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Top 5 Cloud Strategies for CIOs

By April 14, 2010Article

As part of our “Leaders in the Cloud” study, we surveyed 511 executives to gain insights into customer perceptions of cloud computing, current and planned cloud initiatives, adoption drivers, implementation challenges, and business and technological benefits.
(Download a summary of selected findings from the survey.)
In this article, we will examine the top five strategies CIOs should pursue to move forward with cloud computing and the impact of open source on cloud computing technologies.
The Top 5 Cloud Strategies for CIOs
1. Treat it like a business decision. Every IT cloud decision needs to begin with an evaluation of the business need first. Each decision must compare a cloud solution with traditional alternatives. Is the cloud the right choice for a given business need? Can you justify the ROI for it? What are the risks involved? The cloud is not an answer for everything; treat it as another tool in the CIO toolbox. In some cases, there is attractive opportunity and in other cases there won’t be any that you can reasonably justify.
2. Embrace change: start pilots and experiments now.  Ninety-seven percent f our survey respondents have cloud initiatives underway. Fully 18% of them are implementing mission-critical projects in the cloud. The fact is that the cloud phenomenon is an inevitable trend as one CIO of an insurance company put it in our interview:

“The cloud will come – it’s happening now even if it is coming with a lot of hype and a lot of buzzwords. It’s a very logical transition – like we are going from individual car craftsmanship into the era of the industrialization of IT services.

To be sure, these are still early days for cloud computing, but some of the smartest enterprise companies are leveraging the cloud phenomenon and are positioning themselves to leapfrog the competition by providing services to their customers that are faster, cheaper, and better.
Most large enterprises in our study conducted pilots and trials to become familiar with the technology. The goal of these efforts was to maximize learning about the advantages and disadvantages of Cloud Technologies, vendor capabilities and shortcomings, and the business problems it can address. There’s enough available in the market (even though most of it is version 1.0) to get going with your back-office applications and even get them into production and experience significant benefits.
3. Create a cloud innovation sandbox. We found in our study that leading-edge deployers of cloud technology shared their enthusiasm about how cloud computing freed their IT budgets from a domination by maintenance spending. Moving such initiatives to the cloud allowed CIOs to focus a majority of their time and money on innovative ways to use technology to drive business. Creating a cloud innovation sandbox in an external cloud frees up a skunk-works team to innovate without being encumbered by the processes and infrastructural constraints typical of a large enterprise.
4. Think Cloud = Outsourcing 2.0. “It’s the old outsourcing argument: If another firm can do something cheaper and better than you, and you don’t use that firm, your competitors will.”
External clouds are simply version 2.0 of the accelerating outsourcing trend, so treat it like any other outsourcing decision. Here is a checklist to consider while evaluating the cloud outsourcing decision:

  1. Not all cloud vendors are created equal. Make sure you are dealing with trustworthy vendors with a good track record and proven historical performance and are likely to be around 3-5 years
  2. Verify if the levels of support provided by the vendor are adequate for your business and ask for dedicated support, if possible.
  3. Check for vendor certifications in SAS 70 (I or II), ISO 27002, HIPAA, and PCI. Safe Harbor agreements if you are operating in Europe.
  4. Ask your vendors if they are willing to provide you with mechanisms to retrieve your data in your preferred format quickly.
  5. Get full transparency into how your vendors are isolating and protecting your sensitive data as it moves with other customer’s data in their data centers.

In short, do a thorough due-diligence of the application, the vendor, and their infrastructure.
5. Restructure your IT staff skills. IT skills will change in the cloud world. You don’t need to focus as much on infrastructure and you need more vendor management, program management, requirement analysis, and business analysis.

“The jobs of people who sit there patching thousands of servers each time there is a change—those jobs are going away.” – CIO, financial services company

You will need internal capabilities to work with the new cloud platforms and extend those capabilities after the initial roll-outs. The best practices are the same as for on-premise solutions. Establish a Project management office. Follow project management best practices.
Do development in a more agile, iterative way.
The Impact of open source on cloud computing
The open-source impact on the overall software industry, and in particular on cloud computing, has accelerated over the past couple of years. Gartner predicts that IT spending in 2010 will increase by 5.3 percentand will be driven by the cloud and open source which, in turn, will hit sales of hardware as companies are still avoiding large infrastructure projects.
Is open source driving cloud computing? Even though the cloud platforms themselves are proprietary, most production cloud environments run on top of open software stacks. This is in part because proprietary software licenses are still lagging behind in offering cloud deployment options.
As we found in our study, private and hybrid clouds are the biggest growth area in the next three to five years. Many open source tools and frameworks are emerging to address this gap. The appointment of Marten Mickos (former CEO of mySQL) as the CEO of Eucalyptus Systems Inc. demonstrates the market opportunity for open source startups to grow into a market leaders in this exciting growth area.
Here is a list of the top ten open-source cloud computing plays:
Kamesh Pemmaraju heads cloud research at Sand Hill Group. Follow him on Twitter @kpemmaraju.

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