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Changing the way we talk about the Cloud

"Cloud is cheap, fast and easy! Did we mention fast?!" "No hardware required!" "Why build what someone has already built?" Marketing pitches for cloud solutions sometimes run to hyperbole, creating a communications challenge for IT leaders. At a recent meeting of the Arizona Chapter of the Society for Information Management, Meritage Homes CIO Chris Filandro said that IT leaders have to do a better job of explaining to senior management the reality of the cloud.

2011-07-05

It's high time information technology professionals change the way they talk about the cloud. That was the message from Chris Filandro, chief information officer at Meritage Homes, when he recently addressed a meeting of the Society for Information Management. Filandro explained, "Our boards, our CEOs, our CFOs — they're exposed to this cloud discussion on a daily basis. The storyline is that you can pay today and tomorrow have a new solution." Indeed, it's hard to miss the pitches: "Cloud is cheap, fast and easy! Did we mention fast?!" "No hardware required!" "Why build what someone has already built?" Inundated with those messages, it's easy for C-suite leaders and board members to get starry-eyed about the wonders of the cloud (which, in the cases Filandro described, is subscription-based, pre-packaged yet customizable software provided and hosted externally). It's also easy for a CIO to simply dismiss that "cloud noise" as hype. But that is a mistake, Filandro said. "If I stick my head in the sand, there's only one thing that's showing." "The reality is that my leadership team is being told this story, that the IT organization may not really get it, because there are these cloud solutions that are instant 'on' — turn the dial and you're off and running. Then they're hearing from me that it's going to take nine months — and there's this huge disconnect." So, Filandro says, IT leaders have to do a better job of explaining what cloud is, rather than simply dismissing the hype. So what is the reality of the Cloud? Earlier this year Filandro spearheaded Meritage's transition to a cloud-based CRM (customer relationship management) solution. Today, he offers a more seasoned perspective on the associated challenges and opportunities. "Cloud is a great story but it still brings with it a set of intrinsic risks and challenges that have to be overcome." When Meritage first considered a move to the cloud, it had only recently finished the five-year long implementation of an ASP (application service provider)-based sales and lead management system. Even after full implementation, Filandro found that the ASP wasn't able to change quickly enough to respond to Meritage's business needs. And when changes did come through, they weren't up to quality standards. "I'd give the ASP a B- for the sales tool and an F for the lead management CRM," Filandro said. By then Filandro knew that the board had no appetite for another four-year project — that he would have to deliver a high-quality, more highly flexible solution in a much shorter time frame. So he turned to the cloud. In December 2010 he signed a contract with Link text SalesForce.com, a leading provider of cloud-based CRM software. In January 2011 he began implementation of the lead and prospect management solution, which was completed company-wide on February 16. In June the organization will have completed business adoption and refinement and will begin Phase 2 (sales contract management), scheduled for completion in September 2011. "So going to the cloud in this case will take nine months (instead of five years), at about half the cost of our previous ASP solution," Filandro said. Cloud benefits That fast time to market and much lower cost are the biggest benefits Meritage has realized from its transition to cloud-based CRM. Because the cloud solution is pre-packaged, it eliminates three of the steps of a typical application development process (Step 1: Design, architect, purchase, and implement the infrastructure; Step 2: Install the application and optimize it for performance and capacity planning; and Step 3: Figure out client-level access). "So in eliminating those three very complex, often expensive steps, the cloud solution saves time, reduces cost, and mitigates risk," Filandro said. The cloud solution also makes developing very-specialized auxiliary applications relatively cheap and easy -- even if they'll only be used by a small numbers of end-users. The most significant example is Meritage's land forecasting application, used by about 20 people in the organization. "The cloud allows us to meet the needs of customers who in the past didn't get attention -- who didn't get their very-specialized solution." And in comparison to the ASP-model, cloud-based software is more easily customizable, allowing Meritage to custom-fit the out-of-the-box solution to their particular needs. "With cloud, I can really get a quick pin-up solution, but I still have a platform to customize," Filandro explained. Cloud challenges Yet that benefit presents its own challenges, too, Filandro said. "When we customize the solution, it makes it difficult to integrate with other software — a call center solution, for example. That other solution integrates easily with the SalesForce.com standard objects, but not with our custom objects." And customizing the standard program can get expensive. "Cloud providers will advertise the really inexpensive piece, but when you start to develop the solution and dig into the details you realize that you need all these other pieces as well. Sure, the provider has them, but it's a la carte pricing. So the numbers start to add up." The reality: "Consider the full cost of the cloud solution in the context of what you're going to need it to do. Then decide if it's the most cost-effective solution." In addition to the cost of purchasing "a la carte" add-ons from the cloud provider, Filandro said that using in-house developers to customize the software was far more complex and time-intensive that he imagined it would be. "It's a completely different development language. If I were doing it over, I would have my developers do extensive training before implementation, then partner with the consultant during implementation." The reality: "The cloud is probably just as complex, if not more so, to develop in than if you were to bring these solutions in house." And, Filandro has had to change the way he allows users to access the system. "The cloud is a subscription model, where I pay per customer (user). So now I have to vet customers for access to the system -- I have to make sure whether the customer is really going to use this product because if he's not, I don't really want to make the investment," Filandro said. "And as my organization grows, my cost increases," Filandro explained. So there is some "tipping point" — some number of users at which the cloud solution is more costly than the ASP or in-house solution. Lessons learned So a transition to cloud that, on the very surface, seems like it went gangbusters (full implementation in nine months at half the cost!) was actually far more complex, and posed additional cost considerations. And that's precisely the reason that Filandro advocates a more measured approach to cloud transitions. "Cloud isn't the answer to every problem," Filandro said. "It's just another tool in the technologist's toolbox." "Remember that a transition to the cloud is a process, not an event," Filandro said. "If you're a large organization, you don't wake up on Monday on System A and then on Tuesday the dials are turned up on the cloud and everything is working. You still have that normal conversion, cut-over process that we've all been used to in IT for many years." Indeed, Meritage has been running its legacy ASP software alongside the new cloud software, and will continue to do so through 2011. The reality: As quick a transition as cloud might promise, a large organization is still a very big ship to turn. So the first step for the CIO is to understand the realities of cloud-based solutions. The next step is to explain those realities to the CEO, the CFO, and the board. "We have to have a meaningful discussion, to say, 'Let me analyze this cloud solution against my business model and my challenges, strengths, and weaknesses, and then align it to the culture of my organization. Let's put all those pieces together and then we can come out on the other side with a meaningful basis for saying whether this is the right choice or this is the wrong choice," Filandro explained. "And if it's the wrong choice, it's not because the cloud is terrible, it's just not a good fit at this time for this application. And if it's the right choice, it doesn't mean we all run off and start figuring out how to put everything else in the cloud — it just made sense at this time for this application," Filandro said. And for CIOs, he added, "It's a question of how you present it." Bottom line

• Corporate leaders face a daily barrage of messages about how dramatically the cloud will change their business ("pay today and tomorrow have a new solution"). Inundated with those messages, it's easy for C-suite leaders and board members to get starry-eyed about the wonders of the cloud.
• It's also easy for CIOs to simply dismiss those cloud messages as hype. But Chris Filandro, CIO at Meritage Homes, said doing that is a mistake. "If I stick my head in the sand, there's only one thing that's showing." Instead, CIOs must explain the realities of cloud, not simply dispel it.
• Based on his own experience managing a transition to the cloud, Filandro counts among its benefits: reduced time to market (nine months v. five years) and lower cost (about half); risk mitigation; easier development of very-specialized applications; and the ability to customize the solution in house.
• Among the challenges, Filandro cites: costs for "a la carte" solutions that quickly add up; greater complexity for in-house developers; and the need to vet end-users (since cost is per user). Plus, as quick a transition as cloud might promise, a large organization is still a very big ship to turn.
• Filandro: "Cloud isn't the answer to every problem. It's just another tool in the technologist's toolbox."

July, 2011

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