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the new business normal

IDC’s research predicts that within the next two years, Canadian organizations will source 50 per cent or more of their software in the cloud.Dariusz Miszkiel

When broadband Internet provider Xplornet Communications Inc. needed a new system to manage its orders and billings to support its growth, chief information officer Cathy MacDonald turned to "the cloud."

In doing so, she joined the approximately one-third of Canadian businesses that, according to research firm IDC, are moving at least some of their computing operations to remote servers hosted on the Internet – the cloud – rather than running them on local servers.

"Our [in-house] technology had gotten us to where we needed to be," said Ms. MacDonald, whose Woodstock, N.B.-based company specializes in high-speed Internet access for rural customers. "But we needed to implement a solution that would allow us to scale and grow our business to meet our business strategy."

The technology she chose from and its partner, Zuora, enables sales, service, billing and collections. It has allowed her to respond to her company's changing needs without a huge investment in infrastructure or IT staff.

"Because we've gone to the cloud, we're able to configure and respond to changes in our business strategy very quickly," she said. "We [her IT department] view ourselves as very much an enabler of the business strategy now. We can be far more innovative in terms of what we're doing with our technologies, and we can deliver functionality a whole lot faster now than we would have been able to do in the old environment."

As an enabler, cloud is the Robin Hood of business, said Victor Garcia, a senior fellow at Bell Business Markets and former chief technology officer for HP Canada, in that it makes expensive products once accessible to just the rich available as a service, putting them within reach of everyone. But it does disrupt existing business practices.

"We came out of school thinking that the best approach to take was to customize technology to the way we did business," he said. "Only now we are learning that it is a very expensive way to do business. Developing, then maintaining and supporting customized software, is very costly. By using standard software, that forces us to change some of the processes."

With enterprise software that's purchased and installed in a local data centre, a huge chunk of the cost comes from the vendor's services needed to install it and tweak it to match the customer's requirements – perhaps altering data entry screens, or modifying work flows to match legacy processes. Software in the cloud is sold as a service; every customer runs the same programs in the same way, and has relatively few choices to make.

For example, a company opting for some public cloud solutions – say, Gmail – might have to accept that any customization is not an option, while other cloud platforms such as offer some flexibility in their configuration. But it's still nowhere near as flexible as custom software. Business processes have to adapt.

"Cloud changes how IT gets done, sometimes supplementing, and in other situations replacing, how services are delivered," explained Mark Schrutt, director of services and enterprise applications at IDC Canada. And there's no avoiding it; IDC's research predicts that within the next two years, Canadian organizations will source 50 per cent or more of their software in the cloud. That will also change the CIO's job; instead of worrying about internal development, employees and infrastructure, vendor management will take centre stage.

At the same time, said Renny Monaghan, vice-president and head of marketing for Canada and Latin America at, "Cloud lets business people dream again."

He pointed out that when a business unit went to IT with a request or idea during the 1990s, they'd often be told, for example, that implementation would take 12 months and cost $1-million. With cloud, they can quickly try things out on their own, with few or no demands on IT, by purchasing access to a cloud-based service that's already set up, and is managed for them.

"It puts innovation back in the hands of the business people," he said.

However, there's a downside to this enabling. Not only are there risks that security and privacy rules may inadvertently be breached, there's what David Shacochis, vice-president of cloud platform for Centurylink Technology Solutions, calls the "morning after success" that business and IT leaders have to struggle with when a test project in the cloud succeeds. The cloud application then needs to be put into production and tied back to the rest of the enterprise systems.

"At that point, the CIO in a lot of ways becomes the chief integration officer for cloud-oriented systems," he said.

Cloud computing also lets smaller businesses do big things. For Delvinia, a Toronto-based digital consulting and research firm, moving to the cloud was a no-brainer, according to chief executive officer Adam Froman. Building a data centre for a 50-person company was cost-prohibitive. He has moved almost everything into the cloud except core data from the research part of the business, and even that is backed up into the cloud.

One big benefit for him is security. "When we're doing work for clients, we're dealing with major companies that have to have secure environments," he said. "These [cloud] companies have already built them, so we don't have to."

In case of disaster (say, a fire or a massive power failure), he also is able to leverage his supplier's business continuity expertise and facilities.

But cloud computing isn't limited to small companies that can't afford their own IT infrastructure. Larger companies can profit from it, as well.

"When a large company looks at cloud, the first thing that comes to their minds is efficiency," said Warren Shiau, director of IDC Canada's buyer behaviour research practice. "Then the second thing would be, where does that free up IT resources to look at process optimization. On the business side, the best argument IT can make is that they will save money in the first place just by moving to the cloud for certain requirements, and secondly will be saving money by analyzing processes to improve business efficiency."

More advanced companies can then step back and look at which processes belong in the cloud, which ones should be kept in-house, and determine the efficiencies that can be derived from those changes. And that in turn frees up resources for new business initiatives.

How to succeed with the cloud

Success in cloud computing is not a given. Here are three considerations that will tip the odds in your favour, according to experts.

1. Do your homework. All cloud providers are not equal. Mr. Froman advises looking at their service and support models, their security, their service level agreements and their strategic direction, as well as their product offerings, so you have confidence in their capabilities on all fronts. Don't just choose a supplier based on price.

2. Understand the solution and what it can do. Then look at your processes, and how you plan your work, and make adjustments to accommodate your solution of choice before implementation.

3. The business needs to be engaged from the start of planning. Ms. MacDonald set up a team with key people from each affected area of her company so there would be no unhappy surprises at implementation.

And, a bonus tip: Assign someone to manage the relationship with the cloud supplier. It can be a full-time job.

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