Chipita America may be as close to a server-less company as one can find. Its ERP systems, EDI, BI, Office, Exchange and file servers are all hosted in a service provider’s cloud.
About six years ago, when many IT managers were debating Nicholas Carr’s book Does IT Matter, Chipita CIO Scott Martin was moving the Tulsa, Okla.-based snack food maker’s e-mail to a third party’s cloud hosted platform. Since then Chipita has moved the rest its core systems to the cloud.
Martin said he didn’t see a competitive advantage in managing internal systems, believing that his time could be best spent focusing on business needs.
“The real difference that IT leaders [can make] is being able to leverage information to create competitive advantage in the marketplace,” said Martin.
“I feel like a lot of CIOs are in the process of a kind of empire-building,” said Martin.
IT empire builders, he said, believe that maintaining in-house services helps justify their importance to the company. “Those kinds of things are really irrational and not in the best interest of the company,” Martin said.
James Staten, an analyst at Forrester who studies the cloud market, said Chipita is forward thinking for a mid-sized firm. He believes many companies, particularly large ones, have what he calls “server huggers,” or IT officials who resist cloud deployment.
Server-hugging IT leaders “have significant concerns about their ongoing value to the company if they don’t run [IT systems] themselves,” said Staten.
Also, he noted that there are many CEOs “who don’t know anything about technology, so their trusted advisor is the guy trying to protect his job.”
Organizational psychologists say they have seen the behavior described by Staten and Martin.
Michael Barr, a psychologist and department chair of business psychology at The Chicago School of Professional Psychology, said the fear of a loss of control is one reason an IT executive may decide not to move to a cloud environment.
Another reason for resisting the cloud concerns how a person believes his or her status will change once the transition is made, said Barr. The perception, he said, is that “if you are managing vendors you don’t have the same status as someone who is managing direct reports.”
Barr said managers worry that a shift to managing vendors rather than direct reports may take them off the promotion list. Managers and colleagues may not see how much authority, responsibility and direction are given to cloud services vendors, while the interaction with direct reports is visible, he said.
Chipita is a mid-sized, privately held business. It doesn’t disclose its financial results.
Its product lines, which include Old London Foods, Melba Toast, bagel and pita chips are sold by large national retailers, such as Wal-Mart, and smaller ones as well.
CenterBeam, a Sunnyvale, Calif.-based cloud and hosted IT provider is providing the services to Chipita. Martin does keep some servers in his offices, including some redundant Active Director servers, but otherwise minimizes the company’s internal hardware needs.
Martin said he doesn’t believe that he has lost any control of the IT operation. In fact, in many ways he feels has more control and protection for his systems.
The IT operation can control the firewall, for instance, while he can work with the services vendor to ensure the system is secure. “I believe that these cloud partners really have better security in place than what you can do internally,” said Martin.
Also, Chipita can can add virtual servers as needed, he said.
Martin also says he routinely re-evaluates Chipita’s relationship with the vendor and checks the changing market.
His contract limits price increases to the consumer price index, he added. “Our risk is if the market changes and those services become cheaper,” said Martin, but that has not been an issue. He can also move out of a contract in 30 days.
Meanwhile, Martin has focused Chipita’s IT operation on improving the company’s sales tools, and finding new ways to integrate customer information.
By eliminating IT tasks “that are becoming commodities,” Martin said CIOs can focus on being more productive. “For us that’s increasing our sales and decreasing our costs,” said Martin, adding that “those are the two things that make manufacturing companies more money.”