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Ideas for Leaders #465
Six Imperatives for Companies to EmbraceCloud Computing
Key Concept
Cloud computing can offer companies more cost-effective and agile IT capabilities than many traditionalin-house IT services and functions. Based on anextensive study of a company successfully expandingits cloud computing capabilities, as well as oninterviews with 45 other companies, a research teamfrom the MIT’s Center for Information SystemsResearch lays out the imperatives that help companiesprepare for and manage the shift to cloud computing.
Idea Summary
Since 2005, the business units of California-basedhealth care company Allergan has used cloudcomputing for a wide range of functions, from fieldsales effectiveness and travel and expense processingto HR performance planning and identitymanagement. In 2010, the company adopted a ‘CloudFirst’ policy, looking for cloud computing optionsbefore buying or building any additional IT system.Before this time, cloud computing was restricted tobusiness competencies not related to the core andinvolving low-risk data. Starting in 2010, cloudcomputing was expanded to support non-corecompetencies with low-risk data, and was evenexpanded to include some core competencies.Eventually, half of Allergan’s application portfolio maybe cloud-based.
To successfully expand its cloud computingcapabilities, Allergan’s IT executives faced threechallenges:
Careful management of data, especially customerdata. The question is not just one of security. Whoowns the data? Does sales and marketing own themarketing data? Should the finance data be restrictedto the finance function? In the words of Allergan CIOSue-Jean Lin, the data needs to be “democratized” —that is, the enterprise, and not just separate functions,owns the data.
Reskilling IT professionals. As more and more IT
ShareAuthors
Ross, JeanneMooney, JohnPhipps, Jarrod
Institutions
MIT Sloan School of ManagementPepperdine University Graziadio School ofBusiness and Management
Source
MIT Center for Information SystemsResearch (CISR) Research Paper
Idea conceived
January 2014
Idea posted
December 2014
DOI number
Subject
IT StrategyIT GovernanceTechnologyGlobal OperationsOperations ManagementProcess Management
12/27/2014 Six Imperatives for Companies to Embrace Cloud Computing | Ideas for Leaders
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Reskilling IT professionals. As more and more ITservices are outsourced, the capabilities of in-house ITprofessionals must shift from a technical emphasis toan emphasis on structuring, brokering, coordinatingand integrating services.
Governance. The focus here is on aligning the cloudofferings with the needs of the business units. A newposition, Business Relationship Manager, was createdto ensure that business units received the functionalitythey needed. Business Relationship Managers havethe responsibility for working with business units todevelop the parameters of the need then sourcing theIT services required, whether in-house or through thecloud.
The entire IT strategy is guided by an executive, 11-person Technology Steering Committee (on which IThas just two votes, although the CIO does have vetopower).
The benefits of Allergan’s large scale integration ofcloud computing extend beyond cost-efficiency and ITfunctionality, including the speed with which it cannow upgrade its capabilities and respond to new ITneeds. Through the cloud, the company can also do amuch better job of predicting its IT expenses, inessence shifting IT costs from capital expenditure tooperating expenditure.
Business Application
In a 2012 research briefing, CISR researchers JohnMooney, Jeanne Ross (director of the centre), andJarrod Phipps described the Allergan initiative andoffered six imperatives for companies integratingcloud computing. In a 2014 Computerworld article,Moody and Ross slightly refined their list, offering thefollowing five imperatives:
1. Rethink the value proposition. Technology adoption istraditionally driven by a cost-saving mission. At first, cloudcomputing may seem the more expensive approach because of itsimplementation costs; the savings in the long run make it morecost-efficient — as long as IT is driven by a long-term perspectiveand not short-term cost-cutting.
2. Re-architect digitized platforms. Cloud solutions will be comingfrom different sources. There is the temptation to think ofsolutions individually, believing that any integration issues can beattended to later. By then it may be too late. Think in terms ofplatforms, not individual solutions, and look to resolve connectionand interface issues from the beginning.
3. Redesign your IT governance. The key decision here is decidingwhich services are local and which services are global. Globalservices imply a single enterprise solution and rigorousgovernance.
4. Redevelop the IT organization. As explained above, a shift to cloudcomputing requires reskilling your IT professionals fromtechnicians to brokers and coordinators of IT services. New IT rolesalso have to be developed (e.g., Allergan’s Business RelationshipManagers) to help the organization make the right IT decisions.
5. Reset your clock. When it comes to information technology, anylag time is no longer acceptable. IT responses to changes in themarket must be as immediate as possible, making speed, flexibilityand agility the core competencies of your IT function — one of the
12/27/2014 Six Imperatives for Companies to Embrace Cloud Computing | Ideas for Leaders
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main motivations for the shift to the cloud. The age of relying onbuilding, running and maintaining internal software is passed:there is not enough time.
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Further Reading
5 Commandments of Cloud Preparation. John G.Mooney & Jeanne W. Ross. Computerworld (14January 2014).
Embrace the Inevitable: Six Imperatives toPrepare Your Company for Cloud Computing.John G. Mooney, Jeanne W. Ross & Jarrod Phipps.Center for Information Systems Research (CISR)Research Briefing (October 2012).
Further Relevant Resources
Jeanne Ross’s profile at MIT Sloan School of Business
John Mooney’s profile at MIT Sloan School of Business
John Mooney’s profile at Pepperdine University Graziadio Schoolof Business and Management
MIT Sloan School of Business Executive Education profile at IEDP
