Editor’s Note: Giants in the Cloud was written by Network World assistant managing editor, features, Ann Bednarz, based on interviews conducted by CIO Magazine managing editor Kim S. Nash, CIO.com senior editor Brian Eastwood, Network World senior writer Brandon Butler and Computerworld technologies editor Johanna Ambrosio. This package, based on an idea from CIO executive editor Mitch Betts, was edited by Network World executive features editor Neal Weinberg, designed by Steve Sauer and illustrated by Chris Koehler.
CIOs are taking a pragmatic approach to cloud computing, selectively launching SaaS applications and shifting infrastructure resources to IaaS platforms while building their own private clouds.
In our interviews with CIOs and cloud leaders at 16 large enterprises we found that everybody is doing some form of cloud computing. But nobody is all-in on the cloud.
The CIOs we talked to are enthusiastic about the potential for cloud computing, but their optimism is tempered by realism. All are well aware of the challenges posed by decades of investments in legacy systems.
As Ray Voelker, CIO at Progressive Insurance, says: It would be “a whole new ballgame” if Progressive were some midsized business that didn’t have an extensive data center footprint, but “we already have assets we own that we can leverage.”
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Like many other big companies, Progressive today relies on the public cloud mainly for SaaS applications that aren’t core to running the business, such as HR management and expense reporting. On the infrastructure side, Progressive uses IaaS largely for experimentation. More widespread use of the public cloud is a ways off. “We’re likely to continue to watch the move toward hybrid clouds very closely as that technology continues to develop and mature,” Voelker says.
Likewise, Avnet, a $27 billion distributor of electronic components, has been building a private cloud internally for several years, while its public cloud usage is primarily limited to SaaS. Its biggest rollout, Microsoft Office 365, is just getting underway.
Avnet is open to wider use of public cloud services, says CIO Steve Phillips, and has identified three scenarios where it makes sense for the company: To provide functionality that’s not a core competency for IT and wouldn’t sacrifice competitive advantage; when there’s a need to implement quickly and a cloud offering can reduce risk and capital expense; and when a short lifespan is expected.
Boston Scientific, too, is moving faster with SaaS than IaaS workloads.
"SaaS allows us to quickly support our business globally,” says Rich Adduci, CIO at the medical device maker. “The ability to access a lightweight app, with a powerful back-end, and spin it up in minutes, is really a tremendous asset when you’re moving in fast-paced markets.” The “maturity level” of IaaS puts that on the “near-term horizon,” Adduci says.
Conversely, Dow Chemical has moved more infrastructure than apps to the cloud. The company finds this easier to justify financially because those are largely commodity services, whereas applications offer competitive advantage, says Paula Tolliver, Dow’s CIO and corporate vice president, business services. That is, Dow wants to keep closer tabs on key applications, to respond to nuanced changes in business strategy, she says.
About 10% of Dow’s applications are in the public cloud, hosted by external vendors. Looking ahead, about 30% to 40% of applications are expected to be in the cloud in three years. “We’re very optimistic” about the cloud, Tolliver says.
Meanwhile, Dow runs a private cloud for some of its applications and infrastructure, to experiment and learn. Dow’s private cloud delivers a lot of the benefits of public cloud, and it positions the company for future public cloud migrations, Tolliver says.
The appeal of cloud
The Vanguard Group is pursuing all aspects of cloud computing: IaaS, SaaS and PaaS in both public and private models. Speed to market, higher utilization and improved productivity have been the biggest gains for the investment firm, which manages approximately $2 trillion in assets.
“For us, cloud computing is highly cost effective; we believe in the utility-based computing model,” says CIO John Marcante.
Land O’Lakes, with $14 billion in annual revenue, is using a lot of SaaS, especially when compared “to other companies our size,” says CIO Mike Macrie. Database, sales force automation, CRM, EDI, travel and expense—and more—are all residing in the cloud. The cloud has been so successful a technology that the portion of the overall IT budget spent on SaaS has grown from 10% to 30% in the past two years.
Macie says he’s “getting twice the service — uptime, reliability — for the same level of cost” as before cloud was introduced into the company. And the time needed to implement a business request is cut in half “in many cases,” he says.
Some of the same attributes attracted Humana to the cloud.
“There’s a natural draw toward cloud as a technology. It introduces flexibility and capability that didn’t really exist before,” says Brian LeClaire, CIO at health insurance provider Humana.
Brian LeClaire, CIO at health insurance provider Humana
“We use private cloud to share capabilities around data centers, and then leverage interconnectedness” to link elements that are private and public, LeClaire says. “Now we’re moving into software-defined data networks. That last layer is becoming highly virtualized — server, data, network virtualization.”
Western Union has selectively deployed cloud apps, including Salesforce.com, Workday for human resources, and several offerings from Adobe for online customer experience, data management and analytics. The company is taking a prudent approach to leveraging cloud for infrastructure.
“I’m not so hell-bent on cutting costs, but on modernizing the tech,” says Sanjay Saraf, senior vice president and CTO at Western Union. “I can’t waste too much time. Cloud providers have got it down right. It’s low risk and gives me a tremendous amount of speed.”
Likewise, cost savings isn’t a driving factor for Campbell Soup’s cloud initiatives.
“If you make it a money thing, you’re making a mistake. It’s an option to deliver capability,” says Joe Spagnoletti, CIO at Campbell’s. “You have to get it at the cost commensurate with the capability. You can’t do it for cost savings or management efficiency.”
Campbell’s has developed formal processes, reviewed monthly, for the acquisition, management and recertification of its cloud partners. “There are no limitations to the things we’re doing in the cloud, but we’re also not trying to do everything,” Spagnoletti says.
The burden of legacy systems is just one challenge that can slow cloud adoption. Another is concern about vendor lock-in.
To help manage the risk of lock-in, GE is putting in the foundations of what it calls a Service Rail, which is based on as many standards and common foundations as possible. The idea is to create, for instance, a set of services around identity management so users don’t need to worry about multiple IDs or passwords. Also, if business needs change, GE will be able to adopt other types of cloud services and software without having to rework its technology underpinnings.
Although some people worry about security and risk in the cloud, Whirlpool CIO Michael Heim says those issues are improved by cloud computing because the vendors stay up to date on the latest technology. Security problems arise from “how you’re managing, not where it is,” Heim says.