By Stephanie Overby
CIOs first began exploring what we now call the cloud nearly 20 years ago for tactical reasons – it was a way to transfer responsibility for maintenance and updating systems, to change the cost structure of IT investments, to potentially increase availability or reliability. Over the years, IT organizations have moved more and more of their IT resources to the cloud – in many cases, for those same basic reasons.
Recently, however, a significant shift has occurred. IT leaders continue to transfer more systems and applications to the cloud – and over the next two years, those efforts will continue to gain momentum. By 2020, 95% of all organizations will be using cloud for application delivery, 83% for infrastructure, and 73% for platforms, according to IDG’s 2018 Cloud Computing Study. By that time, 67 percent of IT infrastructure and software will be based in the cloud, according to IDC. Certainly, some organizations have found cloud computing services to be faster, cheaper, or more reliable than their in-house options. But the core rationale for enterprise cloud computing adoption has evolved. Cloud services have become a requirement for future digital transformation.
“In its first decade, cloud computing was disruptive to IT, but looking into the second decade, it is becoming mature and an expected part of most disruptions,” notes the Gartner e-book Cloud Strategy Leadership. “For the past 10 years, cloud computing changed the expectations and capabilities of the IT department, but now it is a necessary catalyst for innovation across the company.”
CIOs are no longer just looking to lift and shift what they’re already doing to the cloud.
They are utilizing the cloud to help them keep up with the incredible pace of technology change and leverage emerging capabilities like artificial intelligence and machine learning, big data and analytics, the Internet of Things (IoT), blockchain, and augmented or virtual reality. A funny thing happened on the way to the cloud – it became the key enabler for some of the biggest technology enabled transformations businesses will make going forward and is emerging as a lynchpin for companies looking for opportunities to elevate the customer experience, launch new products and services, explore new markets, or otherwise uncover new sources of competitive advantage.
“If there is a desire to use bleeding-edge technologies in an easy, low-cost way, the cloud is going to be the only option.”
- Michael Cantor, CIO, Park Place Technologies
“Cloud providers will rapidly become the first proving ground for new technologies,” says Michael Cantor, CIO of Park Place Technologies, which provides IT infrastructure maintenance for more than 300,000 assets in over 115 countries around the world. “Innovation in capability will often become available first there because of the ease of distribution and mass of customers who are on those platforms. If there is a desire to use bleeding-edge technologies in an easy, low cost way, the cloud is going to be the only option.”
The massive shift to cloud resources is bringing with it some challenges, like new talent requirements (see the sidebar “Growing Your Own Cloud Talent”) and changes in security and risk management (see the sidebar “Managing Security and Risk”). However, forward-looking CIOs are working to overcome those issues because they know the future enterprise will be cloud-driven.
Cloud Comes of Age
At this point in the evolution of cloud computing, many companies, like the National Australia Bank are aggressively pursuing a cloud-first strategy. “We believe that what the public cloud providers are able to do is superior than anything we can achieve in our own data centers,” says Yuri Misnik, NAB’s Executive General Manager and CIO. Although the bank had pushed some workloads to the public cloud starting in 2012, those moves were incremental. Looking ahead, everything new – and everything else for which it makes sense to migrate – goes to the public cloud. (As with many banks, the company still has a number of legacy systems – some of them 45 years old – that continue to reside onpremises for the foreseeable future.)
The bolder direction came after analyzing the benefits of public cloud, which NAB has found yields cost savings of up to 50 percent and – more importantly – puts it in the best position to innovate. It also enables greater resiliency, stability, and automation. “We’ve proven that building things in the cloud gives us the most efficiency in terms of pace and also gives us the best costs,” says Misnik. “We can use all of the great innovation that public cloud providers are creating. Our developers can focus on business systems and customer-facing value rather than building undifferentiated stuff that AWS [Amazon Web Services] and others can give us.”
Many companies are finding that public cloud options can better enable them to meet today’s incredible demand for technology-enabled business transformation. “Most IT organizations are oversubscribed; they have more project demand than they have capacity and funding. And their business partners are complaining about their slow delivery,” says Mark Peacock, principal and leader of the IT consulting practice at The Hackett Group. “Cloud-native technologies allow IT teams to focus on developing the unique or strategic functionality that their business partners need rather than
having to build and configure infrastructure, middleware, and commodity services.”
The cloud “gives us greater access to next-generation tools than we would have if you had to stand all of those things up on-prem.”
- Steven Carter, CIO, CNX
A Foundation For Transformation
As companies make their future plans for cloud computing, they view it as not just an enabler of innovation – freeing their own resources to focus on differentiating technology capabilities – but a prerequisite for it.
At CNX, a Pittsburgh-based natural gas exploration and production company, CIO Steven Carter sees the cloud as a key part of the firm’s innovation strategy. “We are a datadriven company and everything we do is geared towards moving fast and allocating capital towards projects with the best possible rate of return,” he says. “The cloud allows us to move with the speed and agility necessary to achieve this, which otherwise would be very difficult.”
“Many of the fundamental technologies behind today's machine -learning platforms have been available for years – or even decades. However, harnessing sufficient compute power wasn't practical for the majority of use-cases,”
- Steve Wilson, Vice President of Cloud and IOT Citrix Cystems
Whether his team is building IoT, big dataapplications, visual processing, or predictive analytics, the cloud is speeding up delivery and adoption. “It gives us greater access to nextgeneration tools than if we would have had to stand up and integrate all of those things up onprem,” he says.
Operating in the cloud is giving CNX access to technology that it might have taken longer to get in the pre-cloud era, according to Carter. “We are shaving a lot of time off from first thinking about a project to getting it done,” he says. “And certainly, there’s a lot less waste in terms of cost and effort, because we can just pull down and access various products and solutions online that we can incorporate into whatever we’re trying to do. That allows us to focus more of our time on the business impact of our solutions, rather than the technology. It essentially democratizes the adoption of next-gen tools.”
NAB, the Australian bank, has embarked on a three-year, $4.5 billion transformation project designed to win the trust of customers for exceptional service. This will demand ongoing technology-enabled innovation, much of which is “not possible to do on premises,” says Misnik, the CIO. “Cloud is the foundation for our transformation and the accelerator of it.”
NAB streams all core systems’ data into a cloud native environment. That AWS-backed elastic data lake serves as the foundation for hundreds of machine learning and analytics use cases the bank will explore. One early machine learning project is QuickBiz, an unsecured lending platform for small business that leverage AI to offer straight-through processing of loans. The cloud is also key is helping NAB comply with looming Open Banking regulations mandating that Australia's major banks give customers open access to and control over their own data. “Cloud allows us to move much faster and scale those APIs to open up that data,” Misnik says.
NAB is also collaborating with Microsoft to design card-less facial recognition ATMs using cloud and AI technology. And that’s just the beginning of the cloud driven possibilities, says Misnik. “We want to innovate much more.”
Park Place Technologies is also in the process of moving most of its service to the cloud. “We intend to spend more of our resources on cloud-native development to take advantage of PaaS and serverless opportunities,” says Cantor, the CIO. “That will further lower our management burden, increase our flexibility, and introduce new technology capabilities.” There are many capabilities – for example, Vision API, TensorFlow, Blockchain – that are too expensive to trial in an on-premise version or in a software acquisition mode, according to Cantor.
“These are capabilities we would like to potentially utilize, and the cloud environment allows for an inexpensive and easy integration with those technologies,” Cantor says.
At Citrix Systems, a software provider, cloud is a key enabler of AI and machine learning. “[It has] unlocked a whole new realm of possibilities,” says Steve Wilson, Vice President of Cloud and IoT for Citrix Systems. The company is now able to use AI for a wide range of projects, including projects to improve end user behavioral analytics for information security and cloud vendor APIs to stitch together workflows and fuel analytics that streamline employee productivity. “A lot of what we’re doing with data analytics and AI is only possible due to cloud economics,” says Wilson. “Many of the fundamental technologies behind today’s machine-learning platforms have been available for years – or even decades. However, harnessing sufficient compute power wasn’t practical for the majority of use-cases.”
The Connection Between Cloud And IOT
Cloud computing is also proving to be a fundamental ingredient in the effective use of IoT. One of the world’s largest medical device manufacturers had been investing heavily in IoT to extend the product lifecycle and provide better aftermarket support services. This new treasure trove of patient monitoring data created a wealth of insight for product improvement, but it was also creating operational inefficiencies and cost challenges for IT. The amount of data transmitted daily by cardiac monitoring device implants, for example, caused processing bottlenecks and application performance issues.
Cloud migration was the solution. The company was able to develop an end-to-end IoT platform that connected patients, physicians, salespeople and operations teams while also serving as a foundation for future development and migration of IoT applications. Cloud service delivery didn’t only reduce costs. The enhanced performance of IoT applications and increased efficiency of IoT data analytics capabilities helped the company’s customer to serve patients proactively. The IoT platform, able to support up to 100 million annual transactions, improved patient monitoring, reduced the re-admission rates by as much as 20%, and increased medication adherence. Better understanding of end-user behavior led to a reduction in new product development cycle and time to market by as much as 10 percent.
“Without the cloud, it would be a heavy investment just to do a pilot."
- Dean Del Vecchio, Executive Vice President and CIO, Guardian Life
The combination of cloud and IoT could have ramifications for all sorts of business functions in the near future. “The advance of cloud and the rise of IoT devices (that are connected to cloud-based applications) is going to dramatically change the way we use computers,” says Wilson. “We’re going to move from a place where individuals are closely bound to a specific location or device to a next-generation working model where the relationship of users and applications change. We’ll see more use of voice control, which is already accelerating so quickly. But we will also see a shift where technologies like augmented reality and virtual reality go from the domain of video games to real business applications.”
Where The Start-Ups Are
Guardian Life Insurance spent two years preparing its people, culture, and technology for its own dramatic shift to the cloud. Over Labor Day, it shut down its last owned data center, leaving 20 percent of its resources in co-located centers and the rest in the cloud. “We really want our organization to be much more enabling versus supporting,” says Dean Del Vecchio, Executive Vice President, CIO, and Head of Enterprise Shared Services at Guardian Life. In short order, the IT organization has gone from spending 70 percent of its time on keeping things up and running and 30 percent on strategy and innovation to an even 50/50 split.
“There's going to be an ecosystem there, and that's why we're so excited about the impact cloud will have on innovation.”
- Yuri Misnik, Executive General Manager and CIO, National Australia Bank
The cloud-first strategy enabled that shift, says Del Vecchio. But, just as importantly, “it puts us closer to start-ups.” The once tech-averse world of insurance is now a hotbed of development with technology companies raising billions of dollars over the last four years to finance disruptive and enabling technologies for the industry. If Guardian wants to plug into that opportunity, it needs to be in the cloud, says Del Vecchio. “We can leverage third party data in much more streamlined way to get new insights. It allows us to do a lot of test and learn quickly and cost effectively, spinning things up to see if they work and spinning them down if they don’t.”
Could the company operate on the bleeding edge of “insure-tech” without the cloud? It’s possible, says Del Vecchio – “but not nearly as efficiently or effectively. We’d be nowhere near as nimble.” Thanks to the cloud, the IT organization will be in a better place to meet rapidly evolving business demands, which are in turn driven by changing customer demands. “We’re in a much better position to support our businesses and, with changing demographics, to meet customers when, where, and how they want.” For example, Guardian was able to launch a digital platform for its new direct-to-consumer business in the cloud. The new offering is targeted at tech-savvy millennials and will better position the company to market, sell, and services its dental, accident and critical illness products one-on-one. “Without the cloud, it would be a heavy investment just to do a pilot. That was a big part of our thinking and strategy,” says Del Vecchio. “The cloud allows us to explore, break new ground, and participate in the new ecosystems that are emerging.”
Ecosystems of Services
In fact, that’s where IT organizations are headed with their cloud adoption: toward ecosystems of an increasing array of cloud-enabled services. “There are two major components to a cloud strategy. The first is the decision to begin moving workloads to cloud infrastructure and reduce long-term hardware capitalization costs,” says Rob Krugman, Chief Digital Officer for Broadridge Financial Solutions. “The second, which I believe is where the largest benefit is provided, is the utilization of the platform services available once you are in the cloud.”
Just three years ago, Krugman says, not everyone was ready to move in this direction. “Looking at the present environment, it has become quite evident that the majority of our customers are not only embracing the cloud, but also have strategies in place to expedite their migration. Cloud is central to our long-term plans, which are focused on the development of an open micro-service based approach toward delivering new platforms and products.”
At Guardian, Del Vecchio describes the cloud migration as being in the sixth inning. “There are still workloads we’d like to move over but there are new things coming out every day – tremendous new products to continue to explore, whether that’s AI or automation or natural language processing,” he says.
NAB is piloting Amazon’s Connect call center offering, but the company doesn’t plan to simply take “one contact center voice recognition system and replace it with another,” Misknik says. They’re exploring how to integrate that system with the cloud provider’s transcription, natural language processing, and machine learning services to analyze the sentiment of callers in real time.
“That will enable us to respond to customer demands better and also be more compliant with regulations,” says Misnik. “We’re not just replacing individual services, but integrating all the different components of what Amazon and other cloud providers offer. There’s going to be an ecosystem there, and that’s why we’re so excited about the impact cloud will have on innovation.”
Stephanie Overby is an award-winning technology writer and a former senior editor at CIO Magazine. Contributing Writer Ben Voyles provided additional reporting for this article.