For some IT organizations the cloud computing paradigm poses critical existential questions; How does my IT organization stay relevant in a cloud environment? How does IT still provide value to the business? What can be done to improve the business’ perception of IT’s contribution to the company? Without a clear approach to tackling these and other related questions, IT organizations stumble into a partially thought-out cloud computing strategy and miss out on capturing the short and long-term financial ROI and transformational benefits of a cloud-first strategy.
Several key concepts and principles from ITIL’s Service Strategy lifecycle stage lend themselves to defining and guiding a strategic approach to adopting and implementing a cloud-first strategy. In this article, we’ll highlight and define some of these key principles and outline a tactical approach to implementing a cloud-first strategy.
One of the key concepts leveraged in ITIL’s Service Strategy is the Run-Grow-Transform framework from Gartner. From an executive management perspective, the IT organization’s contribution to the company’s goals and objectives can be framed along the Run-Grow-Transform model – specifically around how IT can help the company (1) Run-The-Business, (2) Grow-The-Business, and (3) Transform-The-Business.
The CIO’s value is both objectively and subjectively measured by answering:
1 – How can IT reduce the cost of current IT operations, thus improving the bottom line?
2 – How can IT help the business expand and gain greater market share with our current business offerings?
3 – How can IT empower the business to venture out into new opportunities and/or develop new competitive business advantage?
We’ll take a close look at each model area, highlight key characteristics, and give examples of how a cloud-first policy can enable a CIO to contribute to the companies’ goals and objectives and not only remain relevant to the organization but enable business innovation.
Run-the-Business and Cloud-First Strategy
Run the Business (RTB) is about supporting essential business operations and processes. This usually translates to typical IT services and operations such as email-messaging systems, HR services, Payroll and Financial systems. The core functionality these IT services provide is necessary and essential but not differentiating to the business. These are generally viewed as basic core commodity services, required IT costs for keeping the business operational.
The CIO’s objective is to minimize the cost of RTB activities without any comprise to the quality of service. A cloud-first policy can achieve these outcomes. It can reduce costs by moving low value-add IT activities (sometimes referred to as ‘non-differentiating work’) to a cloud provider that excels at performing the same work with hyper efficiency. Add in the ability of a cloud provider to leverage economies of scale and you have a source of reliable, highly cost-optimized IT services that cannot be matched by any traditional data center or hosting provider (see AWS’s James Hamilton discuss data center architecture at scale). Case studies from GE, Covanta, and Conde Nast bare out the benefit of moving to AWS and enabling their respective CIOs to improve their business’ bottom line.
Grow-the-Business and Cloud First Strategy
Grow the Business (GTB) activities are marked by enabling the business to successfully increase market share and overall revenue in existing markets. If a company doubles its customer base, then the IT organization responds with timely and flexible capacity to support such growth. Generally, an increase in GTB spending should be tied to an increase in business revenue.
Cloud computing providers, such as AWS, are uniquely capable to support GTB initiatives. AWS’ rapid elasticity drastically alters the traditional management of IT demand and capacity. A classic case in point is the “Black Friday” phenomena. If the IT organization does not have sufficient IT resources to accommodate the projected increase in business volume, then the company risks missing out on revenue capture and may experience a negative brand impact. If the IT organization overprovisions its IT resources, then unnecessary costs are incurred and it adversely affects the company’s profits. Other similar business phenomena include “Cyber Monday,” Super Bowl Ads, and product launches. Without a highly available and elastic cloud computing environment, IT will struggle to support GTB activities (see AWS whitepaper “Infrastructure Event Readiness” for a similar perspective).
A cloud’s elasticity solves both ends of the spectrum scenarios by not only being able to ramp up quickly in response to increased business demand, but also scale down when demand subsides. Additionally, AWS’ pay-for-what-you-use model is a powerful differentiating feature. Some key uses cases include Crate & Barrel and Coca-Cola. Through a cloud-first strategy, a CIO is able to respond to GTB initiatives and activities in a cost-optimized manner.
Transform-the-Business and Cloud Computing
Transform the Business (TTB) represents opportunities for a company to make high risk but high reward investments. This usually entails moving into a new market segment with a new business or product offering. Innovation is the key success factor in TTB initiatives. Traditionally this is high risk to the business because of the upfront investment required to support new business initiatives. But in order to innovate, IT and business leaders need to experiment, to prototype and test new ideas.
With a cloud-first policy, the IT organization can mitigate the high-risk investment, yet still obtain the high rewards by enabling a ‘fail early, fail fast’ strategy in a cloud environment. Boxever is a case study in fail fast prototyping. Alan Giles, CTO of Boxever, credits AWS with the ability to know within days “if our design and assumptions [are] valid. The time and cost savings of this approach are nearly incalculable, but are definitely significant in terms of time to market, resourcing, and cash flow.” This cloud-based fail-fast approach can be applied to all market-segments, including government agencies. The hidden value in a cloud-based fail fast strategy is that failure is affordable and OK, making it easier to experiment and innovate. As Richard Harshman, Head of ASEAN for Amazon Web Services, puts it, “Don’t be afraid to experiment. The cloud allows you to fail fast and fail cheap. If and when you succeed, it allows you to scale infinitely and go global in minutes”.
So what does a cloud-first strategy look like?
While this is a rudimentary, back-of-the-envelope style outline, it provides a high-level, practical methodology for implementing a cloud-first based policy.
For RTB initiatives: Move undifferentiated shared services and supporting services to the cloud, either through Infrastructure-as-a-Service (IaaS) or Software-as-a-Service (SaaS) based solutions.
For GTB initiatives: Move customer-facing services to the cloud to leverage dynamic supply and demand capacity.
For TTB initiatives: Set up and teardown cloud environments to test and prototype new ideas and business offerings at minimal cost.
In addition to the Run-Grow-Transform framework, the ITIL Service Strategy lifecycle stage provides additional guidance from its Service Portfolio Management, Demand Management, and Financial Management process domains that can be leveraged to guide a cloud-first based strategy. These principles, coupled with other related guidance such as AWS Cloud Adoption Framework, provide a meaningful blueprint for IT organizations to quickly embrace a cloud-first strategy in a structured and methodical manner.
By aggressively embracing a cloud-first strategy, CIOs can demonstrate their business relevance through RTB and GTB initiatives. Through TTB initiatives IT can facilitate business innovation and transformation, yielding greater value to their customers. We are here to help our customers, so if you need help developing a cloud-first strategy, contact us here.
-Vince Lo Faso, Solutions Architect