October 12, 2009 ETS-2009-10-10
IT Operations as a Cloud Business Model
Experton Group believes the adoption of a cloud computing business model disruptively impacts all areas of IT – people, processes, and technology as well as administration, development, finance, and operations. Thus, incorporating cloud computing into the operational construct is not as invasive as restructuring to operate in a true cloud computing paradigm. In the former environment, IT utilizes cloud services to achieve certain business goals while retaining the organization's overall operating model. In the latter case, IT operations leap into an agile, more responsive customer-oriented business model that is more finely tuned to anticipating and satisfying user requests. Enterprise IT organizations will need to be well on their way to converting their operations to cloud business models over the next five to seven years to remain competitive. IT executives should fully understand the cloud business model, develop a transformation strategy, gain buy-in from corporate and line of business executives, their own management teams and staff, and begin the journey with a low-risk, but highly visible, cloud initiative.
Business Imperatives
Surveys claim IT executives are very interested in adopting cloud computing solutions within their organizations. Some of this interest will translate to reality, and public and private clouds – and even hybrid clouds – will become part of the IT infrastructure. IT executives should understand the cloud consumption business models and determine which ones are currently appropriate for consideration in the near term.
Cloud computing can be a utility by which IT executives achieve delivery goals or it can become the new environment within which the organization operates. It is far easier to implement an on-premise or off-site cloud solution than it is to convert IT operations to operate under a cloud computing model. Over time, IT organizations will need to make the conversion. Initially IT executives should determine where and how they will incorporate cloud computing solutions within their organizations, and how they can leverage them to change the corporate IT culture.
The cloud delivery and usage paradigms are radically different from those in use by the majority of IT organizations today. For IT organizations to provide cloud-like services consistently and pervasively to their users requires cultural change, redefinition of requirements, and new development, delivery, and operational processes. It takes a number of years before all of this becomes pervasive and standard within an IT organization. IT executives should understand the impacts of the cloud computing paradigm, develop a strategy for transforming the organization, and select a pilot project from which to begin the journey.
The business and IT community continually express their need for agility, availability, performance and scalability – all at the lowest possible costs. Vendors are now claiming that cloud computing is the answer to these requirements. Some software providers have moved from professing they are software as a service (SaaS) providers to cloud providers. Others, like Oracle Corp. CEO Larry Ellison, state that cloud is just the latest hype, that it is something that IT has always offered in some form or another, and is just the latest IT fashion statement. Experton Group believes the capability to offer cloud-like functionality has always existed but, for the most part, IT organizations have not delivered it because it was not included in the checklist of business requirements. Predecessor versions of cloud computing were known as the utility computing model, which has been around since 2002, and the ASP model, which has been around for more than two decades.
But something has changed. The cloud model adds in rapid provisioning and self service functionality – user-controlled agility. Finally, the users can get what they want when they want it without sitting in a queue and waiting in a backlog to be serviced. The system configuration / generation requirements are now real time and that represents a true requirements and delivery cultural change. IT organizations will need to recognize this shift and conform over time.
Cloud Computing Offerings
In the market today there are private and public clouds as well as on-premise and off-site clouds. Public clouds, like Amazon.com Inc.'s Simple Storage Service (S3), are off-site, but private clouds, such as the IBM Corp. development and test offerings, may be either on-premise or off-site. The advantages of these and other cloud offerings are that they are lower-cost solutions, easy to manage, and responsive to change requests. Moreover, the user only pays for what is used, not for total capacity. Figure 1. Cloud Functionality
Function Service Level
Availability 99.95%
Billing Granular by user or usage
Change management Hours – days Provisioning Minutes Release management Minutes Scalability Unlimited
Self service Seconds - minutes Payback period Months
Experton Group discussed the 10 different cloud computing models, service levels, and other aspects in its Research Note "Cloud Computing – Risky Business?" According to an IBM survey on cloud workloads, almost two-thirds of IT executives are considering, using, or would consider private clouds whereas only 30 percent of the respondents would be willing to consider or use public clouds. The types of private clouds receiving the highest consideration currently are as follows:
Application servers Application streaming Data mining and analytics Desktop
Development environments E-mail
ERP
Help or service desks Security
Storage
Test environments
The public clouds of most interest to IT executives today are as follows: Application streaming
CRM – sales force automation Data archiving
Data backup and recovery Development environments DR/BC E-mail Infrastructure capacity Unified communications Web conferencing
Wide Area Networks
Cloud's Impact on IT
Many IT organizations have been moving towards a cloud model as they executed their consolidation and virtualization strategies. However, most shops are not shifting to a self-service model, except for limited elements such as password restoration. Change and provisioning requests still go through the standard request process and are scheduled by IT staff. IT executives will need to change the cultural paradigm on request provisioning if this is to become a self service model. It will mean that business analysts and application development teams need to include the configuration components into the solution so that users can satisfy their needs independently. These elements will need to become policy-based and executives will need to establish the overarching policies that the enterprise desires to have in place in these areas.
An even more difficult problem for IT to resolve will be the billing and metering component. Today, most IT organizations charge back fees to the lines of business – if and when they do charge them back – based on IT elements such as MIPS, ports, storage, and other items of which users have little understanding or relationship to the business. Furthermore, the actual underlying costs that go into the chargebacks tend to be inaccurate and rarely reflect the fully loaded, true cost structure. This will need to change. IT will need to accurately charge users for actual usage and fully recover all of the appropriate IT expenditures. Correcting these imbalances will also have a cultural impact upon various IT units as well as on the lines of business – some of whom are being subsidized under the current IT chargeback model.
Other implications are the requirement for standardization and a subsequent change to the business processes. IT organizations will need to shift to a workload orientation and view processes holistically – from order to cash to financial close or from provision request to chargeback to financial close.
In that most large enterprises have thousands of applications, altering the corporate culture, all the business processes and technology could take a decade or more to complete. Therefore, IT executives need to determine what strategy they wish to pursue and develop a plan for achieving it.
Starting Points
There are three different starting points for cloud computing. Currently existing independent islands of computing can be converted to clouds; new services could be added as cloud services; or a component (or pod) within a current product or service offering could be transformed into a cloud offering. The first two beginning elements can be implemented as either public or private clouds, depending on the actual service offering. For example, development and test environments or storage archiving could be implemented either way. If a public cloud or off-premise private cloud is desired, IT executives need to ensure privacy and security standards and compliance requirements are met as well as the availability, performance, and scalability prerequisites. The solution must also easily integrate with other applications.
Transforming an existing pod to a cloud service offering is a bit more complicated and must be done as a private cloud. One starting point for a pod conversion is to switch storage over to a private storage cloud. For example, companies with EMC Corp. storage usually are upgrading their disks on a rotating three-year cycle. On a pilot basis, when new storage is being installed, a subset of those drives – ones that are dedicated to a selected set of applications – could be implemented in a storage cloud environment. Users of these applications will then be able to do their own provisioning of the storage.
Finally, IT executives should establish the baseline benchmarks of the existing environment before beginning any conversion to cloud services. It is necessary to have strong comparative metrics to point to so that, as buy-in for new cloud offerings are needed, there is a value proposition that line of business executives can understand and sign off on. IT executives will need to prove their case and demonstrate a good return on each investment phase or the journey will end before it
reaches its ultimate destination.
The Bottom Line: Experton Group believes enterprises should transform, wherever possible, IT operations to a cloud computing model so that they can better satisfy business requirements, improve IT productivity, and contain costs. Cloud computing represents the next wave of IT – the commoditization of the delivery of IT products and services. Like any other commodity, IT cloud
services are shrink-wrapped for the user so that he/she can use as much of the service as desired for as long as it is needed, and be charged for them accurately and appropriately. IT executives should work with their user executives and strategic
business partners to develop a cloud implementation / transformation strategy that satisfies business requirements and implement a pilot program that gains the momentum to change the IT operations model.
Additional relevant research is available at www.experton-group.com. Interested readers should contact Experton Group Client Services - [email protected] - to arrange further discussion or an interview
About Experton Group
Experton Group is the leading fully integrated research, advisory and consulting company for mid-sized and large organizations, maximizing the business value of
their ICT investments through innovative, neutral and independent expert advice. Experton Group offers consulting services, market surveys, conferences, seminars and publications related to information and communications technology issues. Our consulting portfolio includes technology, business processes, management and business co-operations, investments and mergers.
