A CIO Primer for Cloud Transformation Strategy

Almost every IT leader you speak with that has has a sense of pride when discussing the cloud strategy they have for their business. We listen to presentations that extol the advantages of CapEx vs OpEx and read white papers and articles explaining the benefits of transforming the footprint of IT at the business level. This often results in the assumption that ANY strategy of dumping the data center in favor of cloud services, will be a substantial win. Although this very often can be the case, greater benefit can be realized when not focusing on being in the cloud, but rather how you get there.

I have had a number of experiences with IT leaders looking to advance their own agenda by pushing cloud migration. That is the nature of people. Unfortunately. their goal is very often to just get there for the sake of the short-term win rather than looking to improve the overall value position of IT at an enterprise level. Don’t get me wrong…This works…but the net gain can be small compared to a true enterprise level strategy.

Enterprise Context

IT product managers and application owners have a deep understanding of all of the parts needed for their application supply chain. This is at the heart of their responsibilities and they are ultimately accountable to upper management for successful delivery. However, the vantage point of these individuals is often based on a granular part of overall IT. Typically, single applications or even subset of the application portfolio cannot truly represent the complete enterprise. Enterprise level IT decisions must be directed with context wider-scale aspects of the business as a whole and the mission of IT as a whole. Tread carefully if cloud aspirations are initiated from a single IT component. Leadership and direction for cloud transformation is best served directly from a higher organizational perspective. In my experience, I have seen considerable rework and unnecessary expense resulting from well-intended application owners looking for a political “win”. This can be quite painful.

Another pitfall to be aware of is over-emphasizing efforts to eliminate infrastructure concerns. Any business having an IT department or is concerned with delivery of applications to users is ALWAYS in the business of infrastructure at some level. Even with eliminating all business funded data centers, the only way to obtain optimal benefit from the cloud is by careful consideration of how the newly provided compute resources are architected, configured and provisioned. A better way to think of this would be that it is advantageous to the business to minimize hardware investments. When you spend big on compute hardware and everything needed to keep it running, the reality is you are paying a premium for resources that are seldom used to capacity. Properly managed, cloud transformation reduces the expense to only the amount of resources that are actually used.

Additionally, how the new resources are provisioned to your solution architects will have an impact on the Time-to-market for their solutions. The greatest assets a company has is its ability to differentiate from the competition. Maximizing the agility your teams have in creating new solutions provides competitive advantage.

Setting the Stage for the “Business” of IT with Enterprise Context

The Triple Constraint

An often used pictorial model used in project management is the “Triple Constraint”. Basically this demonstrates the key attributes that must be handled effectively for successful completion and closure of any project. Usually, these are presented using the terms Time, Cost & Quality or Fast, Cheap and Good. The same perspective holds true for the relationships between these attributes when creating a strategy for IT. The terms I prefer vary slightly and are as follows:

• Quality – the level of completeness that the strategy provides with respect to delivery of applications to the users and the level at which the application is of benefit to the business mission
• Speed – the level at which any IT activity is able to design, build and deliver solutions which differentiate the business from competition
• Cost Mitigation – the ability to minimize financial impact of resourcing IT solutions or the value that the business places on the return from IT

The triangle in the “Triple Constraint” is mostly immutable. Neither the sides or the angles may change in overall proportion. The product of these attributes (the space in the center) represents ITs ability to leverage control over delivery of solutions. It is the overall quantity of the 3 attributes that the IT enterprise has to work with.

I also add an outer circle representing the overall business advantage gained. The size of the outer circle should always be greater than that of the triangle. When an IT strategy does not provide a larger business advantage then it becomes a cost center rather than a value add.

I mentioned earlier that the triangle in the model is “mostly” immutable. The static ratio of the sides does not constrain the length of the sides as long as each side is equal to the others. This means that you do have control over the overall size of the triangle. Optimizing the ability to leverage and control the size of the triangle is done through strategic management of the elements affecting time, cost and quality.

To add additional meaning, different areas of the “business advantage” circle are called out:

• Market Position – This is the area of gain from the strategy around speed and cost mitigation. The benefit of solutions delivered more rapidly and at lower cost.
• Reputation – The positive perception that IT service delivery is contributing. This comes from a combination of how much it meets their needs/wants and how fast it is delivered to them.
• Agility & Strength – By name you would think this would somehow be related to speed. Instead, this represents the businesses commitment to quality combined with the financial investment they are able to back it up with.

Applying this to Cloud Transformation

To begin developing a strategy for application migration to the cloud, the first step is determining what the businesses commitment and/or capability to commit to the effort. Basically, the amount of resources (Time, cost, quality) that they can provide measured against the point of diminishing return (When the circle becomes smaller than the triangle).

To determine an optimal path, the business should consider the applications within their portfolio that IT delivers. An exercise in “Application Rationalization” will help build a strategy for how much infrastructure ownership and control an IT organization can sacrifice in favor of the economies of the cloud.

There are three common options offered by cloud service providers:

• Infrastructure as a Service (IaaS) – With this option, the cloud provider offers a virtual data center housed within their location. This option offers applications the greatest agility with regard to configuration of components providing compute services. Here the provider’s responsibility ends at the hardware level and does not include operating system or component configuration.
• Platform as a Service (PaaS) – The cloud provider takes additional responsibility for server operating systems and application platforms. Flexibility of configuration for these components is limited however availability and scalability are assured.
• Software as a Service (SaaS) – The entire tech stack as well as application logic is delivered. Control over the system is limited to functional configuration of the application alone.

The responsibility matrix for each of these service options shows varying levels of control and responsibility that you can maintain. As responsibility and control is passed to the service provider, direct costs may decrease. However, technical agility is sacrificed and can lead to loss of some of the financial benefits of opportunity.

There are several models floating around for rationalizing investment in applications within a companies portfolio. Evaluation of applications is based on quantifying the impact that each application has on competitive advantage. Applications that differentiate you from competitors are ideal for investing resources to maintain their advantage. Conversely, applications that provide more commoditized utility (like email or chat systems) do not yield any benefit from in-house development or infrastructure expense.

At the bottom of the responsibility matrix I have added labels to each option (P.I.R.O.). These labels correspond to categories used during the application rationalization effort and represent strategies for maintaining the applications as assets.

• Protect – This option is only be used when loss of mission critical IP requires complete internal control.
• Invest – Applications that differentiate the business warrant extra management to optimize them.
• Refactor – As active development of former differentiators decreases, look for ways to economize.
• Outsource – Non-business critical applications can sacrifice control in favor of managed solutions.

Carefully evaluate at each application in your companies portfolio to determine what amount of differentiation they provide to your enterprise competitive advantage. Overlaying these classifications on the different cloud delivery models will offer a solid starting point in determining an optimal strategy.