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Concern # 2 – Operations

Reliability of the Cloud. Cloud Companies may not provide service level required or may go out of business. No one knows that the general reliability of the Cloud will be, or even how it can be measured adequately. If history is any guide to the future, then experimentation with a new model of delivering computing services in a matter of course will involve problems. No one wishes to be the first to experience these problems. Amelioration Strategy: Favor the large End-to-End providers (i.e., EDS/SAP).

Loss of control: data, software, and operational management. How can day-to-day operations and management control be set

Disadvantages of Cloud Computing

Disadvantages of Cloud Computing

up under the Cloud model? What are the organizational implications when data, software, and operations are under someone else’s purview? Clearly, each organization will be forced to answer this question in a different way, but for some, uncertainty in this domain under the Cloud model may prove to be a significant barrier to adoption. For others, perhaps, it will prove to be a great opportunity. Amelioration Strategy: Difficult. Try to maintain in-house expertise to use in case of a problem.

Technical decisions made by third party. What are the implications for IT autonomy when technical decisions are being made elsewhere, out of direct control? Amelioration Strategy: No real solution, unless Cloud and customers are partners.

Lack of in-house experts. Presumably, use of an Cloud will reduce the need to employ in-house experts in various areas of information technology and applications. This will reduce costs, but at the same time strip away skilled personnel from internal IT operations. IT organizations need to understand the implications of the lack of in-house experts. Note this is generally a long-term systemic issue with outsourcing. Like outsourcing, the Cloud model will create a certain level of dependence of the enterprise on its Cloud. Amelioration Strategy: Give in-house experts control over research responsibilities, and give them management decision status.

Staff migration from company. Few have considered the staffing implications of the Cloud model. What will happen to your own IT staff (assuming you have one) after the Cloud starts to take over major segments of your applications portfolio? If the staff leaves, then will your organization permanently lose the ability to ever build up an in-house operation? If so, then what are the long term implications for that? Clearly, migration of staff away can have serious implications, but it is difficult fully to anticipate what they are. Amelioration Strategy: Give in-house experts control over research responsibilities, and give them management decision status.

Boardroom representation. If the Cloud is a key partner in providing your service, it must be aware of all of your competitive plans, yet it also services your customers. The logical board member representing IT would be the Cloud itself, yet since it services competitors, this is not workable. Amelioration Strategy: Give in-house experts control over research responsibilities, and give them management decision status.

Unclear responsibility for failures. With the Cloud sharing your processing, problem determination can be difficult. If something fails, it may be unclear who is responsible for the failure. Amelioration Strategy: Pick Cloud providers carefully. Contract for single point of responsibility.

Technical decisions made by third party. Once the Cloud is doing the processing, it makes the technical decisions. This removes them from your control. The risk is that you are at the hands of the Cloud for IT-based innovation. Amelioration Strategy: No real solution, unless Cloud and customers are partners.

Mass market versus customization. It is impossible to get competitive advantage from IT applications that everyone else has access to. At the same time, customization can be expensive, possibly reversing the Cloud economic advantage.

Concern # 3 – Peak Workload Concerns

Monthly financial cycles, operational peaks, end-of-year, holiday crunches, and annual meetings – what will happen to a fully-developed Cloud model implementation when it is the end of the billing cycle and hundreds of company uses are doing their monthly billing? Will the system be able to handle it? If so, then how much extra capacity will the Cloud be required to build so that no one receives a “busy signal” during peak hours? And if a significant amount of extra investment is required, then how can the Cloud be profitable? The fact is that no one at this time understands the full implications of peak loading. Amelioration Strategy: Proper Cloud selection and use of contract guarantees.

Concern # 4 – Software Issues

There are a variety of software-related issues that must be considered in the evolving Cloud model:

Version update problems. What will happen when new versions of the software program are released? Has anyone  had experience migrating hundreds of different customers, and their data, to new versions? Although this is not impossible, not many Cloud vendors have done it yet,  and as a result it is a legitimate concern. However In my experience salesforce.com does manage this well, you need to make sure you choose carefully.  Amelioration Strategy: Exercise control by having ownership of the server or partition if possible.

Inability to customize. If the user organization has contracted for vanilla services from the Cloud, then it will be either impossible or very costly to make any type of modification or customization in the software outside of strictly pre-defined ranges of change. Each of these ranges for change needs to be negotiated in advance, because each will involve pricing; yet, it is impossible for any user fully to anticipate all of the changes that are going to be required. As a result, for some users the inability to customize the software being used might present a series of unanticipated business problems. Amelioration Strategy: Make this an advantage by minimizing customization.

Concern # 5 – Selection of Best Cloud Vendors

There are 1000’s  of Cloud vendors, but most persons have heard of only a few. Under these circumstances, how is it possible to make the best choice? Clearly advertising and word of mouth is going to play an important part in selection and screening, but this can not substitute for a clear and more transparent process. Until the markets ‘‘shakes out’’ some with the emergence of dominant players who have a good market reputation, selection of Cloud vendors will remain extraordinarily difficult to the user. Amelioration Strategy: Use a consultant with a track record in doing this.

Other Limiting Factors

Contract limitations. It is impossible to place too much emphasis on the importance of careful contract negotiation. Since there is a poor track record – actually no historical record at all – for Cloud vendors, it will be more difficult to write ‘good’ contracts that can handle the vast amount of new contingencies that may appear. As a result, the contract itself may end up being a liability for either the vendor or the user, neither situation of which is good for the relationship. Amelioration Strategy: Sign shorter contracts, adjust as necessary during renewal. Advance study pays off.

Pricing and economic assumptions may be faulty. There is such a high amount of change in the market, that pricing models can not possibly remain stable. They have not stabilized yet, and may not do so until the third quarter of 2012. As a result, any long-term contract (of perhaps more than 1 year) is subject to a significant amount of arbitrage risk in pricing. Amelioration Strategy: Sign shorter contracts, adjust as necessary during renewal. Do more than listen to the Cloud.

User resistance to change. In some organizations, user re-training, acceptance, and possible resistance to change may inhibit model adoption. Any type of change such as this demands significant sensitivity on the part of IT regarding users. Note that user resistance may not come only from desktop workers, but might as well come from line managers worried about confidentiality and security of their proprietary data. “If one of our competitors is using the same Cloud, how can we guarantee we will be protected?” might be one expressed concern. Amelioration Strategy: Improve training.

Reduced ability to develop competitive systems. Being forced to renegotiate new contracts or add ARUs (additional resource units) each time the enterprise wishes to adopt a major change in technology may not be the preferable route for companies wishing to develop competitive systems. Amelioration Strategy: In-house expertise still needed. Don’t let it slip away.

No standards for certification of applications or service levels. There are no standards for either of these. Amelioration Strategy: In absence of standards, develop your own – either on your own, or with unbiased experienced consultants.

Checklist for Ongoing Management of Your Cloud

Stick to clearly defined responsibilities
  • The company
  • The vendor
Follow pricing formulas and ground rules for change
  • Triggers (tariff increases or decreases, cost of living, etc.)
Formalize change management
  • Formal process and authorization
  • Updates/new releases/new services
  • Changes in requirements
  • Triggers
Monitor performance and service level guarantees
  • Define governance process and responsibilities
  • Specify vital signs, tolerance ranges, and metrics. What is measured – response time, storage capacity, up-time, time-to- repair/recovery, other? How frequently? For what time period? How do you calculate? What period to redress?
  • Reporting periods and formats
  • Face-to-face review meetings
  • Issues management
Put in place an escalation policy and process
  • Define conditions as to when to escalate to next higher level
  • Disputes, recourse and remedies
  • Internal responsibilities
  • External responsibilities – arbitration, the courts
Prepare for untoward contingencies, disaster recovery, back-up and insurance claims
  • Testing
  • Insurance (for multiple reasons – privacy, theft, going out of business, liability, intellectual property
  • Planning
Know how to terminate the agreement
  • Define conditions and responsibilities
  • Define transition plan and costs
  • Define who owns what resources
For more information please contact Shaun

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Concern # 2 – Operations

Reliability of the Cloud. Cloud Companies may not provide service level required or may go out of business. No one knows that the general reliability of the Cloud will be, or even how it can be measured adequately. If history is any guide to the future, then experimentation with a new model of delivering computing services in a matter of course will involve problems. No one wishes to be the first to experience these problems. Amelioration Strategy: Favor the large End-to-End providers (i.e., EDS/SAP).

Loss of control: data, software, and operational management. How can day-to-day operations and management control be set

Risks and Limitations of the Cloud Model

Risks and Limitations of the Cloud Model

up under the Cloud model? What are the organizational implications when data, software, and operations are under someone else’s purview? Clearly, each organization will be forced to answer this question in a different way, but for some, uncertainty in this domain under the Cloud model may prove to be a significant barrier to adoption. For others, perhaps, it will prove to be a great opportunity. Amelioration Strategy: Difficult. Try to maintain in-house expertise to use in case of a problem.

Technical decisions made by third party. What are the implications for IT autonomy when technical decisions are being made elsewhere, out of direct control? Amelioration Strategy: No real solution, unless Cloud and customers are partners.

Lack of in-house experts. Presumably, use of an Cloud will reduce the need to employ in-house experts in various areas of information technology and applications. This will reduce costs, but at the same time strip away skilled personnel from internal IT operations. IT organizations need to understand the implications of the lack of in-house experts. Note this is generally a long-term systemic issue with outsourcing. Like outsourcing, the Cloud model will create a certain level of dependence of the enterprise on its Cloud. Amelioration Strategy: Give in-house experts control over research responsibilities, and give them management decision status.

Staff migration from company. Few have considered the staffing implications of the Cloud model. What will happen to your own IT staff (assuming you have one) after the Cloud starts to take over major segments of your applications portfolio? If the staff leaves, then will your organization permanently lose the ability to ever build up an in-house operation? If so, then what are the long term implications for that? Clearly, migration of staff away can have serious implications, but it is difficult fully to anticipate what they are. Amelioration Strategy: Give in-house experts control over research responsibilities, and give them management decision status.

Boardroom representation. If the Cloud is a key partner in providing your service, it must be aware of all of your competitive plans, yet it also services your customers. The logical board member representing IT would be the Cloud itself, yet since it services competitors, this is not workable. Amelioration Strategy: Give in-house experts control over research responsibilities, and give them management decision status.

Unclear responsibility for failures. With the Cloud sharing your processing, problem determination can be difficult. If something fails, it may be unclear who is responsible for the failure. Amelioration Strategy: Pick Cloud providers carefully. Contract for single point of responsibility.

Technical decisions made by third party. Once the Cloud is doing the processing, it makes the technical decisions. This removes them from your control. The risk is that you are at the hands of the Cloud for IT-based innovation. Amelioration Strategy: No real solution, unless Cloud and customers are partners.

Mass market versus customization. It is impossible to get competitive advantage from IT applications that everyone else has access to. At the same time, customization can be expensive, possibly reversing the Cloud economic advantage.

To be continued…

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TalendEverything you need, you get Software-as-a-Service (SaaS) or “Cloud Solutions” is one component of an overall strategy to improve business process. Align business users and IT and get more from your cloud and on-premise data – DON’T WAIT TO INTEGRATE!… Learn more

The rapid adoption of cloud applications, platforms, and infrastructure has resulted in more fragmented data and an increased need to integrate data “in the cloud” with data in on-premise applications and databases. Line of business managers and SaaS administrators need rapid time to value and self service. Meanwhile, the IT organization is tasked with avoiding costly data silos eliminating untrustworthy point solutions.

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Cloud Computing Beats Snow

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Sacher Partners is an accredited Salesforce.com consulting partner, with over 11 years experience supporting customers in maximizing their use of Salesforce.com and Force.com.

Salesforce Consulting Partner

See what more than 59,000 companies have already discovered: salesforce.com delivers results. It’s the most complete CRM in the industry—dovetailing sales with marketing and customer service to keep you on top of every lead, every deal, and every customer.

Successful Customer Relationship Management (CRM) is a journey and not a destination. As your company grows and your customers needs change your organisation will need to adapt in order to remain competitive. This landscape will need to be reflected within your Salesforce.com solution.

Partner with Sacher Partners as your expert Salesforce.com Solutions Administrator to help secure your future CRM solution

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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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