No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new.”
– Steve Jobs
Steve Jobs’ commencement address at Stanford remains one of an entrepreneur's classic sources for inspiration - particularly the notion that time is limited and change is inevitable. What Jobs personalizes in death as the change agent for individual life, Joseph Schumpeter professed for companies and industries as “creative destruction” - the inevitability that innovation will disrupt the economic order of the day.
The Innovators Dilemma, Marc Benioff’s proclamations of how on-premise technology is dead, and Marc Andreesen’s piece in the Wall Street Journal on how software is disrupting every industry - we have leaders who demonstrate clearly how this has happened in the past. Yet in the moment, despite the lessons of history, the agents of change are too often dismissed because it’s just easier to believe the Goliaths of an industry will persist. It’s easier to believe in DEC, Kodak, Blockbuster, Barnes & Noble and Microsoft than it is to believe in upstarts we’ve never even heard of. Even when we acknowledge the initial disruption, as with cloud computing. The ultimate impact is far wider than most of us ever thought possible.
Cloud Computing: Catalyst for Structural Disruption
Less than ten years ago, many signs pointed to an enterprise software industry that looks like the auto industry, where a few major players control a stagnant set of competing ecosystems. SAP, Oracle, IBM, and Microsoft appeared to only have serious competition from one another. Yet salesforce.com emerged from that stagnant market and shepherded in a new generation of innovative enteprise technology providers including Workday, Amazon and Google. These companies and others like them are capturing the hearts, minds and future wallets of the industry.
Cloud providers have shown two structural disruptions over their legacy predecessors. The first is a new level of speed to value. The cost advantages of the cloud were the initial spark, but the ability to get to value in weeks and months rather than years has created a firestorm of enthusiasm in the enterprise around potential impact. If technology-related programs can be executed this quickly, businesses can for the first time ever rely on technology to change current market dynamics. In the past, it was certain that by the time you were able to implement a significant on-premise technology, market conditions would be different, calling into question whether the problems you were solving were even the right ones.
The second structural disruption is more nuanced. It’s a change in the certainty of success and role of failure. In the past, technology projects were complicated initiatives that required everything to be just right. You could be 90% into an SAP rollout and still be uncertain whether or not it was on track and likely to succeed in achieving its goals. To mitigate against this, you structured everything around making sure every possible risk in a multi-year program had been considered and mitigated. Rolling out a new ERP was your equivalent of launching the space shuttle - you got one chance and it had to be right. Everything felt like it was, and actually was, wound too tight.
Cloud technology, for many of the reasons we’ve written about before, has created unparalleled flexibility for enterprises. By being able to show real users, business owners, and technologists progress as you go, you can evaluate, fail and fix almost daily. Users can see what they’re getting all along the way. Being agile has become more than a development trend, it actually represents how the business operates. This is the ultimate manifestation of the relative cost of finding an issue in development vs. testing vs. rollout. For even highly complicated projects, risk is now parceled into smaller pieces because you can spot and test failures at every point along the way. In addition, functional and technical managers no longer have to try to guess and prepare for all the different permutations of what might happen when they start a project. By the time you arrive at the first “go-live”, you already know what’s going to happen because it’s what you’ve been seeing for weeks or months. The ability to be agile and iterate frequently is one of the reason why cloud deployments have seen far higher success rates and far fewer high profile IT failures.
The CIO’s Guide to Making the Cloud Disruption Work For You
Marc Andreesen’s article that we referenced earlier - “Why Software is Eating the World” - describes how software has disrupted industry after industry. This view of software as a catalyst of disruption stands in stark contrast to an age of on-premise technology where leading academics and business leaders argued “Does IT Matter?”. Cloud technologies have changed where enterprise technology lies within these two extremes by radically altering speed to value and certainty of success. This has raised the stakes for more CIOs than ever before - will you lead your company to use technology in a way that directly impacts your competitiveness in the market, or will someone else disrupt your future?
Today, for companies to succeed with the cloud at scale, they need to take advantage of the cloud’s speed to value and agility to iteratively shape their processes and maximize business impact. CIOs who treat the cloud like an ERP initiative are certain to fall far short of translating cloud potential into true business impact. IT organizations must:
- Demand Speed and Agility - Organize their own teams and trusted partners around a model that expects every initiative to start to create value in months.
- Mitigate the Right Risks - Recognize that even for large-scale cloud initiatives, hierarchical, highly structured governance (PMOs upon PMOs) hamper rapid iteration and actually increase risk. What used to be fundamental to a successful voyage may today be anchoring you to the shore. Use cloud technologies to enable iteration and micro failures that will lead to macro level success.
- Think Disruption - Move beyond the template for last year’s best practice. Yesterday's best practices are technology-centric and inward looking. Today's technologies enable you to focus your business outward - on your customers and your customers' customers. Start creating “new practices” that use today's technologies (mobile, social, cloud) to change the way you engage with your customers, partners, employees, investors and other stakeholders. Think innovation and disruption rather than regressing to the mean with the last generation’s best practices!
Cloud technologies have shown a potential that is well beyond previous paradigms of technology. Yet, for enterprises there are many steps between potential and actually driving transformative business impact. And it is in this transition, that lies the second order disruption of the cloud. You see, an entire systems integration industry has been built around how to help businesses consume and get value from technology. But the global systems integration model has been built around generations of limitations in technology that the cloud has removed in just the past few years. The very tools and techniques that enabled this model to deal with the challenges of SAP and Oracle ERP rollouts have created structural weaknesses in dealing with the cloud.
After the first World War, the French constructed the Maginot Line - a set of fortifications, tanks obstacles and other fixed positions to defend the country. It was “extolled as a work of genius” up until the point of World War II, when it became clear that armies were structurally more mobile and agile than ever before. The Maginot Line was essentially driven around and France was successfully invaded in just a few days. The global systems integrator model is the Maginot Line of the cloud world.
Most of us who have been in IT for long enough knew the on-premise application model was broken even before the cloud emerged. We felt the frustration of the business, protested a bit too vehemently at Nick Carr’s accusations that IT didn’t matter, and knew a big project had as much chance of being canceled as completed. Enthusiastic was seldom a word used to describe customers after a project.
Essentially, the same paragraph can be written to describe the state of the global systems integrator (GSI). Individuals and teams can be great, but most of us know that as firms they are mostly identical versions of one another. The scores of us who spent years inside them know that even on the best days they feel like great people trapped by a system created to minimize risk rather than environments that encourage dramatic innovation. And while Twitter is full of enthusiastic paens from customers to Salesforce, Google and Workday, I’ve yet to see close to the same enthusiasm from customers for their GSI partners.
So it’s no wonder that after disrupting on-premise technology directly, the cloud is now disrupting the ecosystems built around on-premise technology. After all, Accenture and Deloitte have as many or more Oracle and SAP developers than Oracle and SAP themselves. In addition, just like on-premise incumbents reacted slowly to the cloud, we see GSIs ‘embracing’ the change in small parts of their organizations while the antibodies within cling with every fiber to the older, more profitable model. Even further, just like in the early days of cloud when legacy providers were suggesting hybrid deployment models for SaaS applications (long since discredited), GSIs are not facing how significantly the industry has changed and are actually touting their long legacies in on-premise as an advantage !
One fundamental difference between the way the cloud disrupted on-premise technology and the current disruption to the GSI model is the level of dialog on the topic. As SaaS and the cloud took off, we saw fireworks between innovative leaders like Marc Benioff and those trying to hold onto the past. So far, we haven't seen close to the same level of dialog around the disruption of the GSI model. Partially this is a result of GSIs trying to attach themselves - no matter how awkwardly - to cloud leaders like salesforce.com, Google and Workday. Faced with already trying to change the very essence of the role of technology in business, cloud leaders have tried to use this embrace for validation “see even they get how big a change cloud is and are on board.”
But ultimately, cloud providers care most about how effectively their technology can be translated from potential to performance for their customers. While enterprises have relied historically on the GSI model to help with technology rollouts, it has only been in the context of IT as the lowest common denominator (Nick Carr’s IT Doesn’t Matter), never in the context of IT as a business disruptor (Andreesen’s model of using software to “eat the world”). The current GSI model is better suited to minimizing technology risk and getting to the lowest common denominator of results than for using technology to drive disruption. As the GSI model proves detrimental to driving disruption, the chasm between GSIs and cloud providers will widen. Finally, over time the economic conflict between GSIs and cloud providers will also become more pronounced. In a world without servers and software, GSIs will lose a substantive portion of the revenue they have taken for granted because it’s just part of the cloud service.
The cloud has shown the fundamental weaknesses in the on-premise centric model currently embraced by the GSIs. Now dozens of pure-play cloud providers are approaching cloud success with tools and techniques yet undiscovered by the GSIs. In fact, the vast majority of high profile public cloud successes across salesforce.com, Google and Workday haven’t even involved the GSIs. Perhaps most tellingly, Salesforce.com purchased a pure cloud provider last year, Model Metrics, to “lead the shift to the social enterprise” despite repeated statements from Accenture and Deloitte on how invested they are in driving social enterprise transformations.
At Appirio, we are attempting to disrupt the global systems integrator because we witness first-hand the contrast between what can be accomplished with an “all cloud” mentality vs a legacy mindset. We believe the cloud-centric model is fundamentally better for customers. While it’s clear that Appirio the company is still a ways from instilling substantive fear into global systems integrators like Accenture and Deloitte, the cloud model we have helped drive is exploding.
Service providers who can drive enterprise success at scale with the cloud must deliver speed and agility, mitigate the right risks and enable customers to create disruptions. At Appirio, we use an agile-inspired approach along with technology built up over 1000s of enterprise cloud projects to deliver value faster and more predictably. By showing business users progress at every stage of our iterative development process, we can fail fast, make adjustments and reduce the real risks - low adoption, usage and impact. Finally, we help our customers think disruptively because that's who we are. Our business runs 100% in the cloud and has scaled and succeeded because of the very things we help customers do. We created a crowdsourced development community, CloudSpokes, because we constantly seek to disrupt our own business in order to deliver more value, more efficiently to our customers.
Ultimately GSIs are trapped by the Innovator’s Dilemma. Or stated through the lesson of the Maginot Line - “generals always fight the last war, especially if they have won it.” Now, CIOs and business leaders must prepare for tomorrow by choosing how they realign their own organizations, how they incorporate partners into their overall strategy, and who the right partners are. For the first time in a long time, cloud technology has made IT cool, relevant and strategic. Now, the only question is how your choices can lead your business to the right side of disruption.