Head in the cloud

In the Harvard Business Review’s May 2003 edition, author Nicholas Carr created a long-running storm of controversy with the article ‘IT doesn’t matter’. It spawned a countless succession of articles in both industry and academic circles. About a year later he followed the article with a published book, Does IT Matter? in which he expanded and clarified further on his controversial themes.

An underlying theme of Carr’s book is the view that, as a business resource, IT becomes less strategic as it becomes a commodity and you can only really gain an advantage over rivals by having something and doing something that others cannot do. Carr believes that core technology functions have become available and affordable to all and, therefore, IT has transformed from a strategic resource into a commodity by its very power and presence.

Carr supports his theory by sharing some examples from the past such as US companies which, in the 1900s, had vice-president roles in charge of electricity. These roles have, of course, long disappeared. I followed Carr’s theme further by looking at our own local history and found one example that supports the commodity view and provides some insight into what can happen in industry once a long-term strategic resource suddenly becomes replaceable by a commodity service.

From steam to electricity in 30 years

Imagine the year is 1899 and you are working at the Eveleigh Railway Workshops in New South Wales. Eveleigh is a big concern, having employed more than 2000 people since the early 1890s. You have worked at the workshops in various roles since the day it opened in 1887 and, 12 years on, you hold the senior position of chief infrastructure officer (CIO). In this role you are responsible for the supply of steam-generated power, which is critical to support the manufacturing and maintenance operations. You are responsible for managing both the infrastructure and the large team of skilled workers required to keep the boilers and steam generators running around the clock. In the same year you have managed a major upgrade project that involved a substantial upgrade to the boilers and power generators. As a result, Eveleigh has built a robust and scalable infrastructure; the steam powered generators are state of the art, the boilers are well-maintained and you are confident they can scale up to any increased demand from the business.

You have also, however, kept a watchful eye on the nearby Ultimo Power Station, which is under construction and due to be completed in 1901. Ultimo is to supply power to the new Sydney tram system but there is talk of Ultimo also supplying electricity to Eveleigh to replace the steam generators. Because you can think of so many technical problems and issues with this new approach, you just can’t see it happening — at least not in your lifetime!

The Ultimo power station

You dismiss the talk as hype; the advent of electric motors and reticulated electricity will have little, if any real impact at this workshop. After all, there has been a big investment made in the magnificent boiler infrastructure and the business is not likely to turn around and decommission it, not now!

However, you are soon proven wrong and over the next three years the inevitable transformation gets under way as the business converts its power generation operations from steam to electricity and large electric motors start to drive the machinery.

From self generating computing to cloud computing in 30 years

Advance to 2010 and CIOs should ponder if history is about to repeat itself with the arrival of mainstream cloud computing. The 30-year history of steam at Eveleigh may also be representative of the unfolding timeline of organisational IT since the introduction of the first IBM PC in 1981. Nearly 30 years on in the evolution of organisational IT and the current discussion throughout the global IT industry is around how cloud computing will bring commoditised technology to business and replace the need for organisations to invest and maintain their own IT infrastructure to support the business.

Is cloud computing inevitable?

An increasing amount of IT is now available as a commodity thanks to cloud computing and this provides CIOs with greater choice around the way they buy IT. CIOs can rethink the traditional approaches to procuring — and licencing — software, hardware, communications and infrastructure and therefore avoid the often large capex impacts created by these purchases, not to mention the avoidance of ongoing maintenance, support and upgrade costs.

The economics of buying IT from a multi-tenanted ‘one to many’ cloud farm will be far more cost effective than continuing to build and maintain a large IT infrastructure that serves the business on a ‘one to one’ model, such as the steam infrastructure did at Eveleigh for nearly 30 years. Business will be attracted to only paying for the IT that they use and the elasticity of cloud technology allows businesses to scale up or down quickly which makes IT far more agile and efficient.

I know of one vendor offering a mature ‘trusted’ cloud platform in Australia and more will follow quickly. The much talked about issues around security and privacy are the most easily overcome — to the point where many organisations will benefit from a better security environment than the one they currently provide themselves.

As a CIO, perhaps it is time to accept the disruptive change of cloud computing is inevitable. Rather than resisting, you must become the trusted cloud advisor to the business and develop strategies for how, when and where the business will or won’t be using cloud technology. Take the time to understand how cloud computing can help you stay relevant in 2010 and use this sweeping change as a strategic weapon to address the long standing issues of misalignment. It is an opportunity for CIOs to put the age-old alignment issue to rest and move into a state of convergence with the business where, finally, a business technology strategy can emerge that has the business objectives at the core.

What CIOs can do to be ready for cloud computing

Stop thinking of it as a fad, or as hosting or outsourcing with a new name. Accept its inevitability, understand the different deployment models and talk with CIOs who have already done it. Decide whether they are very smart or plain foolhardy.

Determine the strategy for how your organisation will use, or not use, cloud computing technology.

Don’t wait for the executive or board to ask you about your stance on cloud computing; have your strategy or discussion paper out there first.

If you are passionate about infrastructure and you are a true technologist, you risk becoming irrelevant and you should consider a CTO role or a role within a cloud computing vendor.

If you have strong executive, financial and business acumen and skills, you need to develop a business technology strategy that exploits maximum business value from your organisation’s investment in technology — including cloud computing.

Analyse the true cost of your IT and build the financial models around doing or not doing cloud computing. Your position must be backed by deep financial analysis.

If your organisation requires you to provide cost effective, scalable, robust and high performance platforms with flexibility, agility and instant time to market, it’s imperative you understand whether cloud computing can help. If you dismiss cloud computing for your organisation, you need a strong Plan B argument that supports an increased ongoing investment in in-house infrastructure and resources.

Scott Stewart is CIO of Wilson HTM Investment Group, which recently signed on to move its IT infrastructure and application delivery to the cloud, and a member of the CIO Executive Council. Check out Stewart's blog for more posts from him .

Copyright © 2010 IDG Communications, Inc.

6 digital transformation success stories