Cloud computing continues to be touted as a major breakthrough in information technology and in how organizations design and deliver business services. Companies that are moving into cloud technologies, while also increasing their reliance on outsourcing, are freeing themselves from organizational and technological constraints while enabling significant new business opportunities.
However, for the internal IT function, the cloud signals significant new challenges. For two decades, IT has been on a journey from being a back-office technical function to a service-oriented and strategic business resource. That services orientation requires different skills across all levels of the IT organization.
More effective management skills are especially important to leveraging cloud capabilities. This is a key finding of new research from the London School of Economics and Accenture, based on a survey of 1,035 business and IT executives as well as in-depth interviews with more than 35 service providers and other stakeholders.
Our research shows that many CIOs and other IT professionals often lack the deep knowledge and experience to move decisively into cloud computing. In practice, we found this knowledge gap to be a major reason for organizational delays in moving to the cloud. One strategist summarized this point by saying: “We are going through an interesting time ourselves from a strategy perspective in terms of our capabilities. We are looking at the IT operating model and figuring out how the IT function needs to change internally.”
Our research points to four core capabilities for effective cloud management:
- Governance, including leadership, organization and coordination
- Business and function vision
- Architecture planning and design
- Delivery of services
|Within each of these four dimensions are important sub-capabilities (see chart) |
The central leadership task of cloud management is to devise and engage in organizational arrangements—governance, structures, processes and staffing—that successfully manage internal and business interdependencies so that the technology function delivers business value for money. Other research into innovation has found that a “business innovator” role in the in-house function is key to moving any external sourcing agenda in the direction of the collaborative innovation with business—and, eventually, with suppliers—that is needed to realize the full business potential of the cloud.
2. Business and function vision
All our research respondents stressed that cloud management requires a high degree of business-facing skills. One such skill is in what we call “business systems thinking.” Business systems thinkers focus obsessively on aligning strategy, structure, people, process and technology. Our cloud research emphasizes the fact that business systems thinkers need to be deployed on cloud projects, where they can act as conduits between business demands and the technical architects.
Another important capability is relationship building, which facilitates the wider dialogue and establishes understanding, trust and cooperation among business users and technology/cloud specialists. Relationship builders develop users’ understanding of technology and cloud, as well as the potential that the cloud holds for their lines of business.
3. Architecture planning and design
When it comes to the cloud, our respondents suggest that the architect capability is critical. The cloud architect has to be comfortable with service-oriented architecture (SOA), because most clouds use a services approach to delivery.
Operating in the overlap between the challenges of IT architecture design and delivery of IT services is the core capability of “making IT and process work.” Technology “fixers” are needed to troubleshoot problems and identify how to address business needs that cannot be satisfied properly by standard technical approaches.
4. Delivery of services
The fourth competency comprises the capabilities required to manage and ensure external supply. These include:
Informed buying. In an organization that has decided to outsource most of its technology services, the informed buying capability is critical to success. Informed buyers analyze and regularly benchmark the external market for IT and cloud services; select the five- to 10-year sourcing strategy to meet business needs and technology issues; and lead the tendering, contracting and service management processes.
Contract facilitation. This capability is crucial for ensuring a smooth relationship between suppliers and business users, in part by ensuring that problems and conflicts are resolved fairly and promptly within what are usually long-term relationships.
Contract monitoring. This involves making inputs into the development and maintenance of a robust contract as the basis for a sound governance framework. The role then leads to holding suppliers accountable for both existing service contracts and the developing performance standards of the services market.
Vendor development. This competency is concerned with leveraging the long-term potential for suppliers to add value, creating “win-win” situations in which the supplier increases its revenues by providing services that drive greater business benefits.
Meeting the challenges of cloud management
Our research points to two major challenges in developing these cloud management capabilities. One is recruitment and retention of the small, highly skilled group needed to manage cloud effectively. The other is evolving these management skills to support the expected increases in cloud deployment and external sourcing over time.
Once technical reliability is established, the retained function needs to become more business-focused and better able to source externally. This makes the relationship building and business systems thinking capabilities especially important. Also, scaling up on external cloud-sourcing will need increased investments in requisite informed buying, contract monitoring and vendor development capabilities.
Whatever the emerging pattern of take-up and speed of cloud computing, it is clear that technology continues to be both a challenge for organizations and a significant opportunity. Making the cloud—and cloud management—successful requires a huge amount of effort.
One paradox is that the challenges of technology have often blinded people to what the real purpose of the technology function is. The cloud offers a path forward. The more that technology gets moved out of the way—into the cloud and/or the supplier—the more the technology function can focus on its real job, which is to exploit the capability that IT makes available for business. Primarily, this will lie in service, information management, business analytics, IT-enabled business innovation and digital business. Organizations must ensure they have the management capabilities in place to reap the full value of the cloud.
About the authors
Professor Leslie Willcocks, Dr. Will Venters and Dr. Edgar A. Whitley are in the Outsourcing Unit of the Department of Management at the London School of Economics and Political Science.
For more information, contact John Hindle.