Living under the commoditisation cloud

Every analyst says that cloud computing will change the CIO’s world. Some argue that IT will become a commodity that no longer needs any introduction, and therefore the CIO becomes superfluous.

Nonsense, say others. The smart CIOs will be more powerful than ever in the modern enterprise.

The cloud will make delivery of services easier and remove the drudgery of managing all those difficult unreliable resources, be they hardware or human. The CIO, in this vision, will have a much more strategic role.

Either of these two scenarios may face any CIO. The trick, in the next few years, will be to identify the threats and neutralise them.

If the cloud doesn’t kill you, it will make you stronger.

As ever it will depend on the individual circumstances of each CIO, the politics of their organisation and their own psychological profile.

Psychopaths, for example, have the perfect emotional make-up to survive the pressures facing the modern CIO, according to studies conducted separately at Harvard, Sydney and the University of California.

The Harvard study identified 14 characteristics that could help CIOs survive in the atmosphere of fear and uncertainty brought about by the shifts caused by cloud computing.

Whether most CIOs have the guilt-free, ruthless and manipulative personalities to thrive is a question that can be explored once we have the evidence that cloud computing really is changing the environment for CIOs and how.

Insight, one of the emerging brokers of cloud computing services for enterprises, suggests that CIOs risk being sidelined as IT becomes a utility.

As a global systems integrator, it has now installed a million cloud seats for clients. If a pattern is emerging among its customers it is that everyone can now order IT.

“They come to us as a broker for all the different cloud apps they want,” says Ashley Gatehouse, marketing director for Insight. “They want a single supplier to manage and one arse to kick.”

But, he adds, the single point of contact at the enterprise is less likely to be the CIO.

“We speak to all sorts now. CIOs a lot of the time, but also department heads and chief operating officers,” says Gatehouse.

Cost-driven decisions Forty per cent of the time, says Gatehouse, cloud implementation is about cost, which suggests a lot more CFOs are getting involved in making IT strategy decisions.

He says the nature of IT strategy is being changed by the different sorts of people getting involved. “CEOs will ask one type of question, while CFOs will ask about costs,” says Gatehouse.

The nature of questions that CIOs ask is changing too: they are becoming more tactical.

“These days CIOs will ask us about putting teams together,” he says.

The conversations about the applications are a lot less complicated. Gatehouse thinks that corporate culture might have been in flux before the onset of cloud computing.

“Cloud computing doesn’t change the game, but it speeds it up,” he says.

Matt Hawkins, MD of service provider C4L, has also noticed the trend. “In large multinationals, there used to be numerous CIOs, at least one for each country. Now there’s a fixed model for IT that is replicated across the world,” he says. “We used to speak to CIOs, but now it’s the CTO who gets involved.”

Denis O’Sullivan, managing director at service provider Deltion, has seen several cases of a COO by-passing the CFO.

“The cloud and SaaS models enable COOs to fund desired solutions from an operations budget without the need to raise a capex request,” he explains.

“The IT guys will always need to be involved because of the need to integrate with existing systems,” says O’Sullivan. “But they may take a reduced role in the decision-making process.”

The role of the CIO is changing, he argues. But not all CIOs are adapting quickly enough.

“Just 18 months ago we found we had to do a really hard sell to CIOs and their managers. There was scepticism about the ability and long term future of cloud. This has turned around and we find that the CIO and his managers are pro-actively supporting cloud,” says O’Sullivan.

It is generally understood that cloud applications will not replace major IT systems, but can be applied to enhance functionality. This means the CIO will enjoy a more strategic role, leading the enterprise forward.

The cloud is almost certainly a threat to the CIO, says Barry Osbiston, UK head of portfolio and solution design at T-Systems.

“The CIO’s influence over businesses will undoubtedly diminish,” he says. “The large corporate and legacy business models will still need CIOs, but to compete they will need to be much more focused on information needs and business processes than their traditional heritage.

“Is it regulated? Can you move services quickly and easily without costs? Do you buy it on the basis of complete reliance in the standardised service you receive?” asks Osbiston.

The answer to one or more of those is certainly no. So the term utility may not be an accurate description of cloud computing.

“That said, IT services are becoming much closer and far more commoditised than ever, and exhibit some clear characteristics that we would associate with a utility,” Osbiston warns.

People who think the CIO is doomed by the cloud have got it the wrong way around, says Larry Augustin, CEO of service provider SugarCRM.

“Will utility computing threaten the position of the CIO? On the contrary, cloud computing strengthens the position of the modern CIO. Cloud computing offers CIOs greater choice and more control,” he says.

By not having to host hardware and software, many of your management tasks will be a lot simpler, it’s argued.

“Organisations have always tried to bypass the CIO,” says Augustin, “and they always will try. But eventually whatever they acquire needs to connect to the rest of the enterprise. It needs to be part of a complete solution, not just a point application. And that doesn’t happen without the CIO integrating it into the overall information architecture.”

An internal debate Nick Kirkland, CEO of IT directors group CIO Connect, agrees.

“The suggestion that the cloud will lead to the end of the CIO is inherently naïve. Only in the IT department would such a debate occur,” he says.

If a new way of dealing with accounting was created, he asks, would the CFO start fearing his role was under threat?

“No, it would be generally be recognised the CFO would be the person to help the business.”

Any CFO who bypasses the CIO is skating on thin ice. A CFO might get the best price but they would not know how to get the best performance out of a cloud computing installation.

By devaluing the organisation’s knowledge and competitive advantage, they could be scoring a terrible own goal, warns Rob Greenslade, a consultant at Centralis.

“Cloud computing has the potential to reposition the CIO as a true peer of the CFO and COO, as the implementer of the business plan, rather than the internal supplier of undifferentiated services.”

Dark clouds? A risk analysis of aspects of the cloud market

Total cloud market Estimated to be only 5 per cent of total IT expenditure, rising to 8 per cent in 2015 (according to Canalys). So hardly a utility yet. Danger rating: 5 per cent

Public cloud Size: $47bn (£29bn) in 2011 Description: Offered by Global providers such as Microsoft, Google, Amazon. Opportunity: Cost savings and fewer installation and support overheads. Threats: Commoditisation of IT; limited opportunity for CIO innovation; devalues IT and lowers barriers of entry to CIO’s domain. Danger rating: 55 per cent

Private cloud Size: $50bn (£30bn) Description: Enterprises run software on own machines, in their own premises or in own datacentres. Opportunity: Provides right environment for innovation, on CIO’s terms, without compromising security. Threat: Low — barriers to entry maintained. Danger Rating: 20 per cent

B2B cloud Size: $31bn (£19.2bn) in 2011 Description: Offered by regional providers, hosters that offer cloud services for running software in regional datacentres. Opportunity: Frees CIO and their IT team from installing and supporting software and hardware. Threat: Blame and credit can be equally apportioned. Danger rating: 25 per cent Compiled with data from Steve Brazier of Canalys and Rob Greenslade at Centralis

Pic: Kevin Dooleycc2.0