The fundamental five

A report from The Economist Intelligence Unit Mapping the cloud maturity curve The fundamental five What businesses must have in place to extract maximum value from the cloud Sponsored by Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud Contents About this research The fundamental five: What businesses must have in place to extract maximum value from the cloud Fundamental Ask the big question: Is your business strategy cloud ready? Fundamental Put a ring on it Make the IT relationship real Fundamental Prepare for the rule of the digital natives Fundamental Practical makes perfect Fundamental Don’t risk the reward: Get good advice Reality checks and balances © The Economist Intelligence Unit Limited 2014 10 Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud About this research The fundamental five: What businesses must have in place to extract maximum value from the cloud identifies and explores the core foundational elements of a mature cloud strategy It is the central piece in the first phase of a research programme, Mapping the cloud maturity curve, sponsored by IBM The second phase will examine the degree to which companies have put this foundation in place and where they lie on the cloud maturity curve As the basis of this research, The Economist Intelligence Unit solicited the views of eight leading experts, based on their real-world experience We also reviewed relevant existing literature The findings and views expressed in this report not necessarily reflect the views of the sponsor We would like to thank all of the executives who participated, whether on record or anonymously, for their valuable insights The author was Stuart Lauchlan Riva Richmond edited the report and Mike Kenny was responsible for the layout We would like to thank all of the people who participated, whether on record or anonymously, for their valuable insights © The Economist Intelligence Unit Limited 2014 Contributors: Ian Davidson, president of Pitney Bowes Europe Kuan Hon, research consultant at the Cloud Computing Project, University of London Antoine de Kerviler, chief information officer of Eurostar David Jack, chief information officer at Hyperion Insurance Group Barry Jennings, senior associate at Bird & Bird Richard Sykes, chairman of the Cloud Industry Forum and former global group chief information officer at ICI Rebecca Wetteman, vice-president at Nucleus Research Leslie Willcocks, professor of technology, work and globalisation and governor of the Information Systems and Innovation Group, London School of Economics Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud The fundamental five: What businesses must have in place to extract maximum value from the cloud Cloud computing has become a business-critical issue, and organisations must take a methodical approach if they are to get the business benefits they have been told—and sold—to expect Many companies have embraced the cloud— technology services delivered over a network connection—to save money, boost speed and productivity and seize new business opportunities But fewer have committed to the underlying strategic machinery needed to achieve optimal business benefits from the cloud and ignite outsized success Well-oiled machinery is becoming a requirement at a time when business is being transformed by cloud, mobile, social and other technologies To compete and win in this fast-paced digital marketplace, companies must align their business strategies, organisational structures and cloud approach To understand the nature of this machinery and whether it is in good working order inside companies today, The Economist Intelligence Unit (EIU) has undertaken a one-year research programme sponsored by IBM For the first phase, the EIU sourced the collective views of eight leading experts, including chief information officers, industry analysts, academics and legal © The Economist Intelligence Unit Limited 2014 experts, to identify the core foundational elements of a mature cloud strategy, based on their realworld experience This report kicks off this initial stage of our programme In the next phase, we will survey executives globally and interview leading practitioners to examine the degree to which companies have put this foundation in place, the nature of the obstacles they face and how far they have journeyed down the road to cloud maturity The five fundamentals, in our view, are: cloudaligned business strategies, organisational structures, corporate cultures, technology infrastructures and governance best practices While companies can reap some benefits from the cloud without having all five of these in place, the corporate engine will not then fire at optimum capacity, thus full benefits will not be realised In short, cloud computing has become a business-critical issue, and organisations must take a systematic approach if they are to get the business benefits they have been told—and sold— to expect Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud x ALIGNED STRATEGY Know what’s possible, what’s imperative and how you will measure success a Fundamental Ask the big question: Is your business strategy cloud ready? A critical starting point for any cloud strategy is to understand the business imperative driving investment What are the business objectives an organisation hopes to achieve? How these fit within the overall corporate strategy? And how will cloud computing help a firm meet those objectives and deliver on that strategy? Often, the main business imperative will be cost-reduction and the cost-efficiencies promised by the cloud delivery model, which reduces the need for capital expenditures on IT infrastructure and resources because companies can, instead, buy technology as a service Increasingly, however, companies are focusing on the greater agility and speed of delivery that cloud systems offer and how these systems can fuel the hot pursuit of new revenue opportunities The primary motivation for cloud adoption has evolved over time, notes Barry Jennings, senior associate at Bird & Bird, an international law firm, who advises companies and governments on outsourcing and cloud implementations and formerly served as industry co-lead for the UK government on its G-Cloud national cloud programme “In 2010, it was basically a moneydriven thing, partly driven by the economic crisis, partly driven by the fact that [chief information officer] budgets had been cut by huge amounts,” he said at the Westminster eForum Next Steps for Cloud Computing conference in London in September 2014 But today, executives have more flexibility to pursue core business objectives with “vigour”, he © The Economist Intelligence Unit Limited 2014 said And they are looking to the cloud to produce growth Freedom fast forward: Pitney Bowes commits to the cloud Organisations often use cloud computing to break free of the shackles of ageing, legacy IT systems and to better position themselves to sell and compete on digital platforms Such is the case at Pitney Bowes, a global corporate mail-equipment and technology provider based in Stamford, Connecticut Ian Davidson, president of Pitney Bowes Europe, says the division’s investment in cloud-based applications for salesforce automation, customer relationship management (CRM) and field-service management was primarily a business decision triggered by its IT function’s inability to provide meaningful comparative operational data “We were faced with a decision really: Do we invest in our on-premise solution, with lots of cost in the back office redesigning those systems? Or we leverage the investment we’d already made in [the cloud] and have our sales and service organisations on a common platform across Europe?” Pitney Bowes chose the cloud route because it could help optimise existing business practices and open up new revenue opportunities “By having sales and service on the same platform, we had greater visibility to our clients and what technology they had deployed, so we have much better life-cycle and sales-cycle management across the organisation,” Mr Davidson explains Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud Of course, cost benefits are still a factor “Anyone who says that they are not focused on cost is not telling the truth That’s still very much an issue But cloud is also about speed and agility and the ability to get stuff to market,” he says ❛❛ Is the discussion around cloud because you want to save money or because you want a better service or because you want to deliver service better? ❜❜ Antoine De Kerviler, Eurostar’s chief information officer Strategic sanity check: What is your business imperative? Speed of execution and enhanced customer experience were the main business imperatives for Eurostar The London-based rail operator’s call-centre staff had been wasting precious time toggling between and among a plethora of computer programs while talking with customers But recently Eurostar streamlined those systems and now “they can concentrate more on the customer than the computer”, says Antoine de Kerviler, Eurostar’s chief information officer (CIO) It is important to focus on specific goals and avoid chasing too many, says David Jack, CIO at the London-based Hyperion Insurance Group “Be honest Is the discussion around cloud because you want to save money or because you want a better service or because you want to deliver service better?” he asks “The executive board will want all three: better, cheaper, faster Be clear about which one you focus on What we’ve done is map [our goals] across five years Are we focusing on delivery, quality or price of service? In each year, what is going to be the most important to the business?” Last things first: Know your success metrics Whatever the business goal driving cloud adoption, it is vital to know what metrics will be used to measure the success or failure of the investment © The Economist Intelligence Unit Limited 2014 These will most likely be quantitative in the first instance, says Rebecca Wetteman, a vice-president and analyst at Nucleus Research, a Boston-based research firm that focuses on technology return on investment (ROI) Nucleus case studies indicate that the cloud can deliver 1.7 times the return produced by IT systems that are run in-house within an organisation’s own data centre, the more traditional set-up known as “on-premise” IT “Part of that is down to a lower initial cost, but if you look out over time, it’s also down to the capacity to add, expand and upgrade without the cost of disruption of a traditional technology project,” Ms Wetteman explains With a traditional project, “the day after it went live, it would be out of date There would be new fixes, new patches, new updates So as an IT manager, I’d be chasing the value curve all the time,” she says “With cloud, you stay on that value curve You don’t need to a cost trade-off You get more value over time for applications, not less.” In addition to quantitative returns that increase with time, many companies realise important, long-lasting qualitative returns For instance, Eurostar’s customer-satisfaction ratings improved after it streamlined its contact centre Such qualitative metrics vary from organisation to organisation and industry to industry and ought to be identified and measured The bottom-line message is straightforward: Know your destination, know why you’re making this journey, and know how you’re going to recognise when you have arrived Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud ORGANISATIONAL HARMONY Redefine teamwork Always bring IT and business executives closer together to ensure cloud technologies support business strategy Fundamental Put a ring on it Make the IT relationship real For too long, employees have complained that the IT department is an inhibitor to progress They blame it for failing to provide systems to support fast-changing business objectives in a timely manner, thus putting the organisation at a competitive disadvantage One side effect has been an organisational schism in the form of “rogue” or “shadow” IT, a phenomenon in which employees looking for better ways to their jobs introduce technologies into the company without permission or consideration for the organisation’s wider technology plan If a new salesforce automation application can be downloaded by anyone with the swipe of a credit card, why wait for the centrally mandated upgrade from IT in six months’ time? While understandable and apt to produce short-term gains, this attitude can lead to fragmented IT strategies with serious long-term implications for corporate governance, compliance and basic security Think us, not them Organisational harmony is the wiser solution, and the onus is on CIOs to create it by retooling how IT works with the rest of the business “The relationship between business and IT has changed,” says Mr Davidson of Pitney Bowes “It is more of a partnership, less of us and them and more of ‘what can we give you?’” Both parties now must focus squarely on how cloud technologies support business imperatives Organisational constructs like working groups and committees can ease IT and business © The Economist Intelligence Unit Limited 2014 cooperation Richard Sykes, chairman of the nonprofit Cloud Industry Forum, advises companies to start with “two or three of your brightest commercial people who are very articulate about how you compete in the marketplace [and] then identify two or three of your best IT operational people Then you have to get those two groups into a very market-focused discussion.” At Eurostar, such structures are in place “We put together a priority list, which we co-manage with other departments at C-level,” explains Mr de Kerviler “The chief commercial officer and I sit together in cost-of-sales committees We discuss the priorities, the infrastructure, the architecture,” he says The two then explain the business issues to the technical staff and the technical issues to the businesspeople Cross-company buy-in to cloud initiatives is critical to success, but a clear owner of the strategy is also necessary That person is most likely to be the CIO At one time, some CIOs feared that cloud computing would reduce their influence, but that concern subsided as it became clear that the cloud did not obviate the need for internal IT expertise and involvement “The IT department has a big role to play in getting organisations over cloud challenges,” says Leslie Willcocks, professor of technology work and globalisation at the London School of Economics and Political Science (LSE) Companies need the strategic approach that only centralised IT can provide, but shadow IT may now be an entrenched cultural phenomenon that organisations will have to tackle as well Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud DIGITAL CULTURE Prepare for the rule of the digital natives Help employees of all ages and backgrounds embrace the “as-a-service” culture Fundamental Prepare for the rule of the digital natives Millennials are rising as a force inside companies, as are a larger group of people who thrive on connection and digital content These digital “natives” and “immigrants” will demand very different sorts of technologies in their working lives than most current employees Many have never known a world without Facebook or Twitter or Google, and their expectations are high for technologies that are powerful, simple and social This massive global cultural shift will shake many organisations, especially if they rely on older business systems and have employees with pre-Internet cultural expectations “In the [old] corporate world, there was a feeling that you were tied up, that you were bound by what had been deployed by your company,” says Bird & Bird’s Mr Jennings People were accustomed to having better technology at work than they had at home and less apt to question it But all that has flipped now, he says: Today’s © The Economist Intelligence Unit Limited 2014 employees expect and demand flexibility and office technology that is as good as what they have at home Bridge all digital divides To optimise their return from cloud systems, many organisations will need to adjust their cultures so that the established workforce and the emerging one work seamlessly together They will have to step up to the demands of digital enthusiasts by providing technologies that empower them And they will need to bring along the rest of their colleagues by using top-down leadership-byexample as well as support and training Time may ease the cultural issues as the “as-a-service” generation comes to dominate the workplace and their mindset becomes the cultural norm For now, however, companies will need to reshape their organisational culture proactively Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud d DYNAMIC INFRASTRUCTURE Be practical Find ways that cloud technologies fit with your organisation’s unique needs and capabilities Fundamental Practical makes perfect Once a sound business imperative has been identified, organisational unity has been achieved and the company culture embraces cloud technology, companies should revisit and perhaps redesign their underlying technology infrastructure This effort is often presented as requiring a “religious” choice between private clouds, where an organisation has a dedicated compute resource of its own, and public clouds, where the compute resource is shared with others The arguments in favour of each have been well rehearsed over the years: Private cloud is more costly but more secure, while public cloud offers greater cost arbitrage, but requires mixing your data in with those of other organisations In reality, the choice is seldom as simple as private vs public, except perhaps for start-ups and particularly bold enterprises Pitney Bowes, for example, is clearly a strong cloud advocate, but its current enterprise-resource-planning (ERP) programme is on-premise, not in the cloud “I can’t see us being 100% cloud,” says Mr Davidson Even those who aspire to be cloud-only will not get there immediately, argues the LSE’s Mr Willcocks This is where the concept of the hybrid cloud comes in—a combination of private and public clouds deployed where appropriate and to coexist with existing on-premise IT investment So an enterprise like Pitney Bowes can keep its existing ERP system in-house, but then layer cloud © The Economist Intelligence Unit Limited 2014 CRM on top of that, thus enabling the company to protect existing investments while also gaining the benefits of more flexible, up-to-date cloud applications Mix and match This sort of combination is increasingly common, says Nucleus Research’s Ms Wetteman, and one that will inform technology selections long into the future “Most organisations that have been around for more than five years are going to have some on-premises systems for some time to come, and it’s probably most cost-effective to keep them where they are,” she argues “It’s IT’s role and responsibility, as a result, to understand cloud integration.” For Cloud Industry Forum’s Mr Sykes, the critical issue is to understand your organisation’s particular needs and capabilities and build technology choices around them Then you can focus on the suppliers and technologies that suit you and your market sector, he says The key message here is: Do not be dogmatic about your technology selections, but be sensitive to your current and future business requirements and capabilities “Very few businesses have the opportunity to move everything to the cloud Other than that it looks beautiful and modern, I’m not convinced it’s the optimum approach,” says Mr Jack of Hyperion Insurance “The real genius is what you keep behind.” Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud GOOD GOVERNANCE Don’t risk the reward Ensure that security, privacy and legal compliance are addressed—up front Fundamental Don’t risk the reward: Get good advice The final element of a mature approach to the cloud is good governance Companies must carefully consider their approaches to the cloud and data to ensure that they have the right technology in place to support corporate needs and that they will not run afoul of laws and regulations The cloud revolution has raised a fresh set of security, privacy, compliance and risk-management questions Such is the relative immaturity of the cloud industry that, in many cases, good governance is typically the responsibility of corporate buyers, not cloud providers While companies can often assess a provider’s security credentials, other areas are less clear-cut Most notably, data-protection law—much of which was written before the Internet era, let alone the cloud-computing age—is often confusing and open to interpretation “The law always lags behind technology Law can regulate technology, but technology can be used to enforce or to break laws,” says Kuan Hon, research consultant at the Cloud Computing Project at the University of London “Some of the requirements of law, as interpreted by regulators, © The Economist Intelligence Unit Limited 2014 are pretty incompatible with cloud computing.” For instance, in Europe, data-protection regulators are concerned about personal data being stored outside European Economic Area borders As such US cloud-services providers face having to set up in-region data centres at considerable cost, which they will pass on to their customers, thus undermining cost-arbitrage benefits “There is no set meaning of data sovereignty,” says Ms Hon “Generally, what people are talking about here is data localisation or data residency If the physical location of data is so important to you, then you need to think about all the locations involved, not just the location of storage Where is the location of processing? Where does the compute happen? Where are the back-up locations?” What this exposes is the need for expert advice on governance, security and contracts Cloud contracts are highly standardised, with even the largest of enterprises struggling for concessions from providers “A lot of organisations just don’t consult lawyers,” Ms Hon says Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud Reality checks and balances The most successful corporate adopters approach cloud technologies with the same seriousness they apply to more traditional IT delivery mechanisms 10 Evangelical cloud-computing advocates once made great play of the idea that companies and even individual employees could swipe a credit card and get started with a cloud service straight away While this carefree way of starting out with cloud services attracted attention in the early days of mainstream adoption and seeded the workplace with enthusiastic users, it is not a good philosophy today—and, in retrospect, it never was While easy start-up is a virtue, the most successful corporate adopters approach cloud technologies with the same seriousness they apply to more traditional IT delivery mechanisms As can be seen with enterprise deployments by the likes of Eurostar and Pitney Bowes, this typically involves top-level support from the business and IT as well © The Economist Intelligence Unit Limited 2014 as expertise and due diligence in procurement, contract management, governance and security In short, if cloud computing is now businesscritical, then companies must treat their evolving cloud strategy as critical, too They need a clear understanding of how and why they are deploying cloud technologies and what role they play in delivering on wider corporate goals They need organisational structures and corporate cultures that optimise ROI and deliver results And they need a pragmatic approach to the selection and deployment of technologies that ensures those choices support good governance Companies that put these gears in place and get them turning will gain a high-performance business Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper 11 © The Economist Intelligence Unit Limited 2014 London 20 Cabot Square London E14 4QW United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8476 E-mail: london@eiu.com New York 750 Third Avenue 5th Floor New York, NY 10017 United States Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: newyork@eiu.com Hong Kong 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com Geneva Boulevard des Tranchées 16 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: geneva@eiu.com [...]...Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud Reality checks and balances The most successful corporate adopters approach cloud technologies with the same seriousness they apply to more traditional IT delivery mechanisms 10 Evangelical cloud-computing advocates once made great play of the idea that companies... corporate goals They need organisational structures and corporate cultures that optimise ROI and deliver results And they need a pragmatic approach to the selection and deployment of technologies that ensures those choices support good governance Companies that put these gears in place and get them turning will gain a high-performance business Mapping the cloud maturity curve The fundamental five: What... place to extract maximum value from the cloud Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper 11 © The Economist Intelligence Unit... from the business and IT as well © The Economist Intelligence Unit Limited 2014 as expertise and due diligence in procurement, contract management, governance and security In short, if cloud computing is now businesscritical, then companies must treat their evolving cloud strategy as critical, too They need a clear understanding of how and why they are deploying cloud technologies and what role they... attention in the early days of mainstream adoption and seeded the workplace with enthusiastic users, it is not a good philosophy today—and, in retrospect, it never was While easy start-up is a virtue, the most successful corporate adopters approach cloud technologies with the same seriousness they apply to more traditional IT delivery mechanisms As can be seen with enterprise deployments by the likes ... examine the degree to which companies have put this foundation in place, the nature of the obstacles they face and how far they have journeyed down the road to cloud maturity The five fundamentals,... value from the cloud Fundamental Ask the big question: Is your business strategy cloud ready? Fundamental Put a ring on it Make the IT relationship real Fundamental Prepare for the rule of the digital...Mapping the cloud maturity curve The fundamental five: What businesses must have in place to extract maximum value from the cloud Contents About this research The fundamental five: What businesses