And the Goal of IT-Business Alignment
by David Mitchell
Senior Vice President, IT Research, Ovum
In his 1962 book Profiles of the Future, scientist and author Arthur C. Clarke says that any sufficiently advanced technology will be indistinguishable from magic. Technology marketers have taken this to heart, embodying their new products with near magical properties in an effort to drive adoption of those products and fuel the continued growth of the technology sector.
Cloud Computing is the latest incantation being chanted by the IT wizardry, with claims that range from the relatively benign to the downright absurd about the impact this phenomenon will have on the IT industry and its customers.
The Ancestry of Cloud Computing
Cloud computing, although frequently presented as a new idea, has deep roots. It is part of the broader evolution of computing from its earliest days, when mainframes were the predominant model of computing, transitioning through the generation of the personal computer that most businesspeople know so well.
No generation of computing has ever succeeded in completely supplanting its predecessor. The current market still sees mainframes flourishing, departmental computing going strong, and personal computers on most desktops.
There have been two intermediate steps on the way from personal computing toward cloud computing. The first of these was the Application Service Provider (ASP) model that came onto the scene during the dot-com boom, although it never really gained strong business adoption. In many ways, one could consider it as having transmogrified into the Managed Services market that many of the traditional outsourcing providers and original entrants from the telecoms industry firms preferred.
The second intermediate step saw the introduction of Software as a Service (SaaS). Two facets differentiated SaaS from the previous ASP and Application Services market: scale and efficiency. SaaS providers developed new software engineering methods that allowed their software to be easier to manage and cheaper to operate, meaning that they were able to increase their revenues by acquiring new customers — without their costs rising at the same rate. This ability to decouple the train-track economics, where revenue and cost lines move up and down together, is a key reason that makes SaaS a better business model than the ASP model ever was.
Cloud Computing, Simply Explained
Beneath the magical aura that surrounds cloud computing are some deceptively simple concepts that, when approached correctly, can offer businesses of all sizes a new set of benefits and a new way to ensure that IT remains aligned with the priorities of the business. There are four basic concepts under the cloud computing banner:
Cloud computing is more about a new management and commercial model than it is about a new technology per se. Ironically, the cloud computing model bears more than a passing resemblance to the mainframe models that were prevalent in the 1960s and 1970s.
Business Agility and Business Alignment in the Cloud
From a business perspective, the real potential of cloud computing is that it can improve the alignment between IT and business.
To begin, the traditional IT models involve a significant element of fixed cost in the annual budget, without the ability to flex costs up or down. Sometimes as little as 20% of the IT budget is available to fund new business initiatives that reduce cost, increase revenue, facilitate the development of new products or otherwise deliver business value. Cloud computing costs are much more variable in nature and can be tuned up or down depending on business needs. This variability allows more spending to be focused on technology that directly delivers business value.
Secondly, improving the time-to-benefit is another key business advantage of cloud computing. Cloud computing removes or significantly reduces the up-front expenditure on software, hardware and project implementation. Being able to get business productivity enhancing tools into the broad user base earlier means that these tools can be used to deliver business value much sooner. When the reduced up-front costs and effects of earlier delivery are combined, the result is that businesses that adopt cloud computing can expect to see the time-to-benefit significantly reduced, as IT becomes more responsive to the business.
Procuring IT systems has always been challenging, requiring that multiple criteria be taken into account. IT is a complex market that has a whole spectrum of suppliers, from small and niche companies right through to massive IT conglomerates.
The emerging cloud computing market is no different. In the last two years, many dozens of new cloud computing companies have emerged, many of which will simply not be viable suppliers in the medium term. However, some of these companies will evolve into major forces in the cloud computing market. At the same time, many, if not all, of the larger IT companies have also introduced cloud computing services.
When deciding on a cloud computing provider, the same range of commercial and technical assessments still needs to be carried out, albeit at a much faster pace. In particular, businesses need to be sure their cloud computing provider can deliver the security, availability, reliability, scalability and other parameters for the business applications that will use these services.
Builds the Cloud for Business
The basic promise of cloud computing is simple.
Companies can have an IT infrastructure that expands and contracts, in line with business requirements, rather than having to invest in computing capacity that sits underutilized except during peak periods. New business initiatives can be started quickly without having to invest in new equipment or use limited in-house IT resources.
Despite this promise, the market has yet to take off. Whenever CIOs are asked why they have not embraced cloud computing more fully, there are usually two answers: security and performance.
As it turns out, while many of the early cloud computing offerings were more suitable for smaller start-up companies that were focused on development and testing new products, rather than built-in security or reliable performance — both critical components of using the cloud in an enterprise setting.
As Mike Marcellin, Verizon vice president of global managed solutions, explains: “We recognized the need to build a cloud computing service to support mission-critical applications that met the stringent security and performance requirements of enterprises. Our goal is to be able to support all company applications so enterprises can truly harness the power of the cloud.”
The Verizon Computing as a Service (CaaS) solution utilizes the global Verizon network and its expansive network of data centers. This highly resilient, on-demand platform enables companies to employ the computing resources in the quantities and duration matched to the needs of their business, something that makes more sense than ever in today’s economy. Verizon gives businesses access to a real-time, self-service portal that lets them dynamically provision and manage physical and virtual servers, network devices, storage and backup services.
When Verizon launched its CaaS solution in June, it built on a 20-year heritage of delivering computing infrastructure and managed services, while addressing the number one IT concern of CIOs: security. Verizon uses a three-tiered approach to security, says Marcellin.
“Verizon Business provides a secure infrastructure and a proactive approach to risk reduction under Verizon’s Security Management Program,” he explains. “Additionally, Verizon Business has built strong security features into its CaaS offering, including secure connections to customer-provisioned resources and an audit trail for all changes.”
Businesses can also opt for a third tier of optional, add-on security services, including identity and access management, host intrusion detection and professional security services.
With recent advances in cloud computing, businesses of all sizes are now adopting this on-demand model. For example, notes Marcellin, one of Verizon’s customers in the medical services market is using Verizon CaaS to support its medical imaging applications. Providing clinicians with access to the images they need to support diagnostics and treatment is a crucial requirement.
In another sector, Modevity, a content rights management company, is using Verizon CaaS to deliver its Software as a Service (SaaS) offering. The demand for its products is variable and needs to scale rapidly, in line with the needs of its customers. Having a cloud computing provider like Verizon Business deliver its IT computing resources on a variable-cost basis is an absolute necessity. For both companies, security, performance and flexibility are key.
Cloud computing has definitely crossed the chasm in terms of the model described by renowned tech consultant and author Geoffrey A. Moore*. Customers are moving beyond pilot projects and are beginning to use cloud computing for business-critical applications, across a range of industries and company sizes. As Marcellin has observed, “Customers are now confident enough in the cloud model to use it for many more things: denial of service protection, e-mail scanning services, collaboration services and more. The range of services consumed in the cloud will continue to grow as enterprises clearly realize the promise of on-demand consumption of IT resources.”
Clearly, cloud computing is coming of age.
*In his book, Crossing the Chasm, Geoffrey Moore describes the life-cycle stages that all products go through: innovator, early adopter, early majority, late majority and laggard. Unsuccessful products fail to cross the chasm between stages 2 and 3.