Accelerating the Digital Transformation with Cloud Computing
In December 2015, I wrote an article for CIOReview about how public cloud computing levels the IT playing field. In a multitenant cloud and in a perfect market, all enterprises, large and small, should pay similar unit pricing. Two years later, my convictions have grown. I still believe that every organization should leverage public cloud services, but I’m also more aware of the significant cultural changes required for a successful program.
Capital District Physicians’ Health Plan, Inc. (CDPHP®) is a not-for-profit health insurer based in Albany, NY. As in many companies, there is more demand than capacity, and financial constraints and reduced scale require us to make tough decisions about where to invest. Our strategy is to leverage the public cloud to digitize CDPHP, which will provide new business capabilities to customers and employees. We are transitioning our employees to focus more on solving business problems and less on solving IT incidents.
We are building agility and lowering the barriers to entry while digitizing the enterprise to deliver new capabilities and experiences
When I started my cloud journey in 2007, the conventional wisdom was that private clouds were more secure than public clouds, and thus, better suited for the enterprise. The industry recently pivoted after realizing that security in public clouds exceeds that of private clouds, while also providing physical anonymity and camouflage.
Cloud computing is another form of outsourcing. With infrastructure as a service (IaaS), IT is acquiring, configuring, and managing data center, computing, and storage services. With software as a service (SaaS), organizations are buying automated business processes as a managed service, with contracted outcomes.
After 10 years of implementing cloud solutions, the following, in my experience, are best practices:
• Start off on the right foot: Invest the time upfront to select the right partners and execute strong contracts. We utilize our Master Services Agreement negotiated by a cross-functional team of procurement, legal, IT, and the business who know how to procure outsourced managed services based on outcomes. Negotiating a well-written MSA that contemplates the lifecycle of a partner relationship—service levels, project milestones, intellectual property, change requests, disentanglement, security, data breaches, technical currency, limits of liability—will reveal much about a partner prior to contractually engaging them.
• Align partner interests: Having the SaaS provider also serve as the implementation partner has improved the probability of a successful implementation by tying the monthly fee commencement to the implementation completion. In our least successful project, the SaaS partner was not the implementation partner and we had to manage the divergent interests of each and assume project and financial risk.
• Be safe: Managing personal health information (PHI) and security is a prime focus. The security team must be adept at evaluating partners that are providing services from remote locations nationally and internationally to ensure that the probability of a data breach is low and regulatory requirements are met.
• Manage the change: Except for industries that are in the software product business, building custom coded applications is becoming less relevant. IT must transition from building, buying, and/or implementing things (software, hardware) to becoming investors who understand the technology landscape and are acquiring, configuring, and integrating technology services. The business will need to realize that its processes are not unique and accept the standard, best practice, business processes that are delivered with a SaaS solution.
• Build business agility: A close business and IT partnership with the lines between them blurred is mandatory. To improve speed, we transitioned functions that were traditionally within IT to the business units. We also leveraged the automation delivered with the cloud services. Our data scientists can now order a data warehouse from Amazon from the CDPHP service catalogue. Leveraging automation provided by Amazon and ServiceNow, the environment is automatically configured in 20 minutes and shut down eight hours later, with no manual effort from IT and at a cost of about $20.
• Build the network: Telecommunications is critical to any cloud strategy. As technology services are delivered remotely, a WAN network architecture that is redundant, low latency, and high quality is mandatory to provide a good experience.
The business value of cloud computing is compelling. We are building agility and lowering the barriers to entry while digitizing the enterprise to deliver new capabilities and experiences. In a recent project—when compared to a legacy solution with licensed software hosted in our data center—we reduced the annual operating costs, the one-time implementation costs, and the implementation time frame by 50 percent, while building new omni-channel and digital capabilities to transform the customer and supply chain experience.
The transformation to cloud computing is challenging. IT will need to be re-engineered to think differently about the value they deliver. IT will become less focused on technology and more focused on business outcomes (today we place equal value on our IT leaders’ business knowledge as we do on their technical knowledge). To achieve the full benefit of cloud computing, an organization’s business processes needs to be modified to match the SaaS partner’s delivered business processes, eliminating customizations and focusing on configurations.
The adoption of public cloud computing is mandatory for mid-size IT organizations to enhance their agility, reduce their “keep-the-lights-on” expenses, free up their capacity to grow, and transform their evolving digital enterprise.