The world of IT remains as exciting today as it was 25 years ago. New technologies, concepts, and trends continue to make the job of the CIO as challenging as ever. We’ve lived through a litany of complex problems: Y2K, ERP, the Dot Com craze, outsourcing, offshoring, and war stories to go with it. Today, we are challenged with the transition from traditional PC’s to mobile devices which are driving an ever higher expectation from our users to deliver our enterprise applications anywhere the users want to work,with the same user experience that they get from their favorite mobile apps.
Is Traditional Outsourcing Going to Die?
Over the last 15-20 years, many companies thought the answer to solving these complex problems was to contact a large IT outsourcing provider and let them solve the problems for us. Those that pursued this path quickly realized that the attractive initial cost agreements quickly ballooned out of control as an ever dynamic IT environment opened the door for change orders and higher costs. Along with those outsourcing agreements, many IT organizations lost the intellectual capability to easily bring the work back in-house as they downsized their internal organizations. This created a terrible paradox—these organizations were now beholden to their IT provider to reduce costs, but now faced an ever increasing cost picture.
Luckily, the environment has changed and CIOs have many more options to choose from as they seek outsourced services. The cloud, in its many forms, offers a wide variety of offerings for IT professionals to leverage as part of their solutions to the business. Most companies today have taken advantage of some form of cloud offering, but the lack of maturity in these offerings prevent CIOs from moving all services to the cloud, and thus causes them to have a foot in both worlds: the world of on-premise and the world of the cloud.
How do we Evolve Our Teams?
As companies move more of their IT solutions into the cloud, the traditional structure and mission of the IT organization needs to evolve and change as the offerings mature. No longer will CIOs need to worry about the engineering capability of their teams, the constant upgrade cycle, and whether they have knowledge of the latest release of whatever product is pertinent. In the future, IT organizations will no longer need to possess the deep engineering talent they have relied on to deliver high quality solutions. Those engineering responsibilities will move to the cloud provider, and subscribers to those services will only need to worry about the end service they purchased. With the plethora of cloud offerings and the need to piece together various capabilities across multiple providers into an overall business solution, IT organizations will need to emphasize the talents to architect a solution across those cloud providers (and for a period of time on-premise environments), ensuring that they deliver a seamless high-performing offering for their businesses. This requires a shift in skill set to understand how to integrate and assemble these offerings.
Maturity is Key
For the most part, mature IT organizations have figured out how to deliver reliable, cost-effective, and high-performing solutions for their businesses. As CIOs look for options to move some, part, or all of their offerings into the cloud, they must face the reality that not all cloud providers are created equal. Additionally, not all cloud offerings are as mature as the traditional solutions that are being provided to run their businesses. This challenge means that CIOs will need to live in a hybrid cloud environment for some time to come. This will require clear strategies on the part of the CIO to determine which applications or services are viable candidates for migration to the cloud.
“Cloud is an ever maturing environment, thus a decision made today may change in the future as the cloud offerings evolve”
There are many ways to approach the strategic evaluation, but looking at the criticality of the systems in your environment and identifying how tightly or loosely integrated those applications are, will provide some indication of what systems are candidates for various cloud solutions. One needs to remember that the cloud is an ever maturing environment, thus a decision made today may change in the future as the cloud offerings evolve. As a result, don’t get wed to any chosen solution and ensure its portability so that you can take advantage of commodity public cloud offerings as they continue to mature. Also, take a lesson from the outsourcing mistakes of the previous decade: don’t create an environment where you are locked into a particular provider and become a hostage to their offerings. After all, haven’t we already learned those lessons from our ERP providers?
The Challenge of Getting Cloud Services from Traditional Providers
We’ve seen many of our traditional IT providers make major moves into the cloud, professing that it’s now a key cornerstone to their solution strategy. It’s exciting to think that at some point I’ll no longer need to manage complex licensing agreements, spend hours/days/weeks consolidating usage across platforms to respond to software audits, along with all of the other benefits of moving to the cloud.
However, there’s one simple problem that I see these providers struggling with—revenue growth.
Why is this such a problem when the cloud locks in an annuity in the form of subscription offerings? As companies transition from large upfront software purchases to a subscription model, our traditional software providers must now find a way to replace that large upfront revenue hit they’re accustomed to in order to keep their revenue growth numbers up for our friends on Wall Street. This has resulted in many forms of convoluted cloud purchasing models that include everything from Bring Your Own License (BYOL) to models where the number of users have to be purchased upfront and locked in for a set period of time. This negates the attractiveness of moving to the cloud where IT is no longer a fixed cost, but costs flex up and down with the cyclicality of our businesses.
It will be interesting to watch how this plays out in the marketplace as new cloud entrants aren’t encumbered by the legacy revenue models and can provide those flexible licensing models to businesses. Will traditional providers be able to make the transition and survive or succumb to these new entrants? Certainly, we’ll have to wait and see as this is not something that will happen instantly.
From Cloud First to Cloud Only
It’s not unrealistic to see a point in the near future where our IT strategies have totally shifted from a cloud first to a cloud only strategy. Security, integration and other concerns that have given CIOs some caution will evolve and ultimately not be a concern. Until that happens though, businesses will continue to have a foot in both worlds—leveraging the cloud where the offerings are viable and leaving the rest of the IT environment under the control of our current organizations. The real question is—how well prepared are you to make this transition?