The Cloud Information Officers cometh

Cloud may be considered a disruptive technology, but it’s also disrupting the role of the CIO and the IT department. That doesn’t mean the CIO is a dinosaur, doomed to extinction. It means the CIO is going to have to evolve and change with the times in order to survive.

Shawn Kernes is vice-president and CTO of Montreal-based Beyond the Rack, a private shopping club that sells designer-brand apparel and accessories over its website. But he says his title should really be chief sanitation engineer, since his job involves cleaning up messes and preventing the organization from getting into those messes again.

Kernes, who spoke at SuiteWorld 2011, Netsuite’s annual user and partner conference held in San Francisco last month, said though the company is only two years old, it’s in “hyper-growth” mode, growing from 18 employees to more than 240 in a matter of 12 months, and it’s now shipping 10,000 packages per day.

When they started out, they were running the business on spreadsheets, or “amything we could get our hands on,” said Kernes, so they started looking for a cloud-based solution to run their financials and eventually deployed NetSuite OneWorld (NetSuite offers ERP, CRM and e-commerce solutions in the cloud, as well as development tools to create on-demand business applications on top of its platform).

The company’s challenge is that it sees 80 per cent of its traffic during a one-hour period each day, when it sends out an email to members with clothing specials at 11 a.m. Typically everything that people really want sells out between 11 a.m. and noon. “Our problem is somewhat unique in that we have to handle a huge spike and then we don’t really care that much about the rest of the day,” said Kernes. Another issue is PCI compliance, which has been important from Day One. “We really only have one asset, which is customer trust,” he said.

Cloud changes the function of IT from managing hardware to managing apps and users, said Kernes. “It’s still just as many people, it’s just a different skill set, [it’s a] focus on integration. We used to run a whole bunch of Microsoft products; today you have developers working on single sign-on for 10 or 15 different things. It’s just like any other software development cycle — tools change, the process stays the same.” Companies considering cloud should change their applications, but not the way their business runs.

The company initially launched everything for everybody — order processing, purchasing, case management — then built a series of custom UIs for its internal warehouse and receiving operations using SuiteTalk Web Services and SuiteScript. The result? From an operational cost perspective, it went from $5 per shipment to $3 per shipment.

While some small businesses are concerned about the reliability of the cloud (a concern that was not mitigated by Amazon’s recent outage), the reality is, said Kernes, that as it stands small business websites go down all the time. During his time at Beyond the Rack, which has been less than a year, the company has had two outages during off-peak hours — not because “the cloud” was down, but because a function wasn’t ready. “That’s not a big deal to a startup compared to running our own infrastructure,” he said.

The bigger issue is training. Nothing will destroy user adoption faster than lack of training, said Kernes. “Our mistake is we threw it in and did minimal training. People started using it and they started using it incorrectly, and it took time to turn around their perception of NetSuite … the reality is it’s our fault, we didn’t give them the training they needed to be successful.”

And just because you’re using an on-demand solution with automatic updates doesn’t mean you can neglect the potential impact of upgrade cycles, he added.

“Test thoroughly and build out semi-automated regressions if possible, and never stop training and retraining on both process and proper execution. If you turn it out too fast you’ll be revisiting it pretty quickly.”

We’re seeing the democratization of technology as the power to create is moving out of the hands of the IT organization, said Ronald Schmelzer, manager partner at ZapThink. “If this was 1998, if you wanted to create a website, you’d pretty much need an IT department. Now you can set up a blog in 15 minutes. You’ve got Twitter, you’ve got Youtube — that’s completely flipped the control equation. Now IT has very little control over the creation of content.”

And this is going to force companies to rethink IT within their organization. As we move away from a world where data is proprietary to one where users expect to access data anywhere, the challenge for the CIO is more about deep interoperability.

Schmelzer believes the role of CIO will change completely by 2020. “The CIO is going to be the strategic planner and regulator for IT assets it probably doesn’t own,” he said. “The IT organization is going to be smaller and more strategic, and the CIO will have to figure out how to leverage technology that the company doesn’t own to deliver strategic value to the business and to customers.”

Like Beyond the Rack’s Kernes, Kelly Bleach has also recognized this changing role. Bleach, who attended SuiteWorld, is CTO of the American Foundation for the Blind, a nonprofit that assists 25 million people with vision loss in the U.S. The organization has typically worked with software specific to non-profits, but recently received a grant that spurred a search for a cloud-based ERP system.

Initially they were using a system built on Microsoft Dynamics NAV (formerly Navision), which was customized for non-profits. “It was too complex to do it ourselves, so we had to hire a consultant for even an upgrade,” she said. “So we started to look at how we could simplify our financials.” Then Bleach saw her sister-in-law, a CFO, doing financial transactions on her laptop — while on the beach during a vacation — and was taken aback by the flexibility of cloud.

However, Bleach was concerned whether a cloud-based ERP solution could work for a non-profit, since her organization has to track donations and deals mainly with grants from government and corporations. But she’s made it work: Grants are treated as “projects” in the system, which have a similar lifecycle. That means the data can be managed in-house.

The organization went live in March with its core financials and donation tracking in the cloud, and is looking to possibly expand this usage down the road to e-commerce. And, since the CEO and many of its vice-presidents are vision-impaired, Bleach is now focusing her efforts on rolling out dashboards with high-contrast colour, large fonts and a simplified UI, as well as a JAWS screen reader or ZoomText for text magnification.

“We’re taking a leap of faith with cloud,” said Bleach. She recommends the IT department get involved in the business process requirements sessions during project kickoff. “I was involved with pretty much all of the decision-making in concert with finance staff,” she said. “We talked out the best way to do something, how we can bring other parts of the organization in. My IT staff is as busy as they ever were, but it’s different.”

Most companies are already using some form of cloud, whether it’s Gmail or a hosted Exchange solution, said Martin McNicoll, president of ERP Guru, a Montreal-based ERP solution provider. Now, companies that once would never have considered putting mission-critical processes in the cloud are starting to look at it.

“I thought that Canada was there in 2005, but I met a lot of resistance,” said McNicoll. Now he’s seeing less of that resistance; the hype around cloud, perhaps, has helped. The business driver, however, tends to be a pain point within the business. He still comes across companies, for example, using Excel spreadsheets, even FoxPro or Access, to run their finances.

Some companies aren’t ready to make the move to cloud, but he says at some point they’ll have to consider it. “I believe this is the way software is going to be delivered — eventually people will have to come to grips with it.” Companies that can benefit from cloud are those with more than one office distributed across the country or multiple countries. “This is where it’s a great fit,” he said. “If they had to put that in place with traditional infrastructure … they’re at the point where it’s too cumbersome.”

Aside from increased awareness of cloud, the trend toward mobility is also putting more pressure on on-premise solutions, said Craig West, NetSuite’s vice-president of channel sales. “Mobile devices are going to continue to put pressure on having real-time access to data,” he said.

While today’s mobile platforms don’t offer an ideal user experience for cloud-based applications, West believes this will improve as browsers get more sophisticated and allow for these types of solutions to run natively. That means a CFO, for exaxmple, could approve quarterly sales orders on an iPad while waiting in an airport, rather than being chained to a desk. “The cloud makes it a lot easier to do that,” he said.

The movement toward location-independent virtualized infrastructures —including applications and processes — appears to be inevitable. “There’s no turning back at this point,” said Schmelzer. “This is happening for a lot of reasons. Organizations are really just not competent enough to run IT infrastructures of the scale that larger infrastructure companies can. They’re not IT companies; to keep trying to chase best practices in an economically effective way, there’s no point.”

Up until recently, for companies to get the most effective use out of technology, they’d have to own it. But today CIOs need to ask themselves whether they really need to own that infrastructure in order to get benefits to the business. The cloud allows them to shift a huge capital expense over to an operational expense, with the flexibility to add and subtract resources as needed, said Schmelzer. They can move from one data centre to another and they’re not bound to a single vendor, at least in theory.

The counterpart to this, he said, is that in a public cloud your data is comingled with other people’s data and you’re reliant on one provider. While companies used to be “locked in” because they had one supplier, with cloud they might be dependent on one vendor for their entire technology stack. So if Amazon goes down, everything goes down. (Schmelzer recommends taking a multi-vendor approach to cloud for mission-critical business processes, even though this will obviously cost more money.)

So while many companies like the architectural approach of cloud, they’re still reticent to select a third-party provider, and many want to own their own private cloud, though they lose many of the economic and management benefits that go hand-in-hand with the public cloud, said Schmelzer.

But for a lot of organizations, the public cloud is going to make a lot of sense, he said. “There’s not a single startup that we’ve talked to that’s even thinking about buying infrastructure.” And that, perhaps more than anything, is an indication of where we’re heading, and why CIOs should be paying attention.

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Jim Love, Chief Content Officer, IT World Canada

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