sense to move certain applications to the cloud, others require plenty of due diligence. “It is a no-brainer to use Mimecast for email. It is an obvious one. And we use Salesforce.” But there is an element of risk mitigation especially if the application to migrate to the cloud is business-critical. He said: “Theoretically there is nothing we will not put in the cloud.”
Gough said he struggles when he encounters new, innovative tools from companies that provide software for actuaries. “The companies won’t sell the software to you anymore. They won’t let you bring it on-premise. They only want to deliver it as a service.”
So why should this be a concern for the CIO? Take a cloud service that takes an insurance company’s data and provides number crunching for risk assessments in life assurance. Gough warned that the insurance data and the service may be accessible now, but what happens if the cloud company goes out of business? “Someone is running a key part of your business, holding not only your data but also owning loads of data streams that you cannot afford to buy, which feed your data.”
“When 2e2 went out of business in 2013, it was an uncomfortable time and a wake-up call for those who put their data in someone else’s datacentre.”
The idea of a software escrow agreement does not truly exist in cloud computing, said Gough. “What happens when the company funded by venture capital goes out of business?” He argued that, while people no longer hand over their backup tapes to someone with a white van to takes to a secure depot, moving business critical data into the cloud and running business services from a cloud provider poses as big a risk.
While a cloud escrow may not be possible, some cloud companies are more open to talking to customers about their architecture than traditional providers, said Gough. “I came across a cloud storage startup, and it was like they had just given birth and everyone had to engage. They charge per gigabyte, per transactions, per day rolling contract. But I am seeing specialist pension providers who do not show me anything and won’t charge per GB. The innovation cloud providers will really want to show you everything because they are true innovators. The people who do not are just the same old.”
Speaking of his experiences, the third CW500 club speaker, Stuart Curley, interim head of IT readiness, Arriva, described the level of openness he found at Salesforce.com compared to traditional suppliers. He said: “When I did a big cloud integration with Salesforce, I spent three days with their tech teams in San Francisco and they told me everything. I was astounded about the amount of information they gave me and the state of art architecture they use.”
Treat cloud like outsourcing
Big corporations have big outsourcing deals that last several years and involve major procurement activity. But business tends to get very frustrated that outsourcing is much slower than on-demand, elastic cloud services, where a department head can purchase a cloud service with the corporate credit card.
Curley said: “You need to negotiate a good deal as soon as the business is talking to cloud providers. Understand all the costs.” In his experience, the total cost of ownership calculations for a cloud service do not always stack up. “It is not that cloud is more expensive, but when you include all the costs that would be part of traditional outsourcing, you need to be absolutely clear what exactly the cloud provider will do for you, and understand the gaps.” The missing pieces of functionality or service that exist in the traditional on-premise environment need to be filled, which start to erode the cost benefits of using a cloud service.
Integration is a key aspect of traditional outsourcing, and a challenge when CIOs wish to use multiple cloud providers. Curley says: “Cloud integration isn’t as simple as you think. Cloud providers offer integration technology and APIs, but they won’t do the integration for you and, in my experience, the system integrators are not very au fait with doing cloud integration.”
Cloud is just a technology service so, whenever there is a problem, Curley said CIOs should look for a guaranteed time to resolution. Given the rapid pace of development of cloud services, glitches can occur, leading to downtime. “I want to see a rapid release cycle with continuous testing and the ability to rollback updates. If your business will depend on the service, ask to see the outage history and how long it took to get affected services up and running.”
Training must also be addressed as IT departments move to the cloud. On the buying side, “Applications are being revolutionised, web enabled, and are using open source. And from a commercial perspective we may have a partnership with one man bands. How do we cope if they go out of business?” Nuffield Health’s McMullan said.
Managing a cloud contract is not the same as in traditional IT, Curley warned. “CIOs need to develop their capability to manage cloud contracts. Assuring a service is very different to managing one.”
He said cloud computing is an opportunity for the CIO to build an in-house cloud developer team, which is needed to support the agile working practices that cloud enables. “All CIOs want to outsource their development teams but, in my experience, I don’t see cloud developer skills at the big system integrators who still focus on SAP, Oracle and PeopleSoft skills. So I see an opportunity to build your own cloud development team. Most people want cloud because it is quick.” He urged CIOs to argue the case to bring development back in-house. But, unlike traditional software development, this team should focus on the technology, understand agile and continuous development.
This year traditional IT is set to come head-to-head with cloud computing. As the CIOs at the CW500 discussion highlighted, CIOs cannot ignore the change in culture that will occur in the IT department. IT will become a broker of services and this will require a different set of skills to what IT has been used to with outsourcing. It is unclear how much support the big system integrators can give to develop skills gaps in IT and CIOs may well need to hire new people to build a cloud-focused team. And, as the applications delivered through the cloud become more business-critical, the cloud provider industry will need to address major shortcomings in their contracts.
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This was first published in March 2015