How to make cloud computing work

In the previous Industry Insight, I considered how software as a service (SaaS) could confer competitive advantage relative to other systems, including ERP. Now I will review critical aspects of the risk-based billing model that makes cloud computing work in the South African context:

It is simply not possible for a CIO to know everything there is to know about hardware, software and networking, but they should know all there is to know about how an integrated IT solution serves the best interests of the business.

Unfortunately, the traditional process of selling a business application into a large corporate involves taking the IT executive decision-making team on overseas trips to wine and dine them, and perhaps talk a little technology. This treatment is an easy way to win the favour and create a bias towards certain products.

A recommended SaaS service model avoids this conflict of interest by delivering a business service - the actual technology behind the service is the turf of the vendor and irrelevant to the customer. It may sound unusual, but in this business model, all parties are compelled to act in the best interest of the customer's company and not the individual.

If the vendor is not prepared to lay down some form of risk/reward, then the solution was probably not right for the customer.

Any IT implementation needs a team of programmers for maintenance and additional development requirements. This can be costly. The service model permits companies to add their own unique competitive advantages to their software - without the burden of an IT team.

Even though a SaaS service provider might be software-focused, the entire IT infrastructure should be included in the model.

Richard Firth is CEO and chairman of MIP Holdings.

The ideal is to provide applications based on known best practices for verticals, but not for a vendor to insist clients retain only these services. On the contrary, since the vendor has an investment in the growth and prosperity of its customers, it encourages them to bend the rules, break out of the norm and excel through the innovative use of technology.

Instead of the ERP vendors' “don't change the software” message, customers are encouraged to make changes, but in partnership with the vendor that has taken the time to get to know the company and can advise on realistic changes that will benefit the business.

The IT division may be run from within the company in this model, but the equipment and applications belong to the vendor. A game of politics and one-upmanship can't be played in a department of one, so the CIO/IT manager has one focus: the business. Furthermore, a bias towards certain technologies and frequent loss of skills is no longer an issue customers have to deal with.

Due to the worldwide shortage of experienced IT skills, often IT personnel are treated differently in a company to staff working in other departments. The very nature of the IT department's work may allow an IT resource to work from home or enjoy more flexible working hours to facilitate work being done when company users are not logged on.

This flexibility may cause tension between departments and sometimes charges of favouritism are levelled at IT. The service offering allows the technical resource to be treated differently without attracting the attention of other staff and improves intellectual property retention.

Traditional outsourcing is not a flexible option. Customers are presented with the solution vendors have to offer as an all-or-nothing deal. In the real world, every company has slightly different needs; whether in the field of disaster recovery, equipment required, process changes or any other facet of technology.

There is no silver bullet or one-size-fits-all solution, and the service model permits companies to use only what they need, with additional resources available almost immediately should they be required.

It is important to note that, even though a SaaS service provider might be software-focused, the entire IT infrastructure should be included in the model: hardware, networking, software, operating system and even existing business applications.

Many traditional IT vendors have no stake in their customers' business and do not focus their efforts on improving the bottom line. More often than not, individual staff members are focused on implementing popular applications and going on courses in order to raise their skills or market value, with the ultimate goal of a better job somewhere else, earning international recognition or becoming a highly paid consultant.

The service model delivers a strategic approach to IT, designed to make the vendor more money. But due to the structure of the model, the only way it can earn more from its customers is by improving the performance of its customers' KPIs. In other words, if a vendor wants to improve revenue, it first needs to play its role in improving its customers' revenue.

* In the next Industry Insight, I will look at further critical factors in making cloud computing work.

* Richard Firth is CEO and chairman of MIP Holdings.