What Can “Cloud” Do for Your Business?

Technology is always changing and customers looking for a cloud solution often say they are looking for a “true cloud.” The question is – What is true cloud?  More importantly, What can cloud do for your business?

Just as process improvement methodologies typically look at People, Process and Technology, cloud computing models look at Organizational Readiness, Software and Technology Infrastructure.

Technology

Over the years we have seen many different “Cloud Maturity” models which typically pass through multiple phases resulting in a true multi-tenant or public cloud architecture. Regardless of how many phases are depicted in the model there are always more variants than can be created resulting in more of a scale of maturity than a simple label for a phase. A simple model is:

Phase 0 – Dedicated Physical Hardware.  Before the cloud was the cloud, people had all of their equipment on premise or in a co-location facility where they basically bought rack space, power and connectivity services from a data center provider.

Phase 1 – Dedicated Private Cloud. When I-BN was founded back in 1999, each customer had dedicated hardware and there were almost no shared components other than backup, anti-virus and networking.  Early phase clouds were simple outsourcing of IT to a service provider who took responsibility for running the applications which were formerly on premise.

Phase 2 – Hybrid Cloud. As service providers gained size and experience, we began greater centralization of services. At the same time as technology grew more advanced, more components of the architecture could become shared.

Phase 3 – Virtualized Hybrid Cloud – With the continuing advance of technology, hardware became a shared service component. Virtualization allows multiple customers to run on pools of hardware which are subdivided into virtual servers, switches and other formerly physical components. The combination of more powerful hardware and “software defined” components provides greater efficiency in the use of the underlying resources.

Phase 4 – Multi-Tenant Software Cloud - Although the term multi-tenancy could be ascribed to any cloud environment using virtualized hardware, the term usually is associated to applications which can run multiple customer databases using a single instance of software code. In phase 4 there are still multiple components dedicated to a single customer such as the presentation layer (web or terminal services) for the application, separate database instances, etc.

Phase 5 – True Multi-Tenant Cloud – In phase 5 all components are truly shared. Virtualized hardware running multiple company software utilizing a single database infrastructure.

In early cloud, service providers were able to offer economies of scale through purchasing power or simple sharing of software or bandwidth across multiple customers.  Back in 1999 few small to mid-sized customers knew how to run terminal services or the early Citrix technologies (WinFrame and MetaFrame) that enabled wide area networking.  As cloud matured and the technology advanced more and more components could be shared resulting in greater efficiencies and capabilities for adopters of cloud services. 

Software

The line between software and technology continues to blur.  All technology utilizes software to operate! Is Windows or Linux software or part of the technology? Of course, the answer is yes! The real question is when is software part of the technology or cloud stack, and where is the line drawn to declare the software a component of the business management system? The answer is really not clear, especially when some software will run on different database platforms or utilizes different operating systems as part of its solution. Databases are also constantly changing and evolving to take advantage of the advances in chip technology and pooling of resources in the cloud.

Software is often considered to be “true cloud” when it is web native/browser based or operating system agnostic. However, that is often a misnomer as even browser-based solutions may react differently in a Microsoft, Google or Apple based browser.  Recent security updates to Google Chrome have broken several cloud systems which were not keeping up with the latest technology. Similarly many applications which work in a browser now have mobile applications to improve usability on a phone or tablet device. Does this make a mobile application less “true cloud”?

Software is also going through a maturation process.  In the early days of PC based computing software developers strove to make their code efficient to work on computers with little memory and minimal compute power based upon todays standards. As technology advanced and computing power became greater and more memory was available, programs struggled to keep up with the pace of change on the hardware and often became complex and “bloated.”  Applications evolved from simple “fat clients” where all data and software had to be in one place at one time, to client-server architecture where many calculations happened centrally, to cloud based where all calculations happen in the cloud.

With the emergency of cloud, software development has also been evolving towards a micro-service strategy where smaller single purpose applications interact with other applications to allow for “agile” development.  In a micro-service architecture these smaller programs can be updated to provide greater functionality without impacting the larger overall application.  The micro-service architecture is also a strategy for interaction with other cloud services.  For example, many companies use multiple clouds for deep expertise in a particular function or technology. Examples include:

• External payroll service providers,
• Tax rate and filing services,
• Foreign currency rate services,
• Inventory optimization services.

Most leading business management software was developed before current technologies and methodologies were developed. Newer software companies often tout themselves as true cloud, but may lack the functionality of the legacy applications.   Many legacy applications are being rewritten or adapted to take advantage of micro-service architecture or become web-native. 

Assessment of cloud software should look at several factors:

• Fit for Business – The number one criteria is always,  does the software meet the functionality requirements of my company.
• Ease of Access – Can the functionality be consumed from anywhere at any time?  Do I need to install something locally to access it?
• Open Architecture – Can data be accessed from other programs and can I send data to the program from other programs?  Open architecture is critical for interaction with web stores, customer and vendor systems or other cloud-based applications and services.

Organizational Readiness

The advantages of cloud computing include

1. Anytime, anywhere access to critical business information.
2. Ease of integration of information and workflow with customers, suppliers and other external stakeholders and systems.
3. Optimal utilization of computing power to create the economies of scale that garner lower costs

Those three advantages of Cloud Computing have now been combined to enable digital transformation.  

• Real time data with additional input from suppliers can enable “intelligent forecasting” of demand with optimal order sizes to increase order fill rates and reduce carrying value of inventory.
• E-commerce combined with artificial intelligence can target related in-stock or drop ship products to expand sales opportunities and deepen customer relationships.
• Automation and integration can reduce time and effort required to capture and process transactions.

Cloud advantages only become benefits when integrated into the processes and procedures of the business. Accordingly, Cloud Maturity Models have emerged to assess how “ready for cloud” an organization is. Typically used in large enterprises, these tools look at different aspects of the company such as:

• Organizational Readiness – Is management committed to making changes that would garner the advantages of a cloud-based systems platform? Are the people ready for a change in the way they work?  In the context of small to medium sized business, organizational readiness often comes when the principal owner makes the decision to embrace new technology.  

? Has Amazon, Wayfair or other online companies come into the market

? Is the company falling behind other competitors who have embraced technology

? Have the next generation family members come into management?

? Will the team accept input from tools like intelligent forecasting?

• Business Strategy – How does the organization’s business strategy align with a cloud based system architecture. 

? Does the strategy envision allowing front line employees to make decisions within parameters of approval procedures?

? Does the company need an e-commerce site or is the acceptance or demand for online order processing increasing?

? Are customers interested in paying their bills online?

? Is EDI or some other form of vendor portal now available for integration?

• Architecture – Is the organization ready for cloud from a physical infrastructure and software perspective?

? Has the organization adopted remote work policies

? Does the company have a IT/telecom infrastructure to support remote access?

? Does the business management system support mobile applications and have an open architecture for integrations?

? Does the company have real time reporting to support real time decision making and/or artificial intelligence?

• Adoption – Has the organization truly integrated the cloud into its business?

Adoption is the focus of the Open Alliance for Cloud Adoption Cloud Maturity Model - A Linux Foundation Project, Inc.  The Open Alliance for Cloud Adoption (OACA) model seeks to answer the question - “What should our journey to cloud and hybrid IT look like?”

Models like that of the OACA offer a way for an enterprise to plot its maturity level in the context of a number of possible use cases. These models can be applied to divisions or departments within a large organization of for a whole company. Each organization using a model should assess its position with a cloud service model that is applicable them. There is no one size fits all approach and the journey will always be unique for your company. Like any methodology, the key is to understanding the objectives of why you are doing the activity and to follow a process for achieving your goal.

Conclusion

When looking for a cloud solution for your company, the journey begins with an honest self-assessment of what you want to accomplish and how ready you are for change. All true benefits come from a process-oriented approach which integrates people, process and technology into a solution that meets customer needs.  

The cloud can be thought of as your computing resource similar to a utility that provides water, telecommunications or electricity to your business. The first step in the journey is often the realization that most companies do not generate their own power or lay their own fiber optic cable, but outsource their utility to a service provider.  

There are several major differences in cloud computing compared to utility consumption models.

1.      Although many large providers like Microsoft or Amazon believe they can be your one stop shop for everything cloud, they are not monopolies or exclusive providers like many power companies. At some point, the limits of working with a single public provider get reached. Perhaps one vendor offers services another doesn’t, or implements them better.

2.      Federation refers to the interoperability of cloud.  The most common “federated service” is single sign on whether it be with your Microsoft, Facebook or Google ID.  Your cloud will need to interact with many other company clouds to achieve “federation” where benefits are the greatest.  Fortunately, or unfortunately, there is no centralized grid operator which manages the flow of information amongst clouds. Integration and interoperability standards are immature and typically require specialists to make integration seamless and effective. This is why Open Architecture was listed as a key factor to consider in software.

3.      The cloud computing model is still relatively new and unregulated.  Most cloud service providers will try and lock you into long term contracts with minimum spend requirements to attain market competitive pricing. Consumption based pricing may be the theoretical model of true cloud, however; bundled cloud services are the most common way companies use to simplify cost and/or obscure pricing. True consumption-based pricing is often the most expensive model in current cloud computing for regular and recurring operation.

The OACA model does not focus on what specific technology the “cloud” utilizes nor does it specify a particular model as “True Cloud,” but focuses on the journey and benefits to be derived from an optimized cloud, whatever that may be for your organization.  There cannot truly be one answer for what defined “true cloud” as there is not one organizational structure that best fits all companies!

For more information and further analysis, visit the I-Business Network Blog