Clouding Your Judgment

Archie Deskus, VP & CIO, Baker Hughes

Archie Deskus, VP & CIO, Baker Hughes

The cloud is here to stay and this trend has triggered changes in our businesses and personal lives.

Is the hype and drama about cloud computing clouding your judgment?

Cloud computing is one of the leading trends in today’s marketplace and proposes an alternative to traditional IT service models. The cloud offers a vast array of options for services and capabilities in a rapidly available and scalable solution.

“As new technology trends emerge, careful consideration must be given to viability, maturity and advantage to determine what is worth pursuing”

We are beyond the question of whether the cloud is a viable option, but should consider at what point it fits in the business plan and where does it fit in your company or personal use. Technology leaders must ask themselves how cloud computing can be leveraged in their business and IT strategies as a vehicle to accelerate and achieve their desired results. Scale, speed, variability, cost, security, functionality and flexibility are some factors to consider when evaluating the use of the cloud.

The initial race to move to the cloud appeared to be motivated by economics. The promise of low cost, high flexibility and without long-term commitment sounded like utopia. The reduced reliance on capital investments, fixed infrastructure, internal computing resources, and human capital were compelling reasons to adopt the cloud to transform or evolve an organization. However, for small organizations where significant investments would otherwise be needed when they may not have the resources or technology to support a large infrastructure, the cloud provided the obvious choice. For larger organizations, this would not necessarily be the case; however, there could be motivation in moving from a long-term capital investment to operationalizing expenses based on consumption. While there may be a perception of economic value, leaders need to take careful consideration of transition costs, long-term costs once captive, and growth.

Cloud providers come with a breadth of options and capabilities; however, the question to consider is what components of the business are most suited and will drive the optimal return from a cost/benefit/risk perspective. For cyclical businesses or companies where periods of significant demand and subsequent ebbs of activity occur, the cloud provides the variability of provision, allowing corporations to only consume and pay for what they need, when they need it. Without a doubt, one of the cloud’s greatest appeals is the speed with which services can be provisioned and scaled. This agility assumes a certain level of acceptance of native functionality, and minimal customization in order to leverage the need for speed.

For enterprises where business processes are bespoke and heavily customized, the cloud may not be optimal since businesses require capability that is too far removed from native to be cost effective in the cloud.

Although the benefits of cloud services are obvious, the migration and adoption to the cloud depends on sufficiently addressing security and privacy requirements. Being in the cloud requires organizations to accept some level of shared resources, which, at times, can conflict with expectation of total control. There are differing opinions whether total control translates to lower exposure rather than relinquishing control to a capable provider to manage and sustain. The ultimate decision depends on the provider’s ability to meet specific customer regulatory requirements, a commitment to contractual protection against risks, and sufficient acceptance of liability. While I believed in the potential of the cloud for several years, I wanted to see it mature and become pervasive before making major commitments. As we have seen with other technology platforms, I am concerned the ultimate cost model will not translate to lower cost. Rather, technology providers have found ways to increase revenues through customization, upselling and evolving consumption models. Cost aside, cloud infrastructure has the benefit of greater ability to remain current and reduce risk of obsolescence, provide for a scalable model to support growth/ contraction of a business, and greater transparency to business partners.

Cloud applications offer a bounty of choice –there is an app for everything. Choice can be an opportunity as well as a problem. Adding capability that drives real top-line or bottom-line value without significantly increasing the cost base should be the goal. Unfortunately, the direct sell to individual users by the cloud services providers can create a shadow application portfolio and increase costs and risk. This can be mitigated through governance and appropriate controls.

Our approach has been pragmatic, evaluating on a fit-for-purpose basis. Obvious choices are areas with specific need and low risk, such as point solutions for HR and sales & marketing, which do not require heavy integration to backend systems. New capabilities with significant backend integration and investment must undergo a more rigorous evaluation.

Of particular importance these days for the oil and gas industry, which has been slower to adopt, is the impact from the dramatic decline in oil prices. As we see continued cost pressures, there will be greater emphasis to look for solutions that can scale quickly and react to market volatility. Additionally, the consolidation of the industry will require interim scaling up for acquisition integration and divestiture activities.

Objective as a CIO

As a CIO I have learned that the CIO role varies dramatically from business to business and there are many reasons why IT can be viewed as a utility player, an enabler or a leader. Important factors are where the role reports in the organization, whether the product or service offerings have embedded technologies, the level of automation and sophistication of the business operations, and the innovation mindset of the industry and company. In most businesses, many of the transformative opportunities are likely to come from technology advancement. CIOs that bring a balanced capability and perspective on leveraging technology to advance or improve the business are valued well beyond their technology leadership capabilities.

My personal objective as a CIO has always been to try to move organizations to the ultimate potential of technology beyond cost. Where technology has been core to the business strategy and at times even drives the business strategy, I have seen the greatest business transformations. Organizations with mature CIO roles are better places to leverage technology as a foundational component to business strategy.

Irrespective of any specific technology trends, I believe companies must have an integrated business and IT strategy aligned to maximize business results. As new technology trends emerge, careful consideration must be given to viability, maturity and advantage to determine what is worth pursuing. Relevance of specific new innovations will vary based on industry and market opportunities, and must be balanced with an organization’s ability to embrace and drive change. Business leaders must remain open to new ideas and trends, but selectively seize the game changers, thus, delivering the greatest value.