Business in the Cloud

MICHAEL HUGOS, Principal at the Center for Systems Innovation [c4si], writes, speaks and consults on strategies for IT and business agility and mentors development teams. He spent six years as CIO of a multibillion-dollar distribution cooperative developing a suite of supply chain and business systems, transforming the company's operations and revenue model. He won the CIO 100 Award and Premier 100 Award for his work, and is also author of Essentials of Supply Chain Management and Business Agility. DEREK HULITZKY, Vice President of Content Development at a global technology media company, is a keen industry watcher with an intense focus on how CIOs and companies manage their technology teams and responsibilities. A seasoned technology marketer, he is an accomplished event and panel moderator with a rich background in technology content creation, audience development, and management.

Preface xiii

Acknowledgments xvii

Chapter 1 The Evolution and Future of Corporate Business Structures 1

Example of a New Corporate Organization Structure 3

Model of a Responsive Organization 5

A Cybernetic Economy 7

Cybernetics is about Control and Communication 9

Profit Potential of Self-Adjusting Feedback Loops 11

Viable Systems Model: A Framework for Business Agility 14

A Cloud-Based Model for Business Organizations 19

Notes 22

Chapter 2 The New Economics of Business 23

Moving to a Variable Cost Operating Model 24

Information Technology Finally Becomes a Utility 27

Variable Cost IT Operations Enable Business Agility 30

A Combination of Technologies Creates Cloud Computing 34

Implications of the Transition to Cloud Computing 38

Notes 41

Chapter 3 Key Technologies Used in Cloud Computing 43

Cloud Computing Defined 44

Software-as-a-Service 47

Server Virtualization 49

Service-Oriented Architecture 52

Open Source Software 54

Web Development and Mashups 58

Blending It All Together 60

Notes 61

Chapter 4 Data Security and Service Reliability 63

Will Your Cloud Service Provider Be Here Next Year? 63

What to Look for in a Good Service Provider 65

Elements of Good Data Security Policy 66

Cyber Threats and Perimeter Security in Cloud Computing 69

Encryption: The Next Frontier of Data Security 72

Contracts, Service-Level Agreements, and Guarantees 73

Negotiating Service and Pricing 77

Performance Penalties and Restitution Clauses 79

Notes 80

Chapter 5 Moving to the Cloud: When and Where 83

A Business Strategy Based on Agility 84

Using the Cloud for Business Advantage 87

Business Applications with the Greatest Potential 89

Risk Considerations with the Cloud 91

Cloud Cost Considerations 94

Case Study: Selling ‘‘Designer Chocolates’’ 96

Notes 99

Chapter 6 The Transition from Managing Technology to Managing Business Processes 101

The Fixed Cost of Maintaining Large Data Centers is Being Challenged 102

Public, Private, and Hybrid Clouds 103

Issues to Consider with Private Clouds 107

The Cloud is a Platform for Managing Business Processes 109

Automate Routine Processes and Focus People on Handling Exceptions 113

Four Technologies that Enable Responsive Business Processes 115

Notes 117

Chapter 7 The New Role of Information Technology 119

Is Traditional IT Irrelevant? 119

A Tumultuous Ride for the Chief Information Officer 121

The End of IT as We Know It 122

Changes in IT and Business Unit Staffing 123

Evolution of the Traditional Corporate IT Department 124

Agile IT Professionals Using Cloud Technology will be Embedded in Business Operating Units 125

Cloud Computing Separates Data Center Operations from System Development 127

Do We Need Enterprise Technology Architects, or Business Architects? 128

Companies are Investing in New Business Process Design 129

A Renewed Focus on Using Technology for Profit and Competitive Advantage 132

Notes 135

Chapter 8 Five Profit Enablers Driving Business to the Cloud 137

Harvard Medical School 137

Golden Gate University 140

Silicon Valley Education Foundation 143

Beachbody.com 147

Five Profit Enablers Driving Business to the Cloud . . . and Away from Corporate Data Centers 148

Notes 152

Chapter 9 The Business Impact of Cloud Computing 153

New Economic Engines for Growth 153

Time to Get Agile and Reinvent Traditional Business Operations 155

Get Ready, Get Set, Go: Success in a Real-Time Economy 157

Interconnected, Adaptable, and Specialized 159

Collaboration is Now More Profitable than Control 163

Necessity Makes Radical the New Normal 165

The Recovering Complexaholic 169

Notes 170

Chapter 10 Global Implications of the Cloud 171

Real-Time Global Collaboration 171

Serious Games 173

Cloud-Based Collaboration Enables a New Way of Working: The Dynamics of Swarming 176

Real-Time Visibility Could Make Us a Whole Lot Smarter 180

New Realities and New Opportunities 183

Notes 188

About the Authors 191

Index 193