The Strategic Benefits of Adopting an Enterprise Cloud Computing Platform
Cloud computing platforms are enabling enterprises to attain faster time-to-market of new products, in addition to enabling higher levels of collaboration and communication with suppliers, stakeholders and partners externally. Enabling cost reductions through consolidation of legacy IT systems while increasing process efficiencies is delivering a positive Return on Investment (ROI) while also increasing customer responsiveness. The strategic benefits of adopting a cloud computing platform emanate from having a single system of record that quickly accelerates information and knowledge sharing throughout an enterprise. One of the most visible processes external to an enterprise is how new product introductions are executed. A unified cloud computing platform can accelerate this process, delivering gains in time-to-market and competitiveness of an enterprise quickly. Ultimately the shift from a legacy IT system platform and architecture that lacks scalability to a cloud platform that can quickly scale to future needs is crucial for many business' survival.
In this essay I will argue that enterprises can attain greater time-to-market, collaboration, cost reduction and scalability of their business models by phasing out aging, legacy IT systems and replacing them with a unified enterprise cloud computing platform. The complexity, need for coordination and intensity of competition and market dynamics continue to accelerate across all industries. Cloud platforms have the ability to deliver real-time, accurate customer and company-specific insights that are transforming business models today, making them more scalable and agile to respond to opportunities and threats (Berman, Kesterson-Townes, Srivathsa, 2012). Attempting to synchronize the diverse departments, processes and systems to support strategic priorities and plans is highly dependent on the IT platform and systems used for sharing information and collaborating both within and outside an enterprise. The continual shift to cloud computing platforms and away from legacy IT systems has broken down silos and removed constraints that held enterprises back from achieving more through the use of better information (Cusumano, 2010).
Cloud computing platforms also have the innate design advantages of being able to elastically scale for the specific workloads placed on them, in addition to having in-built Application Programming Interfaces (APIs) that streamline system integration (Fershtman, Gandal, 2012). While the technical aspects of scalability are taking enterprise software availability and ease of customization to an entirely new level, the economic impact of cloud platforms relative to legacy enterprise on-premise software is changing how companies buy and expense software today (Aleem, Christopher, 2013). Given elasticity of cloud platforms to scale to specific workloads and application needs predicated on user's requirements, the analytics and traceability of performance is further fueling a shift in how enterprises purchase software with the Platform-as-a-Service level of the cloud technology stack most often managing these services (Beimborn, Miletzki, Wenzel, 2011).
On-premise enterprise software applications often require millions of dollars in upfront costs, with services often costing ten times the actual cost of the application. Given the inherent design of cloud applications to scale in response to the need for precise computing resources needed to support enterprise-wide applications while monitoring usage in real-time, cloud platform providers can accurately assess the amount of resources used. Even in private cloud configurations where the entire cloud platform is contained within a data center, these same data accuracy levels and economics hold true. The shift from highly expensive on-premise applications where capital expense (CAPEX) budgeting is used to pay for IT infrastructure are giving way to operating expense (OPEX)-based financial models where enterprises pay for only the amount of IT resources needed to scale their businesses (Creeger, 2009). The economic benefits of having an IT infrastructure than can scale to meet peak workloads, yet is agile enough to be quickly reconfigured for new business models provides inherently greater competitive focus, speed and responsiveness than their traditional on-premise counterparts (Cowen, Gawer, 2012). Given the greater time-to-market, collaboration, cost reduction and scalability that enterprise cloud platforms are providing today relative to on-premise systems, it is clear that the trend of OPEX-based spending surpassing CAPEX for enterprise IT platforms will continue.
Scalability and Enterprise Cloud Platforms
All industries share a continual common and increasingly urgent need to scale their operations economically while staying agile enough to respond to changing market conditions. In the past legacy IT systems were often constructed with the explicit assumption that business models would rarely if ever deviate from a highly standardized series of processes deliberately designed to reach economies of scale quickly. These business models, so prevalent in the last century, strove for accuracy, predictability and an assiduous pursuit of lean manufacturing techniques that included a strong reliance eon Six Sigma as a means to find and eradicate variations in any process. IT infrastructures that were designed with economies of scale and consistency as their primary objectives severely limited their ability to scale in foreseen and often disruptive directions (Reavis, 2012). One of the most valuable lessons learned by enterprises and entire industries that were driven out of markets and eventually business by faster-moving, more information-efficient competitors was that IT infrastructure and platforms had to scale quickly to meet the requirements of business models (Winans, Brown, 2009). For any new and emerging business model to thrive and for a business to have a chance at surviving and moving beyond disruption, IT infrastructure and platforms have to become an integral part of the strategic mix of the business (Fershtman, Gandal, 2012). Legacy IT infrastructures defy this level and type of analysis as they were primarily constructed to provide for consistency of production process and the minimizing of variation in production, service, pricing and distribution practices (Teixeira, Pinto, Azevedo, Batista, Monteiro, 2014). Ironically the highest performing companies today and in the future will have IT infrastructures and applications that provide processes and flexibility of specific application areas to capitalize on variation in customer demand and profit from it. When the business benefits and value of traditional on-premise IT infrastructure is compared to enterprise cloud computing platforms, the financial and operational value of greater agility can be quantified. The next section, measuring the business benefits of an enterprise cloud platform provides this analysis.
Measuring the Business Benefits of an Enterprise Cloud Platform
The most significant business benefits of IT platforms and infrastructure have progressed beyond eliminating variation from operations, production or services. Today IT architectures must be perfectly aligned with strategic plans and initiatives for an enterprise to mitigate risk and capitalize on new opportunities (Ghormley, 2012). The strategic benefits of greater time-to-market, collaboration, cost reduction and scalability are enhanced or experience degradation when IT system fail to stay aligned to strategic initiatives and goals (Hayes, 2008). Time-to-market of new applications developed within IT departments and often personally managed by CIOs is a key metric to evaluate how agile a given IT infrastructure is. Enterprise cloud-based business platforms including those developed by Salesforce include programming development tools and applications, in addition to extensive support for Application Programming Interfaces (API) which streamline integration of enterprise cloud platforms to legacy, 3rd party systems, platforms and applications (Silva, Costa, Oliveira, 2013). Orchestrating all of these technologies together to support key business initiatives and objectives leads to a 70% reduction in time-to-market for creating and launching new applications (Hilwa, Mahowald, Perry, 2014). Legacy, on-premise IT infrastructure often requires highly customized coding and development with adapters and connectors costing $250,000 or more to produce and an annual cost of nearly $10,000 to keep current (Berman, Kesterson-Townes, Srivathsa, 2012). Even under ideal conditions and in an exceptionally well-run IT department, the time-to-market of new applications is exceptionally slower and more expensive than when applications are built on a cloud platform.
Integration, infrastructure, IT costs and IT staff productivity also illustrate how standardizing on an enterprise cloud platform can deliver significant cost and time savings relative to legacy on-premise systems and platforms. Cloud architectures have standardized on APIs as a means to streamline and simplify complex integration workflows between diverse systems, making it possible to integrate enterprise-wide cloud infrastructure with legacy Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and Supply Chain Management (SCM) systems (Silva, Costa, Oliveira, 2013). On many legacy, on-premise systems and platforms, the most common approach to integrating diverse systems together is either through simplistic UNIX operating system companies including the use of the File Transfer Protocol (FTP) embedded in shell scripts or a reliance on other file transfer protocols (Sharif, 2010). This approach to system internetworking and connectivity does not scale and often literally will crash a system if the adapter or connector cannot keep pace with the transaction workloads needed (Reavis, 2012). A recent study by International Data Corporation shows that infrastructure cost reductions on an enterprise cloud platform can save up to $102,829 per 100 users (Hilwa, Mahowald, Perry, 2014) while there is no cost reduction possible on legacy on-premise systems and platforms. In many respects, legacy on-premise systems and platforms are like asbestos in that they must be contained to ensure incremental costs are not spread throughout an organization. This proliferation of costs for legacy systems is…