Cloud: Space for the Channel?

Intro Myself and where I workAnswer the key question- is my data safeWhat are the hurdles we have to cross? What are the actionable things we can do?Why should you consider going to the cloud?

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Intro Myself and where I workAnswer the key question- is my data safeWhat are the hurdles we have to cross? What are the actionable things we can do?Why should you consider going to the cloud?

2010 Gartner Hype Cycle for emerging technologies

How did I get here to be presenting in front of you about building the case for cloud?

To my understanding of the cloud and the benefits it brings

Not by first great western

Or my brompton

It was many years crawling under desks

And fixing issues running a medium sized value added reseller. A VAR

In the beginning...

At a time of reinvention- it is really important to ask what IT is for?

What do we do for the business?Or more specifically- what is the production function of IT???http://blogs.gartner.com/mark_mcdonald/2010/06/27/what-is-the-production-function-of-it/What is the Production Function of IT?by Mark McDonald | June 27, 2010 | 1 CommentUnderstanding IT’s role in the enterprise is complex and incomplete. IT is the subject of great debate as some see it as the source of competitive advantage and others see it as an enabling function. CIOs and IT professionals themselves have a tough time answering the question about IT’s role.Why? because I believe we are asking the question in the wrong way.We need to ask,“What is the production function of IT?”Production function, sounds kind of academic right, but its simply the output you get for all the combination of inputs. Its what you take and what you make.Every part of your enterprise has a production function. So, when you ask different parts of the enterprise what they take and make you get answers like:SALESTOP LINE REVENUE: We take prospects and turn them into ordersSUPPLY CHAINPROFIT: We take orders and turn them into invoicesFINANCECASH: We take invoices and turn them into cashIT?????? Silence ??????I know its silence because I have asked the question to dozens of IT leadership teams. They look at each other and cannot put IT’s contribution in a simple answer. It is not because IT is more complex than these other functions. No its more that IT professionals have thought of themselves as something apart for the enterprise, something special and therefore not falling under the same rules.There are two production functions for IT that can be summarized in two words SPEED and SCALE.SPEED: We take strategy plans and turn them into operational performanceIT’s production function is to deliver speed of execution against the company’s strategy and plans. Strategy execution involves change and change requires IT participation. The faster IT is able to execute its processes, deliver results and accelerate strategy execution the better.IT drives speed when it concentrates on reducing its own internal cycle times for providing IT services, solution development and governance. Concentrating internal operations on speed of execution makes IT more responsive and innovative. IT organizations operating at speed give their business a steady stream of value that actually expands ITs role and enterprise flexibility.Without speed, IT is a bottleneck to strategic execution and operational performance. It is the reason we cannot go faster. This is the reason why change is expensive. The reason why I have to control IT costs, because if they cannot go fast enough for me, then I had better make sure that they do not cost too much.SCALE: We take operations and increase their capacity and reduce their average costIT’s other production function is to create scale of operation across the enterprise. Scale in this sense is the ability to IT to aggregate activities and deliver greater capacity at a lower average cost. IT creates scale through its infrastructure and operations activities that make the modern enterprise possible. IT is one of two scale functions in the enterprise. The supply chain is the other scale function.IT drives scale through the infrastructure by constantly aggregating operations, virtualization and active contract management to gain the benefits of being bigger. Without this scale, growing transaction volumes and the cost of operating disparate infrastructures would literally consume the company’s profit.Without scale, operations drown in a combination of complexity, duplicate cost and faltering service levels. You see this with high growth companies that are heroes that suddenly fail – because they do not have scale.***What is IT’s production function? To deliver speed and scale to the enterprise.Speed and scale can seem as two different things, and that can be part of the reason why they are difficult for CIOs and IT leaders to articulate. Most go “ah ha” when they think about their role in speed and scale.But, when you boil it down, we know why an enterprise has a sales function, a supply chain, a finance function, etc. We had thought that IT existed to manage the technologies that these functions depend on.That is true in terms of the activities IT provides, but ‘to what end’Speed of execution andScale of operation.

But it’s a question I didn’t ask myself seriously enough until recently- sounds academic though doesn’t it?

It is a bit- but hopefully it’ll help you understand what we’re here for, just like it helped me. What does production function mean?

It’s the combination of all the inputs

Which create the outputs.

The problem is, that in IT, they’re hidden. Hard to find.Let me contextualise it for you- What do Sales do?

They turn prospects into orders. What does the supply chain do?

They turn orders into invoices.What does finance do?

The turn invoices into cash.So what does IT do?

What do we do for the business?Or more specifically- what is the production function of IT???http://blogs.gartner.com/mark_mcdonald/2010/06/27/what-is-the-production-function-of-it/What is the Production Function of IT?by Mark McDonald | June 27, 2010 | 1 CommentUnderstanding IT’s role in the enterprise is complex and incomplete. IT is the subject of great debate as some see it as the source of competitive advantage and others see it as an enabling function. CIOs and IT professionals themselves have a tough time answering the question about IT’s role.Why? because I believe we are asking the question in the wrong way.We need to ask,“What is the production function of IT?”Production function, sounds kind of academic right, but its simply the output you get for all the combination of inputs. Its what you take and what you make.Every part of your enterprise has a production function. So, when you ask different parts of the enterprise what they take and make you get answers like:SALESTOP LINE REVENUE: We take prospects and turn them into ordersSUPPLY CHAINPROFIT: We take orders and turn them into invoicesFINANCECASH: We take invoices and turn them into cashIT?????? Silence ??????I know its silence because I have asked the question to dozens of IT leadership teams. They look at each other and cannot put IT’s contribution in a simple answer. It is not because IT is more complex than these other functions. No its more that IT professionals have thought of themselves as something apart for the enterprise, something special and therefore not falling under the same rules.There are two production functions for IT that can be summarized in two words SPEED and SCALE.SPEED: We take strategy plans and turn them into operational performanceIT’s production function is to deliver speed of execution against the company’s strategy and plans. Strategy execution involves change and change requires IT participation. The faster IT is able to execute its processes, deliver results and accelerate strategy execution the better.IT drives speed when it concentrates on reducing its own internal cycle times for providing IT services, solution development and governance. Concentrating internal operations on speed of execution makes IT more responsive and innovative. IT organizations operating at speed give their business a steady stream of value that actually expands ITs role and enterprise flexibility.Without speed, IT is a bottleneck to strategic execution and operational performance. It is the reason we cannot go faster. This is the reason why change is expensive. The reason why I have to control IT costs, because if they cannot go fast enough for me, then I had better make sure that they do not cost too much.SCALE: We take operations and increase their capacity and reduce their average costIT’s other production function is to create scale of operation across the enterprise. Scale in this sense is the ability to IT to aggregate activities and deliver greater capacity at a lower average cost. IT creates scale through its infrastructure and operations activities that make the modern enterprise possible. IT is one of two scale functions in the enterprise. The supply chain is the other scale function.IT drives scale through the infrastructure by constantly aggregating operations, virtualization and active contract management to gain the benefits of being bigger. Without this scale, growing transaction volumes and the cost of operating disparate infrastructures would literally consume the company’s profit.Without scale, operations drown in a combination of complexity, duplicate cost and faltering service levels. You see this with high growth companies that are heroes that suddenly fail – because they do not have scale.***What is IT’s production function? To deliver speed and scale to the enterprise.Speed and scale can seem as two different things, and that can be part of the reason why they are difficult for CIOs and IT leaders to articulate. Most go “ah ha” when they think about their role in speed and scale.But, when you boil it down, we know why an enterprise has a sales function, a supply chain, a finance function, etc. We had thought that IT existed to manage the technologies that these functions depend on.That is true in terms of the activities IT provides, but ‘to what end’Speed of execution andScale of operation.

IT’s production value number 1 is Speed.

Turning organisational strategy into execution

As Fast as possible- to deliver results to the business

And to do that IT has to be as responsive as possible

Because without speed IT is a bottleneck to operational performance.

Take operations

increase their capacity and reduce their average cost to again deliver operational performance.

IT should equal agility. Yet when we’re purchasing systems, rarely does agility factor heavily enough.

Traditional IT departmentIn the past, the only way for a company to maintain control of their business process was to completely own the technology supporting the process. The rationale was that a company's most strategic, differentiating processes are unique and therefore have to built by the company either from scratch or by heavily customizing packaged applications. This also meant owning the entire technology stack supporting the process and the application. So, while the intent was to create differentiated processes that were agile and differentiating, the reality has become that the technology stack is an albatross around the IT team's neck that prevents them from moving as quickly and as efficiently as they would like to.The result is that while IT organizations are keen to support the business, they are unable to go much beyond providing basic services. The solution to the problem of managing the entire stack was traditionally either hosted/managed server services or outsourcing, but each introduces its own problems.http://blog.appirio.com/2009/05/do-your-most-strategic-apps-belong-in.html

OutsourcingIn the case of outsourcing, the enterprise gains cost savings but relinquishes control of their business process and has to adhere to the provider's "best-practice" process. This clearly means that outsourcing can only be applied to commodity processes rather than any differentiating processes or processes where innovation is needed. The IT team's role shifts to primarily vendor management with little ability to innovate or drive the business.

Hosted/Managed ServersHosting gets a bit closer to solving the problem because it reduces some of the IT team's pain in terms of managing infrastructure. However, the IT team still needs to spend a lot of their time maintaining the application and the middleware stack, i.e., applying patches and bug fixes, implementing upgrades, maintaining integrations, etc. In addition, the team also needs to manage their relationship with the hosting vendor. So, again, the main impact is some cost savings but no real gains in terms of agility or ability to innovate or support the business.

IT department in the cloudCloud computing changes the decision process completely. No longer do companies face a choice between relinquishing all control of their business process for cost savings or dealing with the high costs and complexity of supporting an entire software stack.Platforms like Force.com and Google App Engine give companies a way to control the parts of the stack that matter most, the application and business process layer and abstract away the management of the infrastructure. This means that the IT team can focus their energies on driving innovation and supporting the business.

#1 Not having to worry about scaling- the provider does

. #3 The provider is constantly updating its software,

But the provider has to focus on game driven design- to make sure the customer acquisition costs remain OK and you users can adopt quickly

#4 Creating Loosely coupled systems enables greater integration for less cost and dependency

. #2 By separating configuration and code, it enables IT to rapidly reconfigure operations

Less dependencies

Means you can Reconfigure faster

Aligns cost to value- Which means time to value is much quicker

Creates Agile, Business Aligned Systems

Green?

What does this mean for the channel?

Cloud Represents a Perfect Storm for Channel partners

A shift from Capex

To Opex

A shift in focus

Away from a technology focus

Towards a business focus

So why is the cloud so scary for the channel?

The cloud offers a lot of what the Channel used to.

Disrupts the financial model

And the skills

Why should you go to Cloud? The momentum is with Cloud.

So I think the Channel needs to embrace the Cloud

So what to do now?

The most important thing is to retain the status of the trusted advisor

Which means you need to be educating the customers, not them educating you

Cloud is an Evolution and a Revolution

But you need to start taking part

Which means reselling Cloud Services, Changing your mix of services

Construct your portfolio

Eat your own dog food

Selling Support

And Services around cloud offerings

Cross sell other Cloud Services- don’t lose budget

Provide Due-Diligence to choose the right solutions

Bring Cloud to the Customer’s network safely and smoothly

Deliver On-ramp services, that enable customers to get to the cloud

That Leverage Cloud and On Prem – “Hybrid” I hate that term!

More focus on Business Consulting

– not “how IT”

but “Why IT”

Just because Customers could do it themselves

Doesn’t mean they will. It is not the end of the channel. It’s just going to be differentMost people haven’t got the time or inclination to do it themselves. No one would have cleaners or builders if they did it themselves.

How can you dip your toe in the water?

Cloud and Perpetual don’t mix well at all- like oil and water

Set up a new business unit focused on Cloud

Enable customers who want to move to the cloud to do so

Run your perpetual business like a cash cow

Leave the customers that are happy with the old model in there (Cloud isn’t secure)

Without cannibalising your existing business

Develop a subscription revenue stream.

So when the perpetual business does die- you can fold it into the subscription business

The economics of Cloud are hard. The best providers typically spend 1 years revenue to acquire a customer

You’ve got a head start

But trying too quickly to Cloud will lead to disaster- so Watch out

Oh and subscription businesses are worth 2-3x a services business.

Green?

Intro Myself and where I workAnswer the key question- is my data safeWhat are the hurdles we have to cross? What are the actionable things we can do?Why should you consider going to the cloud?