Saturday, February 26, 2011

Will Cloud Computing help the business align to the market?

I was recently at a private conference of CIOs when in the midst of discussing activities such as CRM to ERP, it became clear that not only did everyone understand these applications, but also that every company had them. Almost all of those companies have expensive customization programmes in place, tailoring these systems to fit their needs. This behaviour is puzzling, but to explain why, we'll need to first look at the concept of business evolution.

All business activities share a common evolutionary pathway, a lifecycle; from the innovation of an activity, to custom built systems implementing that activity, to the provision of products, to eventually commodity provision and the appearance of utility services.

It is unusual to find activities that are commonplace, well understood, well defined and accepted as a cost of doing business being treated as though they were in an earlier stage of evolution with heavy customization. But each CIO told how that was exactly what was happening at their company, and the discussion became surreal when we discovered that many of the customizations being made to systems like CRM were common as well.

Surely, these activities are best served by being provided as a standardized commodity ideally through a market of utility services? Isn't that the whole point of cloud computing? So why aren't we all flocking to consume a host of common activities through the utility services of cloud providers? Well, a diverse range of companies already are.

However, several of the CIOs who had looked into the issue said these services didn't work for their company. On further questioning, it became clear that it wasn't IT but the business that was pushing for the customization in order to fit in with their way of working. Several CIOs had even used the standardized services of cloud providers to challenge this - asking the business to justify the additional orders of magnitude costs for a customized system by demonstrating the differential value that 'their way' made.

Whilst we often talk about business and IT alignment, this shouldn't mean IT just delivering what the business asks for. In circumstances where there is no differential value, then it's better to 'fit to the model' rather than 'fit the model to us'. We do the former all the time - from banking to electricity provision; we don't go and build our own customized solutions, we just find a way to work with the dominant market standards.

Will cloud computing help the business to treat common, cost-of-doing-business activities as though they are common and a cost of doing business? Or, will some businesses continue to spend vast sums customizing that which really makes no difference?

Could the cloud help the business re-align itself with the market?

Reprinted from LEF site