Last week I wrote about the 2013 MIT Sloan CIO Symposium which I recently attended. The Symposium included a number of talks and panels on the key issues facing CIOs, as every business is essentially becoming a digital business. Big data and cloud were the most prominent transformative technologies discussed at the Symposium. My remarks last week were focused on big data. I now want to turn my attention to cloud computing, and its impact as a key driver of the changing role of the CIO.
These days, few question the importance of cloud to individuals, companies of all sizes and the economy in general. In a just published report by the McKinsey Global Institute, Disruptive technologies: Advances that will transform life, business, and the global economy, cloud is listed as one of 12 technologies with significant potential to drive economic impact and disruption by 2025. The report said:
“The cloud is enabling the explosive growth of Internet-based services, from search to streaming media to offline storage of personal data (photos, books, music), as well as the background processing capabilities that enable mobile Internet devices to do things like respond to spoken commands to ask for directions. The cloud can also improve the economics of IT for companies and governments, as well as provide greater flexibility and responsiveness. Finally, the cloud can enable entirely new business models, including all kinds of pay-as- you-go service models.”
But, as with all major transformative technologies, along with the promising potential come serious challenges. I remember attending the 2009 MIT CIO Symposium, which, as a recent article with the provocative title IT Dinosaurs in Cambridge pointed out, “was all about the cloud.” In 2009, cloud was still a relatively new concept that CIOs were just getting their heads around. “Fast forward 4 years,” the article added, “and you have a conference with an innovation theme, a hot topic for CIOs these days as they grapple with trying to staying relevant in a digital world of rapid change. And yet we have a panel full of industry representatives complaining about the cloud as though it were some new concept worthy of their fear and contempt.”
Cloud is now making the transition from cutting edge, promising innovation to an additional set of tough IT challenges for CIOs to manage. CIOs are indeed embracing cloud, but they are being cautious. The cute child is now a teenager, still full of promise, but also of mischief if not properly handled.The CIOs in a panel on Strategic Agility through IT agreed that cloud can be a great help in providing business users with the agility they increasingly demand to keep up with the pace of technological and market changes. Turning to an external cloud service provider is often a faster and less costly way to implement a new application than relying on the internal IT organization.
But, while acknowledging that such business users may turn to outside cloud providers on their own out of frustration with their slow moving IT departments, the CIOs expressed their own frustration with the problems that such actions often lead to, including costly duplication of services and silos of information that make it difficult to deploy enterprise-wide applications and shared processes. They were particularly frustrated with cloud software vendors that make their lives more difficult by going directly to the business users, bypassing the central IT organization.
Michael Relich, CIO of clothing retailer Guess? said that cloud vendors that sell directly to the business makes IT more difficult to manage. “It’s getting more complex because it’s proliferating. I call it cockroach technology.” But, as other CIOs pointed out, this is not a new problem for IT. Departmental and business users have gone around them in the past when they felt IT was not being responsive to their needs and was seen as an impediment to change rather than a partner in moving forward.
This was indeed the case in the 1980s and 1990s with the advent of the client-server model of computing. Client-server systems were built out of relatively inexpensive microprocessors and other PC and workstation technologies and were optimized for lost costs and simplicity. Different departments within the enterprise started to bypass the central IT organization, which managed the expensive mainframes located behind the glass walls of the data center, and acquired their own computers for their own applications. Initially, it was easier, faster and less expensive to develop and operate new applications in such distributed systems because there was no central IT organization to slow you down with enterprise-wide architectures and processes.
But over time, these companies ended up with large numbers of relatively isolated and underutilized departmental servers, each dedicated to its own applications and supported by its own staff. Eventually, this made it difficult to share processes and consolidate IT resources in order to improve the quality and reduce the costs of the overall IT infrastructure. Enterprises then started to consolidate most of these departmental servers into a few large centralized data centers that were easier to manage and secure. CIOs now face a similar challenge as departments can easily acquire cloud-based services which, if not properly managed, could lead to a similar proliferation of isolated cloud islands across the business.
An additional set of challenges were discussed in The Evolving Cloud Agenda, an industry panel led by CIO Journal editor Michael Hickins. Cloud vendors often go beyond the underlying hardware and software to provide an overall business process, including HR, sales support, accounting and record management. This raises a number of serious questions, especially when something goes wrong. What is the legal relationship between the cloud service provider and the client? Who is ultimately responsible for the security of the data in question? What financial responsibility does the cloud provider have if the service is unavailable?
The Service Level Agreements underlying the security, performance and reliability of cloud services are still being worked out. SLAs can vary by customers, as cloud providers may cut one-off deals in order to win a competitive bid. As cloud vendors assume more risks and responsibilities for the services they provide, their price advantage over in-house services may begin to erode. Legal compliance may not be transferable at all from client to cloud provider, especially in regulated industries like healthcare and finance.
Scott Blanchette, CIO of hospital operator Vanguard Health Systems, said that most of Vanguard’s mobile and social software is already running in the cloud, but vendors and customers must work out the risk management issues for more mission critical applications. As a result, “The new cloud environment is going to be very evolutionary over the next five to 10 years.”
For startups, small businesses and individuals, the benefits of cloud computing are so compelling that they trump SLA concerns, although they should remember that you get what you pay for when comparing cloud services across different providers. But, it’s not surprising that a complex, transformative technology like cloud will take time to deploy in larger enterprises, most of which already have significant legacy IT infrastructures.
Understandably, CIOs of these larger companies are more conservative when considering public clouds, especially for more mission critical applications and/or those that involve sensitive data. For such applications, they are more comfortable developing on-premise private clouds that provide cloud-based services to their employees, business partners and clients with many of the advantages of public clouds. It’s quite possible that the more successful of these private clouds will then offer their services to other companies in their industry, on their own or in partnership with IT service providers.
Over time, the emergence of cloud standards and open source platforms like OpenStack will help blur some of the distinctions between private and public clouds. It’s quite likely that one of the major contributions of cloud to the IT industry will be the introduction of outside-in open standards that will enable the creation of a global supply chain of IT-based business services, software components and applications. This will bring advanced engineering practices to the world of IT, enabling the development of complex IT solutions by drawing upon pre-defined business services and components with standard interfaces from multiple sources within and beyond the enterprise.
Needless to say, all this will take time, as well as careful management and governance. Which brings us to what may well be the overriding message coming out of the 2013 MIT Sloan CIO Symposium, namely the changing role of the CIO. IT is more important than ever in our increasingly digital economy where digital technologies are having an impact in just about every single aspect of the business. In response, the role of the CIO is evolving in multiple directions.
First and foremost, as several panelists reminded us, CIOs need to make sure that the trains run on time. They need to balance innovation with stability. As Kazuhiro Gomi, CEO of NTT America put it: “running things smoothly is sometimes more important than being innovative.” CIOs need to remember that regardless of how much their roles change and what exciting additional responsibilities they assume, “their core responsibility of keeping the proverbial lights on remains intact,” said SAP CIO Michael Golz. Otherwise, “you can forget the innovation discussion. If the email’s down, it doesn’t even happen.”
But, as Russell Reynold’s Shawn Banerji said in his introduction to the CIO panel he moderated, “[CIOs] have to do all the old plus the new.” What are some of these new responsibilities? This question was succinctly answered by technology analyst Eric Lindquist, who characterized the profile of the CIO emerging out of the MIT Symposium in this eWeek article:
“He or she is an expert at doing more with less and is adroit at whittling down the traditional costs associated with keeping the lights on. But the CIO is also absolutely ahead of the rest of the company in implementing, cloud computing, mobility, social networks and big data.”
“The CIO is also a security expert, as well as a department-to-department ambassador, and is always ready to listen to even the most out there technology idea. The CIO knows more about business than the CEO and more about digital marketing than the CMO, and takes the lead in retraining the current IT staff and nurturing the kid in the mailroom, who is the social network wizard. And, oh yeah, the email system never goes down, the data is always real time, and the data center is all virtualized.”
“If all that sounds like a tall order, it is. But it is the profile that most resembles the CIO, which emerged from the 10th Annual MIT Sloan CIO Symposium. After sitting through keynotes and panels . . . I was left with the image of the current CIO role as an increasingly powerful and maybe an increasingly impossible job.”