- Date: November 10th, 2010
- Author: Jeff Cerny
As cloud solutions gain traction in the enterprise, new challenges are emerging. Accenture's managing director of cloud computing looks at how businesses should address these challenges and how cloud technologies are changing the role of IT.
What is cloud computing if not outsourcing?
In the same way that Detroit began to adopt robotics into the auto industry in the 70s and 80s (an upcoming Transformers storyline portrays the Motor City of the next century as a global robotics manufacturing hub), the information industry will automate and specialize as new capabilities are developed. Outsourcing to the cloud is increasingly viewed as a source of competitive advantage, both in increased agility and cost savings, allowing a company to concentrate resources on its primary business. But how is outsourcing a CRM application different from outsourcing the call center?
Jimmy Harris has become an expert in cloud technology as an extension of his experience with outsourcing. After completing a degree in finance at the University of Virginia, he began applying his interest in technology at Accenture. He has stayed with the consulting giant through every technological trend since 1980, from punch-card programming to systems-integration consulting. He has directed major technology projects for insurance and mortgage companies, banks and utilities. He was also managing director of customer contact services, focusing on reducing contact rates and handle times, as well as increasing customer satisfaction. Jimmy ran the company's infrastructure outsourcing business from 2003 through last year. That's when he was asked to define and manage Accenture's growing range of cloud solutions.
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1. Jeff: Coming from your outsourcing background to now working exclusively with cloud technology, do you see cloud services being very different from other kinds of outsourcing? Is it more a difference in degree than in kind?
Jimmy: Cloud services in their purest form are outsourcing. They move the responsibility for a process or service to a third-party provider. Once you accept it on those terms, you have to evaluate cloud services similarly to the way you evaluate other outsourcing. The first thing to get in place is the right business environment and migration path. The alternatives have to be competitive on the bases of cost, capability, and performance. There are also security and functional requirements to take full advantage of moving to cloud services.
2. Jeff: The financial model shifts away from a large capital outlay that is annuitized with future value tables and then compared to a business-as-usual approach, toward a cloud model of a simple monthly or annual fee. What other financial considerations come into play with the cloud?
Jimmy: With software as a service, for example, you need to look at total cost of ownership; what it takes to implement, deploy, and integrate into the existing business processes. Do I have the appropriate governance models in place? Will I be able to effectively integrate the data and services across multiple service providers? What cost, if any, do upgrades add? What we see is that while cloud technology itself is less capital-intensive, there is still a need to consider those other factors in the total cost of cloud-based services.
3. Jeff: What kinds of criteria are you looking at to determine whether a particular service is a good candidate for cloud outsourcing?
Jimmy: Actually, there's a tool we've designed called the Accenture Cloud Computing Assessment Tool, which looks at the technology workload and helps determine which segments are good candidates for cloud services for our clients. We look at how computing-intensive it is, how storage-intensive, the performance requirements, variability of demand patterns, security, and privacy requirements. We essentially map out the characteristics of the application workload to see if it's appropriate for a company given their requirements in a cloud services option. The criteria we use are somewhat different from the traditional ISV selection. We look at more than a dozen categories to determine the appropriateness of the workload, and we continue to refine the criteria in the model as well as update our understanding of what is becoming available in the marketplace. As you can imagine, it's a very dynamic environment. It's literally changing every day.
4. Jeff: Has the cloud enabled a democratization of business process and technology away from the gatekeepers, the way Photoshop or legal software has put things in the hands of the end user? How does that affect corporate structure?
Jimmy: The governance model for information technology in larger enterprises needs to be thoroughly evaluated because of the phenomenon you're describing. The momentum is toward more of a business-services orientation, with the value being in the ability of the business to select services that match their requirements and then acquire and dispose of those services in a much lower-friction way than they do today. So the role of IT changes considerably from a purveyor of service to being an integrator of service. IT needs to be involved because there are still considerations related to cost management, performance, security, and data placement, but the changes enable the business to behave in a much more independent way with its use of technology.
5. Jeff: Does the need for an IT manager who excels at aggregation, brokerage, and arbitration require a new job description? What kind of person have you found to be good at this?
Jimmy: It's a person who has a combination of traditional governance, service management, and service integration capabilities. I see some companies that are better at recognizing this than others. The skills that are needed are ones that allow a person to understand and manage a multi-sourced environment, closely link the supplier and technology functions in the business, and understand the business even better than they do the specifics of the technologies. The emphasis has moved from being digital craftsmen to being integrators and arbiters of services with the intersection of skills to know what is economical, what will technically work, and what approach best matches the specific business environment.
6. Jeff: Along with compatibility between services, what are the key requirements for moving to a service aggregator model?
Jimmy: This is interesting, because some people view the service aggregator as an operations function, which it is in part. But as important as that aspect is, the service aggregator should be the driver of the migration from conventional service capabilities to cloud service capabilities. As much as we talk about responsibilities for aggregation and brokerage, the role of the service aggregator should be working in concert with the business technologists and purchasers from a dynamic roadmap. It should not only be able to interact, but also to drive the migration of new services and decommission the existing services with a sharp eye to gaining the best cost and performance. Much is written about provisioning and end-to-end SLA management, service catalogs, and CMDBs, and those are certainly important. But it's not as much about being there as getting there.
7. Jeff: How realistic is the premise that a business can go to market faster using cloud services?
Jimmy: Particularly among small to medium businesses, there is a considerable advantage to using cloud services to go to market, whether it's introducing new products and services or being able to expand geographically. There are also opportunities for large clients, specifically global companies. We're working with a variety of companies on the idea of "minimum business infrastructure," which is cloud-enabled and allows businesses to set up operations in a new geography quickly. It also lets them better integrate the supply chain or compress or shorten it by using cloud-based services or to deploy those services into a mobile environment more quickly. So even while we're still somewhat early on with this, it's easy to see how the availability of a set of standard services being acquired and deployed more rapidly could speed products and services to market and also to new geographies and segments more quickly.
8. Jeff: One of the ways service providers are addressing security concerns is with a private cloud that operates behind a company's existing firewall. How well does this work, in your experience?
Jimmy: Well, people tend to be binary about the way they assess this and say the private cloud is secure and the public cloud is not. I don't believe that's the case. Enterprises that operate behind the firewall may reduce the risk of security issues, but it doesn't completely mitigate or eliminate all the issues. A highly virtualized environment within the firewall requires a new a new set of security tests. Suddenly it's not possible to physically contain system applications and data behind virtual LANs or with a physical separation of devices. The private cloud does provide a greater sense of security because it is behind the firewall, but it's not a panacea. In general, security is a real concern as it relates to publicly available cloud services, and the service providers are responding with innovative approaches like the virtual private cloud and client partitions within the public cloud environment. I still see security as the single issue that is precluding much more rapid adoption of cloud services.
9. Jeff: Do you see governments moving to regulate cloud services as "information utilities" at some point?
Jimmy: I think regulation will be driven less by cloud services as generic utilities and more on the basis of the business being transacted in those utilities. Banking and healthcare will continue to be highly regulated, and there will always be certain regulations around pharmaceuticals. I don't see it being based on the technology they run on as much as the nature of the product or service. What we may begin to see are tests devised to ensure that the technology is able to maintain compliance with those regulations. I believe we will need to deal with that on a global level. The EU directives that are coming out are much different from those we see in the United State. We tend to look at the commercial relationships and maintain a highly regulated environment in certain industry segments. Then China, for example, has a very different regulatory landscape altogether.
10. Jeff: How do you see the challenge of managing and monitoring the service levels at the endpoints where the users are involved?
Jimmy: That will continue to become harder. It's not easy today, and I think there will be a heightened requirement to be able to fully explain how to monitor and manage service level compliance as projects become more distributed, potentially over multiple service providers. The market understands this requirement, so in engagements with many service providers there are tools that allow you to monitor services being deployed via the cloud. It's important to ensure that the service components are included in the CMDB and to be able to monitor performance and availability consistent with the end user's needs.
Managing the endpoints is not always done well in today's environment because of the multiple layers of technology required to deliver a service. For example, consider a hotel reservation system. The hotel cares about the availability of the reservation system, but what it really cares about is filling rooms. You need an end device, a local area network, a router, a switch, a circuit, another router, another switch, a load balancer, an application server, and a database server. All those things need to be in place and working today to be able to say, "Yes, I can make that reservation." We use synthetic transactions to make sure each of those components is available. Not only to represent the availability of the end service, making the reservation, but also to anticipate the denigration in service going on, seeing that the database is slowing down, or that a router starts to bog down.
What's next is that this entire process is contracted. The potential is for the activity across the business process, from the sale to booking it in the ERP system, entering the order, sending the order to the factory, scheduling the build of the product and shipping it out, all that is virtualized.
I think we're still just at the beginning of the cloud phenomenon. We're going to see more services introduced, a greater amount of interest and demand in the market, and more innovative applications of the technology to business concepts. One of the continuing outcomes will be more emphasis on the services themselves and less on the hardware and technology underneath, which translates to a greater focus on doing business.
Jimmy Harris is the Managing Director of Cloud Services at Accenture and is based in Reston, Virginia.
Jeff Cerny has written interviews with top technology leaders for TechRepublic since 2008. He is also the author of Ten Breakable Habits to Creating a Remarkable Presentation. You can reach him at jeff@jeffcerny.com or follow on twitter @jeffcerny.
Mark P. McDonald
from my opinion the implementation of gst will only worsen the daily life of the middle class and the lower class earners. they will really hit by this gst. our government should think other means or ways to collect income from the rakyat coz this will really create the domino effects. The price of goods will increase and everything will be out of control, like what had happen when our gov. reduce the oil subsidy. Actually the gov should be more creative ex. attract more fdi, increase the tax at exclusive restaurants, hotels etc.
Dear Prime Minister,
I think before General Election 2012/2013 better don't GST first.
After General Election 13 ( GE13) then only you should do the following :
1. Implement GST (make sure percentage as high as possible)
2. Increase Petrol to beyond the RM2.80 mark set by Abdullah Badawi.
Don't worry got many ideas such as ' We should not hide behind subsidy any more' and so on…
3. Think of other ideas to victimised malaysian
Furthermore what can the Malaysian do?
You already got back the remaining 4 states what ! (After GE 13)
The other side also as havoc as your BN side maaa….
…who else to vote
Long Live the BN….
Without prejudice, we all know that GST will eventually get implemented, whether we want it or not, or wouldn't it? But is it actually lower than the current SST, even tough the proposed amount is only 4%? SST is only applicable to a specific chain on industry and sectors, for example restaurants and entertainment outlets. With GST, practically every thing that we purchase and consume is going to be subjected to tax (GST).
Let's look at a layman's example. We may be subjected to SST perhaps a few times a month, when we patronize F&B and entertainment outlets, and lets say, we spend about RM150.00. This would mean the SST charged would be RM15.00 (10%) and RM7.50 (5%). This would produce a grand total of RM172.50, which would in the end be incurred by the buyer, which maybe a husband who is spending his family, or perhaps a group of friends who share to pay the bill.
I think this is ok because this will only happen once in a while, usually at the end of the month for the middle & lower class, when salary is in. it may very well be a one off thing once a month. Paying additional RM22.50 would not impact to the rest of the costs incurred for the entire month onwards.
Now, let's ponder upon a layman's example on GST. We all drink, eat, travel, make purchases and buy petrol everyday. In comparison to the SST example, we are now subjected to a 4% GST on the petrol we purchase, the roti canai and nasi lemak we eat for breakfast, the nasi gorem ayam we have for lunch, the tarik after work, and the weekly marketing we do at pasar malam and markets for the household.
Let's do the math to find out if GST is in fact lower than SST. We'll base it on a typical daily life of a middle class Malaysian.
Petrol – RM30.00 (with GST – for the same amount, it will be RM30.00 + 4% = RM31.20)
Breakfast – RM3.50 (with GST it will be RM3.50 + 4% = RM3.64)
Lunch – RM5.00 (with GST it will be RM5.00 + 4% = RM5.25)
After work – let's skip the tarik for argument's sake
Weekly Marketing – RM100.00 (with GST it will be RM100.00 + 4% = RM104.00)
Now, if we add up the expenses above, the total without GST will be RM138.50. With the GST, the amount is RM144.09. The difference is RM5.59, very like, per day. So, on a monthly basis, the layman from the middle class would be subjected to an approximate hike to RM167.70 (just daily routine expenses in comparison to RM138.50). But of course we don't purchase RM30.00 of petrol everyday, and the pasar malam and market visit happen once a week.
** Note – the expenses above are just daily routine expenses. Other purchases will inevitably happen and the payments for bills, rents, and other Goods and Services Tax shall be left to rest for this example's sake. You'll understand why in a bit.
Besides, the GST, for a petroleum producing country, the fuel price should be made cheaper than countries that import fuel, much cheaper.
With the GST in hand, we should also not forget that not all sectors and industry practice a steady, guaranteed salary increment annually. So what happens to the middle and lower class Malaysian when every thing that is needed, purchased and consumed increases in price when the salary is still the same?
Basically, i have just been introduced to this term GST. I'm not really sure of all the advantages and disadvantages this new implementation brings to the table but i know that although GST is being implemented worldwide, the government should be concerned on the issue whether we, the citizens; some of which who are categorized under the middle class and lower class are financially prepared to encounter this situation. Personally speaking, a 4% increase in everything is pointless. Based on what Muhammad Irfan Indrakunavan said, the logic is completely there. Why bother changing the taxing system when the percentage is still at a low 4%? SST is less costly as compared to GST. Until the citizens are financially prepared for this implementation, i suggest that the government should reconsider this implementation.
Essential food and services will be exempted from the proposed Goods and Services Tax (GST).
Among exempted items are rice, vegetables, cooking essentials like sugar, salt and oil, seafood, meat, electricity for domestic users (first 200 units), domestic water usage, services and goods meant for export and international services.
So your teh tarik, roti canai etc are not subject to GST.