CIOs Must Lead Cloud Initiatives
Tuesday, July 24, 2012
Every five to ten years there is a disruption to the Enterprise IT infrastructure which generates significant business value and undermines current operating models. Some of us are old enough to remember the introduction of desktops, ERP and the Web, technologies that eventually became indispensable in our daily business lives. Now CIOs have the next great opportunity to change the game for their companies with the Cloud. In working with companies large and small who are adopting the TraceLink Business Cloud, we recognized that CIOs need to be engaged in the definition and implementation of this new strategic direction.
At the heart of the transformation is the dramatic change it will have on IT spending. Gartner recently released its Worldwide IT Spending Forecast. Overall IT spending for the $3.5 Trillion industry is forecast to increase 3% in 2012. The table below also clearly demonstrates that in the current IT model, enterprise software is only 5.8% of expenditures. The software that runs the business requires significant ongoing investment in computing hardware, IT Services and Telecom infrastructure.
At the core, the Business Cloud represents an opportunity to transform the computing, application and collaboration model for how business is conducted. CIOs need to distinguish true Cloud solutions that utilize the global computing utility model, such as the TraceLink Business Cloud, from the rebranded SaaS providers that call themselves the “Private Cloud”. The economic and technical benefits of these “designed for the Cloud” applications are based on leveraging and enhancing the globally elastic computing utility model. The challenge for CIOs is moving the company in this direction while recognizing that current and future investments in their own or a business partner’s computing infrastructure will shrink. The Cloud provides such flexibility that CIOs no longer have to amass large, fixed IT budgets to deliver the capabilities that business owners require.
The next layer of value is the application deployment and delivery model. True Cloud applications for the business are always ready to use and quick to integrate. The new application model eliminates the need to spend years to configure, customize, integrate and deploy. Even the administration model is more user-driven and less centrally managed by IT. The model poses a challenge for IT departments and Systems Integrators whose budgets for a Cloud-based solution are 1/10th or less than that for a legacy on-premise approach. CIOs need to champion true Cloud applications even with resistance from internal departments and business partners whose interests are not fully aligned with the business opportunity for the company.
The final and most important strategic decision is to identify the unique solutions that define the Cloud initiative. Just as Web 2.0 was defined for consumers with collaborative applications such as Facebook, Twitter and Pinterest, business network collaboration will drive the innovative new value from the Business Cloud. For decades, enterprises have spent millions and in some cases a billion dollars establishing an ERP infrastructure to streamline internal processes. Today, however, business success is defined by how well you manage your extended business network, not just your internal operations. Yet “external collaboration” on this network is still driven by point-to-point email or portals that lack any cross-company or cross-function transactional collaboration capabilities. By driving supply chain collaboration through a Business Cloud, product, information and financial flows of the company become frictionless and adapt rapidly to market and operational changes. The best aspect of this strategy is that it greatly enhances the value of the ERP investments made over the last few decades by feeding these systems the network-wide data they need.
Gartner (http://www.gartner.com/technology/research/it-spending-forecast/) is predicting Public Cloud spending to grow at 18% a year which is 4 times the current spending growth projected by overall IT. The Public Cloud service market is expected to hit $200 Billion by 2016. This would put the market on par with the Enterprise Software market.
Once again CIOs are on the forefront of driving strategic value for the business with the Cloud. CIOs must lead this transformation since the status quo with their organizations and their IT business partners will be impacted.
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