CIOs Have To Outdo The Stealth Cloud

In economics, disintermediation is the removal of intermediaries in a supply chain – cutting out the middleman. Instead of going through traditional distribution channels, which had some type of intermediate such as a distributor, wholesaler, broker, or agent, companies may now deal with every customer directly via the Internet.

The real power of the internet is only just being understood.  Bill Gates is famously quoted as saying that people overestimate the change that occurs in two years and underestimate the change that occurs in ten years. The internet is a classic example of that.

Back in the late 1990s when the internet started to gather momentum there was a huge hype and billions of dollars of venture capital thrown at some pretty wacky ideas. Out of that emerged a few key companies that have gone on to be significant businesses like Amazon and eBay to name a few.

The internet made information easily and freely accessible. Blogger.com, for instance, was launched in 1999 but didn’t gather any real momentum until Google bought it in 2003. Now bloggers are challenging mainstream media for mind share. In the UK when we woke up to the general election result where did we check first for the news? Probably not the TV or radio.

Blog sites and specialist interest websites are disintermediating newspapers and magazines because they offer good quality content for free. This is forcing the newspaper business to radically change its business model, completely transforming their operation. This is disintermediation at work.

The shopping experience has also changed radically. Low cost mail order operations have prospered as the internet is a cheaper route to customers. Those stuck in the expensive world of high street premises have been forced to cannibalise sales by launching an online brand.

But the impact of the internet on business computing, in the guise of cloud computing, is probably more significant than anything we have seen to date and it is having a dramatic effect in a number of different places across the enterprise.

The world turned upside down

The cloud is a real opportunity to bring innovation to business users, but it comes at a risk in terms of security, compliance and integration. CIOs are suffering from the 3 Cs:

• Consumerisation

Every business user is also a consumer and expects Web 2.0 style apps to be delivered to any and every office device – just like at home. The expectations of business users around IT have changed dramatically including the look and feel of the applications, the availability and performance, and the different devices that can be used – PC, Mac, iPhone and Smartphone. The question on every business users lips is “why can’t corporate IT do this for us?” This is based on little or no understanding of the needs and challenges of enterprise-grade computing including scalability, security, back-up, recovery, performance and integration.

• Cloud

Apps are enabling business users to sidestep the formal IT procurement procedures via the cloud. They can select, test and use applications that are hosted outside their company. Something which is being termed the “Stealth Cloud” as it is being initiated without the knowledge, permission of support of the CIO.

• Compliance

The business users are being hammered by regulatory compiance which covers everything from data security to Sarbanes-Oxley (SOX). This has an impact on the features and functionality of the computer systems dployed – whether they are process management, content management or inventory control.

Be very, very afraid of the stealth cloud

It is not just the CIO who is at risk due to the Stealth Cloud. It has a huge compliance, security and reputational risk element – rather than being a cost saving for a company. In fact cloud computing can cost more than on-premise apps. At present, companies are funding the IT strategy of the company through the CIO (infrastructure, applications, integration) and at the same time business users ignore these applications and are hiding IT spend on the Stealth Cloud  in operating expense budgets as ‘training’, ‘consultancy’ or something else. How many of these applications are integrated into the corporate processes? If not they are causing a looming compliance nightmare?  And when security, back up, data integrity problems or an acquisition of the vendor denies users’ access to the application/service, what impact will that have on the company’s reputation or ability to operate? Processes, what processes?

End users are liberated and at the same time frustrated

Now most business users have better, newer and more compelling IT at home than at work. This change has occurred in the last two to three years. It has given business users a false sense of their IT expertise. This belief puts them in direct conflict with their IT departments, who are the IT experts and see end users as ‘dangerous hobbyists’.  However, cloud apps mean business users can get projects moving far faster, rather than wait for IT to install software on internal servers – which means RBI (Return Before Investment), rather than ROI. For example, at Nimbus we now find our process mapping projects are being launched six months faster when the Nimbus cloud offering is used.

What has IT ever done for us?

So how does IT continue to prove its worth and educate employees on just what it takes to deliver enterprise level applications in a world where consumers have the choice, and often the power, to choose the applications they want to use in a business environment?

IT needs a make-over. It needs to be seen as the supporter, coach and cheerleader for the business and for cloud computing. That way IT will be able to show real value as a trusted advisor. If IT takes a negative stance, it will drive the Stealth Cloud even deeper underground.

Ian Gotts is CEO at business process management company, Nimbus Partners