Explore how IT organizations can harness cloud services to simply and streamline operations and transform them for business disruption. We also discuss how businesses can re-think their business models to not only keep up, but to find and capitalize on new opportunities.
Understanding IT Transformation
With the rise of commercial cloud computing vendors and services, the role of IT is changing dramatically. While the IT organization in the past had total control of computing resources, now IT is tasked with providing oversight, management, and vetting of options. IT must be able provide the business with ways to integrate process and data across silos. The security organization is also responsible for ensuring security and compliance. IT now has to provide oversight and management of both cloud and on premises computing services. This means that IT needs to provide a transition plan for applications that no longer have the modularity to support business requirements. IT operations has to ensure that performance in a hybrid and multicloud world is consistent and predictable.Unfortunately for many companies, their IT organizations were busy maintaining legacy applications in a data center that wasn’t even ready for virtualization technology. It’s hard to believe now, but two decades ago IT organizations spent up to 80 percent of their time just keeping workloads up and running in their data centers. Business leaders began losing patience with the slow pace of the IT organization to support new innovative initiatives. Some companies have invested in emerging cloud technologies and app modernization offerings that help them transform aging applications. The successful organizations are on a path toward transformation led by cloud and cloud services.
Escaping the IT Legacy Trap
Ironically, legacy applications are often core to managing core business processes, such as payment services and customer management. But the architectural foundation of these applications means that they’re unable to be easily updated as business processes change. The applications themselves may be monolithic, complete with dependencies on other applications within the computing environment. Assuming that these applications can simply be lifted into a cloud platform is tempting. In reality, this approach is one of the most expensive and least productive ways of gaining productivity.First, not only does the application itself need to be moved, but also all the related dependent applications. In addition, these applications were not efficiently developed because of the technical constraints of an older computing model. Moving these applications to the cloud will require a massive amount of compute and storage resources that will be expensive. Equally problematic is that you gain no strategic advantage of having these out-of-date applications live in the cloud. The code can’t be easily modified to meet new business demands.
What is the solution? The applications have to be transformed and modernized, which means that dependencies are removed from the applications. The application is redesigned as a set of modular services. When possible, frequently used services are written once and reused. The bottom line is that it is imperative that these legacy applications are updated and modernized to gain the innovation benefits of the cloud.
Preparing for the Cloud
While focusing on the technical underpinnings of adopting a cloud strategy is necessary, you need to take a step back. Your journey needs to begin with the cultural changes that you’ll have to embrace. While developers and business leaders may be excited about rushing to adopt cloud services from their favorite vendor, the IT organization may be resistant to change. Many organizations begin to use cloud services without a plan. For example, team leaders may want to rush to adopt cloud services without understanding the requirements for protecting sensitive data for compliance and security. This is asking for trouble.You have to make sure that everyone is educated about what the cloud can and can’t do. Everyone should understand how the cloud would play a pivotal role in redefining the pace of business. It should be clear to everyone that adopting the cloud for the business is a team sport and requires that IT and business units collaborate. It also means that there needs to be a balance between total freedom to use whatever cloud or cloud services that seems useful and the need for management of computing. The more that everyone understands about responsibility and goals for the cloud, the more successful the company will be. Have a well-established set of guidelines that are agreed upon and well understood.
The adoption of cloud as a strategy and plan calls for new practices, skills, and roles. How do you go about modernizing existing applications? Are there Software as a Service (SaaS) applications that live in the cloud that are a better fit for the way business is being conducted today? If a SaaS application is the answer, you need to determine how and where it will be used. There may be a need for adding new business processes for that SaaS application. If enough departments are all using the same SaaS application, you should consider working with the selected vendor to create a licensing agreement that is beneficial to the business.When building software is in the business interest of a company, the relatively new methodology and practice of DevOps (development combined with operations) is well suited to the cloud. DevOps and the agile approach for defining and developing software is a practice that may be new to your business.
Most parts of a company will be affected by a move to the cloud and will also have to make adjustments in roles and skills. This degree of cultural change can be difficult to implement, and it will take time before staff are used to the new cloud ways of doing things. We recommend pilot projects, bringing in training from industry experts, and hiring people experienced with the cloud to take on important leadership roles.
After all that preparation, you’ll be ready to deploy cloud technologies, in either a private, hybrid, public, or multicloud context. You will still learn more as you go and will have to make adjustments to your processes. Your staff will have an opportunity to upgrade their skills, which can lead to new opportunities. But if you’ve done a good job in cleaning up your legacy data center and creating a new cloud culture, your path forward will have a much better chance of success. Ultimately, what you have done is to create a new business agility and flexibility based on new practices and effective use of cloud technologies.Building for Innovation
The cloud makes building connections between your employees, business partners, and customers easier. Innovative companies can no longer live with strict boundaries among business units, subsidiaries, partners, suppliers, and customers. These relationships are key to your company’s success, and building better communications, feedback mechanisms, and transparency will benefit everyone. For example, supply chains benefit when both producers and consumers increase the transparency of their inventories, business plans, and customer needs.As IT transforms itself to help guide the cloud strategy, the organization can become an agent of change. With the use of well-defined cloud services supported by standard Application Programming Interfaces (APIs), it is possible to more quickly establish new innovative applications and services to support partners and suppliers. With the use of either public or private cloud services, a business can pilot new services with selected partners and iterate based on feedback. The ability to build quickly, test, change, and execute is the best way to experiment with new business models without requiring a massive capital investment.
As you move forward with connecting your ecosystem together more tightly, you’ll find an increasing need to manage the myriad data sources your company and others maintain as though they were a single pool of information. It’s a complex task that requires careful business and architectural planning. When these application, process, and data services are freed from their traditional constraints, the business benefits will be compelling.In the previous generation of computing infrastructure, a business would have to create complex integration software to enable the ability to link customers and partners into the same set of services. This environment could take an enormous amount of time to architect and design. With the advent of the cloud, you can now create an environment where common APIs and cloud services can link an ecosystem together efficiently without having to build a separate computing environment. With the advent of agreed-upon cloud infrastructure standards, an ecosystem can be established more quickly so that a business can transform business practices to increase revenue and satisfaction.
The Business Imperatives
There was a time when a business could design a set of applications and computing platform that could stand the test of time. The environment could take years to develop and could be in place for a decade or more.Clearly, the competitive environment has changed, driven primarily from advances in cloud services. No longer does an emerging business have to spend millions of dollars on designing software and services from scratch. Now, a new company with an innovative idea can leverage inexpensive cloud services and build a new service; test it out with early adopters; and take over an established market, as shown in the following figure.
The advantage of these upstart companies is that they have no legacy, no installed base to protect, and can afford to take risks with new business models in the hope of up-ending an established and lucrative market. In that sense, bringing your IT organization up-to-date is table stakes — something that just must be done. The deeper advantage of modernizing IT comes from putting innovative concepts into action before an unknown competitor has a chance to lure your customers away.
Creating a cycle of innovation.By establishing a well-defined cloud strategy that is a collaboration between key constituents across your business, you will be in a good position to get started. You can begin the process of streamlining your IT organization by modernizing critical business applications and moving key workloads to the cloud. You’ll be able to make well-informed decisions about which workloads should remain on premises and which services should reside in the cloud. Management as a team will decide which cloud services meet the company guidelines for security, governance, and stability. While most businesses will support multiple clouds, you can set guidelines to limit the number of vendors your IT team will need to work with and manage. With this preparation, you have set the stage for being ready to innovate to protect the relationship with your customers and partners. Setting a cloud strategy plan into action will help create an advantage for your company.
Optimizing Your Existing Business
Before you rush to establish your cloud strategy, take a step back and think about how you interact with your customers. How do you reach your customers today? You’ll discover that most of your customers are already consuming cloud services in many different ways. These customers will expect that you’re using cloud services as a key business strategy. You want to be able to demonstrate that you can react to their needs for change without delay. Today’s customers expect your applications and services to be able to transform in near real time. If you can’t meet their expectations for rapid change, they’ll find providers that are more responsive to their needs. The bottom line is that without the agility of the cloud platform, you can’t quickly meet customer expectations.Take the example of a furniture business that has served its community for more than a century. The company has strong ties to the local community and understands the taste of customers in the region. But the market is changing. New cloud-based online furniture companies are springing up everywhere. They have no relationships in the community, and they have a variety of products from many different suppliers. They don’t have the solid reputation of the business that has been around for a long time. However, they have something that the established furniture business doesn’t have: a wide selection of products that are not back-ordered. A customer simply goes onto their commerce site and finds the precise item, purchases it, and waits for two days before it shipped for free.
Can a physical furniture store hope to compete? There is no guarantee. However, a physical store can create a business model that is a hybrid between the physical store where a customer can see products they might want to buy, work with a designer, and create a trusting relationship. At the same time, the furniture company can create a companion cloud-based set of services where store-based offerings combined with third-party furniture and related items can be sold. Customers can order online and then come to the physical store to pick up items and potentially see them in the store after they’re ordered. In addition, the store can begin to collect data about which customers are most likely to purchase and how tastes are changing. Innovative ideas, such as having local artisans custom build furniture and accessories based on buying patterns, can transform a traditional furniture store into a competitive business.
The furniture store has years of best practices experience that can be applied to the cloud model. With the cloud, the business can build out innovative services that leaders know are important to their customers and can experiment with new ideas that are managed in the cloud.
Modern Development and Deployment Strategies
How does an established business move to an innovative cloud strategy? How do applications get developed so that they’re innovative and ready to support a multicloud environment? DevOps — a combination of modern application development and deployment techniques — are the requirement for building cloud-based innovation. With DevOps, developers employ an agile development approach that assumes an iterative development process. The focus of DevOps and agile development is to focus on customer needs and metrics that can predict success. How do customers use the new software? Is it intuitive? Does it encourage customers to stay on the site and purchase additional merchandise? Is the application modular and flexible enough to adopt as customers react to the environment? Is it easy to partner with businesses that offer complementary offerings? What is the performance like once the software is deployed across different cloud platforms and within an on-premises environment?In its ideal state, DevOps streamlines development and deployment processes so products can be deployed at any time, not just when a new “release” has been created. For example, say that your business has a custom suit tailoring SaaS application that your customers use successfully. However, your customers tell you that they need a feature where they can send a proposed suit design to someone who will sign off on the design before it goes into production. Before DevOps, the feature would get bundled with other features and eventually included in a product release, which might take months before it was released to customers. But with DevOps operating in a continuous development and continuous deployment model, the feature could be developed, tested, and then deployed in days or even less time. The deployment organization would update the SaaS application, and customers will see the new feature right away. Your customers will love your responsiveness and will stop asking you when features they have requested will finally be released.
Revisiting Your Business Model
One of the benefits of the cloud is that it makes it easier to adapt your business model or to experiment with new ideas that could transform your business.In the past, businesses saw software services as a necessary part of their strategy but not a driver of growth. That has changed. You only have to analyze the success of companies like Uber, Airbnb, Netflix, and hundreds of other businesses that are challenging established businesses because of the cloud. In fact, the success of these types of companies is the fact that they have sophisticated cloud-based services where they can build and modify applications quickly and use data to understand customer expectations. The list of businesses with new business models is long and growing. The mindset in the software world is to find new ways to disrupt businesses—in other words, have a business model that is more compelling than what was previously used.
So, if your business optimizes its data center, business relationships, and current business practices, you have probably increased your company’s success. However, you must realize that the more successful you are, the more other businesses are looking at your business and trying to find weaknesses in your business model that they can take advantage of. Therefore, you have a responsibility to your business to re-examine your business model, and possibly change it, on a regular basis.
Transforming the Business Model
Smart businesses aren’t afraid to break their business model and experiment with new approaches to satisfying customers. In fact, the cloud is also the perfect place to experiment with new ideas. All of this agility and flexibility can be applied to trying new things in the cloud. For example, it’s relatively easy to create a new website that takes a different approach, like packaging your product as a service so that customers can begin by selecting one service and then adding other options over time. With the flexibility of cloud services, you can test these ideas with a set of willing customers to see what offerings and approaches have the best potential for success.
Business models are comprised of a set of characteristics of your business that can be adjusted to change how your company does business and how your customers and partners interact with you. Who are your partners today? What customers are you selling to today and can you expand your reach into new market segments? Is there a way to offer a subset of your products so that customers gain an appreciation of your offerings before they have to spend money? Offering compelling offerings that solve customer problems encourages them to buy once they get a taste of success. Being able to leverage the cloud to both offer and manage customer interaction transforms your ability to move quickly to increase your business.To make such a significant business model change can be hard to do, but it is worth it if it gives your business a new life. The cloud can help you by making it easy to experiment with your business model via the agility and flexibility. Instead of changing your business completely overnight, you can set up a subsidiary division or even stand-alone business, perhaps with a different name and brand. Treat it as a real business, but limit the number of customers or services to keep it less complicated, and see whether you get the traction you need. If you do, you can grow the new business at your own rate. On the other hand, if you don’t get the traction you need, you can close that experiment and try another until you find something that works for your business.