CIOs are taking a pragmatic approach to Cloud computing, selectively launching SaaS applications and shifting infrastructure resources to IaaS platforms while building their own private Clouds.
In our interviews with CIOs and Cloud leaders at 16 large enterprises we found that everybody is doing some form of Cloud computing. But nobody is all-in on the Cloud.
The CIOs we talked to are enthusiastic about the potential for Cloud computing, but their optimism is tempered by realism. All are well aware of the challenges posed by decades of investments in legacy systems.
As Ray Voelker, CIO at Progressive Insurance, says: It would be "a whole new ballgame" if Progressive were some mid-sized business that didn't have an extensive data center footprint, but "we already have assets we own that we can leverage."
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Like many other big companies, Progressive today relies on the public cloud mainly for SaaS applications that aren't core to running the business, such as HR management and expense reporting. On the infrastructure side, Progressive uses IaaS largely for experimentation. More widespread use of the public cloud is a ways off. "We're likely to continue to watch the move toward hybrid clouds very closely as that technology continues to develop and mature," Voelker says.
Likewise, Avnet, a $US27 billion distributor of electronic components, has been building a private Cloud internally for several years, while its public Cloud usage is primarily limited to SaaS. Its biggest rollout, Microsoft Office 365, is just getting underway.
Avnet is open to wider use of public cloud services, says CIO Steve Phillips, and has identified three scenarios where it makes sense for the company: To provide functionality that's not a core competency for IT and wouldn't sacrifice competitive advantage; when there's a need to implement quickly and a cloud offering can reduce risk and capital expense; and when a short lifespan is expected.
Boston Scientific, too, is moving faster with SaaS than IaaS workloads.
"SaaS allows us to quickly support our business globally," says Rich Adduci, CIO at the medical device maker. "The ability to access a lightweight app, with a powerful back-end, and spin it up in minutes, is really a tremendous asset when you're moving in fast-paced markets." The "maturity level" of IaaS puts that on the "near-term horizon," Adduci says.
Conversely, Dow Chemical has moved more infrastructure than apps to the cloud. The company finds this easier to justify financially because those are largely commodity services, whereas applications offer competitive advantage, says Paula Tolliver, Dow's CIO and corporate vice president, business services. That is, Dow wants to keep closer tabs on key applications, to respond to nuanced changes in business strategy, she says.
About 10% of Dow's applications are in the public Cloud, hosted by external vendors. Looking ahead, about 30 per cent to 40 per cent of applications are expected to be in the cloud in three years. "We're very optimistic" about the cloud, Tolliver says.
Meanwhile, Dow runs a private Cloud for some of its applications and infrastructure, to experiment and learn. Dow's private Cloud delivers a lot of the benefits of public cloud, and it positions the company for future public Cloud migrations, Tolliver says.
The appeal of Cloud
The Vanguard Group is pursuing all aspects of Cloud computing: IaaS, SaaS and PaaS in both public and private models. Speed to market, higher utilisation and improved productivity have been the biggest gains for the investment firm, which manages approximately $2 trillion in assets.
"For us, Cloud computing is highly cost effective; we believe in the utility-based computing model," says CIO John Marcante.
Land O'Lakes, with $14 billion in annual revenue, is using a lot of SaaS, especially when compared "to other companies our size," says CIO Mike Macrie. Database, sales force automation, CRM, EDI, travel and expense - and more - are all residing in the Cloud.
The Cloud has been so successful a technology that the portion of the overall IT budget spent on SaaS has grown from 10 per cent to 30 per cent in the past two years.
Macie says he's "getting twice the service -- uptime, reliability -- for the same level of cost" as before Cloud was introduced into the company. And the time needed to implement a business request is cut in half "in many cases," he says.
Some of the same attributes attracted Humana to the Cloud.
"There's a natural draw toward cloud as a technology. It introduces flexibility and capability that didn't really exist before," says Brian LeClaire, CIO at health insurance provider Humana.
"We use private Cloud to share capabilities around datacentres, and then leverage interconnectedness" to link elements that are private and public, LeClaire says. "Now we're moving into software-defined data networks. That last layer is becoming highly virtualised -- server, data, network virtualisation."
Western Union has selectively deployed cloud apps, including Salesforce.com, Workday for human resources, and several offerings from Adobe for online customer experience, data management and analytics. The company is taking a prudent approach to leveraging cloud for infrastructure.
"I'm not so hell-bent on cutting costs, but on modernizing the tech," says Sanjay Saraf, senior vice president and CTO at Western Union. "I can't waste too much time. Cloud providers have got it down right. It's low risk and gives me a tremendous amount of speed."
Likewise, cost savings isn't a driving factor for Campbell Soup's Cloud initiatives.
"If you make it a money thing, you're making a mistake. It's an option to deliver capability," says Joe Spagnoletti, CIO at Campbell's. "You have to get it at the cost commensurate with the capability. You can't do it for cost savings or management efficiency."
Campbell's has developed formal processes, reviewed monthly, for the acquisition, management and recertification of its cloud partners. "There are no limitations to the things we're doing in the cloud, but we're also not trying to do everything," Spagnoletti says.
The burden of legacy systems is just one challenge that can slow Cloud adoption. Another is concern about vendor lock-in.
To help manage the risk of lock-in, GE is putting in the foundations of what it calls a Service Rail, which is based on as many standards and common foundations as possible. The idea is to create, for instance, a set of services around identity management so users don't need to worry about multiple IDs or passwords. Also, if business needs change, GE will be able to adopt other types of cloud services and software without having to rework its technology underpinnings.
Although some people worry about security and risk in the cloud, Whirlpool CIO Michael Heim says those issues are improved by Cloud computing because the vendors stay up to date on the latest technology. Security problems arise from "how you're managing, not where it is," Heim says.
Amazon and Google have come a long way toward being enterprise-friendly, and corporate legal teams have come a long way in their understanding of cloud, Heim says. IT's role is to communicate and demonstrate how the cloud meets business requirements. "People worry about risk and security -- [but] you improve security and de-risk your environment with Cloud. I also believe you improve your ability to compete," Heim says.
Wayne Shurts, CTO at food distributor Sysco, echoes that sentiment.
"Cloud providers understand legal and security issues are some of their biggest obstacles, so they've really concentrated on it and focused on it. They have pretty good answers," Shurts says.
Sysco recently completed a major Cloud project: Deploying Microsoft Office 365 for 20,000 users. "There's nothing in my managing email that's a competitive advantage. I'm perfectly happy having someone else manage that for me," Shurts says.
One piece of advice from Shurts? Feed the network.
"Your network has got to be Class A," Shurts says. Sysco is in the middle of a three-year network upgrade project to increase bandwidth, provide more complete redundancy and improve traffic prioritization. "The network really becomes even more important and a huge point of failure in your infrastructure than it ever was before."
Data movement is also a concern for Family Dollar, whose Cloud deployments include HR applications, SharePoint and the Familydollar.com website.
In general, the systems that lend themselves to cloud need to be used most of the day, don't have a batch processing cycle and aren't terribly data intensive, says Family Dollar CIO Josh Jewett. For this reason, much of the retailer's IT resides on premises. ERP and data warehousing, for example, are internal largely because so much data runs through these systems that "there isn't a good business case" for passing it in and out of the company continuously, Jewett says.
"You have to move it through a skinny pipe. That takes a lot of time, and partners may charge by the megabyte or terabyte. If you're talking about close to a petabyte of data, not only is it hard to move but it's cheaper to keep it on premises," Jewett says.
Cloud skills in demand
On the skills front, CIOs are in agreement that companies need to reexamine the traditional roles and capabilities in their IT shops to be successful in the cloud.
"IT today is more of a broker of hosting services--both internal and external--than a purveyor of specific tech platforms. It's changing the nature of the work across IT," says Greg Moran, CIO at Nationwide.
Nationwide's Cloud efforts so far have been largely internal, built on a virtualised infrastructure with Linux running on mainframes. That approach provides the company with many of the benefits associated with Cloud - flexibility, standardisation, manageability - but in a private setting, Moran says.
Cloud is a big change for people and organizations, says Randy Spratt, CIO and CTO at McKesson. There are "different skill sets, different relationships with vendors, different ways of deploying and provisioning services."
Change management becomes an "evangelical" function, Spratt says. "Just building and deploying isn't enough. You need to educate businesses about what they have. It's like an internal sales job."
Understanding virtualization is essential; if it can't be virtualised, it can't go to the cloud, says Bob Fecteau, CIO at systems integrator SAIC. In general, Fecteau sees a path away from pure skills (coder, network manager) and toward information brokers. Tomorrow, IT will be asked, "how can you get me the info we need to make key business decisions?" he says.
For more on how these companies are embracing Cloud computing, check out the rest of our Giants in the Cloud series: