Head in the Clouds – Why Cloud can be a tough slog for the enterprise

Cloud based services – (IaaS, PaaS, SaaS, DBaaS etc.) are a paradigm shift from the legacy, on premise IT infrastructure architecture. Businesses are pivoting to cloud, motivated in part, by the fear of industry disruptors who are already in the cloud. In the past, sophisticated applications and a distributed enterprise infrastructure was a barrier to entry. Upstart competitors simply did not have the capital and staff to compete with large institutions. Today, with cloud services, this is no longer the case.  

In this series of articles, we will level-set on the benefits of cloud – the vision of cloud. We will then look at the common challenges organizations are facing when moving to cloud and ways to mitigate these challenges.

Shut Down Your Data Centre

Let’s consider cloud, from an infrastructure perspective. For large enterprises, an IT infrastructure consisting of complex networks, switches and data centres, supporting hundreds of business applications is simply not a differentiator.  Nobody walks into a bank branch, signs up for house insurance or buys a new car because the company just opened a shiny new data centre.

For large enterprises, IT is expensive, complex, and needs constant care and feeding.  Executives who don’t fully understand IT infrastructure may continuously play a risk vs reward game with the IT budget.  They try to control spend by under investing in IT infrastructure and then every few years, they receive an ultimatum from their IT infrastructure teams. A major upgrade is required that will cost millions, take a year, and cause significant internal disruption. It is easy to justify email when everyone is using typewriters and envelopes but moving from Windows 7 to Windows 10 for 80,000 desktops distributed worldwide becomes a tough sell. As part of a comprehensive cloud strategy, Windows 10 is simply a must do upgrade and ultimately with the end of Windows 7 support in January 2020 – it’s mandatory. But for executives who may not understand the complexities of IT, this can feel like a forced upgrade for questionable business benefit.

Under investing in IT and then every few years, making large capital investments to catch up and repair, has been a typical pattern in many organizations. Careers in IT have been built on transformational success and have failed on a perception of end user disruption and business impact. Enterprises go through a cyclical wave of infrastructure change and risk tolerance. Then the pendulum swings back, and change fatigue and risk aversion take hold. With much fanfare, portions of the organization are outsourced.  Five years later, with much wailing and gnashing of teeth, the very same portions are insourced again.  With this cycle, CIOs, CTOs and their lieutenants come and go.

The challenge with IT infrastructure, is that while it is a necessity to run the business, IT infrastructure is so far removed from the customer and the revenue stream it is difficult to accurately measure the benefits of incremental change. Typically, enterprises use complex financial business cases - but how accurate are these models? In one major enterprise, a finance executive admitted that they had never stress tested the business case model against a real world, completed program. It was simply too difficult and they were too busy.

Part of the challenge with IT is that the further away one gets from the customer, the less the IT teams may know about the business. Application teams are typically focused on business, customer and employee outcomes. However the infrastructure teams are focused on shared services, servers, networks and platforms. How that infrastructure translates into business advantage may be vague at best. People who operate in the infrastructure world are technologists and given the complexity and importance to the business operations, they have to be highly competent and focused on the technology. While they try to be business focused, large IT groups can become an internal business where decisions may be made based on a favorite technology, a favorite vendor or simply on promoting political agendas.   

Why the Cloud?

The fundamental premise with cloud is that businesses large, medium or small give their IT infrastructures and their application services to other businesses who focus on providing these services. These cloud services are not necessarily business differentiators. It is the customer data, the customer and employee experience and the enterprises’ specific business applications and processes which are the differentiator. Fundamentally, if I am a cloud service provider, then you are my customer and my success is directly aligned with my ability to meet your needs and deliver you a service at a reasonable and competitive price. Effectively, this makes IT infrastructure and standard enterprise applications truly accountable and measureable. Now for every user you add, for every CPU you consume and every blob of storage you reserve, you pay. Orchestration, automation, scalability and instant gratification are but a few clicks away. There is a contract and Service Level Agreements (SLAs). There is no internal organization telling you that your application is three versions behind and the upgrade will cost $X millions and take Y months. In the perfect world, IT becomes a utility that business people and internal developers sign up for. Ideally, economies of scale allow cloud vendors to deliver services at lower cost per unit than even the largest enterprise. They can focus more people on security and compliance and they can manage upgrades with no downtime. Backups happen behind the scenes in a high availability environment.

The difference between cloud services and managed services is that you are not carving out a piece of your infrastructure and organization and giving it to another company to manage and run. You are not outsourcing your cafeteria, you are looking at a menu and ordering in. Moving to cloud has the promise to create a consumption based cost model that makes the use of IT more visible. It also has the ability to address the inevitable fluctuations in the business cycle, elastically scaling services as required. 

Cloud truly is a beautiful thing but are you seeing fluffy white summer clouds or are these storm clouds on the horizon? In future articles we will explore what happens in the real world from an enterprise perspective. What are the typical impediments to moving to cloud and what can be done to mitigate them?

Simon Morris is a Digital Transformation leader at KPMG.  When his head’s not in the clouds, he is riding his bike, carving turns on his snowboard, or building water-cooled personal computers with his son.