Pragmatic cloud computing Six keys to successfully using the cloud

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1 Pragmatic cloud computing Six keys to successfully using the cloud

2 It is imperative to develop a clear cloud strategy that is based on facts, that articulates the benefits and risks and that is holistic 6in its approach involving both business and IT

3 Pragmatic Cloud Computing Six keys to successfully using the cloud If you believe the hype on cloud computing you could be convinced this is the ultimate solution to all of the issues companies have had in the past regarding IT decisions: that this new model of cheap, on-demand and flexible infrastructure, computing, storage and applications will allow CEOs, CFOs and CMOs to concentrate on core business and just plug and play when they need some IT. Cloud computing seemingly enables businesses to finally realise the vision of buying IT as a utility, reducing the reliance on IT departments and avoiding highly visible project failures. The approach to developing the business case for cloud computing can be driven by the narrow lens of IT cost savings, with confusion about the appropriate cloud-based model Despite the high expectations, our experience suggests that there are misconceptions about the implications of the cloud for the role of IT and regulations relating to what can and can t be put in the cloud for reasons of data privacy and security. In addition, the approach to developing the business case for cloud computing can be driven by the narrow lens of IT cost savings, with confusion about the appropriate cloud-based model (public, private or hybrid?). Some of the most common questions we are being asked include: What do I do with cloud? How do I understand the benefits of the cloud? How fast do I have to move? What is the impact on my business? Why should I do this? Is it just hype? Is this right for me? The greatest opportunities and risks lie in the potential to disrupt established value chains by lowering the barriers to entry. We believe that most clients do not spend enough time understanding the implications of cloud computing on their industries. Staff in many organisations are using cloud infrastructure regardless of the organisation s official position on using the cloud. Ease of access, credit card payment, instantaneous fulfilment and a perception that if it is not a critical system and/or data it is okay to use the cloud are allowing users to buy cloud services for a range of applications. As such, many organisations may be unwittingly exposed to significant risks. It is imperative to develop a clear cloud strategy that is based on facts, that articulates the benefits and risks and that is holistic in its approach involving both business and IT. Here we ll discuss six tenets which we believe will help clients steer a safer course through the uncharted waters of cloud computing. Pragmatic cloud computing 1

4 Thoroughly assess the relevance of the cloud to your organisation and where its impact can establish the most value 1. Cloud is a business decision, not an IT decision Some cloud vendors are currently selling cloud and offering savings of as high as 70%. We suggest that focusing on a headline operational cost saving figure underestimates the business transformation required as well as potentially significant setup costs that, when considered, rarely make the business case for cloud compelling. Cloud offers a new economic and consumption model for IT and application purchases; however, what many are not highlighting is the business transformation and IT migration which has to accompany the purchase of cloud services to derive real business benefits. These can be time consuming, involve write downs of existing investments, process re-engineering, systems migration and structural changes. Moving your IT systems to the cloud is not a simple lift and shift. It requires transformation (in technical parlance, virtualisation ). This key step is often overlooked in the business case. The cost of a migration to a virtualised environment may outweigh the savings the cloud offers. Clients should look to plan and build for the cloud not migrate large legacy systems to the cloud. The business case for the latter is seldom positive. 2. Security and privacy are crucial to embracing the cloud Security and privacy concerns should not deter clients from using cloud services. In fact, the cloud provides organisations with an opportunity to reassess and enhance the security and privacy practices they currently use. Current legislation, and draft legislation seen by the authors, allows data to be moved outside of Australian territory as long as steps have been taken to protect data to meet security and privacy requirements. Regulatory concerns need careful consideration prior to moving data offshore; however, this does not prevent clients from taking advantage of many easy-to-implement offshore cloud services, such as system testing and other shared resource centres. Equally, while many of the cloud offers in Australia are domestically provided reducing some of the regulatory concerns their security and privacy should still be assessed. Cloud providers take security and privacy seriously as their business is dependent on maintaining customers trust. Through economies of scale, they are likely to invest in security infrastructure that would not be cost effective in a standalone business and they often seek to provide customers with independent assurance over the security of their environment. Our recommendation thoroughly assess the relevance of the cloud to your organisation and where its impact can establish the most value. This requires building a strong business case with clear milestones and tracking its benefits. 2

5 A key element to planning cloud implementations is understanding the impacts and risks that cloud has on your information assets. Whether offshore or in Australia, organisations have many options, from private on-site clouds through to public clouds, and all offer differing levels of risk and security which need to be considered. Our recommendation build a strong end-to-end risk assessment management process, which encompasses the forward-thinking of the cloud while still considering the risks including an assessment of those controls implemented by cloud providers. This process should be such that it provides the organisation s information with the appropriate level of accountability, security and privacy throughout its life cycle from collection, processing, storing, archiving and destruction regardless of where data resides. Our recommendation assess the business function requirements carefully alongside the existing and future application requirements and build a cloud framework with key business rules to provide good governance around the use of cloud options 3. How to select a cloud that meets your needs Clouds come in all shapes and sizes: from private clouds, through hybrid clouds to public clouds. As confusing as this sounds, they have different characteristics which help in the selection of the best fit. Private clouds tend to be on a client s site utilising existing client data centre capabilities to provide a shared resource pool internally (i.e. transforming your own IT systems into an internal cloud ). This provides high levels of security and network performance which many clients will see as essential. However, this does not mean that every application or business function needs to reside in this environment; other options are open to you as well. Public clouds, such as Amazon, Google, Microsoft and many others, offer shared capabilities in large data centres where either an intranet or the Internet is used for networking. These tend to offer low-cost access to computing, storage, software and other assets; however, sometimes they do not offer the same performance as a private, on-site cloud owned by the organisation. This does not mean they are unsuitable for large enterprises; but rather that the decision and choice should be made only after careful consideration. Hybrid clouds are now coming of age, where software is used to bridge the gap between the internal private cloud and the external public cloud. This allows clients to move some activities to the public environment when required and bring them back inside the private cloud, if needed, without the loss of performance. Our recommendation assess the business function requirements carefully alongside the existing and future application requirements and build a cloud framework with key business rules to provide good governance around the use of cloud options. Pragmatic cloud computing 3

6 4. Strategic planning for the cloud The cloud affects the business across many different areas. As discussed earlier, using the cloud is a business decision, not an IT decision. It can involve investments, process and structural realignment, as well as providing new business opportunities. Creating strategic frameworks around these opportunities and assessing the value creation options can open up options for M&A, divesting assets or, in some cases, even becoming one of the new cloud process providers. The dis-intermediation of the current process models though the creation of new cloud niche market providers will be a threat to some, but a major opportunity to others. Many non-core functions will naturally migrate to the cloud. For companies in which the supply chain is not a core business, it may be easier to use a cloud process provider for these services. The global impact of cloud computing should also be considered when analysing the strategic options to extend the business footprint and also to ensure that any threats to the business are clearly identified and understood. Our recommendation conduct a thorough strategic planning exercise on the impacts and opportunities of the cloud to drive execution quickly where there is clear advantage. 5. The roles of IT and the CIO are crucial to success The CIO has a clear and crucial role in driving this level of change within the organisation. The ability of the IT organisation to rapidly adapt to change and support the business transformation will, in many cases, determine success. IT organisations generally know what technically can and cannot be undertaken. This knowledge, coupled with the business planning around cloud computing, should enable timely decision making. One important point to be aware of is that the cloud is not outsourcing. This key distinction means the business will need a strong IT function with clear strategic objectives. Although some of the day-to-day management of IT infrastructure may disappear, the CIO will need a strong, real-time dashboard to manage the Service Level Agreements (SLAs) with cloud suppliers and make capacity planning decisions quickly to support the business. IT may need stronger skills than previously to maintain control over the new challenges which the cloud presents. Our recommendation the CIO and the senior IT team should undertake a review of current skills against anticipated future skill requirements and take a lead role in the execution of the cloud strategy. IT may need stronger skills than previously to maintain control over the new challenges which the cloud presents 4

7 To make the most of the cloud, you need to do your homework and due diligence. Following these steps can help your organisation to take advantage of the best aspects of the cloud while helping to minimise your risk 6. Communication The impact of the cloud will resonate through the business as well as the investor community, with estimates from 2011 suggesting that 25% of all Venture Capital funding in the Internet was on cloud companies. Accordingly, the cloud will have a major impact on companies, both financial and in the way they organise themselves, as they embrace this approach to the consumption of infrastructure, IT and software. Cloud uptake is happening, although at differing rates in different geographies. Communication internally with the business and its IT organisation is essential to keep the focus on the core business while change is being undertaken. To create the confidence needed for success, communication is also needed with the investor community so they understand that the risks are clearly understood and being managed, as well as the opportunities and the clear execution plans that are in place. Finally, but by no means least important, clear communication with customers is required regarding the benefits they will see and the time it will take for these to arrive. Our recommendation execute an integrated communication plan in line with executing any moves to the cloud. Here s a list of things to remember about using the cloud: 1. This is not just an IT cost reduction program; it is a business transformation 2. A clear business case is needed, with clear measureable deliverables 3. Security, privacy and business governance are important, so investigate what can and cannot be accomplished within the regulations don t believe everything you hear 4. Using the cloud is a journey and as such needs clear planning to choose the right partners. Not all cloud providers offers are the same 5. The cloud opens many new and exciting strategic options. Think about how to capture these options in your analysis 6. Although this is a business transformation, both IT and the CIO are crucial to success and need to be a core part of the team 7. Be clear in communications across all aspects of the business, both internally and externally, about the business benefits and expected outcomes. Remember that the cloud exists for a good reason: it can be a pragmatic tool that can help your business better manage its IT requirements. But to make the most of the cloud, you need to do your homework and due diligence. Following these steps can help your organisation to take advantage of the best aspects of the cloud while helping to minimise your risk. Pragmatic cloud computing 5

8 Robert Hillard Partner Alastair Banks Partner Sandy Aitken Partner Sanj Perera Director Tel: Mobile: Tel: Mobile: Tel: Mobile: Tel: Mobile: Contact us Deloitte 550 Bourke Street Melbourne Vic 3000 Australia Tel: Fax: This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively the Deloitte Network ) is, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte s approximately 182,000 professionals are committed to becoming the standard of excellence. About Deloitte Australia In Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australia s leading professional services firms, Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 5,700 people across the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. For more information, please visit Deloitte s web site at Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 2012 Deloitte Touche Tohmatsu. AM_MEL_02/12_46720

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