Tag: outsourcing

Forbes has four predictions for 2013… I challenge them all

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Over on Forbes Antonio Piraino makes four predications for the year ahead:

Cloud Computing: Four Predictions For The Year Ahead – Forbes.

I want to discuss my opinion of each of them.

1) “The cloud wars are (still) rumbling and they’re getting louder”. 

I sort of agree with the sentiment of this; that companies will be looking for value-add from cloud providers rather than simple metrics (such as network, storage or service). However I completely disagree that a battle will unfold next year – I think this is a growing market and we are seeing clear differentiation between offerings. The giants in this space are, in my opinion, desperately trying to carve out a none-competitive space in the growing cloud market, rather than going head-to-head in the battle the author  describes. For that way lies only commodity offering and a drive to the bottom. I suspect that differentiation will be a more likely tactic than “war”.

2) “A titanic cloud outage will create a domino effect”. 

The article argues that “As more IT resources are moved to the cloud, the chance of a major outage for a corporate enterprise… becomes exponentially more likely to occur”. Really? How on earth can the increasing outsourcing of service lead to an exponential increase in risk? The risk is dependent upon a number of factors:

1) Capability of the cloud provider to manage the service (again not dependent on the number of services managed)

2) Capability of the cloud user to contract effectively for risk (again not dependent on the number of services outsourced).

3) Multiplexing of services on a single site – this is dependent on the number of cloud users, however it is an architectural issue as to whether the risk increases. It is certainly not exponential that five companies sharing one building are at greater individual risk than if they each have their own building. The analogy of airline accidents v.s. car accidents comes to mind.  When a plane fails it looks catastrophic, but more people die on the roads.

The article goes on to say that “If an unexpected cloud outage were to take place within the context of [ financial services trades] , the banks would stand to be heavily penalized for incompliance” – I absolutely agree – because if they weren’t adopting defensive approaches to moving to the cloud they would be incompetent. As a recent Dell think-tank I was part of discussed, banks are already moving to the cloud, and for mission critical activity, but they are working with cloud providers to ensure that they are getting the same level of protection and assurance as the would in-house. Like any outsourcing relationship it is incumbent on the purchaser to understand the risk, and manage it. Indeed banks should be evaluating the risk of all their ICT whether in-house or external – as the high-profile failures at Natwest recently demonstrated in-house IT can be  risky too!

3) A changing role for the CIO. 

Here I  agree with the article. Governments will get more involved in regulation relevant to cloud, and this will create new opportunities. Whether CIOs  will act as “international power-brokers, ambassadors even diplomats” as the article suggests depends on how they move to the cloud – many cloud providers intention is to create cloud offerings which do not demand an understanding of international law. I also doubt that the “human-responsibilities will shrink” – this only counts if organisations see cloud as outsourcing rather than opportunity  – many CIOs are probably realising that while they are loosing headcount in certain ways (e.g. those data-centre administrators) they need skills in new applications only possible with the availability of cloud. How many CIO’s imagined managing  data-analytics and social-networking specialists a few years ago?

4) Death of the desktop as we know it.

“The expectation is that an employee’s mobile device is now their workspace, and that they are accountable for contributing to work on a virtually full time basis…”  I am intrigued by the idea of what is going to happen to the desktop PC. I know I use my smartphone and ipad a lot, but usually for new things rather than the same activities I  use my laptop for. For example I annotate PDF’s on the train,  read meeting notes during meetings, even look at documents in the bath. These are in addition to the use of my desktop PC or laptop (which I use for writing and for the host of applications I require for my work and for which I require a keyboard and solid operating system). Yes I bring-my-own-device to work, but I either demand a “desktop” like environment to run on it (i.e. integrated applications and services) in which case the management of the virtual desktop applications is as complex as the physical assets (save the plugging in and purchasing). And the idea that I will use my own device on a “virtually full time basis” is clearly none-sense… health and safety would not allow a person using a screen all day to have a smart-phone or tablet as that screen.

I don’t deny that PC’s will change, and that the technological environment of many industries is changing. But my question is whether this will increase or decrease the amount of work for the CIO? My earlier post (Cloud Computing its so 1980s) pointed out that the demand for applications within industry has not remained static or decreased – we will only increase our demand for applications. The question is then whether managing them will become easier or more difficult. For me the jury is still out but if pushed, it is for this reason that I think Windows 8 could be successful in this space.

I believe many of us are waiting for a device which capitalises on the benefits of tablets and smartphones, but which will run the complex ERP and office applications our businesses have come to rely upon. Sure we could try to make do with an iPad or Android device, but Windows 8 promises the opportunity to use the full industry proof applications we already have in a new way. I anticipate seeing lots more of these Windows 8  devices in the next few years – though  with many of the applications becoming much lighter on the desktop. After all the iPad and smartphone demonstrated the importance of locally running Apps not of cloud services…  they were just smaller and easier to manage applications.

 

 

Accenture Outlook: The coming of the cloud corporation

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I have written, with two colleagues, an article for Accenture’s Outlook journal which introduces the idea of the Cloud Corporation:

Accenture Outlook: The coming of the cloud corporation.

The article discusses various trends in outsourcing which will impact upon Cloud (and vice versa).

Cloud computing remains focused on cost cutting achieved through new technology, however lessons from the past suggest that this is only a minor part of the disruptive innovation which Cloud may offer. In particular we should not ask “what is cloud computing?” but rather “why is cloud computing?” – in essence exploring the pressures on innovation today which resonate with the idea of utility computing.

While the cost saving is an important incremental innovation on existing practices, it is cloud’s potential to allow new forms of organisational collaboration which offer the potential of radical innovation. Moving the data-centre outside the organisation asks us to evaluate the relationship between the data-centre and the organisation. Is it “ours” to horde and control, or are parts of it able to be shared, opened, exploited by others (partners, customers, suppliers etc)? In turn does this opening of the relationship between the organisation and its information recast the organisation itself?

 

A Cloudy Future for Microsoft?

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Friends at www.horsesforsources.com (an influential Outsourcing Blog) provide a useful analysis of Microsoft’s position in the Cloud Market. The comments are perhaps more interesting than the piece…

Click here for their article – A Cloudy Future for Microsoft?.

Lock-ins, SLAs and the Cloud

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One of the significant concerns in entering the cloud is the potential for lock-in with a cloud provider (though clearly you otherwise remain locked-in with your own IT department as the sole  provider).

The cost of moving from one provider to another is a significant obstacle to cloud penetration – if you could change provider easily and painlessly you might be more inclided to take the risk. Various services have emerged to try to attack this problem – CloudSwitch being one which created a considerable buzz at the Structure 2010 conference.   Their service aims to provide  a software means to transfer enterprise applications from a company’s data centre into the cloud (and between cloud providers). Whether it can live up to expectations we have yet to know, but CloudSwitch is attempting to provide a degree of portability much desired by clients – and probably much feared by Cloud Service providers whose business would reduce to utility suppliers if they are successful.

But this links into another interesting conversation I was having with a media executive last week. They mentioned that since cloud virtual machines were so cheap they often (effectively)  host services across a number of suppliers to provide their own redundancy and thus ignore the SLA. If one service goes down they can switch quickly (using load balancers etc) to another utility supplier. Clearly this only works for commodity IaaS and for relatively simple content distribution (rather than transaction processing) but it is a compelling model… why worry about choosing one cloud provider and being locked-in or risking poor SLA  – choose them all.

An Over Simplistic Utility Model

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Brynjolfsson, E., P. Hofmann, et al. (2010). “Economic and Business Dimensions Cloud Computing and Electricity:Beyond the Utility Model.” Communications of the ACM 53(5): 32-34.

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This paper argues that technical issues associated with innovation, scale, and geography will confront those attempting to capitalise on utility computing. They take the utility model of computing (i.e. that cloud computing is analogous to the electricity market) and identify key challenges.

In particular they identify the following technical challenges:

1)    The pace of innovation of IT – managing this pace of change requires creative expertise and innovation (unlike utilities such as electricity which, they argue, are stable).

2)    The limits of scale – Parallelisable problems are only a subset of problems. Scalability of databases has limits within architectures. APIs e.g. using SQL are difficult for high-volume transaction systems. Further large companies can benefit from Private Clouds with little advantages, and greater risks, if they go to the public cloud.

3)    Latency: The speed of light limits communication. Latency remains a problem. For many applications performance, convenience and security considerations will demand local. [While not mentioned in the article it is interesting to note that this problem is being attacked by http://www.akamai.com/ who specialise in reducing the problems of network latency through their specialist network]

They also identify the following business challenges:

1)    Complementarities and Co-Invention: “Computing is still in the midst of an explosion of innovation and co-invention First that simply replace corporate resources with cloud computing, while changing nothing else, are doomed to miss the full benefits of the new technology” (p34). It is the reinvention of new services which are key to the success of cloud. IT enabled businesses reshape industries – e.g. Apple quadrupled revenue by moving from perpetual licence to pay-per-use in iTunes, but this demanded tight integration of EPR and Billing which would have been difficult within the cloud given their volumes.

2)    Lock-in and Interoperability: Regulation controlled energy monopolies, and electrons are fungible. Yet for computing to operate like electricity will require “radically different management of data than what is on anyone’s technology roadmap”. Information is not electrons – cloud offerings will not be interchangeable. “Business processes supported by enterprise computing are not motors or light-bulbs”.

3) Security – We are not concerned about electrons as we are with information. Regulators, laws or audit is not needed. New security issues will need to be faced (see  (Owens 2010) for interesting debate on security).

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Owens, D (2010) “Securing Elasticity in the Cloud”, Communications of the ACM 53(6) 48-51 doi: http://doi.acm.org/10.1145/1743546.1743565

IT departments as “outside”

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Joe Peppard, in a recent EJIS paper (Peppard 2007), makes the point that utility computing (along with outsourcing and ASP) are premised on a gap between IT function and the customer/user. “They assume the user is the consumer of IT services, failing to acknowledge the value derived from IT is often not only co-created but context dependent” (ibid, p 338).

Joe suggest that this is founded upon the ontological position that “IT is an artefact that can be managed”, and subsequently that the value of IT is in its possession.  This leads to the obvious claim that rather than focusing on IT management, we should focus on delivery of value through IT. This brings our perspective of IT function (and of Cloud Computing within the enterprise) from the realm of cost-saving efficiencies (as Carr 2003 might suggest) to a focus on contextual practice – supporting work.  As Joe’s the article argues “to seek not to management IT per se, but to manage to generate value through IT”.

Carr’s (2003) argument is thus that the IT function is not needed since this is outsourced to the ASP/Cloud provider. But a more subtle point might be that it needs to instead be pervasive – IT installed within business functions (so as to better contextualise Cloud Services within business practices). While IT services prior to the Cloud increasingly focused on getting the “plumbing” of the organisation correct (i.e. ensuring the email worked, installing ERP, networking the systems), with the use of Cloud services their role must be focused on improving the integration of Cloud services into the work practices of users  – focusing on both social and technical practices which can be supported or enhanced through IT.

We remain fixated on the CIO and IT department as our focus for Cloud Computing.  This seems odd. For what if this role of contextualising IT is better suited to users (who are increasingly technologically proficient particularly around Cloud Services (e.g. SalesForce / GMail)). With the Cloud users are increasingly powerful actors able to engage with, and even procure, IT infrastructure for themselves. How this might influence the role of IT within the enterprise is far from clear but it will certainly lead to new battles and new challenges.

References:

Carr, N. (2003). “IT Doesn’t Matter.” Harvard Business Review: 41-49.
Peppard,J (2007) “The Conundrum of IT Management” European Journal of Information Systems (2007) 16, 336–345. doi:10.1057/palgrave.ejis.3000697

How Cloud Computing Changes IT Outsourcing — Outsourcing — InformationWeek

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via How Cloud Computing Changes IT Outsourcing — Outsourcing — InformationWeek.

This article provides a useful look at the outsourcing relationship and compares this with the Cloud contracts. In particular (quote) “Cloud computing blurs the lines between what had been conventional outsourcing and internal operations, and it will test IT’s management and control policies”.  The article points out that companies are not ready for the challenges of Cloud growth, with their survey suggesting only “17% say they directly monitor the performance and uptime of all of their cloud and SaaS applications”. with a “shocking 59% relying on their vendors to monitor themselves”.

This is indeed shocking. As companies contemplate moving their operations to the Cloud they are perhaps being led into a strong sense of security by the vendors promises. But as demand grows these vendors facilities will be stretched and less certain.

On contracts the article points out that a cloud computing contract is a hybrid of outsourcing, software and leasing and are major contractual commitments.

Finally the more obvious points about business strategy are made – pointing out that a cloud provider may be less interested in driving innovation and major technological change as they are not as aligned to a businesses core capabilities and objectives.