The Cloud

Four Steps for Transforming Enterprise IT

Some say the cloud will make the CIO role and enterprise IT disappear. But smart CFOs understand that the cloud presents an opportunity to unlock I...
Timothy ChouApril 27, 2012

With the growth in cloud-service offerings, and the increasing adoption of private, public, and hybrid cloud-computing strategies and practices within the enterprise, many people have begun discussing the future of the CIO and corporate IT.

Will the IT department simply become a purchasing organization managing a bunch of service contracts at the behest of finance and the lines of business? By the time 2020 rolls around, will there be any need for a CIO? After all, if, as Nick Carr predicted in his 2004 book Does IT Matter? IT truly becomes a utility, like, say, electricity, conferring no competitive advantage, well, we don’t have a CPO (chief power officer), do we?

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I don’t see the future playing out that way. But I do think we need to think differently about IT and the changes that will be wrought by the cloud beginning with a fundamental assumption.  If you believe that ultimately there will be only 10 suppliers of information technology, then the traditional role of corporate IT as a provider of applications and compute power to the business will indeed surely fade away. In that case, the CFO will need someone to monitor the invoices and, of course, renegotiate the contract annually: activities that are not a whole lot different than managing your telecom spend and power bills, or your real estate lease.

If, on the other hand, innovation has not suddenly died (and I don’t think it has), there will be thousands of suppliers of application, software development, operations management, compute, storage, data center, and network cloud services. And in that case, corporate IT will not go away. It will, however, need to transform.

Transforming Enterprise IT
The key to accomplishing this transformation is to see the world from specialized industry-specific applications down, as opposed to from the infrastructure up. Since all corporate IT businesses grew bottom-up by first purchasing hardware and then building roomscomplete with chilled water, fans, and raised ceilingsto store that hardware, our tendency is to possess IT departments that are expert in infrastructure. And they see the challenges of new computing paradigms in that light. 

But if you think from the application down, you may end up purchasing compute and storage cloud services in some areas, while deploying your own specialized services in others.  Some semiconductor companies, for example, deploy more than 25,000 severs, but some large consumer-application cloud-service companies use more than 100,000.

But the buy versus build decision must always begin from the point of view of the specialized business application.  So here are my four recommendations for CFOs:

  1. Inventory all of your existing applications and develop a plan to move them to the cloud.  Improve operational efficiency and, yes, become the CPO.
  2. Organize your people by application and domain specialization.  That doesn’t mean Unix or Windows, and it doesn’t mean human resources or financials.  Get granular. In the oil and gas industry, that might mean reservoir management, drilling and development, or exploration.
  3. Given that specialization, have the people in those areas give you a lecture on the top five business challenges in their domains. And I don’t mean making sure e-mail runs on their iPads.
  4. Pick one or more of those business challenges and have them find the best software and data parts for you from the thousands of cloud suppliers, and have them build the best IT resource for your company for that challenge.

The best IT departments, the ones that learn the fastest and achieve the most, could then turn around and offer the same service to other companies in your vertical, thereby creating a new line of business, and generating new revenue, as an application provider. Now there’s a competitive advantage.

And if you think that could never happen, remember the story of the airline that developed an industry-specific reservation system that it sold in 2007 for $5 billion.


Timothy Chou teaches cloud computing at Stanford University. He is the former president of Oracle On Demand and the author of Cloud: Seven Clear Business Models.

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