Strategic benefits of adopting enterprise cloud computing platforms
Explains the benefits of choosing to adopt an enterprise cloud computing strategy and the potential to increase efficiencies as a result. Time-to-market, cost reduction and greater coordination are all key benefits of an enterprise cloud computing strategy. All of these elements taken together are essential for an enterprise to attain its long-range objectives over time.
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Business Systems Development
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.
Introduction
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.
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 apparent in the IT labor cost reductions that are attainable with an enterprise cloud computing platform. The IDC study, Salesforce1 Platform: Accelerate App Dev with Huge ROI (Hilwa, Mahowald, Perry, 2014) reports that IT labor cost reductions on a cloud platform can deliver as much as a 44% reduction in annual labor costs. The same study found when enterprises chose a cloud platform, they were able to attain a cost and efficiency reduction of $243,814 per 100 users vs. legacy, on-premise systems and platforms (Hilwa, Mahowald, Perry, 2014). When an enterprise cloud computing platform was standardized on vs. continuing to rely on legacy on-premise systems and platforms, enterprises realized a savings of $318,965 per 100 users per year (Hilwa, Mahowald, Perry, 2014).
One of the most commonly cited concerns and regarding enterprise cloud computing platforms is application, login and data security. With the many instances of public cloud computing platforms being hacked including Amazon Web Services, this is a valid concern. Security and stability of enterprise cloud computing platforms is so essential to the business models of enterprises standardizing on this platform, they have strategic IT plans defined with entire sections on security planning and management (Sharif, 2010). Enterprise cloud platforms of The Federal Information Security Management Act of 2002 (FISMA), Statement on Standards for Attestation Engagements (SSAE) No. 16, Reporting on Controls at a Service Organization (SSAE 16) (formerly SAS 70), International Standards Organization (ISO) 27001, Payment Card Industry Data Security Standard Level 1 (PCI DSS), Safe Harbor & TRUSTe standards) and SSL 128-bit VeriSign transmission level security. Enterprise cloud computing platform provides are investing the majority of their research and development funds into security in an added effort to alleviate this as an objection to selling their services. Annual infrastructure costs are reduced from $170,731 to $67,902 as a result of the combined effects of these factors taken together (Hilwa, Mahowald, Perry, 2014). Table 1 in the Appendix, Comparison of Enterprise Cloud Platform and Legacy On-Premise Systems and Platforms summarizes the analysis completed that shows the business value of an enterprise cloud platform. Each of the attributes listed in the table are what CIOs and IT departments use to evaluate IT platforms and infrastructures to determine how best they align with their specific strategic goals and initiatives. Integration, infrastructure, IT costs and IT staff productivity are essential cost and benefit components in calculating the total business value of an enterprise cloud computing platform.
Conclusion
Each industry's competitive landscape continues to accelerate based on real-time data availability and greater insights into supply chains, customers and costs. The previous-generation, legacy on-premise systems and platforms does not scale to current and future business models and their accelerated data needs. Enterprise cloud computing platforms are being designed to provide a scalable, secure system of record that can support both previous and current generation enterprise applications. Through the use of APIs, cloud-based resource allocation and optimization, and the development of virtualization technologies, enterprise cloud platforms are capable of surpassing legacy IT systems from an application performance and scalability standpoint (Wood, Ramakrishnan, Shenoy, Van, 2012). There continues to be intensive levels of investment in development and programming languages as well (Hilwa, Mahowald, Perry, 2014) including support for Ruby, Java, Python, visual workflows and role-based access control (Aleem, Christopher, 2013). These factors and the innate scalability and security enterprise cloud platforms are delivering greater time-to-market, collaboration, cost reduction and support for emerging business models today.
Appendix
Table 1:
Comparison of Enterprise Cloud Platform and Legacy On-Premise Systems and Platforms
Platform Feature
Enterprise
Cloud Platform
Legacy On-Premise Systems & Platforms
Time-to-Market For New Applications and costs
A recent IDC study shows that the Salesforce1 platform accelerated time-to-market for new applications by 70% or more
Source: (Hilwa, Mahowald, Perry, 2014)
Time-to-market for legacy applications designed through agile and waterfall methods average $250K or more in many organizations; time lag drives delivery date past deadline.
APIs for legacy system integration and costs
Extensive with Salesforce1 having 10X the number of APIs
Source: (Hilwa, Mahowald, Perry, 2014)
None, all custom hand coding for adapters and connectors
(Avg. is $60K - $90K per adapter per system integrated to.)
Infrastructure Cost Reductions (including costs associated with in-house development activities such as servers, software, hardware, travel, and consultancy services)
$102,829 per 100 users cost reductions
Source: (Hilwa, Mahowald, Perry, 2014)
No Cost Reduction Possible
IT Labor Cost Reductions Based on Greater Efficiency
44% annual reductions IT labor costs.
Source: (Hilwa, Mahowald, Perry, 2014)
Requires unique, expensive skill sets to keep existing infrastructure in place and operating reliably
IT Staff Productivity (avoiding IT hires and reduce their ongoing maintenance and application development costs).
$243,814 per 100 users cost reductions
Source: (Hilwa, Mahowald, Perry, 2014)
No Cost Reduction Possible
Data Independence -- All Apps. Operate Completely independent of the underlying data, increasing app. Security and reliability
Inherent in the design of an enterprise cloud platform.
Not available as many on-premise apps rely on tight integration to databases at the field and record level.
(unavailable)
Development environment that includes advanced support for Ruby, Java, Python, visual workflows and role-based access control
Inherent in the design of an enterprise cloud platform.
Each of the programming languages would operate separately; there would be no common code base; further fragmentation of IT development and application management.
Application and Platform Security
FISMA, SSAE 16 (formerly SAS 70), ISO 27001, PCI-DSS Level 1, Safe Harbor & TRUSTe standards) and SSL 128-bit VeriSign transmission level security.
(standard and included at no charge)
Customized security programming and development; security to the O.S. level requires frequent patches and ongo8ing system maintenance contracts (22% of the purchase price of the operating systems and apps)
Support for Mobility Application Development and costs
Supported to the API Level
Source: (Hilwa, Mahowald, Perry, 2014)
None -- must start an entirely new programming effort for each new mobile app.
(new mobile app. ranges from $5K to $50K depending on complexity)
Business Productivity (faster application development, moving staff members to positions focused on growing the business, higher productivity because of better applications, and other cost reductions in operations.)
$318,965 per
100 users per year.
Source: (Hilwa, Mahowald, Perry, 2014)
Not Applicable
User Productivity
Average productivity gain of $62,227 per 100 users.
Source: (Hilwa, Mahowald, Perry, 2014)
Not Applicable
Annual Infrastructure Costs (IDC Study)
$67,902
Source: (Hilwa, Mahowald, Perry, 2014)
$170,731
Source: (Hilwa, Mahowald, Perry, 2014)
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