Aspects of cloud computing have been available to-and rejected by-IT outsourcing customers for years, from hosted applications to on-demand hardware support. But as the breadth of the cloud has expanded to include a growing number of software-, platforms- and infrastructure-as-a-service offerings that can be quickly deployed as needed with low management overhead and little vendor interaction, the temptation to move away from traditional IT services provisioning is mounting.
On the other hand, having your IT services in the cloud involves a host of risks, from data control issues to lack of transparency to the financial stability of new providers. Prospective cloud service customers must take into account a number of unique issues associated with cloud delivery in conjunction with the criticality of the software, data and services they're considering transitioning from a traditional IT services model, says Dan Masur, a partner in the Washington, D.C. office of law firm Mayer Brown.
"Maturing cloud-enabled services present powerful tools for scalability, flexibility, lower cost, or even better security, but 'the cloud' is not a set of magic bullets," says Phil Fersht, founder of outsourcing consultancy Horses for Sources. "There are lots of terrific cloud service innovations being developed right now all over the world. This is great news for IT customers, but the service provider landscape is going to be tougher to navigate for quite some time."
The beauty of cloud computing, however, is that it's not an all-or-nothing proposition for outsourcing customers. "The real debate shouldn't be 'cloud' versus 'not-cloud,'" says Fersht. "Many next-generation solutions will certainly leverage cloud services, but critical decisions facing CIOs are less about delivery methods and more about how technology solutions can deliver disruptive levels of value over the longer term."
Customers of traditional IT services can take the following five low-risk steps to evaluate whether cloud computing services are right for their organizations.
1. Start Playing in the Sandbox. The cloud is perfect for trying out new technologies beyond the core services the IT organization and its existing service providers deliver to the business, says Doug Plotkin, head of U.S. sourcing for PA Consulting Group.
"These can be turned on for a period of time, and tested, then turned off if they do not prove useful," he says.
What's more, using the cloud as a test environment keeps costs down. If it doesn't work, the expense is off the books.
2. Send less-critical services to the cloud. Find some less vital functionality in your organization-storage, email, business continuity-and try it out in the cloud. Traditional IT services customers are toying with a host of new software-as-a-service products in this way, says Fersht. "[They] learn about cloud services by trying them out. This generates some near-term value and builds the foundation for the truly innovative business solutions that should come next."
Services involving routine, non-sensitive information or "nice to have" business tools with limited scope are less risky prospects for cloud pilots than enterprise-wide, mission-critical services involving regulated or business sensitive data, says Mayer Brown's Masur.
3. Carve something out. Many IT decision-makers will balk at cutting over to, say, a hosted email offering or infrastructure-as-a-service from Rackspace or Amazon in one fell swoop. That's why Plotkin suggests IT mangers "consider commoditizing some of the services that IT provides to the business, and carefully moving a small part of the delivery to this more flexible model." Build and test it in parallel with the existing delivery method to determine if a wholesale "lift and shift" to the cloud has merit, he adds.
4. Solidify a next-generation sourcing strategy.Don't just throw together a PowerPoint about how your IT organization plans to embrace cloud services in conjunction with your traditional IT outsourcing model. "Ask some hard questions about where the firm needs to be over the next three to five years regarding technology," says Fersht.
For example, Should you be in the data center business? Is that custom application truly a competitive differentiator? How should your outsourcing strategy shift to ensure long-term value?
"These are questions that deserve serious consideration," Fersht says. "Enterprise decision makers that don't re-think technology now will be left behind by competitors that are."
5. Don't wait to do your due diligence. Not ready to try out desktop-as-a-service, play around with Microsoft Azure, or sign a new pay-as-you-go contract with an outsourcer? Now is still the time to start digging into the details of the cloud computing market. Research not just vendor offerings and approaches, but financial stability and scalability.
If you're considering signing a contract with some new vendors, go deep. Among the issues to consider, says Fersht: Are you having the right conversations with services vendors who have the process depth and delivery model to help you determine your next moves? Do you have confidence in the solutions being touted by the provider, or are you just getting the hard sell? Have you seen real evidence of vendor capabilities to deliver business effectiveness?
Make sure you understand not just the promise of the cloud, but potential perils, adds Plotkin, especially with more aggressive, risk taking sellers. Finally, make sure you have a back-up plan should any cloud provider underperform.
Read more about outsourcing in CIO's Outsourcing Drilldown.