The move to as-a-service digital technology demands a major transformation in the internal capabilities required to reap the huge potential rewards; organisations that fail to adapt risk missing out
Cloud adoption is now a question of when rather than if for most organisations. However, many risk missing out on the full benefits of as-a-service IT by failing to develop the skills required to exploit the advantages of moving their digital technology off-premise.
Management consultancy McKinsey & Company forecasts businesses can generate up to $1 trillion in added value by 2030 due to the potential of cloud to deliver additional speed, productivity, flexibility, scale and innovation, but only if they put the right measures in place. “Cloud offers tremendous value, but the benefits don’t appear magically,” says McKinsey.
One key element of this for successful organisations is developing a deep understanding of the fundamental shift from IT as a product, whether hardware or software, which is bought and often adapted, to IT consumed off the peg on a pay-as-you-go basis. This requires a transfer in mindset from pure technology to a greater focus on business outcomes.
“When you start to sell the service of gaining access to something, you change the way of thinking about what that thing is,” says Dr Alan Brown, professor of digital economy at the University of Exeter Business School and former chief technology officer at IBM. “You then begin to understand the value you receive from it.”
Commercial thinking required
Putting such thinking into practice is Ranjit Gill, UK chief information officer (CIO) of pharmaceutical and healthcare multinational McKesson. He has recently overseen a large-scale implementation of Salesforce’s software-as-a-service sales and marketing tools, and is now looking to ensure the business benefits fully from its cloud investments.
“Now we have this technology, how do we really start to drive value from it? It’s all about understanding what skillsets we need internally,” he says. For him, a key aspect is bringing in and developing talent that is “both IT-literate and also more commercially minded”.
Such commercial thinking is a necessary aspect of extracting maximum value from agile processes, as cloud has hugely accelerated development times and rapid innovation, says Ed Alford, who was enterprise CIO and then vice president of digital transformation at energy giant BP until the end of 2020.
“With cloud, within maybe two weeks, you can spin up a minimal viable product without spending a lot of money,” he says. “But then you need to have the conversation: how much does it cost to scale it? And should we scale it? So it’s the ability to change the timeline from delivering a finished product to the business to doing it in stages. This involves co-creation with the business, as well as getting the technology environment up and running.”
For Gill, this means generating and fostering a deep and close relationship between IT and the rest of the business, and IT should never stand alone. “When you do a programme in an agile way, there’s no such thing as an IT project. If you have that, you’re going to fail,” he says.
Meanwhile, there is value in ensuring the partnership between IT and users runs deep in other ways, says Charlie Forte, CIO at the UK Ministry of Defence. He believes there are crucial lessons to be learnt from the way consumer IT uses cloud, particularly around the benefits of focusing on end-users and their needs.
“Cloud and the journey to cloud sit in the technology shift towards the consumerisation and the commoditisation of our underlying toolsets,” he says. “The technology we use in our personal lives is dominated by themes of personalisation and flexibility, and if something in that world doesn’t have the best of those characteristics, you won’t use it. It’s why Zoom has been so successful because it’s so easy to use.”
In a similar way, Forte argues, cloud-hosted tech is forcing organisations to rethink their approach to technology. “Cloud is helping us to focus on those really important themes and that becomes an important part of what we need to make our business successful,” he says.
A new approach to budgeting
A further big shift for organisations is how cloud changes the way IT is paid for. It involves a fundamental transformation from on-premise projects funded by capital expenditure, which require annual budgeting and big-ticket sign-off from financial decision-makers, to ongoing programmes that can quickly be turned on or off and scaled at pace, and are paid for from operating expenses.
This, again, requires different skillsets and a new approach to budgeting and finance, says Alford. One of the main issues, he says, is due to the flexibility and accessibility of cloud services, it’s now easy for almost anyone in an organisation to switch on pay-as-you-go cloud services, leading to the risk of IT costs spiralling out of control. “The last thing we wanted was everybody using the BP credit card to spin up more disks any time they wanted,” says Alford.
To avoid that, BP had to learn fast. Alford established a “cloud service line”, which took responsibility for orchestrating demand and matching it to the service received from the cloud provider. “It could kill instances that were running, but people weren’t using,” he says.
“We even put apps on the developers’ phones that allowed them to easily snooze their environments at lunchtime and at 5 o’clock at night.” The result was BP didn’t have to pay for any of the hours when its cloud services were unused.
Adapting traditional tech skills
Although cloud puts a bigger than ever focus on business outcomes, CIOs like Alford and Gill also warn that organisations should not lose sight of the importance of developing in-house technical skills, rather than simply expecting those aspects to be transferred fully to the cloud vendors.
“If you want to work and operate in the cloud, you still need to have a core internal capability,” says Alford. “Having your own engineers, albeit that you don’t need hundreds of them, will save your bacon a lot of the time, and you’ll save yourself a lot of money as these people generate value in terms of safety, reliable operations and security.”
However, many of those capabilities are unlikely to exist within the organisation in the first place, he adds. For BP, it was a case of taking their in-house on-premise team and reskilling them to have the right technological understanding to get the best out of its two cloud providers, Amazon and Microsoft.
Meanwhile, finding CIOs and other digital leaders with skillsets that span both technology and the “softer” business skills demanded by cloud, is challenging, says Graeme McNaull, associate director of IT recruitment firm Harvey Nash. “More than ever, CIOs need to be able understand the tech jargon and relate that back to the business leaders who are not technically minded,” he says. “But we’re frequently getting feedback from our clients that someone wasn’t able to articulate exactly what they were trying to do.”
However, he points out, it’s impossible to have long-standing cloud skills. “You can’t find someone with 15 years’ cloud experience, as it’s still very, very new,” he says. “But there’s a need for IT leaders with a vision of how everything fits together; these days, they need to understand the business as much as the CEO.”