True digital transformation is just that—a transformation.
Consider this case of an established independent software vendor (ISV) coming face-to-face with a real threat to its business. They’ve had a lot of success in the market, operate on the enterprise level, and everyone knows who they are. But recently, a smaller ISV startup has come along with a multi-tenant platform in the cloud that has the potential to directly compete with the veteran ISV’s product.
Not only is the startup beginning to take the mid-market, but they’ve also introduced efficiencies that will make it possible for them to run a highly profitable B2B business that can threaten the older company’s sweet spot—the enterprise market. This forces the traditional ISV to take the inevitable next step: a move into the cloud.
The journey to the cloud this company will have to make is not just a matter of lifting and shifting legacy apps and business processes from an on-premises infrastructure to an IaaS provider such as Amazon Web Services, Microsoft Azure, or Google Cloud Platform. It is, rather, a fundamental change in business model and culture.
A move to the cloud is the result of a strategic reassessment of how to address new market needs and expectations. It is part of an effort to reach out to new target markets and to stay ahead of the curve. As befits a strategic move of this scope, new skills will need to be learned, existing business units may need to be reorganized and/or new groups established, and business processes will need to be re-thought. Getting to the cloud changes everything; this post will look at the leadership decisions and team building it takes for a company to make that transformation a success.
Let’s return to our case of the traditional ISV and the enterprise-grade business solution they provide. The way that they have always operated, each sale is for millions of dollars and entails a lengthy, on-site implementation and integration effort. Once up and running, their product will require frequent or maybe even continuous on-site customer support.
But lately it’s become clear that the ISV is reaching a saturation point in terms of new customers that can afford their solution. They want to expand into the mid-market, but quickly realize their competitive edge in that segment has been eroded by smaller, more agile Software as a Service (SaaS) vendors. As mentioned above, these new SaaS vendors are looking to leverage their growing traction in the mid-market to target large enterprises. In short, leadership at the traditional ISV understands that, if they want to stay relevant, they have to find a more cost-effective way to deliver their value continuously. So the company’s management decides that it’s time to launch an SaaS version of their service.
The Cloud Leadership Team
Winning ISVs will understand that a paradigm shift of this scope requires strong leadership to map out and then implement the transformation. A small but powerful cloud leadership leadership team must be assembled and put into place. Everyone in the organization has to know that this cloud leadership team gets its authority from and reports directly to the CEO. A cloud center of excellence (CCoE) has rapidly become an indispensable method of performing just that role. The CEO, in turn, has to proactively support the CCoE throughout the process—constantly communicating to all layers within the business that the long-term business benefits to be gained from the digital transformation are worth the temporary pain.
The CCoE has to be composed of multi-disciplinary tech and business evangelists who have a clear vision of the company’s desired long-term goals. The team also needs the skills to interface with and mobilize every aspect of the business’s activity, from R&D to IT, sales, marketing, HR, and finance. They have to be able to acknowledge the fear and uncertainty that will be generated by the process and be able to manage the change in a way that engenders cooperation instead of resistance.
Development and Delivery
The cloud leadership team is, in essence, made up of educators and trainers. The following are just some of the development and delivery issues these key players will help the organization address in the transition to the cloud.
The R&D team has to understand the need to rapidly and continuously deliver new features. Advancing into the cloud requires the adoption of DevOps processes such as CI and CD. The cloud leadership team must lead this conversation, guiding R&D to define and adopt the required new roles, responsibilities, processes, and tools. The development team needs to learn:
- How to deal with multi-tenant architectures, including keeping customer data segregated
- How to maintain an application with different running versions
- What it means to use an IaaS vendor’s API and resources that are, by definition, ephemeral
- How to ensure that the SaaS app is more or less plug-and-play (vs. next-next-next installations)
- How to find the right balance between traditional resources and those that have to be built “from scratch,” and
- How to architect the interaction of apps with the underlying cloud infrastructure in a way that controls the level of cloud vendor lock-in
The cloud leaders do not need to be high-powered DevOps consultants themselves, but they have to be able to bring in the right outsourced consultants who can help prioritize and accelerate the changes to existing R&D, support and operations processes, as well as devise new processes.
The transformation will inevitably create IT skill gaps. In most cases, it’s a question of retraining and educating current personnel. The central IT team will need guidance on:
- How to avoid high levels of bimodal and shadow IT
- How to break down silos and achieve greater operational agility
- How to support higher velocities of product releases, and
- How to shift energy from infrastructure support to engagement with core business processes
Unfortunately, in some cases, these changes will mean that personnel will need to be replaced. The cloud leadership team must provide strong guidance and support to the IT leaders (CIOs and directors) and to HR throughout that process.
The organization must learn how to provide effective levels of support by remote to tens of thousands of customers (compared with on-site support for tens or, at most, hundreds of customers). It’s also important to know how to convey to the customer support team the critical impact of customer experience on high rates of renewals, which are the new business KPI.
The very architecture of a SaaS application must take into account the need for efficient customer support. The generic layers should be built in such a way that customer support—on all tiers, but especially on tiers 2 and 3 (the code level)—does not have to replicate very customized environments to reproduce an issue. The cloud leaders should be able to introduce cloud systems that can help them quickly replicate a whole stack on the cloud (for example, Amazon CloudFormation) and allow them to easily share these “under investigation” environments with the developers.
Management and Control
Once the organization has traction in the cloud, the cloud leaders must help the enterprise establish controls and audits to keep cloud costs and security under control, as well as establish new ways to recognize and report revenue (recurring revenue streams vs. massive commercial agreements).
The leadership team must make sure that the correct tools are put in place to contain costs, ensure availability, and maintain high levels of compliance and security. A true life story: in experimenting with AWS regions, one organization “forgot” about a provisioned SQL server in the Asia Pacific region and it took six months and about $10,000 before that became apparent. Today, with multi-cloud management tools, it’s less likely to happen. But someone needs to make sure that effective cloud management is in place.
Sales and Marketing
Moving from contracts worth hundreds of thousands or even millions of dollars + 24% annual support to $100/user rates with the option to leave at any time will be a threat to “legacy sales guys.” The cloud leader needs to be able to package the new model in a way that serves the business yet keeps the sales team motivated. Similarly, marketing will need help in reframing its messages and its channels as it reaches out to a wider, unfamiliar audience.
At the end of the day, the potential benefits of true digital transformation are sweeping, in terms of competitive edge, business growth, financial stability, and more. It is up to C-level management, and especially the CEO, to get all stakeholders on board and pulling together towards the same goals. A dedicated cloud leadership team (CCoE), with full management support, acts as their proxy.
Whether the organization has decided to take a gradual approach or to jump in feet first, throughout the process management must provide the cloud leaders with access to budgets, consistently broadcast their support, and back up the team when things go wrong—and things will go wrong. The transformation is never easy. If the right leaders are in place to define the new shape of the organization and its future in the cloud, however, the transition will be a lot smoother.
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