As digital transformation shakes up traditional business models, organizations of every size, in every industry, are exploring better ways to keep pace with change. Adoption of cloud computing technology has significantly increased over the last few years, promising a great opportunity for innovation amongst businesses if approached correctly, selectively and at the right pace. And the cloud model provides some compelling options to assist IT as its fiscal priorities move from cost management to cost optimization.
According to IBM Cloud Managed Services Global Portfolio Manager Janice Dunstan's interview with Lynda Stadtmueller, VP of Cloud Services at Frost & Sullivan, a survey by Frost & Sullivan found 80 percent of U.S. companies are increasing use of cloud managed services as they evolve their hybrid IT strategies. There is no doubt that IT departments are under increasing pressure from the executive board to adopt new and innovative cloud models faster.
However despite this momentum, many businesses still seem skeptical of how cloud computing can enhance or replace all or part of their IT environment as cloud technology is not a one-size-fits-all offering.
Apparent questions on many IT executive minds: What is the right mix of cloud models — the optimal combination — that can have the biggest impact on our business? What cloud models can truly move the needle, i.e. increase revenue, decrease cost or take market share from our competition? What logistics should I consider as we begin orchestrating cloud services?
Following are three primary cloud models that you can consider based on your business requirements, financial profile and industry regulations:
Public Cloud: A public cloud model is one in which a service provider makes cloud resources available, typically on a pay-per-usage model. The biggest benefit companies typically reap in a public cloud model is cost savings coupled with ease of scalability. You don't have to buy, install, operate or maintain servers or other equipment and can develop your own applications. The resources are pretty much offered on demand so any changes in activity level can be handled very easily. As a result, users typically benefit from the savings of large-scale operations hosted by public cloud providers like Amazon Elastic Compute Cloud (EC2), IBM's Blue Cloud, Sun Cloud, Google AppEngine and Windows Azure Services Platform.
Private Cloud: A private cloud model provides a secure environment in which only the specified client can operate. While broadly providing similar scaling benefits, a private cloud lets you use your own infrastructure, on your own terms, either locally (in your datacenter) or externally (collocated, rented, etc.). It might be operated directly by your IT team or managed by a third party specializing in this kind of service, taking care of setup, monitoring, backup and maintenance issues. Depending on your industry (such as financial, government, military, legal firms, clinics and hospitals) and based on specific regulations concerning data integrity, privacy and downtime, companies may choose a private cloud to have more control over the data and underlying infrastructure — with only your own services running and your own data stored on your private cloud boxes.
Hybrid Cloud: A hybrid cloud model incorporates a mix of current systems and public or private cloud options. In addition to the scalability and business continuity benefits of the public and private cloud models, a hybrid model also enables increased speed to market as a key differentiator. With a hybrid cloud, you can quickly spin up environments to test, prototype and launch new systems of engagement applications like mobility, business intelligence and social apps around core ERP systems of record, for example.
As you can see, it's not as simple as saying, "we need to move to the cloud." Consider what you're trying to accomplish. Are you looking for turnkey apps to automate business processes? Do you want to bring the benefits of cloud management and consumption to your existing enterprise software by hosting your current apps in a private cloud? Or are you looking to develop new applications or access innovation faster through best of breed applications in a hybrid cloud environment keeping your core, installed ERP systems in place?
Determine what you're trying to achieve with your business, how your IT processes align to it, and which cloud model will serve you best.
The best part of embarking on a cloud journey is that it doesn't have to be all or nothing. One of the benefits of cloud is its flexibility and choice — there's no need to go all in if your business needs don't require it or there isn't a strong business case associated with the move.
For instance, ripping and replacing your core, mission-critical and customized ERP system might not your best target for a migration to a cloud environment given the economics and immaturity of cloud ERP systems today. You've spent significant time and money customizing and optimizing them, and you don't want that investment to go to waste. At the same time, the industrial strength ERP capabilities that you have in place today are not yet available in cloud applications. Experts estimate functional parity between customer-installed and cloud ERP applications is at least 5-10 years away.
As discussed above, many organizations are instead exploring a hybrid IT approach by choosing to keep their core systems of record like ERP in place and innovating around the edges with best of breed, faster, cheaper and more nimble technologies for mobility, social, big data, and BI, as examples.
This flexible hybrid IT strategy is quickly gaining popularity. According to a CIO article, a Forrester Research survey found 59 percent of respondents say they are adopting hybrid IT, primarily to scale their computing resources and ultimately to better serve customers.
To summarize, here are the key takeaways:
- Don't replace an application or process with an unproven cloud solution unless you're sure it will deliver the return on investment you require. A full redeployment to a less functional system will likelylead to wasted time, money and resources not to mention the significant business disruption it will cause. Ripping and replacing your stable, core ERP system is a great example of what not to move to the cloud.
- Instead, consider a move of your installed core ERP application to a hosting provider in a private cloud environment. Let the provider worry about running the hardware and related infrastructure, while you simply consume it as a service. You can decrease your infrastructure capex investments significantly, improve your security profile and scale to meet new demands while freeing up resources to focus on other strategic projects.
- Take advantage of the innovation that cloud technologies can deliver now. You can start by focusing on systems of engagement, like mobile, BI and social applications that can be optimized fast, for quick cloud wins. At the same time, keep it low risk by leaving your proven, tested core ERP and other systems of record untouched so the business and the board can support this one-step-at-a-time approach to the cloud.
It's clear that cloud is a compelling option for companies that need to keep up with new imperatives driven by digital transformation. Keep an eye on new cloud services that continue to emerge. With a thoughtful approach to cloud, you can save significant money, time and resources, lower risk by keeping your core systems in place, and innovate faster to deliver what your business needs today.
A Strategic Timeline for Next-Generation ERP
Read this CIO.com executive brief to understand how IT organizations can seize the opportunity to enable IT-driven business transformation with next-generation ERP.
Hari Candadai, GVP, Global Product Marketing and Strategy
Mr. Candadai is a seasoned marketing professional with over 22 years’ experience in global product marketing and corporate marketing management. He has consistently demonstrated his leadership by building strong customer relationships and optimal cross-functional partnerships. The author of several thought-leading white papers on disruptive software and services models, and one of the chief evangelists for independent support, Mr. Candadai is a frequent speaker at industry conferences globally.