by Stephanie Overby

How Cloud Computing Promotes Business Growth

Apr 11, 2011
Cloud ComputingSaaS

For Coty, IHG, Synaptics and Lojas Renner, using cloud computing is a key part of a strategy to expand business operations and increase profits.

Coty is growing.

Last fall, perfume giant Coty purchased cosmetics companies OPI and Philosophy, acquired a brand out of Germany, bought the sixth-largest makeup manufacturer in China and signed Lady Gaga to develop a signature fragrance.

“We’re on a serious growth incline,” says Coty Global Director of Information Management Carmen Malangone. “IT is expected to roll with the punches and perform.”

InterContinental Hotels Group (IHG) is growing.

In 2010 IHG opened 259 hotels and relaunched its Holiday Inn brand. Five years ago, to support that growth, Bryson Koehler, IHG’s senior vice president of global revenue and guest technology, would have been purchasing servers, building software and retooling custom business processes. Today, he says, “I don’t want to go into the data-center-building business.” Or the software business. Or the business-process-assembly business.

Lojas Renner is growing.

Brazil’s second-largest department store chain, Lojas Renner plans to double in size in the next five years. “We’re growing faster than ever, and I could not afford to have the same lead times I had before to grow the infrastructure, expertise and teams,” says CIO Leandro Balbinot.

Synaptics is growing.

A touch screens and track pads maker, Synaptics has been growing 25 percent a year for the last three years. “Our objective is to stay in front of the market, so we have to put more and more money into engineering,” says Senior Director of Information Systems David Riley. “We can’t put all that money into IT.”

Do you sense a theme?

All these businesses need to put time and money into growth; they don’t want to invest time or money in IT. And that’s why these companies—each in its own way—are turning to the cloud. (For expert advice about cloud-vendor contracts, see “How the Cloud Can Turn Toxic.”)

A New Value Proposition for IT

While cloud computing adoption has been swift among startups and small-to-midsize businesses with little or no legacy IT operations, larger enterprises have been slower to adopt cloud-related services. Selecting the right providers and services is a gamble when products, pricing and performance change daily. Also, companies that have large capital investments in custom software or infrastructure can find it difficult to make a case for scrapping it all. Then there are the issues of integration, standardization, security and control.

But when the time is right, the cloud can be the way to grow, no matter the size of the enterprise. Not only can software as a service (SaaS), infrastructure as a service (IaaS), and platform as a service (PaaS) be fast and relatively cheap enablers of corporate growth, they can enable IT groups to serve the expanding enterprise more strategically. “From a corporate growth standpoint,” says Mark White, CTO of Deloitte Consulting’s technology practice, “it frees up time for IT to spend on improvement and innovation.”

IT’s value used to lie in its ability to create, execute and manage complex stuff like data centers and software. But as those things get offloaded to turnkey solutions, says IHG’s Koehler, IT’s value changes. “Cloud allows IT to become the workbench for the business, helping it fine-tune the things that enable us to grow.”

Coty: From Backdoor IT to Full-Frontal Cloud

Cloud computing sorta snuck up on Carmen Malangone.

Coty’s global director of information management discovered rogue systems popping up at the cosmetics conglomerate in early 2009. Business leaders had decided to do without the geeks, as Malangone puts it, by signing SaaS deals on their own hook and imploring IT to make them work. “We realized we had to step up our game and bring some real value to the table or risk being bypassed and ending up with some pretty big problems,” Malangone says.

Big, indeed. When Malangone joined the company 13 years ago, annual revenue was $250 million; today it’s $4 billion. His business counterparts weren’t making a power play with their backdoor deals; they just needed new systems faster than internal IT could provide them. Today, Malangone’s looking at cloud options for “just about everything.” He’s built a model for evaluating cloud applications in terms of business requirements. “You can’t fool yourself into thinking that SaaS is always quicker or cheaper,” he says. (See “6 Biggest Cloud Computing Myths.”) Today, Coty is using SaaS for global HR, legal and CRM. Malangone has found the cloud to be an enabler of IT responsiveness. In 2006, for example, the company had 10,000 consumer contacts a year; today it has over 100,000.

“Since we started running SaaS, we don’t even blink,” says Malangone. “We make some small changes and keep going.”

Lojas Renner: Timing Is Everything

Leandro Balbinot began exploring IT-as-a-service options while director of IT and information systems for InBev, the burgeoning brewery formed by the merger of Brazil’s AmBev and Belgium’s Interbrew. Before the company purchased Anheuser-Busch in 2008, Balbinot was looking for a SaaS provider for collaboration tools. But that’s where his cloud adoption stalled. “At that time, it was difficult to find an on-demand offering for a mission-critical service,” Balbinot says. “And when you’re managing IT and very complex governance processes in 32 different countries, convincing each [geographic region] to implement standard processes is very, very hard to do.”

Fast-forward three years, and the Lojas Renner CIO is using a number of SaaS options, including the company’s core e-business and retail applications.

Timing isn’t everything when it comes to cloud in the growing enterprise; it’s the only thing.

Lojas Renner had worked with several outsourcers in the past, but found the relationships too rigid. “You couldn’t find the flexibility or scalability you needed. It was a six-month process just to figure out how to add something to the contract,” Balbinot says. “That made it very difficult to grow fast.”

In the past, if Balbinot needed to double the capacity of his core systems, it could take 90 days. Now, it takes a week. New projects get up and running faster, too. It takes four to five days to make a production copy, compared to 45 pre-cloud.

The trick, says Balbinot, is giving oneself over to the vendor’s processes. “You can’t say, ‘Well my process is better than yours.’ You have to say, ‘This is the best practice and I will follow it as-is.’” His IT team members weren’t instantly converted, but after a month, they began to buy in. “They worried that they were not going to be able to manage and deliver the way they are supposed to,” Balbinot says. “Now they understand the delivery model.”

Lojas Renner still has a few legacy systems running in its level-five data center. Some, such as the company’s proprietary point-of-sale system, Balbinot says he’s unlikely to move to the cloud anytime soon. “We’d have to find someone with more expertise in the system than we do.” But he takes cloud into consideration for every new IT demand and is currently evaluating local IaaS providers.

Synaptics: The Need for Speed

When David Riley took over as Synaptics’ director of information systems, the company had invested little in IT infrastructure and tools. Essentially, it was a green field. In less than a year, he’s implemented new IT service-management tools, an internal social network and an organizational modeling system—all in the cloud.

In the hyper-competitive and rapidly growing touch screen and track pad market, speed is critical. A single-tenant, on-site IT service management system, for example, could have taken Riley and his team six months or longer to get up and running; the SaaS version was operational in 60 days.

Riley says the cloud will help him deal with network latency issues; about half the company’s 650 employees sit in Taipei or Hong Kong and suffer slow response times accessing Synaptics servers in Silicon Valley. “We are pushing, little by little, more applications to the cloud,” Riley says. Next on his list is a virtual-machine or VPN cloud to attack latency issues, and storage as a service for corporate paperwork that now piles up in files.

The cloud is also saving Riley money. His total IT spending (baseline plus projects) is now at 1.7 percent of revenue and his industry’s average, according to Gartner, is 2.4 percent.

IHG: Proceeding with Caution

Many growing enterprises don’t have the relatively green IT field Riley had, and must pursue cloud options in bits and pieces. “You’re not just going to take our mainframe and put it in Amazon [Elastic Cloud Computing]. You don’t just port it all to the cloud,” says IHG’s Koehler. IHG still has its data center that houses legacy applications. Over the last five years, Koehler has been migrating some applications to the cloud and using IaaS to bring the company’s data closer to its customers and employees from Dallas, Texas, to Dalian, China. “We’re not moving all of our legacy equipment to the cloud overnight,” Koehler explains. “But as we rewrite those systems on new platforms, we make sure they’re built with the cloud in mind.”

That’s the way smart CIOs implement cloud solutions to support growth, says Deloitte’s White. “First, you have to find the workloads that make sense. Then you have to create a business case,” he says. “Cloud is not a silver bullet.”

As IHG has expanded, Koehler has inked deals with three IaaS providers to support application development and testing, Web content, and call-center processes. He’s subscribed to SaaS products for sales, email and collaboration. He’s selected PaaS options for CRM processes. Koehler has taken a multi-vendor approach as the market evolves. “I don’t want to lock us in, because we don’t know where it’s going to end up yet,” he says.

IHG is halfway from a “legacy, single data center, mainframe system environment to an in-the-cloud solution,” says Koehler. And he’s convinced the company is headed in the right direction. “We’re replacing legacy systems that have been with us for decades. We’ve pushed ourselves to place a big bet on how we think the future will unfold.”

Koehler’s future is still a ways off. But there are 640,000 hotel rooms and counting waiting to be filled tonight and his job is to figure out how to help sales and marketing and HR and finance do that most successfully through IT. And the best way, Koehler believes, is not to run a data center or build software. “I let someone else deal with the power, pipe and pain of IT infrastructure. None of this happens overnight,” says Koehler. “It’s very, very hard. But once you get there, it’s great.”

Stephanie Overby is a freelance writer based in Massachusetts.