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Time for the Next Generation of Cloud Leadership

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Wednesday, May 2, 2012

Time for the Next Generation of Cloud Leadership

The cloud computing market is the now the "big thing" and there are hard revenue facts to back up that claim.  As an example, independent research firm Forrester Research expects the global cloud computing market to reach $241 billion in 2020 compared to $40.7 in 2010, according to a new Forrester report called “Sizing the Cloud”. This same Forrester Report indicates that although Infrastructure-as-a-Service (IaaS) is going to capture a significant share of this revenue, the Software-as-a-Service (SaaS) market will grow to to $92.8 billion by 2016.

This rapid growth is a classic technology market paradigm shift.  And, paradigm shifts, even in the fast paced world of Information Technology (IT) are often very hard for most people to grasp. It is not that they are necessarily resistant, lack intelligence or don't want to move forward.  The truth is that we see through a lens that is familiar and the unfamiliar is hard to grasp, especially if it requires us to think differently. The challenge is that the familiar will often not take us into the future. The world changes, and as it does the familiar often becomes our enemy, not our friend.

Interestingly, when change around us is a rapid as the move to cloud computing, we often cling to the familiar because it provides us with stability when in reality the familiar is destined to keep us from meeting new opportunities in our changing world. Think Kodak. While they clung to the familiar the world changed and they were caught unable to catch up. The familiar was their nemesis.

I see the same dynamics at play in the cloud computing market.  And, although I am not predicting an epic cloud computing failure on the level of a Kodak, I do predict some surprising changes in in both the vendor community and among major enterprises as a result of lack of leadership in successfully navigating the cloud.
This begs the question about whether or not it might be time for the next generation of cloud technology leadership?

In 2011, I just got a chance to read a really interesting article titled, "Above the Cloud: The Next Generation of Cloud Leadership", published on November 9, 2011 by Darren Cinti, Matt Aiello and Jason Kranz. The basic premise of the article is that to fully deliver on the promise of cloud computing, cloud service providers (CSPs), Software-as-a-Service (SaaS) providers and customers will all require some new and highly specific leadership abilities.


Having just completed and published an in depth study of Information Governance and eDiscovery Practices for Cloud Service Providers (CSPs) that found several alarming flaws in cloud leadership with both vendors and the enterprise, 
I re-read the 2011 article by Darren Cinti, Matt Aiello and Jason Kranz with a more informed perspective.

General Issues with Cloud Provider Leadership


The current crop of cloud technology leaders on the vendor side of the equation have done an amazing job of monetizing the cloud during the early adopter phase of the technology adoption cycle.  The early Cloud Service Provider (CSP) leaders from organizations such as Amazon and RackSpace identified the demand for off site storage and dedicated hosting facilities and built the IT infrastructure to meet those demands.  And, these early bets have paid off as industry analysts estimate AWS to be a billion-dollar business with a 10% profit.  However, to continue to grow this business, CSP leadership is going to have to venture out beyond the outsourced data center and storage model into the IT solutions and managed services arena.  And, although organizations such as AWS with its Marketplace offering and  are showing signs of understanding this quickly evolving paradigm shift, I am not convinced that the leadership completely understands the subtle nuances of moving into software solutions.

As an example, as I found from the hundreds of interviews that I did with many of the CSP executives, 98% did not understand even the most general requirements for information governance or eDiscovery and didn't believe that they (as a CSP) had any need to provide such services.  At first I was perplexed by this response.  But, after further reflection, it began to make sense.  After all, why would an organization that had built a billion dollar business literally overnight need to consider changing their business model and expanding their offerings?

Darren Cinti, Matt Aiello and Jason Kranz answer this question in their article by stating that it is not only a matter of what markets to pursue and services to offer, but also a matter of business model innovation, which is a more rarefied strategic talent.  Does this mean that the current CSPs are "one trick ponies"?   This is probably the case for many that can't adopt to the new paradigm.  However, as indicated, organizations such as AWS seem to be at least making an attempt to expand its offerings.  However, I am going to contend that even AWS is going to have to bring in new leadership that understands this new software solutions paradigm to be successful.

This leads us to an examination of the hundreds if not thousands of Software-a-Service (SaaS) providers.  Building upon the multi-billion dollar success of salesforce.com, application developers funded by VC's looking for the next big ".com" throughout the world have jumped into the SaaS fray offering literally just about any type of software solution that you can imagine. However, many are having trouble "Crossing the Chasm" from early adoption and success to a full blown and financially viable business model.  Possibly, that reason is that most of the early SaaS companies were and still are started and run by technologists.  However, it probably takes a sales, marketing and customer services leader to take them to the next level.  And, in the world of SaaS, these next generation leaders are hard to find.

Darren Cinti, Matt Aiello and Jason Kranz quoted the CEO of a SaaS provider who asks, "How do you monetize the customer long term?" Answering that question requires the ability to find the right combination of services, delivery, and internal resources in a rapidly evolving competitive landscape to produce a reasonable profit for the provider and real value to the customer. Bottom line, it take a next generation leader.

The last group that I am going to comment on in regards to cloud providers are the big legacy software providers such as Oracle, Microsoft and IBM.  Historically, these giants have offered their legacy software to corporations under large and very expensive enterprise wide license schedules with 20%-40% annual maintenance and millions of dollars in associated custom programming and services to ensure that these systems work.  Corporate buyers didn't really like this model but it was the only game in town.  As the age old saying goes, "an enterprise IT buyer was never going to lose their job by choosing IBM whether the solution worked or not".

With the advent of SaaS over the past 5 years, the legacy providers now have competitive.  As an example, why would an enterprise of any size not license salesforce.com on a per seat basis and not have to pay for any of the IT infrastructure costs?  The answer is that you wouldn't.  And therefore, the legacy providers have been forced to respond.  However, it has not been as easy as you may think.  Offering a SaaS solution requires planning and time.   These organizations just can wake up one morning and decide that starting today they are going to offer SaaS solutions.  They either have to build new applications from scratch or acquire an existing code base.  Further, once they have the new SaaS offering in place, they then have to go to their installed base and begin the sales discussion that they now offer the option of SaaS.  And, this process is wrought with danger as it signals to customers that SaaS is now an option.  As a result, many decide that they should begin looking at alternative vendors.  In short, many legacy providers have experienced client cannibalism at best (competition between the legacy software sales team and the new SaaS sales teasm) and loss of clients to competitors at worst while they attempt to make the transition to offering the option of SaaS.

None the less, these legacy vendors have few options.  Therefore, Oracle, Microsoft and IBM have all jumped into the cloud game with some pretty spectacular IaaS, PaaS and SaaS offerings.  However, it has not been without at least a "pound of flesh" as I know many legacy software sales executives that were making a million plus per year and have been replaced with telemarketing sales people selling and supporting SaaS solutions. Once again, successfully making this transition to the cloud is going to take next generation leadership.

General Issues with Cloud User Leadership

I am not going to rehash all of the operational and financial savings that can be realized by moving to the cloud.  Instead, I am going to comment on the leadership aspects of what the enterprise  needs to do to be successful leveraging the cloud.

Most Global 2000 organizations have very competent IT leaders that run massive international organizations with multi-million dollar budgets.  However, how many of these leaders truly understand the value of the cloud and how many are willing to dismantle these massive organizations in the spirit of doing what's right for their share holders? And maybe an even more fundamental question is how many Global 2000 Board of Director members and C level executives understand the value of the cloud and are directing their IT executives to move forward with cloud migration plans?  The answer to both of these questions is "not very many" and therein lies the gap in leadership.

Darren Cinti, Matt Aiello and Jason Kranz state that in organizations that employ the cloud, the focal point will inevitably be CIOs. They will have to understand how cloud computing can best support the business, both operationally and strategically. They will have to work collaboratively with other functions and parts of the business to realize the greatest possible value from the cloud and to uncover additional uses. And they will need to be trusted advisers to their CEOs, helping assess the trade-offs, risks, and advantages of various uses and deployments of the cloud for the company. More specifically, CIOs will need a comprehensive understanding of the issues in key business and operational areas.

I contend that the Global 2000 needs a new breed of CIO, one that is less technical and more business savvy with the ability and willingness to lead and not worry about maintaining previous IT empires.  I contend that is it going to take next generation cloud leadership.

Conclusion

The cloud is no longer something that is going to possibly happen and may just be a fade.  The paradigm shift to the cloud is underway and therefore technology providers and technology users alike need to examine their current leadership and determine if a change may be required to at least provide the opportunity for success.

It is not that current leadership is not necessarily resistant, lack intelligence or don't want to move forward.  The truth is that we see through a lens that is familiar and the unfamiliar is hard to grasp, especially if it requires us to think differently. The challenge is that the familiar will often not take us into the future. The world changes, and as it does the familiar often becomes our enemy, not our friend.

Darren Cinti, Matt Aiello and Jason Kranz conclude that as cloud computing develops over the next two to three years, leadership will be critical to the success of providers and buyers alike. Cloud customers whose CIOs understand and address those critical business and operational issues – security, integration of services, technical talent, legal/privacy/compliance, and vendor management –will get a head start on using the cloud more extensively and realizing its benefits: cost-savings, ability to access services on any device anywhere, reliability, scalability, and the agility those attributes confer on the business. For technology product and services companies, the impact of the new model of cloud delivery is even broader, affecting almost all functional areas of the organization from engineering and development and customer service through sales and marketing up through the key roles in the C-suite. Those providers that get it right will win the race to be market leaders while laggards will likely fall by the way side. In this new world, CEOs and Boards of provider companies and buyer companies will need to make sure that they are hiring executives with the right competencies – and they will have to move expeditiously as more companies compete for cloud talent that is already in very short supply.

Under any circumstances, being a part of this paradigm shift is nothing less than spectacular.

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