Cloud Ecosystems, Profitability, Common Sense & the New Order
February 8th, 2012 By: Industry Perspectives
Bob Deutsche joined Intel in 2004 and has more than 25 years of business and IT experience in positions that ranged from data center operations to software development to CIO. He can be found online at Bob Deutsche on the Intel Server Room.BOB DEUTSCHE
The goal of every publicly traded company is to deliver value to its shareholders. From a simple financial perspective, and with the exception of non-profits, this value is measured in terms of profitability, customer and employee satisfaction. Of the three, profitability seems to make shareholders the happiest. It’s generally a company’s line of business (LOB) groups, where the products or services are developed, that generate these profits.
Eighth Fundamental Truth: Profitability
It’s this last point I was thinking about when I set out the eighth and final fundamental truth of corporate cloud strategy: Altruistic motives do not generally keep the lights on.
Let’s face it. If you’re reading this blog, chances are good that if I asked somebody in your LOB area about your business knowledge, most would either laugh or ignore me. If this weren’t true, why after 30+ years of essentially the same dialogue, do we still have to argue whether IT has any business value?
I’d also bet that if I asked the same people what you or your group contribute to the profitability of the company, most would say they see lots of money going into IT but nothing much of value coming out. Right or wrong, you all face the attitude of the fictitious sales VP I described in one of my earlier blogs on cloud strategy.
In this same blog, I also identified the perspective you bring to the party that your LOB person doesn’t have. It is this skill that can be used, as the world struggles through the area of the cloud hype cycle that Gartner calls the Trough of Disillusionment, to lead your company through the chaos of broad adoption (assuming your voice is heard).
Many of you have led or participated in a large hardware migration project or a major application development effort. Was the experience akin to herding cats, with each product and/or vendor representing a cat that absolutely had to move in the same direction for the effort to succeed? How did you manage the herd through the hardware or system’s lifecycle? Were you, like me, always impressed with how quickly these cats, when something started going south, always knew it was another cat’s problem.
Grudgingly, though, we all knew the reason for the drill. Each cat is responsible for its own interest’s profit and time spent chasing and fixing problems impacts attainment of that goal. Unfortunately, as the ultimate stakeholder in this relationship, we were the ones held accountable to fix the problem. This experience is the source of that unique perspective I mentioned earlier and which will be of significant value in the evolving Cloud Ecosystem.
To begin this part of the discussion, review image below. (Click graphic to view full size.)
(Graphic courtesy of Intel.)
First, using the profitability goals of each component of a typical end-to-end public cloud ecosystem as a baseline, take an architect’s perspective of the process. Once you do this, you begin to appreciate the challenges ahead—and the unique perspective you bring to the solution.
Next, confront the conflicting profitability expectations within your own enterprise. As we discussed in the column about the mythical sales VP, his or her first concern is profitability. From their perspective, reducing your footprint — based on the promises made by the Cloud Service Provider (CSP) — is a way to boost profit without losing anything. Sometimes this is true, but other times it’s not.
Playing Offense or Defense
At this moment, you have a choice. Do you take an offensive or defensive strategy to confront your contribution to profitability? If on the offense, what are you doing today, within your larger organization, to remove the emotion from these types of discussions and to force an unbiased financial focus on the realities of your environment? It’s also critical to recognize that in some cases, outsourced and cloud-hosted applications will save your company money and boost profit. How will you discuss these instances?
Next, recognize that every CSP is different and they, like every other component of the cloud ecosystem, are not altruistic. To stay in business, they must be profitable in the long term. While it’s not your job to understand the details of how they make money, it is your job to understand how their pursuit of profit will potentially impact the services provided to your company. Although this isn’t an exhaustive list, we can infer some indicators by looking at how they ensure delivery of services:
- What are the procedures for monitoring/reporting SLAs, maintaining global government policy compliance, and securing data?
- Do they have an audit process and what standard is it based on?
- What is their level of assumed indemnity (first and/or second)?
- Do they support an open architecture if that is important to your corporate strategy?
Finally, how do the Telcos end up playing in this space? This varies from country to country, and we are beginning to see a trend where they are assuming the dual role of data center and network cloud service provider. If this trend continues, the evaluation criteria we mentioned earlier fall a bit short if you consider topics like intelligent edge, radio access, and broadband access networks. Right now, though, it’s hard to predict how this business model will play out other than to recognize that changes are imminent. The best advice I can offer is to insure someone in your organization is assigned to monitor activity in your geography.
To conclude, this blog is the final one in our series of discussions on the eight fundamental truths of corporate cloud strategy. Thanks for reading them, and for contributing your thoughts and experience through the journey. Also, thanks to Data Center Knowledge for publishing it and to my colleagues at Intel for the collaboration.
My next series of columns will take a practical look at end-to-end cloud security. I hope you’ll be there to join in the discussion. As always, you can reach me through Twitter.
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