The fundamental five

A report from The Economist Intelligence Unit
Mapping the cloud maturity curve
The fundamental five
What businesses must have in place to extract maximum value from the cloud
Sponsored by

© The Economist Intelligence Unit Limited 20141
The fundamental five: What businesses must have in place to extract maximum value from the cloud
About this research 2
The fundamental five:
What businesses must have in place to extract maximum value from the cloud
3
Fundamental 1
Ask the big question: Is your business strategy cloud ready?
4
Fundamental 2
Put a ring on it. Make the IT relationship real
6
Fundamental 3
Prepare for the rule of the digital natives
7
Fundamental 4
Practical makes perfect
8
Fundamental 5
Don’t risk the reward: Get good advice
9
Reality checks and balances 10
Contents
1
2
3
4
5

The fundamental five: What businesses must have
in place to extract maximum value from the cloud
identifies and explores the core foundational
elements of a mature cloud strategy. It is the central
piece in the first phase of a research programme,
Mapping the cloud maturity curve, sponsored by
IBM. The second phase will examine the degree to
which companies have put this foundation in place
and where they lie on the cloud maturity curve.
As the basis of this research, The Economist
Intelligence Unit solicited the views of eight leading
experts, based on their real-world experience.
We also reviewed relevant existing literature. The
findings and views expressed in this report do
not necessarily reflect the views of the sponsor.
We would like to thank all of the executives who
participated, whether on record or anonymously,
for their valuable insights. The author was Stuart
Lauchlan. Riva Richmond edited the report and Mike
Kenny was responsible for the layout. We would like
to thank all of the people who participated, whether
on record or anonymously, for their valuable
insights.
Contributors:
Ian Davidson, president of Pitney Bowes Europe
Kuan Hon, research consultant at the Cloud
Computing Project, University of London
Antoine de Kerviler, chief information officer of
Eurostar
David Jack, chief information officer at Hyperion
Insurance Group
Barry Jennings, senior associate at Bird & Bird
Richard Sykes, chairman of the Cloud Industry
Forum and former global group chief
information officer at ICI
Rebecca Wetteman, vice-president at Nucleus
Research
Leslie Willcocks, professor of technology, work and
globalisation and governor of the Information
Systems and Innovation Group, London School
of Economics
About this
research

Many companies have embraced the cloud—
technology services delivered over a network
connection—to save money, boost speed and
productivity and seize new business opportunities.
But fewer have committed to the underlying
strategic machinery needed to achieve optimal
business benefits from the cloud and ignite
outsized success.
Well-oiled machinery is becoming a requirement
at a time when business is being transformed by
cloud, mobile, social and other technologies. To
compete and win in this fast-paced digital
marketplace, companies must align their business
strategies, organisational structures and cloud
approach.
To understand the nature of this machinery and
whether it is in good working order inside
companies today, The Economist Intelligence Unit
(EIU) has undertaken a one-year research
programme sponsored by IBM. For the first phase,
the EIU sourced the collective views of eight
leading experts, including chief information
officers, industry analysts, academics and legal
experts, to identify the core foundational elements
of a mature cloud strategy, based on their real-
world experience. This report kicks off this initial
stage of our programme.
In the next phase, we will survey executives
globally and interview leading practitioners to
examine the degree to which companies have put
this foundation in place, the nature of the
obstacles they face and how far they have
journeyed down the road to cloud maturity.
The five fundamentals, in our view, are: cloud-
aligned business strategies, organisational
structures, corporate cultures, technology
infrastructures and governance best practices.
While companies can reap some benefits from the
cloud without having all five of these in place, the
corporate engine will not then fire at optimum
capacity, thus full benefits will not be realised.
In short, cloud computing has become a
business-critical issue, and organisations must
take a systematic approach if they are to get the
business benefits they have been told—and sold—
to expect.
The fundamental five:
What businesses must have in place to
extract maximum value from the cloud
Cloud computing
has become a
business-critical
issue, and
organisations
must take a
methodical
approach if they
are to get the
business benefits
they have been
told—and sold—to
expect.

a
x
A critical starting point for any cloud strategy is to
understand the business imperative driving
investment. What are the business objectives an
organisation hopes to achieve? How do these fit
within the overall corporate strategy? And how will
cloud computing help a firm meet those objectives
and deliver on that strategy?
Often, the main business imperative will be
cost-reduction and the cost-efficiencies promised
by the cloud delivery model, which reduces the
need for capital expenditures on IT infrastructure
and resources because companies can, instead, buy
technology as a service. Increasingly, however,
companies are focusing on the greater agility and
speed of delivery that cloud systems offer and how
these systems can fuel the hot pursuit of new
revenue opportunities.
The primary motivation for cloud adoption has
evolved over time, notes Barry Jennings, senior
associate at Bird & Bird, an international law firm,
who advises companies and governments on
outsourcing and cloud implementations and
formerly served as industry co-lead for the UK
government on its G-Cloud national cloud
programme. “In 2010, it was basically a money-
driven thing, partly driven by the economic crisis,
partly driven by the fact that [chief information
officer] budgets had been cut by huge amounts,”
he said at the Westminster eForum Next Steps for
Cloud Computing conference in London in
September 2014.
But today, executives have more flexibility to
pursue core business objectives with “vigour”, he
said. And they are looking to the cloud to produce
growth.
Freedom fast forward: Pitney Bowes commits
to the cloud
Organisations often use cloud computing to break
free of the shackles of ageing, legacy IT systems
and to better position themselves to sell and
compete on digital platforms.
Such is the case at Pitney Bowes, a global
corporate mail-equipment and technology provider
based in Stamford, Connecticut. Ian Davidson,
president of Pitney Bowes Europe, says the
division’s investment in cloud-based applications
for salesforce automation, customer relationship
management (CRM) and field-service management
was primarily a business decision triggered by its IT
function’s inability to provide meaningful
comparative operational data.
“We were faced with a decision really: Do we invest
in our on-premise solution, with lots of cost in the
back office redesigning those systems? Or do we
leverage the investment we’d already made in [the
cloud] and have our sales and service organisations
on a common platform across Europe?”
Pitney Bowes chose the cloud route because it
could help optimise existing business practices and
open up new revenue opportunities. “By having
sales and service on the same platform, we had
greater visibility to our clients and what
technology they had deployed, so we have much
better life-cycle and sales-cycle management
across the organisation,” Mr Davidson explains.
Fundamental 1
Ask the big question: Is your business
strategy cloud ready?1
ALIGNED
STRATEGY
Know what’s
possible, what’s
imperative and
how you will
measure success.

Of course, cost benefits are still a factor.
“Anyone who says that they are not focused on cost
is not telling the truth. That’s still very much an
issue. But cloud is also about speed and agility and
the ability to get stuff to market,” he says.
Strategic sanity check: What is your business
imperative?
Speed of execution and enhanced customer
experience were the main business imperatives for
Eurostar. The London-based rail operator’s
call-centre staff had been wasting precious time
toggling between and among a plethora of
computer programs while talking with customers.
But recently Eurostar streamlined those systems
and now “they can concentrate more on the
customer than the computer”, says Antoine de
Kerviler, Eurostar’s chief information officer (CIO).
It is important to focus on specific goals and
avoid chasing too many, says David Jack, CIO at the
London-based Hyperion Insurance Group.
“Be honest. Is the discussion around cloud
because you want to save money or because you want
a better service or because you want to deliver
service better?” he asks. “The executive board will
want all three: better, cheaper, faster. Be clear about
which one you focus on. What we’ve done is map [our
goals] across five years. Are we focusing on delivery,
quality or price of service? In each year, what is going
to be the most important to the business?”
Last things first: Know your success metrics
Whatever the business goal driving cloud adoption,
it is vital to know what metrics will be used to
measure the success or failure of the investment.
These will most likely be quantitative in the first
instance, says Rebecca Wetteman, a vice-president
and analyst at Nucleus Research, a Boston-based
research firm that focuses on technology return on
investment (ROI).
Nucleus case studies indicate that the cloud can
deliver 1.7 times the return produced by IT
systems that are run in-house within an
organisation’s own data centre, the more
traditional set-up known as “on-premise” IT. “Part
of that is down to a lower initial cost, but if you
look out over time, it’s also down to the capacity
to add, expand and upgrade without the cost of
disruption of a traditional technology project,” Ms
Wetteman explains.
With a traditional project, “the day after it went
live, it would be out of date. There would be new
fixes, new patches, new updates. So as an IT
manager, I’d be chasing the value curve all the
time,” she says. “With cloud, you stay on that
value curve. You don’t need to do a cost trade-off.
You get more value over time for applications, not
less.”
In addition to quantitative returns that increase
with time, many companies realise important,
long-lasting qualitative returns. For instance,
Eurostar’s customer-satisfaction ratings improved
after it streamlined its contact centre. Such
qualitative metrics vary from organisation to
organisation and industry to industry and ought to
be identified and measured.
The bottom-line message is straightforward:
Know your destination, know why you’re making
this journey, and know how you’re going to
recognise when you have arrived.
❛❛
Is the discussion
around cloud
because you want
to save money or
because you want
a better service or
because you want
to deliver service
better?
❜❜
Antoine De Kerviler,
Eurostar’s chief information
officer

For too long, employees have complained that the
IT department is an inhibitor to progress. They
blame it for failing to provide systems to support
fast-changing business objectives in a timely
manner, thus putting the organisation at a
competitive disadvantage.
One side effect has been an organisational
schism in the form of “rogue” or “shadow” IT, a
phenomenon in which employees looking for better
ways to do their jobs introduce technologies into
the company without permission or consideration
for the organisation’s wider technology plan. If a
new salesforce automation application can be
downloaded by anyone with the swipe of a credit
card, why wait for the centrally mandated upgrade
from IT in six months’ time?
While understandable and apt to produce
short-term gains, this attitude can lead to
fragmented IT strategies with serious long-term
implications for corporate governance, compliance
and basic security.
Think us, not them
Organisational harmony is the wiser solution, and
the onus is on CIOs to create it by retooling how IT
works with the rest of the business. “The
relationship between business and IT has
changed,” says Mr Davidson of Pitney Bowes. “It is
more of a partnership, less of us and them and
more of ‘what can we give you?’” Both parties now
must focus squarely on how cloud technologies
support business imperatives.
Organisational constructs like working groups
and committees can ease IT and business
cooperation. Richard Sykes, chairman of the
nonprofit Cloud Industry Forum, advises companies
to start with “two or three of your brightest
commercial people who are very articulate about
how you compete in the marketplace [and] then
identify two or three of your best IT operational
people. Then you have to get those two groups into
a very market-focused discussion.”
At Eurostar, such structures are in place. “We
put together a priority list, which we co-manage
with other departments at C-level,” explains Mr de
Kerviler. “The chief commercial officer and I sit
together in cost-of-sales committees. We discuss
the priorities, the infrastructure, the architecture,”
he says. The two then explain the business issues
to the technical staff and the technical issues to
the businesspeople.
Cross-company buy-in to cloud initiatives is
critical to success, but a clear owner of the strategy
is also necessary. That person is most likely to be
the CIO.
At one time, some CIOs feared that cloud
computing would reduce their influence, but that
concern subsided as it became clear that the cloud
did not obviate the need for internal IT expertise
and involvement. “The IT department has a big role
to play in getting organisations over cloud
challenges,” says Leslie Willcocks, professor of
technology work and globalisation at the London
School of Economics and Political Science (LSE).
Companies need the strategic approach that
only centralised IT can provide, but shadow IT may
now be an entrenched cultural phenomenon that
organisations will have to tackle as well.
Fundamental 2
Put a ring on it. Make the IT
relationship real2
ORGANISATIONAL
HARMONY
Redefine
teamwork. Always
bring IT and
business
executives closer
together to
ensure cloud
technologies
support business
strategy.

Millennials are rising as a force inside companies,
as are a larger group of people who thrive on
connection and digital content. These digital
“natives” and “immigrants” will demand very
different sorts of technologies in their working
lives than most current employees. Many have
never known a world without Facebook or Twitter
or Google, and their expectations are high for
technologies that are powerful, simple and social.
This massive global cultural shift will shake
many organisations, especially if they rely on older
business systems and have employees with
pre-Internet cultural expectations. “In the [old]
corporate world, there was a feeling that you were
tied up, that you were bound by what had been
deployed by your company,” says Bird & Bird’s Mr
Jennings. People were accustomed to having
better technology at work than they had at home
and less apt to question it.
But all that has flipped now, he says: Today’s
employees expect and demand flexibility and
office technology that is as good as what they have
at home.
Bridge all digital divides
To optimise their return from cloud systems, many
organisations will need to adjust their cultures so
that the established workforce and the emerging
one work seamlessly together. They will have to
step up to the demands of digital enthusiasts by
providing technologies that empower them. And
they will need to bring along the rest of their
colleagues by using top-down leadership-by-
example as well as support and training.
Time may ease the cultural issues as the
“as-a-service” generation comes to dominate the
workplace and their mindset becomes the cultural
norm. For now, however, companies will need to
reshape their organisational culture proactively.
Fundamental 3
Prepare for the rule of the digital
natives3
DIGITAL CULTURE
Prepare for the
rule of the digital
natives. Help
employees of all
ages and
backgrounds
embrace the
“as-a-service”
culture.

d
Once a sound business imperative has been
identified, organisational unity has been achieved
and the company culture embraces cloud
technology, companies should revisit and perhaps
redesign their underlying technology
infrastructure.
This effort is often presented as requiring a
“religious” choice between private clouds, where
an organisation has a dedicated compute resource
of its own, and public clouds, where the compute
resource is shared with others. The arguments in
favour of each have been well rehearsed over the
years: Private cloud is more costly but more secure,
while public cloud offers greater cost arbitrage, but
requires mixing your data in with those of other
organisations.
In reality, the choice is seldom as simple as
private vs public, except perhaps for start-ups and
particularly bold enterprises. Pitney Bowes, for
example, is clearly a strong cloud advocate, but its
current enterprise-resource-planning (ERP)
programme is on-premise, not in the cloud. “I can’t
see us being 100% cloud,” says Mr Davidson.
Even those who aspire to be cloud-only will not
get there immediately, argues the LSE’s Mr
Willcocks. This is where the concept of the hybrid
cloud comes in—a combination of private and
public clouds deployed where appropriate and to
coexist with existing on-premise IT investment. So
an enterprise like Pitney Bowes can keep its
existing ERP system in-house, but then layer cloud
CRM on top of that, thus enabling the company to
protect existing investments while also gaining the
benefits of more flexible, up-to-date cloud
applications.
Mix and match
This sort of combination is increasingly common,
says Nucleus Research’s Ms Wetteman, and one
that will inform technology selections long into the
future. “Most organisations that have been around
for more than five years are going to have some
on-premises systems for some time to come, and
it’s probably most cost-effective to keep them
where they are,” she argues. “It’s IT’s role and
responsibility, as a result, to understand cloud
integration.”
For Cloud Industry Forum’s Mr Sykes, the critical
issue is to understand your organisation’s
particular needs and capabilities and build
technology choices around them. Then you can
focus on the suppliers and technologies that suit
you and your market sector, he says.
The key message here is: Do not be dogmatic
about your technology selections, but be sensitive
to your current and future business requirements
and capabilities. “Very few businesses have the
opportunity to move everything to the cloud. Other
than that it looks beautiful and modern, I’m not
convinced it’s the optimum approach,” says Mr
Jack of Hyperion Insurance. “The real genius is
what you keep behind.”
Fundamental 4
Practical makes perfect4
DYNAMIC
INFRASTRUCTURE
Be practical. Find
ways that cloud
technologies fit
with your
organisation’s
unique needs and
capabilities.

The final element of a mature approach to the
cloud is good governance. Companies must
carefully consider their approaches to the cloud
and data to ensure that they have the right
technology in place to support corporate needs and
that they will not run afoul of laws and regulations.
The cloud revolution has raised a fresh set of
security, privacy, compliance and risk-management
questions. Such is the relative immaturity of the
cloud industry that, in many cases, good
governance is typically the responsibility of
corporate buyers, not cloud providers.
While companies can often assess a provider’s
security credentials, other areas are less clear-cut.
Most notably, data-protection law—much of which
was written before the Internet era, let alone the
cloud-computing age—is often confusing and open
to interpretation.
“The law always lags behind technology. Law
can regulate technology, but technology can be
used to enforce or to break laws,” says Kuan Hon,
research consultant at the Cloud Computing Project
at the University of London. “Some of the
requirements of law, as interpreted by regulators,
are pretty incompatible with cloud computing.”
For instance, in Europe, data-protection
regulators are concerned about personal data
being stored outside European Economic Area
borders. As such US cloud-services providers face
having to set up in-region data centres at
considerable cost, which they will pass on to their
customers, thus undermining cost-arbitrage
benefits.
“There is no set meaning of data sovereignty,”
says Ms Hon. “Generally, what people are talking
about here is data localisation or data residency. If
the physical location of data is so important to you,
then you need to think about all the locations
involved, not just the location of storage. Where is
the location of processing? Where does the
compute happen? Where are the back-up
locations?”
What this exposes is the need for expert advice
on governance, security and contracts. Cloud
contracts are highly standardised, with even the
largest of enterprises struggling for concessions
from providers. “A lot of organisations just don’t
consult lawyers,” Ms Hon says.
Fundamental 5
Don’t risk the reward: Get good advice5
GOOD
GOVERNANCE
Don’t risk the
reward. Ensure
that security,
privacy and legal
compliance are
addressed—up
front.

Reality checks and balances
Evangelical cloud-computing advocates once made
great play of the idea that companies and even
individual employees could swipe a credit card and
get started with a cloud service straight away.
While this carefree way of starting out with cloud
services attracted attention in the early days of
mainstream adoption and seeded the workplace
with enthusiastic users, it is not a good philosophy
today—and, in retrospect, it never was.
While easy start-up is a virtue, the most
successful corporate adopters approach cloud
technologies with the same seriousness they apply
to more traditional IT delivery mechanisms. As can
be seen with enterprise deployments by the likes of
Eurostar and Pitney Bowes, this typically involves
top-level support from the business and IT as well
as expertise and due diligence in procurement,
contract management, governance and security.
In short, if cloud computing is now business-
critical, then companies must treat their evolving
cloud strategy as critical, too.
They need a clear understanding of how and why
they are deploying cloud technologies and what
role they play in delivering on wider corporate
goals. They need organisational structures and
corporate cultures that optimise ROI and deliver
results. And they need a pragmatic approach to the
selection and deployment of technologies that
ensures those choices support good governance.
Companies that put these gears in place and get
them turning will gain a high-performance
business.
The most
successful
corporate
adopters
approach cloud
technologies with
the same
seriousness they
apply to more
traditional IT
delivery
mechanisms.

Whilst every effort has been taken to verify the accuracy of this
information, neither The Economist Intelligence Unit Ltd. nor the
sponsor of this report can accept any responsibility or liability
for reliance by any person on this white paper or any of the
information, opinions or conclusions set out in the white paper.

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