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Archive for August, 2011


Cloud Computing Beats Snow

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Management Summary

I started with what we thought was a simple question: what management practices will focus IT professionals on business results more effectively? For over 40 years business executives have been complaining that IT professionals are more interested in IT than they are in the business. And there is plenty of evidence that those complaints are legitimate. We have all heard stories of huge, technically elegant projects that failed miserably when they were implemented because they were inappropriate, poorly designed, or they “solved” problems that end users didn’t know they had (or knew they didn’t have).

However, I learned rather quickly that it isn’t easy to pull together an inventory of management tactics; our “simple” question raised all kinds of very basic issues about IT’s fundamental role, about what it means for IT to add value, insourcing versus outsourcing, recruiting strategies and career paths, IT/business relationships and accountabilities, and IT professional development strategies.

Focusing IT Professionals on Business Results

In short, focusing IT professionals on business results takes you back to very basic principles about how to plan, organize, and manage the IT function. Your basic organizing principles not only send signals to your IT professional staff about what they should focus on, but over time they also generate career experiences for the IT staff that either build knowledge of the business, and a value orientation towards the business – or do not.

I learned that IT professionals need only basic knowledge about the business. Staff who are highly technically-oriented, and who have been hired to make the boxes and wires work reliably, really don’t need to know the business – they need to know how to operate the technologies they are responsible for, how to fix problems, and what levels of performance matter. Other than that, investing time and money in teaching them core principles of marketing, finance, or operations may well be a waste of the organization’s resources.

Fortunately, however, there are a number of things you can do to improve the way your IT professionals think about the business and how they focus their time and energy on acheving results for the business. We have identified a wide range of management practices that can encourage and develop a business orientation among those IT professionals whose knowledge and understanding of business practices does make a difference.

This report lays out in detail some new and radical ways to think about the issues, and proposes a basic rethinking of some very fundamental IT management principles – including how to determine which IT functions to retain within the company and which ones to outsource, what kinds of staff to hire and how to assimilate them into the company (not just the IT organization), and how to develop effective working relationships with your business partners. Taken one at a time, none of these practices is all that radical, but implementing each of them effectively can lead to a different kind of IT capability than what we typically find today.

There are two different avenues to take to focus your IT professionals on business results. At one extreme, we suggest that you consider very seriously outsourcing virtually all of the technical functions in the IT organization – all those IT staff whose don’t understand the business, don’t want to learn about it, and who contributions are primarily technical. At the other extreme, we recommend adopting a portfolio of management practices, including key relationship managers, that will foster the communication of business requirements and reward your IT staff for accomplishing meaningful business results. Both paths are viable – in one case you rely on formal contracts and service level agreements to ensure that IT investments are appropriately deployed and focused on business results, and in the other you depend on fundamental management practices to identify, enable, encourage, and reward business-focused efforts within the ranks of your IT professionals.

Summary of Findings

The difficulty of focusing IT professionals on business results is not new; in fact, it is at least 40 years old. As long as there have been IT specialists who cared more deeply about their own technical expertise, there has been a gulf between end users who view IT as a tool to accomplish their business objectives, and those IT specialists whose goals is to produce and operate the tools themselves.

My research led us to the following observations and conclusions about this challenge:

  • Four major forces are making IT’s business orientation even more critical today than it has been for the last 40 years: corporate policy decisions about IT priorities have become much more central to basic business strategy; the rise of Application Service Providers and Internet front-end toolkits is changing the near-monopoly value-added role that IT has historically played in large organizations; getting past  the ERP backlog has freed resources for innovation and pointed senior management directly at e-commerce opportunities; and electronic commerce itself is evolving beyond simple Web site design and maintenance, placing broader and more critical pressures on IT to be integrated directly into business operations throughout the enterprise.
  • There are at least four separate groups whose commitment to focusing IT professionals on business results is important: corporate management; IT’s clients in the business; IT managers; and IT professionals themselves. These four groups have different needs, different interests, and different criteria for assessing the contributions of IT to the business.
  • Many, if not most, IT professionals are simply not interested in business outcomes. Their education, their interests, and their experiences, are all focused on how to make the technology itself productive. There are virtually no opportunities for IT professionals to learn business skills in formal professional development programs.
  • Within the ranks of IT professionals, there are four distinct groups whose education, experiences, career goals, and interest in the business issues are vastly different: pure technologists in infrastructure roles, project managers and systems analysts, IT general managers, and “hybrids” or relationship managers.
  • There is no clear agreement on what is meant by “business results,” or on what constitutes “business literacy.” What one IT professional in one organization needs to know about the business differs radically from what his or her peer needs to know, whether they are working for the same organization or not. Demands for general business literacy or “business acumen” for IT professionals are not only difficult to respond to, but may actually be misleading in that they can distract executives away from more important questions about specific performance requirements for IT roles.
  • There are two broad organizational strategies for addressing these challenges: radical enterprise innovation, or transformation; and aggressive IT evolution towards a customer-centric or relationship-oriented form of organization. Both strategies are radically different from what is most common today.
  • Many IT organizations have recently implemented Account Management jobs as a way to foster customer-centricity and develop more constructive relationships between IT and the business. There are several different forms of Account Management, but all have proven difficult to implement. Nevertheless, Account Management appears to be a highly promising means of improving the focus of IT organizations on business results.
  • Measurement and reward systems are one of the most effective ways to signal what is important to your professional staff, and to reward them for achieving important outcomes. Yet there is almost no evidence that performance measurement and reward systems for IT professionals are coupled to operational business results in any meaningful way.

Key Recommendations

  • Any program of improving the focus of your IT organization on achieving business results must begin with a broad organizational analysis. Be very clear, strategically, about the value-adding role of IT in your business. If some IT activities are not central to it value-adding role, consider seriously whether they should be continued internally, or outsourced. IT activities that are not unique, differentiated, or linked closely to business results can often be done more efficiently and more effectively by a service provider whose commitment to business results is ensured through contractual service level agreements.
  • For the value-adding core IT roles, link their activities and performance measures directly to important business outcomes; leverage those linkages with explicit compensation and reward programs tied directly to outcomes.
  • Develop a portfolio of business systems and procedures for communicating business requirements and goals to your IT staff: formal planning mechanisms, IT Account Manager roles, project planning and management systems, and formal, results-oriented individual performance measurement and reward systems. Most importantly, take these practices seriously, and be certain you develop a culture of shared accountability and understanding between the business and IT.
  • Ensure that IT professional development programs include (and require) basic business skills along with technology-oriented programs. Develop formal classroom programs, support outside management education programs, and build two-way job rotation programs that enable IT professionals to have experiences directly in business roles.
  • Lastly, don’t ignore one of the most fundamental ways to build a business-oriented IT staff: recruit for IT positions from a wider diversity of schools and majors. Starting with a more diverse resource pool may be the most effective way of all to build a more business-oriented IT organization.

Article by Shaun White http://www.sacherpartners.eu Contact Shaun for more information

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“Globalization” has different meanings for business strategy and information systems. In the business context, globalization is the process of operating an enterprise in such a way that it can meet competition in any region of the world. From the specific perspective of information technology, globalization means building systems that can support a geographically independent administrative structure. This implies that all processes in the information infrastructure of the enterprise can operate transparently across international borders, although in practice no enterprise has completely reached this ideal state.

Globalization

Globalization

Globalization has become a business goal more than ever before, and the information systems of major corporations span geographical, cultural, and technical barriers around the world. Systems can no longer be developed without a clear view of international requirements and variations, as well as emerging tools for information and technology integration, such as the Internet and enterprise systems software. In a globalizing business, information systems are part of the structure, not simply accessories to it. But developing and maintaining these systems seem to grow more complex each passing day.

Through both applications and infrastructure, the IT organization must enable corporate-wide communication, coordination and efficiency. At the same time, customized and locally responsive solutions are needed in each individual country or region of operation. The technical challenge of running a global infrastructure – which may encompass hundreds of data centers and support processes – is enormous. The managerial and organizational challenges of developing and deploying global systems – and the workforce that uses them – are equally, if not more, ambitious.

Business Challenges of Globalization

Multinational enterprises face many challenges:

  • Because there is no single strategy for globalizing, the enterprise must learn to deploy multiple strategies simultaneously in different regions of the world. For example, it may cooperate with a competitor in some places, while competing in others.
  • The multinational faces a continuing conflict between the forces of globalization and those of localization, and must strike a balance between them. There is a trade-off between adaptation to local, national and cultural conditions and the economic logic of being a multinational enterprise. It is questionable how competently traditional organizational forms can deal with this trade-off.
  • Complicating this balance still further are the forces of global competition from other multinationals. While having a global presence means being vulnerable to attack in all locations simultaneously, it also means developing the ability to counter-attack in more than one place at a time.
  • While some start-up companies can become “instant multinationals” by gaining access to customers (e.g., via the Internet) without building traditional infrastructures, large and established multinationals must devote a great deal of time and effort to match the cycle-time and service performance of some of these small competitors.

Because traditional organizational forms cannot always competently deal with these challenges, it is necessary for multinationals and companies that hope to become multinational to globalize their strategies, their organizational structures, and their information systems.

Competitive strategy is based upon access to capital, location-specific resources, knowledge, and technology, as well as access to customers and suppliers in a time-sensitive manner. Global competition places a growing premium on effective use of corporate information and knowledge, and the resulting speed and flexibility of decision-making. It’s the ability to manage, communicate and act upon enterprise-wide information that distinguishes a truly global corporation from a simple association of national businesses.

Technology Enablers of Globalization

Today’s information technology (IT) provides much of the arsenal multinationals need to compete globally, but the role of IT within a global business is understandably complex. IT must help the multinational implement complex strategies, leverage better communications, accelerate business processes, shorten product and service development cycles, make company boundaries more permeable, and, above all, meet the needs of global customers. This demands a coherent, globally efficient information super-structure that is still locally adaptive. Just as there is no single global strategy, there is no single IT structure for or path to globalization.

Globalization of IT is enabled by developments in telecommunications, hardware and operating systems, as well as the spread of enterprise systems and collaboration software. Telecommunications provisioning has been simplified by globally unified billing, and by the spread of virtual network technologies such as frame relay, ATM and the Internet. Hardware platforms and their associated operating systems make it possible to quickly roll out branch offices and deploy competitive information systems into foreign markets. And perhaps the greatest developments enabling globalization are found in enterprise systems that can create integrated information and applications infrastructures that function as cogent operational and development platforms for global business processes.

Technological advances and fast-growing experience enable multinationals to accelerate their progress through the four stages of globalization:

  • The exporter is a domestic company that sells its products internationally through local sales offices or agents.
  • A multi-domestic company has parallel business operations and information systems in multiple countries.
  • A transnational company performs some (but not all) core business processes or functions in a consistent or coordinated way wherever it has a presence.
  • A truly global company acts as one operational and administrative entity, with a controlled amount of local business variation, independent of national jurisdictions.

Moving to the next stage always represents major transformation for the enterprise. Success requires deep understanding of how business strategy, structure, processes, and technologies intersect to make the business a global presence.

Key Recommendations

How do we make our IT infrastructure, our key shared applications, our technology support capability, and our business information management capability truly global? What does it take to ensure that global infrastructure meets the demands of the business – both globally and locally?

  • Develop an infrastructure road map to enable transition from your current business model to the more global model you’d like to be, closely tracking the business strategy of your enterprise.
  • Don’t settle for abstract debates about “globalization,” “transnationalization,” or other “-izations.” Define your business model in terms of specific characteristics of your business operations and their information and technology infrastructure.
  • In moving towards globalization, “cherry pick” only one or two major business processes or functional areas at a time to transition. Move area by area, as your corporation moves up the learning curve and gains experience in working globally.
  • Understand that the “local vs. global” conflict will emerge at every stage, forcing you to make detailed and difficult decisions. Plan for this in advance, including pre-selling and pre-testing all proposed application and infrastructure modifications.
  • Develop and care about your people. Give them the chance to rotate through international jobs, and reward them for picking up international skills. Be on the lookout for emerging talent in overseas subsidiaries.
  • Use the global council approach to ensure that business and technology teams work together in defining from the beginning what the business wants to accomplish with enterprise systems.
  • Use team structures to support global business processes and their applications. Establish centers of excellence, including “virtual” ones when necessary, in order to focus key skills on key systems and their implementation problems.
  • Continue to monitor developments in technology that will change your tactics for IT globalization. Pay particular attention to inter-enterprise systems development tools, provisioning of virtual networks at the global level, and vendor offerings of turnkey services.

This report focuses on the technical and managerial components of global infrastructure design, global process determination, and the rollout of global systems.

Chapter 2 surveys the international business setting, with a special focus on the challenges of globalization.

Chapter 3 reviews of enabling technologies of, and integration approaches to, globalizing IT infrastructure.

Chapter 4 discusses how to organize and manage a global IT function, with special emphasis on how to achieve success in implementation projects.

Chapter 5 discusses how companies can succeed in rolling out global enterprise systems.

Article by Shaun White http://www.sacherpartners.eu Contact Shaun for more information

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Key Recommendations

There are many factors that determine success in large-scale projects. But what is surprising is that management and motivation, combined with measurement and tracking of the right things, explains success far more than selection of tools or specific methods of work that are employed within the systems development function. All too often we find well-organized teams, using the most advanced tools and methodologies that nevertheless are not successful. As a result, we have focused on the management and leadership skills that are required. In addition, we have identified a strong problem with governance of large-scale projects and have been able to formulate recommendations that address these issues as well. Putting all of these factors together will significantly raise your chances of success or help you turn around a project that is teetering on the brink of disaster.

Large Projects

Large Projects

Make sure the business vision has been clearly articulated and championed by senior executive management. The fundamental building block for a successful large-scale systems effort is senior executive management support. The champion for the project must come from this group. Without this important element, the likelihood of failure is very great. Systems of this magnitude need to be defined in terms of key business outcomes. It is by focusing on the business outcomes that the meaning of the large investment required for different systems becomes clear. Outcomes needs to be defined not in terms of process or an other inwardly looking criteria, but rather in terms of specific deliverables of business results in the market or with customers. If the organization is unable to define these factors for the system, then consideration should be given to not building it.

Place the program under a leader with obvious business “subject matter” credentials, and credibility within the enterprise. Leadership of large-scale systems efforts is critical in getting success. What kind of leadership? A common mistake is to treat the effort as though it is a systems project. It is not. It is a business project, and should as a result be led by a well-recognized business leader. Picking the leader is critical, and is not done by the IT group. Instead, it is an enterprise matter and senior executive management needs to be part of the consultations. Picking a senior business executive to lead these projects is a strong signal for success. It makes it easier to communicate systems initiatives to others in senior management and to various business function elements whose cooperation is needed.

Establish an effective “governance” linkage to executive management. Failure comes from lack of a clear governance model that links together the IT group in charge of the project and the executive management that ultimately is responsible for signing the checks for funding. The purpose of the governance model is to build into the process a system of collaboration between IT and executive management that insures continued funding. This continued support comes in the form of consultations that continue to clarify the strategic mission of the project, and to review the continued change in its strategic dimensions. Sometimes external factors, for example, change, leaving the IT shop without any clear way to adjust their efforts. The business senior management is generally charged with being outward-looking and is responsible for monitoring external competitive threats and other market developments, including emerging opportunities, in order to provide constant steering of the systems development process for large-scale systems.

Assure the presence of in-depth business function membership on the project team. Another failure factor is a project that does not have business function membership on the operational side of the project. Successful projects keep this part of the governance structure in place, and ensure that the business function representatives are constantly engaged as the system is created and rolled out into the organization. The most common problem is the “fair weather friend” syndrome, when the business function leaders are there at the beginning of the project, but then disappear or divorce themselves from the effort the moment a problem appears, or there is the slightest hint of difficulty. “It’s not my project – I would have done it differently,” says the back-biting business function leader. “They want to do it that way, then let them pay for it.”

Maximize continuity among the project team participants. Even short-term turnover is a major problem for most IT shops. For long-term projects, the problems magnify. Only a few original members of a project are around to see the project through to its conclusion. A key best practice in this regard is to work hard and carefully at retaining the senior talent in any large-scale job. This is not to say that all talent available should not be preserved and sheltered, but continuity among team members is a major success factor in staying on time and budget for projects. The nature of large-scale systems is such that the cumulative effects of a series of small delays from various sub-teams can add up to really large delays overall, particularly when the critical path is changed – as it almost always is. For smaller projects, this issue can be dealt with on an ad hoc basis, however, for large-scale projects, the ripple effect can become debilitating. Therefore, a formalized system for maintaining continuity of participants is a critical element.

Implement stage gate reviews with executive management. Stage gate reviews are points in the project where the organization makes a major assessment of its continued viability. It has its parallel with the milestone process in classical project management. Stage gates are defined so that a clear message can be formulated for executive management in the company. It is their continued support upon which rests the funding and mission of the effort, and they need to be kept constantly informed regarding the status of the project. In this way, funding is assured, and the higher elements of strategy are continually injected into the systems delivery process. This is in contrast to the practice of letting a large-scale systems effort gradually sink into oblivion, away from the eyes of executive management. The stage gate review process needs to be scheduled with executive management far in advance, and kept on their calendar. A sense of importance and mission must be maintained, so that actual executive management, not lower-down representatives are sent to participate in these meetings.

Track and publish schedule results and costs. Good program management rests upon carefully watching expenditures for each stage in the process. A best practice is to publish the results regarding time and budget to all persons involved in the project – both on the IT as well as on the business side. What is the effect? This helps all parties involved to realize the critical nature of the effort that is underway. Doing this usually helps to motivate the various teams on the critical path, and to increase a general level of awareness of the project, thus stimulating overall efforts at cooperation, something sorely missing from many projects. In most organizations, it is human psychology to band together even more tightly into cooperative teams when there is a sense of urgency and a pressing business-critical mission that needs to be accomplished. In contrast, it is the silent projects that die a silent death, unnoticed by the larger organization.

Assure the effectiveness of mechanisms to coordinate with other projects. Large-scale systems projects are never an island unto themselves, but rather exist within the rich context of many other initiatives that are going on, some of which occasionally may have higher short-term priorities. It is necessary to ensure that any large-scale systems effort is integrated into the planning for other smaller projects that may be underway. The purpose of this is multifold. It is useful in ensuring allocation of resources, both funding, and skills, among the various projects. It is also necessary in order to ensure a consistency of architecture. This coordination process needs to be constant, and be built into the overall governance mechanism of the project.

Assure effective coordination in planning the Technical Architecture. Due to the enterprise-wide nature of large-scale systems, it is often the case that different systems (and sub-systems) overlap or even conflict with one another. This is why the role of the chief architect is so important. Coordination planning around architecture is one of the key high-level tasks of management for a large-scale systems implementation. This process is not a one-time step in a long sequence of systems development events. Rather, it is a constant point of review that is done as a punch list element for each major step along the way. In this way, many problematic issues are resolved before they occur.

Does the project team have adequate technical staffing and liaison? Throughout a lengthy project, the skills required will change. This factor combined with the inevitable turnover in IT organizations, and the long-term nature of a large-scale project introduce a structural uncertainty into any proposed project. We have seen that between different sub-projects, there is always the challenge of distributing adequate technical and specialized talent effectively. This in itself is a serious management challenge. Most projects at the same time are forced to rely upon outside contractors for major pieces of the work. Finally, all of the teams involved – either insiders or outsiders – must be set into a program management structure that will facilitate adequate communications with business. The best practice is not to set this type of communication as a policy, but to systematically build it into the schedule of work so that there is little doubt it will take place. An additional benefit is that this type of scheduling ensures that eventually this type of exchange of important information becomes an accepted part of the corporate life-style. This, in turn, helps to inculcate these same values into the different sub-contractors who might be working on various projects from time to time.

Assure that effective escalation processes are in place. Since large-scale development programs are composed of different projects, and these projects in turn are sometimes composed of sub-projects, inevitably there arise conflicts between different teams. Disagreements over different technical solutions, cross-team effects of one solution spilling over onto another, and the struggle for resources that must carefully be allocated across and between different teams – these are only a few of the issues that spawn disagreements. From the very beginning it is best practice to design into the organizational structure of the project management group the specific ways for escalation to take place. This will ensure that a coherent decision-making structure is put into place.

Make change leadership a planned and visible component. All too many IT shops take on large-scale systems development projects and gradually allow them to slip out of visibility to the business side of the house. The danger in this behavior is that IT eventually comes to be seen as the “owner” of the project. In reality, of course, it is the entire business (not IT) that is the owner of the project. In order to ensure this idea remains at the forefront of people’s minds, leadership of change is engineered into the program management of the project. Visibility is important in order to continually refresh corporate learning and consciousness of the changes that are taking place. In addition, it helps the IT team remain in contact with the business so that important information can be picked up regarding anticipated changes in strategy.

Actively envision and plan for the “Living There” stage – supporting the new environment and harvesting the business benefits. Effectively conducting a large-scale development effort is more than the day-to-day operations involved with program management and reporting. The best projects have in their field of vision a picture of how the system will operate when it is completed – not only a technical vision, but an operational vision encompassing the business process that will out of necessity change. In order to harvest business benefits, companies prepare for the completed system and how it will be used a long time in advance, instead of waiting until the system is near completion, then worrying about how it will be used and implemented into business processes. When companies wait too long before focusing on the end state, we have found their chances of success drastically reduced. Envisioning the future, and actually training for the future, needs to be built into the systems development process from the very beginning, or at a minimum from the middle of a project. This will help ensure that everyone is on board and that the organization will be prepared to take immediate and full advantage of the system once it finally is ready (see Project ES: Implementing Enterprise Systems for details regarding the different stages of ERP rollouts).

Assure ongoing communication and dialogue with the target business operation – manage expectations. The politics of large-scale systems implementation require constant communications and expectations management. This must be systematically maintained throughout the project, so that towards the end – or at any other crucial moment – it is possible to get the support and funding needed to accomplish milestones in the project. Management of expectations is a large part of this effort. Pace, timing, and verification of benefits to end-user groups needs to be controlled carefully so that the system does not develop a poor reputation before it is even completed.

Article by Shaun White http://www.sacherpartners.eu

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Define your strategy. Determine the basic strategy your are employing (e.g., why you are going to us an Cloud Computing and what it is going to provide for you). We have identified several generic strategies that are available including time to market and cost reduction, and several variations. Without knowing your basic raison d’etre for going the Cloud Computing route, it will be impossible to evaluate your success, or to value the service you are buying.

Assess your current platform and investment. You need to determine the compatibility of the proposed Cloud Computing with your platform, both from a technology point of view as well as from a systems maturity viewpoint. Look for application sets that are not well developed in your organization, and have a relatively small number of interfaces to other applications, that will tend to be relatively stable over time, and that do not require a large amount of customization to meet your needs.

Cloud Computing

Cloud Computing

Determine source of value added for Cloud Computing. Evaluate where the Cloud Computing will give your value added. Are you merely replacing an application process or are you going to get something from using the Cloud Computing that you could not obtain otherwise? Understanding this helps to set the pricing for the service. Another critical factor is the level of commoditization in the market. Cloud Computing will charge premiums for services that are unavailable elsewhere.

Estimate integration issues (and who is going to pay for them). Our research suggests companies will tend to underestimate the cost and complexity of integration between their infrastructure and the Cloud Computing. You may be able to save by having the basic development of the system paid for by the Cloud Computing, but if there are counter-balancing integration challenges that must be funded by your own organization, the Cloud Computing advantage may disappear. Understanding who is going to pay for what during the entire lifetime of the Cloud Computing relationship is necessary to truly understand the value you are getting.

Contract service level agreement (SLA). Negotiation of SLAs for the Cloud Computing relationship can not be done too carefully. The trend is to have a single point of contact for any problem – either application or network performance – that is being contacted in case of problems. First, second, and third tier escalation and Problem Determination Procedures (PDPs) and Trouble Ticket Tracking need to be defined well and subjected to a testing period.

Implement “vanilla,” then add value. Our analysis indicates that a user should go as long as possible (in the contracted relationship) without introducing customization or any other changes in the services being purchased. Contacting for the “vanilla” layer of services will give the best price-performance. When absolutely necessary, and after the bugs in the Cloud Computing relationship have been worked out, you can then begin to add value to the contract gradually by introducing extra services (and features) as required. According to the VCM, the key to limiting the unpredictability of long-term contract costs in an outsourcing relationship is to avoid customization as long as possible. One advantage in the Cloud Computing model is that it almost always provides a vanilla level of basic services that can be hitched onto in order to stabilize the long-term costs of the contract.

Do a cost analysis. For any consideration of the Cloud Computing model, a cost analysis needs to be done so that the Cloud Computing option is compared to alternative paths. Any cost analysis has a diverse set of variables cost factor elements that can be either included or excluded from the analysis, and depending on what is included the analysis outcome varies. One advantage to the Cloud Computing contingency is that it is possible to receive a fixed fee commitment from the Cloud Computing along with a clear bill of services. Although what is included will vary from contract to contract and from one service provider to another; nevertheless, it should be possible to define the services in a bundle that can be compared to your own costs of providing them internally, although there will be many judgement calls concerning where to load on costs.

Chapter 2 of this report reviews the value proposition being made by Cloud Computing. What value to customers are they bringing to the market, and what are the factors that determine whether it is likely to be successful?

Chapter 3 details the basic types of Cloud Computing and describes the “delivery chain” from infrastructure and applications through networks to desktops that must be managed to produce high performance in Cloud Computing.

Chapter 4 introduces our Why-What-Who-How framework for making decisions about going with an Cloud Computing approach.

Chapter 5 reviews the basics of negotiating an Cloud Computing contract for services.

Chapter 6 identifies the current risks and limitations of the Cloud Computing model, and proposes various amelioration strategies that can be employed. We have also provided three appendices.

Appendix A provides a checklist of factors to consider when evaluating an Cloud Computing.

Appendix B provides a watch list to monitor for the Cloud Computing sector.

Appendix C provides a more detailed look at the Cloud Computing value proposition from a cost standpoint.

Article By Shaun White http://www.sacherpartners.eu Learn More

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Why?

Why provision application services externally? Since the Cloud Computing market is still emerging, you should only consider Cloud Computing if the value propositions are directly translatable into business advantage for your firm. You should clearly understand the underlying business forces, competitive pressures, and urgency that may make Cloud Computing an attractive option. Is first mover advantage for a greenfield operation or spin-out likely to translate into lasting competitive advantage? Is flexibility to exit a business, or rapidly ramp up business volume important? Can you reliably forecast the transaction processing scale required of your technology infrastructure twelve months in the future? Could the wrong in-house technology decision now create an unscalable wall that blocks business growth? Should you ration capital funds, and focus them solely on core, differentiating assets, not operating infrastructure?

Cloud Computing Decision Sequence

Cloud Computing Decision Sequence

In the first stages of the decision processes, it is necessary to carefully determine and assess the underlying forces that are compelling change in your IT infrastructure or business. In some cases, the reason could be that external competitive pressures are forcing your enterprise to develop new eBusiness services, or to go to market in a different way. Or the external pressures could be simply along the low-cost provider trajectory. In any case, there can be a variety of external forces that will compel the organization to make significant changes in its business processes and how it delivers IT support to make them work.

At the same time, significant internal pressures can be a driving for adoption of the Cloud Computing model. For example, if there is a chronic shortage of IT personnel, then it may be completely impossible to deliver the required IT services any other way. There may be core competency issues coming to the surface, (e.g., if there is consensus around the idea that many IT services should be done by outsiders, leaving key personnel to focus on activities that support core competencies of the organization, instead of frittering away their talent elsewhere).

What?

What are the specific business results and performance levels the Cloud Computing solution must deliver? Since few vendors have tackled the end-to-end service delivery chain (and demonstrated consistent competence provisioning each specific service), it’s critical to understand the performance characteristics and limitations of the applications, networks, infrastructure and support services (starting with help desks) that make up your Cloud Computing delivery chain. Are the application’s business process design and the Cloud Computing technology integration sufficient to support everyday business operations? Will the technology infrastructure (network and operations) prove reliable, and sufficiently robust, to meet transaction processing needs? Should you limit the number of vendors providing service to reduce finger pointing, or should you consciously involve sufficient partners to optimize contingency and exit planning?

Who?

Who should you choose as your providers? And should the arrangements be viewed as transactions, or as longer term strategic partnerships? Since contracts are predominantly short-term, the accepted rules for prioritization, risk, and relationship management could shift dramatically. Should you structure arrangements to capture intended financial advantages quickly, while hedging your company’s most critical risks? Or should you take the time to negotiate arrangements that address each potential issue in advance? Will your service level agreements be little more than mutual goals in a situation where contracts may expire before default agreements and remedy options can be enforced? This forms the baseline against which the Cloud Computing model is compared. After the base line costs for providing the service internally is established for a period of time, usually 2-3 years, the next step is for the user to contact different Cloud Computing vendors and begin their selection and development of contracts.

How?

How should you organize to manage transition and ongoing operations in an Cloud Computing-based service model? Is “service sourcing” destined to become a key competency in your organization? Will dramatic changes redefine the role of your IT organization, or will the continuing evolution away from custom development be sufficient? Will traditional internal application maintenance and support become obsolete? Can technology and service integration be outsourced, or will rapid integration become a core competency that distinguishes operational and technology leaders? This has several implications and challenges:

  • IT Organization. The IT organization must readjust itself to working and “interleaving” with an outside service provider. This can mean either that people will be re-assigned to more ‘core’ activities for the company, or they will leave. Support structures and how the help desk operates must be debugged, and changed so that users or customers are not disadvantaged by the transition to the new model.
  • Project Management. The way in which the IT organizations, and the business units that drive priorities in IT must change to accommodate the new Cloud Computing delivery model. Instead of making demands against internal resources, now it is necessary to work with partners, and this changes completely how the budget approval and planning process operates.
  • Business Processes. Finally, in order to make full use of the Cloud Computing provisioning of IT services, it is clear that many if not all business process must be changed, or at least modified, in order to adjust to the new model. For example, policies for handling sensitive data that is going to be stored and processed by the Cloud Computing must be worked out. Also, it is important to keep track of business processes over time to see if any significant potential for synergy or consolidation appears.

In summary, the Why-What-Who-How framework for choosing Cloud Computing starts with the large “macro” forces that are shaping the utilization of IT in the organization, then narrows down the options by first understanding the scope of what is required. After that is determined, the nature of the required application set determines the general type of Cloud Computing to choose. After that, pro forma cost estimations are made to establish a base line for cost and expenditure that is a point of comparison for the Cloud Computing model. Cloud Computing are then selected on a variety of both financial and non-financial data, and contracts, including SLAs are negotiated and registered. After that, still the organization faces a serious amount of work in adapting to the new provisioning model.

Article by Shaun White Sacher Partners Ltd

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