Cloud, a mean, not an end.

Many IT people see the cloud as the ultimate goal. It will solve all the problems IT departments have. I’m also seeing some boards having the same issue and mandating a move to the cloud. But the cloud shouldn’t be the end goal. It adds value in some situations, but should not be the ultimate objective. It’s a mean to an end.

So, what does cloud really give us?

A cloud is an environment where resources can be provisioned to deliver a specific task. Resources can be physical or virtual servers from pre-defined sizes, disk space, software components such as databases and many other things. These resources are reserved for a period of time and released when no longer needed. And users only pay for the time they reserve the resources. If managed correctly, cloud can reduce the cost an IT environment by only provisioning what is required at any moment in time. Cloud in itself is a cost reduction play at best.

Is that still the problem?

As many CIOs report to CFOs, reducing cost is still on the agenda of many IT departments. However, for how long? Because something else is happening in the business world. Information Technology is becoming pervasive. Smart phones, tablets and PCs can be found in nearly all households. The millennium generation is technology savvy.

Combining this trend with globalization resulting in a quest to reduce operating costs, enterprises increasingly rely on information technologies to automate routine processes and tasks. Online banking, electronic shopping have all appeared as a result of reducing costs.

But that’s not all. When the internet appeared in the early 21st century, start-ups were created to develop communities that facilitated the interactions amongst enterprises and between companies and consumers. It was the start of the B2B and B2C business. The stock market boomed, and we know the rest. Most of those companies did not have their business model sorted out and according to CNN, an estimated 1.7 trillion $ got lost in the internet boom.

Even if things didn’t work out at that moment in time, the basic idea was sound. If we look at the market today, we have three types of players:

  • Service Providers, enterprises creating, promoting and delivering services to others
  • Service Brokers, enterprises connecting providers and consumers by offering a service catalog and facilities to find, choose and consume services from a multitude of providers
  • Service Consumers, individuals or enterprises consuming services from the providers through the brokers.

A specific enterprise can have multiple roles, but it is interesting to ask yourself what role you want to play. Uber for example is a typical service broker. Yes, Uber manages some of its own services but ultimately it wants to put independent drivers in contact with customers.

What role does your company wants to play?

So, the fundamental question is the role your company wants to play. Let me give you a simple example. Let’s assume for the moment you are an automotive OEM and you are working on a “connected car”, in other words, a car that contains electronics allowing the driver or passengers to consume services during the drive. Such services can be streaming music, videos, road indications, touristic information, intelligent insurance and I could name many others.

IOT-part3-pic1You will build the car with the appropriate electronics so the services can be delivered. But to deliver those services you will have to provide them. And here you have many choices. You may decide that you will build all the services you offer to the client, so you will be the sole service provider and the broker. You can also decide that you will control everything that is offered to the client, but that you will open up the platform to other players so they can also offer services in your car. So, you are the service broker and potentially one of the service providers.

Or you could even go one step further and make an agreement with Google (Android) or Apple to support their existing ecosystem. In that case you are actually outsourcing the provisioning of services to a third party.

So, what role do you want to play? There are pros and cons in each model. In the short term as there are no standards, all models will appear on the market. The question is which models will be successful in the future.

But what does this have to do with cloud?

Now, let’s assume for a moment you want to be the service broker. You will have to build a platform that is operating 24*7 for an unknown amount of users. You can build a separate company all together to do that, but you have an IT department with experience in running critical systems. Don’t they operate your SAP or Oracle Applications platform?

This means however that your IT department will no longer just support your operations, but become an integral part of the business. This requires a change in mentality, both within the IT department and with the business teams.

The amount of users for the platform IT has to build are unknown and depend on your business success. The user experience is critical to that success, so regardless of how many users, response times have to be great. This leads to the use of cloud and of cloud native application development, both new subjects for most IT departments. So, involve them early as they will need time to experiment.

Let’s go one step further and assume you decide to open up that platform to external partners. How do you attract those partners? How do you enable them to test the platform and interact with it? Your IT department needs to set-up an environment where those developers can find documentation on how to develop and test the services they are developing. They need a portal to describe their service, to identify its cost and to interact with end-users in case of issues. IT will have to implement those facilities.

Last but not least, you probably want to test third party services before you make them available on the platform, so you will need a team to check each service and approve it.

The uncertainty on the infrastructure and platform requirements lead to the utilization of cloud services so you can consume only what you require at any moment in time and manage the costs in line with the actual consumption and business revenues. Cloud is a way for you to balance your cash flow and delight your end-users. Cloud is a mean, not an end.

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