Mastering the Cloud

7/29/2019 Mastering the Cloud

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Roadmap to Cloud Success:How to Get There?

Mastering The Cloud in Eight

Easy Steps: Top Strategies to

Rocket Your Companys Growth


2/13

Roadmap to Cloud Success:How to Get There?

This paper accompanies Part 5 o the eight-part SAP

Webinar series: Mastering The Cloud in 8 Easy

Steps: Top Strategies to Rocket Your Companys

Growth.

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BeyondtheHotAir:

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CloudBenets101:

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RoadmaptoCloudSuccess:

How to Get There?

CompetitiveEdgeintheCloud:

Is the Sky the Limit?

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Roadmap to Cloud Success: How to Get There? 1

Cloud Strategy and Roadmap:

ThePathtoanAgileBusiness

The case or cloud computing adoption sounds compelling. But how should

companies make the move? What are the most important steps to get there?

What should their cloud strategy and cloud roadmap look like?

This white paper explains eight steps involved in successully transitioning

to the cloud, as ollows:

1. Adopt a progressive mindset

2. Watch, learn, and experiment

3. Demonstrate quick wins

4. Develop a business case

5. Understand the risks

6. Analyze the current IT portolio

7. Create a vision o the end-state

8. Develop and execute the roadmap

Step 1: AdoptaProgressiveMindset

The frst step in a cloud computing strategy and roadmap is or your com-

panyboth management and employeesto adopt an open progressive

mindset regarding application o new technologies to gain business benefts.The move to cloud computing also involves changing mindsets, cultural pat-

terns, process patterns, and colleagues hearts so that they willingly adapt to

new approaches and technologies.

Spearheading disruptive change in the organization will be the most di-

fcult part o the journey.

Use of the cloud in our industry is an exception rather than the norm. I

think a lot of companies in more traditional, mature industries like ours are

missingoutonalotofopportunitiestotakeadvantageofwhatthecloud

has to offer. I would encourage these companies to be open-minded and

progressiveandlookatalternativestotraditional,client-server,on-premise

systems. CEO, manuacturing company


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Understanding the clouds power and potential is certainly important; but

getting mentally ready to take the plunge can be a stumbling block. The

underlying reasonsperceived or realare many:

Fearoftheunknown

Fearoflossofcontrol

Fearofjobloss

Riskaversion

Lackoftoleranceforchange

Machiavelli said this about change more than 500 years ago:

Thereisnothingmoredifculttotakeinhand,moreperiloustoconduct,

or more uncertain in its success, than to take the lead in the introduction

of a new order of things.

A companys top management should drive change in order to ultimately

generate value or customers and shareholders. Transorming a companys

business using cloud solutions is not just about technology adoption and

implementation. It also involves broader business and operational changes

in several areas including governance, budgeting, contracting, regulatory

compliance, polices, people, and processes. Thereore, management needs

to educate and convincingly explain to everyone in the company who will

be impacted by the change what the company is doing and why the new

approaches bring value to the company. Success in getting to the cloud

depends on adapting to change.

Step 2: Watch, Learn, and Experiment

Embracing any new technology involves learning. Sand Hills 2010 Leaders

in the Cloud research study (see Appendix A) ound that companies typi-

cally conduct experiments to see how the cloud really works and how it fts

or doesnt ft into the requirements o the business. Through this process,

companies became amiliar with constraints, issues, and benefts o the

technology.

Many surveyed executives described this testing phase as similar to that

o adopting outsourcing services: experiment with nonstrategic projects to

acclimate the company to a new way o doing business, evaluate selected

vendors, and assess business benefts. As their companies experienced

the benefts and understood the technology, their outsourcing initiatives

matured successully and gained a signifcant share o projects.


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Step 3: Demonstrate Quick Wins

Many o the companies participating in the Sand Hill survey set up innova-

tion sandboxes (a.k.a. Skunk Works projects) where their project teams were

allowed to work with the new technology within the context o a specifc

business initiative.

Here are some examples o such small, experimental projects that the com-

panies in our study are executing in the cloud:

Initiatedevelopmentprojectswheresmallteamsworkonspecic

business-driven projects on a public Inrastructure-as-a-Service (IaaS)

cloud such as Amazon. Examples o these projects include a short-

term marketing campaign, IT resources or oshore developers, and a

new website or photo sharing.

DevelopasmalltacticalapplicationonaPlatform-as-a-Service(PaaS)

cloud such as Force.com or Windows Azure. Because the platorm wasso easy to use and did not require any programming knowledge, one

CIO o a manuacturing company developed a simple HR application

in less than a week. He said this would have taken several months or a

proessional technical developer using traditional platorms.

AcquireaSoftware-as-a-Service(SaaS)applicationforanon-mission-

critical business process. An executive in a media company rolled out

a cloud-based e-mail system to hundreds o users in less than a month.

Based on high user satisaction with this new e-mail system, the com-

pany decided to roll out the e-mail system to all o its users.

When the companies successully completed these projects in much shorter

time and with less eort than it would have normally taken, they then

pushed the results up the value chain and unded new pilot projects. The

Sand Hill study ound that many companies used the cloud to solve specifc

and tactical problems and, or the most part, achieved successul results.

At the next stage o getting to the cloud, however, companies need to

develop a business-case-driven cloud strategy that is fne-tuned by fndings

and value gained rom the tactical projects. The emphasis needs to shit at

this stage rom too much how to more o what and why. Otherwise,

short-term, tactical projects will dominate the transition to a cloud-based IT

reality, which wont necessarily generate global business value or, even

worse, will end up with vendors driving the companys agenda.

Step 4:DevelopaBusinessCase

Companies should consider the ollowing undamental business drivers

when building a case or cloud computing:

Businessagility:Identiy how to apply cloud applications and plat-

orms to the business, enabling better and aster competitiveness.


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Operationalexcellence:Investigate how cloud solutions can lead

to improved availability, reliability, and lower total cost o ownership

(TCO), acilitating investing the savings back into the business.

Ihaveneverestablishedacloudcomputingstrategyorissuedamandate

thateverythingneedstogooffpremiseormovetosometypeofhosted

model.Thedriverbehinditisabusinessneedandwasdenedand

executed by line-of-business stakeholders. CIO, healthcare company

Like any other emerging technology, the undamental decision to embrace

cloud computing comes down to fguring out how the investment in the

cloud will yield positive returns to the business at an acceptable risk level.

I the company uses a public cloud or solving specifc business problems, it

also becomes an outsourcing decisionone where the company also looks

or value in solutions that are less expensive, saer, and better than what itcan create by itsel.

In the past ew years, public cloud solutions have improved, becoming more

robust and also more compelling in quality, stability, and overall cost-to-

beneft ratio.

Many commodity services (e-mail, backup, archival, collaboration, etc.) are

now available as public cloud services. Commodity services now available

in the cloud also include the ollowing standard business processes:

Customerrelationshipmanagement(CRM)

Expensemanagement

Accounting

HRmanagement

Manufacturing,wholesale,andprofessionalservicescomponents

ERP(whichisespeciallybenecialforfast-growthcompanies)

For each business problem a company seeks to solve, it needs to look at a

cloud solution and compare it with alternative solutions rom both return on

investment (ROI) and TCO perspectives.

Step 5: Understand the Risks

Like any new technology that oers credible business value, there are also

risk actors to consider. Risks around security, privacy, and governance

are major concerns or nearly every company. Sand Hills Leaders in the

Cloud 2010 research study ound a broad range o attitudes about security,

privacy, and governance.

Security concerns vary greatly by companydepending on the ollowing

actors:


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Businessgoalsandrewards

Perceivedorrealrisks

Levelofrisktolerance

Valueandsensitivityofinformationassetsanddata

Regulatoryconcerns

Sand Hills survey o IT executives ound large enterprises were more

concerned about data privacy, security, and governance issues than smaller

companies (see Exhibit 1). Most o the small and midsize SME IT leaders

were emphatic that a cloud vendors security processes must be superior to

any that their own company could provide. The reason: small companies

cost structures are such that they cannot aord to build secure inrastruc-

tures that match those o large enterprises or the leading cloud vendors.

Among many examples o surveyed business executives rom SME compa-

nies who were pleased with the security o their cloud vendors is the ollow-

ing statement rom a SME manuacturing company executive:

WehavebeenusingSaaSapplicationsformorethannineyears,and

wehaventhadasecuritybreachsofar.Attheendoftheday,weare

veryvigilantaboutsecurity,includingstrongpasswordsandfrequent

password updates; and we audit usage patterns of our users to monitor

foranyuntowardbehavior. CEO, manuacturing company

Exhibit1: Comparison of large and small companies concernsabout cloud computing

LargeEnterprises

Small andMidsize

Enterprises

Data privacy 63% 46%

Governance (e.g., policies for control, security,monitoring and services)

53% 36%

Developers/corporate culture 38% 28%

Lack of practical experience with cloud computing 33% 47%

Migration/interoperability 25% 25%

Lack of standards 23% 19%

Regulation 15% 7%

Lack of development and monitoring of service-levelagreements (SLAs)

5% 18%

No barriers 0% 11%

Dont know 3% 2%

Large enterprises refer to companies with $20 billion or more in revenue. Small and midsize Enterprisesincludes companies with less than $500 million in revenue.

Source: Sand Hill Group Cloud Computin Survey 2010


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However, vendors could ail, as was the case with Amazons high-profle

ailure in April 2011, which resulted rom a confguration error. What

would happen to a customers data in that case? Would the provider return

the data, or would it be lost orever? The good news is that companies thatproperly understood their cloud vendors oering made sure they included

data backups and redundancies in their applications. They also conducted

due diligence to ensure they properly understood the vendors oer-

ings, service level agreements (SLAs), and architecture. Such companies

remained unscathed and ran their operations without any interruption

during the Amazon outage.

Many vendors are getting certifed to security standards such as SAS 70.

Even i a vendor is certifed, the most important question to ask is: does the

certifcation meet yourspecifc security requirements? As one surveyed

executive stated:

Youshouldreallyaskforasecurityreview,especiallyifyouareabig

company dealing with a smaller company and the risk to you is greater

thantherisktothemincaseofasecuritybreach.Ontheotherhand,

if you are a small or medium-sized business, your risk is much lower if

youaredealingwithawell-establishedlargecloudvendorsuchasSAP,

Salesforce,Amazon,orMicrosoft,thatisbettingtheirbusinessontheir

cloudservices. Principal consultant, leading security frm

Step 6:AnalyzeYourExistingITPortfolio

Another important step in the roadmap o getting to the cloud is perorm-

ing an inventory o the companys current IT systems and developing a

logical model o the existing architecture including all relevant systems,

data, applications, processes, unctional components, and services. As part

o this exercise, companies should ask the ollowing questions and analyze

the systems rom the ollowing perspectives:

Whatisworkingandwhatisnot?

Whatiscoretothebusinessandwhatisnot?

Whatisdrivinginnovationandwhatispreventingprogress?

Wherearethecostinefciencies?

Whatisdrivingbusinessvalueandwhatisnot?

Howarethesystemscoupledandinteroperatingwitheachother?


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This analysis not only provides a snapshot o the companys current state o

IT but also delivers crucial inormation to help fne-tune its business case

based on the new architecture.

Without doubt, the cloud deployment options in the architecture will drive

down cost inefciencies and improve agility and scalability, among other

benefts. Analyzing an existing IT portolio in this manner typically takes no

longer than our to six weeks in a midsized company.

Step 7: Create a Vision of the End-State

Once the company has a clear understanding o the current state o its IT

portolio, the pain points, and the cost inefciencies, it can then begin to

map out the vision o moving purposely to the end-state. That end-state will

include a description o which architectural components, data, applications,

systems, services, and processes will move to the cloud in what order, and

how much decoupling will be required to isolate the components. In design-

ing the end-state vision, the company needs to design a reerence platorm

that leverages cloud technologies or highly scalable automation, low-cost

hardware, middleware, and application servers to connect new and existing

applications.

Such an analysis will consider not just the technology piece but also the

people, process, and the cost aspects including the most important areas

such as budgeting, TCO, service level agreements, governance, and compli-

ance.

The Sand Hill study ound that, even i the cost o moving to the end-staterom the current state is $5 million (or example), most small to midsize com-

panies will move ahead with the initiative i the end-state generates cost

savings o more than, say, $10 million per year.

Step 8:DevelopandExecutetheRoadmap

Ater creating a vision o the end-state, companies then need to determine

which applications and data to move when, and where, beore detailing the

specifcs around how to move them. It is not necessary or practical to move

everything all at once. Create a roadmap or a long-term perspective (say,

three years) and map out how the architectural components will move overin a staged manner to a much more eective, efcient architecture. This

roadmap exercise should not take more than a month to map out in a small

or midsized company; this includes a cost and beneft analysis or each stage

o the roadmap.

Typically, companies ocus on the low-hanging ruit with the most busi-

ness value and place them on the roadmap frst. For example, companies

initially select a relatively less-critical application that is currently not

running cost-efciently in house. Moving it to an external cloud quickly will


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create signifcant business value. As a next step, they then select the less-

valuable and more risky systems that are still worth moving, and place them

at the back end o the roadmap.

Another consideration is to review the project portolio and identiy new

and innovative revenue-generating projects that will beneft rom a aster

time-to-market advantage using cloud technologies.

For each o the identifed applications, companies need to evaluate the ven-

dor capabilities and the risks associated with the security, data privacy, and

governance with each vendor. Compare dierent cloud provider oerings.

They also need to evaluate the oering o cloud vendors to ensure that it

meets the security, scalability, reliability, and privacy needs o the enter-

prise and meets established security and compliance (SAS 70, FISMA, ISO/

IEC 27001, PCI, and HIPAA) standards. This evaluation includes:

ReviewthevendorsSLAprovisionsbasedonthecompanysspecic

business risks, risks that typically may not be covered in standard

SLAs.

Identifychangesrequiredinthevendorsdatacomplianceand

security procedures (i any) to adapt to the companys risk, compliance,

and business metrics.

Identifyinteroperability,lock-in,andcompatibilitiesissuesanddeter-

mine workarounds as applicable.

Carryoutahands-onproductandtechnologyvalidationandevalua-

tion against the above criteria.

Assessthecompanysnancialstabilityandlongevity.

Evaluatethecompanyscommitmenttoinnovatingwithitscustomers.

Obtainexamplesofcustomerssuccesses.

ConclusionTransitioning to the cloud is similar to a major change initiative and needs

top management support, clear vision, and careul planning. The eight steps

presented here are sequenced in a logical order designed to yield maximum

value. Typically, the more detailed activities o later steps provide addi-tional inormation that helps companies fne-tune and refne the results o

previous steps. In this sense, this is an iterative and cyclical process that

companies can apply throughout the IT lie cycle.


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APPENDIX A

OverviewofSandHill2011CloudSurvey

During January-February 2011, Sand Hill Group conducted a research study

to gauge sotware vendors cloud outlook or the coming year and beyond.

The study utilized an online survey to gather executives impressions on the

direction o the cloud market, their cloud strategies, and customer readi-

ness or adoption.

A total o 100 sotware CEOs and senior executives responded to the

24-question survey and provided insight about their cloud revenues today

and next year, customer attitudes and readiness, and which products and

services are gaining traction. Thirty-two percent o the respondents identi-

fed themselves with titles o CEO/Presidents, and another 32 percent identi-edasVicePresidentsofsales/marketing/services.

The study also identifed the long-term trends including which layers o

the cloud stack will take hold in the next three to fve years. In addition,

researchers conducted in-depth telephone interviews with some executives

to gain more insight. Participants in the initial survey as well as the ollow-

up interviews were guaranteed that their identities would remain confden-

tial in order to protect the strategic nature o the corporate inormation

provided.

A broad cross-section o sotware companies participated in the survey.

Nearly three-quarters o the respondents were rom product companies.

The executives represented primarily midsize and small companies. Thirty-

seven percent were rom companies with less than $10 million in revenues,

and 28 percent have revenue o at least $10 million but less than $250 mil-

lion. About 18 percent o the respondents were companies with greater than

$1 billion in revenues.

The fndings o this study are intended to give sotware companies direc-

tional insight as they make business decisions. Although eorts were taken

to survey a wide variety o sotware companies, the study is not necessarily

a representative sample o U.S. sotware companies.


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APPENDIX B

Overview of Sand Hill 2010 Cloud Research Study

In 2010, Sand Hill Group released a landmark research study identiying the

business value realized by companies deploying cloud-computing initia-

tives today. A two-phase interview study design uncovered both the in-depth

insight o specifc customers and vendor experiences, and a quantitative

market survey provided a snapshot o cloud initiatives and priorities at a

variety o companies. The interviews and survey questioned respondents

about their current cloud initiatives, current and planned use o specifc

cloud models, business benefts, organizational and technical challenges,

and details o specifc use cases.

In-depthInterviews

In order to gain an understanding o the cloud experience at a variety o

types o companies, Sand Hill conducted a total o 40 one-hour, in-depth

interviews.Twenty-twointerviewsinvolvedCIOs,VPsofIT,systemsarchi-

tects, and technology directors at small, midsize, and large companies. This

group o executives represented a variety o industries, including insurance

and fnance, energy, telecom, manuacturing, healthcare, media, and tech-

nology.

To gain insight rom leading sotware vendors, Sand Hill conducted eight

interviews with executive-level individuals who were responsible or cloud

strategy and products within their organizations. Again, a mixture o repre-

sentatives rom large and small sotware companies was included.

QuantitativeSurvey

As part o the study, Sand Hill Group conducted two Web-based quantitative

surveys in collaboration with McKinsey & Co. and Tech-Web. These surveys

received a total o 511 qualifed responses. Most respondents were CEOs,

CIOs, or other senior IT executives at their companies, which ranged in size

rom small businesses to global corporations.

The combination o qualitative interviews and quantitative surveys present

frst-hand accounts on the current state o cloud computing initiatives rom

an impressive cross-section o enterprises. However, the results may not be

reliably projectable across the universe o American businesses. Thereore,

the fndings and implications in this report are intended to provide direc-

tional guidance during product development.


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AboutSandHillGroup

Sand Hill Group (http://www.sandhill.com) provides strategic management,

investment and marketing services to emerging market leaders. Sand Hill

Group is best known or its work in the $600-billion sotware and services

market. As ounder o the Enterprise and Sotware conerence series,

Sand Hill Group has been credited with uniting the sotware business eco-

system o executives, entrepreneurs, investors and proessionals. The frm

is also the publisher o SandHill.com, the premier online destination or

strategic inormation on the sotware business. The site and its newsletters

are read by thousands o top sotware industry executives every week. Sand

Hill Group also unds primary research into key technology and business

model trends that impact the sotware business.

Copyright2011SandHillGroupThe inormation contained herein has been obtained rom sources believed to be

reliable. Sand Hill Group disclaims all warranties as to the accuracy, completeness or

adequacy o such inormation. The Sand Hill Group shall have no liability or errors,

omissions or inadequacies in the inormation contained herein or or interpretations

thereo. The reader assumes sole responsibility or the selection o these materials

to achieve its intended results. The opinions expressed herein are subject to change

without notice. Reproduction o this report in print or electronic orm is strictly pro-

hibited without written permission rom Sand Hill Group.

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Mastering the Cloud