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Oc cio roundtable mooney management imperatives for realizing value from cloud computing 2013 06 12

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  • 1. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds John G. Mooney Department Chair and Associate Professor Graziadio School of Business and Management Pepperdine University jmooney@pepperdine.edu Research Affiliate Center for Information Systems Research (CISR) MIT Sloan School of Management jmooney@mit.edu; Research Fellow Irish Centre for Cloud Computing and Commerce Management Imperatives for Realizing Business Value from Cloud Computing This research was made possible by the support of MIT CISR sponsors and patrons. Cynthia Beath, Peter Reynolds, Jeanne Ross, and Jarrod Phipps contributed to the research project. June 12, 2013 Orange County CIO Roundtable
  • 2. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 1 CISR Research Patrons A.P. Moller Maersk (Denmark) AECOM Aetna, Inc. AGL Energy Limited (Australia) Akamai Technologies Allianz Global Corporate & Specialty Allstate Insurance Co. AMP Services Ltd. (Australia) ANZ Banking Group (Australia) Australia Post Australian Taxation Office Banco Bradesco S.A. (Brazil) Banco do Brasil S.A. BBVA (Spain) Bemis Company, Inc. Biogen Idec Blue Cross Blue Shield of Massachusetts BNP Paribas (France) BP (U.K.) BT Group (U.K.) Canada Pension Plan Investment Board Canadian Imperial Bank of Commerce Capital One Services, LLC CareFirst BlueCross BlueShield Chevron Corp. CHRISTUS Health Chubb & Son Commonwealth Bank of Australia Credit Suisse (Switzerland) DWS (Australia) Encana Corp. (Canada) Equinox Ltd. (New Zealand) ExxonMobil Global Services Co. Fidelity Investments FOXTEL (Australia) France Telecom Holcim Brasil S.A. Insurance Australia Group International Finance Corp. Itaú – Unibanco S.A. (Brazil) Johnson & Johnson Leighton Holdings Ltd. (Australia) Level 3 Communications ManpowerGroup Marathon Oil Corp. MetLife NASA New Zealand Govt.—GCIO Office Nomura Research Institute, Ltd. (Japan) Origin Energy (Australia) Parsons Brinckerhoff PepsiCo Inc. Principal Financial Group, Inc. Raytheon Company Reed Elsevier Schneider Electric Industries SAS Sears Holdings Mgmt. Corp. Standard & Poor’s State Street Corp. Sunoco, Inc. Swiss Reinsurance Co. Ltd. (Switzerland) TD Bank (Canada) Teck Resources Ltd. (Canada) Tenet Health Telstra Corp. (Australia) Tetra Pak (Sweden) Time Warner Cable Trinity Health United States Dept. of Health & Human Services United States Postal Service Unum Group USAA VF Corporation Westpac Banking Corp. (Australia) Woolworths Limited (Australia) World Bank MIT CISR gratefully acknowledges the support and contributions of its Research Patrons and Sponsors. CISR Research Sponsors The Boston Consulting Group, Inc. EMC Corp. Gartner, Inc. IBM Corporation Microsoft Corporation Oliver Wyman, Inc. Tata Consultancy Services MIT CISR’s Mission  Founded in 1974, MIT CISR delivers practical, research-based insights on how digitization enables enterprises to thrive in a fast-changing global economy.  MIT CISR engages its community through research, electronic research briefings, working papers, meetings, and executive education. 2012 MIT CISR Research Projects Doing Business Digitally  Strengthening Your Digital Business Model  Building Digitized Platforms Can Be Slow: What Are the Alternatives?  Digital Innovation: Designing Customer-centric Products and Services Redesigning Organizations for the Digital Economy  The Next-generation Enterprise: Designing for an Increasingly Digital Ecosystem  Case Studies in Social Media Innovations  BYOD: Radical Changes to Managing Technology and the People and Processes Relying on It  Working Smarter: Seizing the Opportunities Created by Ubiquitous Data Rethinking the Role of the IT Unit  Managing Your Firm’s Total Digitization: The Next Frontier  Business Complexity: Shifting IT from Problem to Solution  Managing IT Supply and Demand: How to Build a World-Class Service Organization 5 Cambridge Center NE25–7th Floor Cambridge, MA 02142 Ph. 617-253-2348 Fax 617-253-4424 cisr@mit.edu http://cisr.mit.edu © 2012 MIT Sloan CISR 1 December 2012
  • 3. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 2 What exactly do we mean by Cloud Computing? “Cloud computing is [an approach] for enabling ubiquitous, convenient, on-demand, network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort or service provider interaction” US National Institute for Standards and Technology, 2011
  • 4. Forrester’s Cloud Computing Taxonomy Forrester, “The Evolution Of Cloud Computing Markets,” July 6, 2010
  • 5. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 4 Cloud Adoption Case Study “We want to reach $10 Billion in sales by 2015 with an even broader geographic footprint.” —David Pyott, CEO, Q1 2010 Insight Magazine “That’s Doubling our business in the next 5 years!!” —Fred Orensky, (then) Head of Enterprise Architecture Is our company ready for doubling the business? Is our platform ready for doubling the business? Will the business units wait for the IS organization?
  • 6. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 5 Allergan Enabling Business Capabilities  Key business capabilities required: – Talent management – Field sales effectiveness – Rapid integration of acquisitions – Cost management – Strategic agility  Key performance goals for the IS Organization – Increase responsiveness to business needs – Increase speed of deployment – Reduce time-to-value realization – Curtail proportional growth in IT budget  Adopted a “Cloud First” policy to address these business needs – Before buying or building new systems, conduct a systematic review of whether a viable public cloud option exists Sue-Jean Lin, CIO “It’s not just efficiency that is important; people take that for granted. It’s business capability enablement. But of the various business capabilities we are currently enabling, agility is key.”
  • 7. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 2010: When Would Allergan Consider the Cloud? High / Unmanageable Low / Manageable Extent of Data Security Risk ExtenttowhichtheProcessisa DifferentiatingCoreCompetency HighLow Cloud Sweet Spot Avoid Experiment Single Tenancy  Salesforce / Force  SuccessFactors  Taleo  eLoyalty  Omniture  WebEx  Akamai  Google / Postini
  • 8. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 7 Management Practices for Enabling “Cloud First” @ Allergan Architecture Review  Technical Assessment — Assures the solution’s agility, reliability, scalability, and alignment to IS standards  Security Review — Assures that data is secure in use, in flight, and at rest Vendor Due Diligence  Vendor Assessment — Assures quality of service, security, compliance, and data portability  System Risk Assessment — Identifies vendor and system risk profile Vendor Management  Periodic Audit —Recertification for expanded services —Renewal —Data extraction  Contract Mgmt. —Inclusion of Security and Privacy addendum
  • 9. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 2010-2012: Allergan’s Cloud Journey 2010 2012
  • 10. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 9 Realized Business Benefits of Cloud Computing  Increased responsiveness, speed of deployment, business agility  Faster pace of adoption  Improved reliability, frequency of updates, security  Simplicity  IT cost savings  “Elastic” provisioning of “burst” computing & DR capacity  Shifting CapEx to OpEx  IT budget reallocation (from “build & run” to “deploy & exploit”)  Better information (deep analytics, collective intelligence)  Distribution of digital products and services  Enablement of “web native” applications (social, mobile, location-based, “BYOD”)  Enablement of “loosely-coupled” multi-enterprise processes
  • 11. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 10 Challenges to realizing the competitive benefits of cloud  Data security concerns  Legal/regulatory compliance  Immaturity and instability of vendors  Service reliability and business continuity  Weak contracts, SLAs, and consequences for non-performance  Integration and interoperability with on-premise systems  Vendor lock-in and ambiguous data portability  Loss of control  Limited transparency  Limited expertise, understanding, exemplars, and trust  Long-term cost uncertainties  Resistance: “SHeBeNoBiF”
  • 12. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 11 Key question:  What are the effective management practices associated with realizing business value from cloud computing, while mitigating its challenges and potential risks?
  • 13. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 12 Embrace the Inevitable! Six Imperatives to Prepare for Cloud Computing
  • 14. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 13 Imperative #1: Re-define the IT value proposition  Beyond business efficiency to business agility  For the IT Unit, beyond efficient provider of IT resources to agile provisioning of business capabilities and services
  • 15. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 14 Imperative #2: Re-focus Enterprise Architecture  From tightly-integrated enterprise-wide platforms to a hybrid of minimal core “on-premise” platform augmented by loosely-coupled, modular, “on-demand” cloud services  From technology artifacts to service interfaces  Enabling experimentation at the edges and consolidation at the core
  • 16. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 15 Imperative #3: Re-allocate funding  From CapEx to OpEx  From Managing Technology Investments to Managing Value Realization
  • 17. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 16 Imperative #4: Re-structure IT Governance  Shift IT decision rights from centralized to distributed (including vendors)  Ensure access to (rather ownership of) appropriate services and business capabilities
  • 18. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 17 Imperative #5: Re-think the purpose of IT  Beyond standardization for enterprise efficiency to accommodating user needs, personal work-styles and technology preferences for empowerment and creativity
  • 19. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 18 Imperative #6: Re-engineer the IT Organization  From a dominant focus on “build and run” to brokering services, integrating data, and exploiting value
  • 20. Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds 19 Implications for IT Professionals “Adapt, or become obsolete”
  • 21. Announcing a new MBA degree in Digital Innovation and Information Systems (“DIIS”) at Pepperdine University’s Graziadio School Launching in Fall 2013
  • 22. DI-IS Curriculum Design • Standard MBA core plus six designated DIIS electives: – Digital Innovation and Strategic Transformation – Business Analytics and Intelligence – DIIS Portfolio and Project Management – Business Process Analysis and Innovation – Enterprise Architecture and Infrastructure Management – Managing DIIS Security, Privacy, and Ethics • Students may request to replace up to two of the above with electives in managing teams, leadership, change management, creativity, marketing, negotiation, quantitative analysis or an applied research project.
  • 23. 23 Thank you!

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