oc cio roundtable mooney management imperatives for realizing value from cloud computing 2013 06 12
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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
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
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
Forrester’s Cloud Computing Taxonomy
Forrester, “The Evolution Of Cloud Computing Markets,” July 6, 2010
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?
Center for Information Systems Research (CISR)
Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds
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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.”
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
Exte
nt
to
wh
ich
th
e P
roc
ess i
s a
Dif
fere
nti
ati
ng
Co
re C
om
pe
ten
cy
Hig
h
Lo
w
Cloud Sweet Spot
Avoid Experiment
Single Tenancy
Salesforce / Force
SuccessFactors
Taleo
eLoyalty
Omniture
WebEx
Akamai
Google / Postini
Center for Information Systems Research (CISR)
Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds
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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
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
Center for Information Systems Research (CISR)
Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds
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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
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”
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?
Center for Information Systems Research (CISR)
Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds
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Embrace the Inevitable! Six Imperatives to
Prepare for Cloud Computing
Center for Information Systems Research (CISR)
Center for Information Systems Research (CISR) © 2013 MIT Sloan CISR – Mooney, Ross & Reynolds
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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
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
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
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
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
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
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”
Announcing a new MBA degree in Digital Innovation and Information Systems (“DIIS”)
at Pepperdine University’s Graziadio School
Launching in Fall 2013
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.
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Thank you!
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