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Silver linings: A strategic transition to the cloud

For companies looking to tap the power of the cloud, a phased rollout can promote alignment between IT investments, business strategy and organizational capabilities.

Cloud ComputingCIOs can be forgiven for feeling a sense of urgency to integrate the cloud into their operations in an effort to keep up with the competition. Recent Forrester research found that corporate spending on the cloud will reach $191 billion in 2020, from $72 billion in 2014, due in part to the accelerated replacement of existing infrastructure and software with cloud offerings.1  The challenge for companies, then, is to extend the cloud throughout the organization in a strategic way that drives operational efficiency, supports business strategy and maximizes return on investment.

Given the complexity of replacing existing core systems on an enterprise basis and the overall maturity of newer cloud-based applications, organizations need to consider many factors. Industry alignment, M&A strategy, and existing infrastructure and systems may influence their approach to cloud implementation and give them pause. In my experience, organizations can get a better return and adoption through a phased rollout. By starting with discrete functions and then expanding cloud applications to complementary tasks and departments, companies can build the organizational capacity to support a more ambitious migration to the cloud.

Getting started with a phased rollout
Most companies have already adopted some cloud solutions, whether for the enterprise (such as recruiting) or in a more limited way for specific departments or functions (such as HR). Despite a growing familiarity and comfort with cloud-based solutions, organizations can face a number of challenges that make a more sweeping cloud implementation problematic. In many companies, departments have implemented systems and software that are tailored to their needs. Other functions may still be using on-premise legacy systems, leading to an IT environment characterized by disparate systems. Any effort to replace existing systems with a cloud offering must also account for data aggregation and migration. Further, to avoid disrupting operations, a company must also determine the best way to implement or integrate to legacy systems. It’s little wonder that, for many executives, a holding pattern may be preferable to the thought of embarking on a months-long IT implementation that siphons focus and resources from core business activities.

Capturing value from the cloud
One reason for the rapid move to the cloud is the range of benefits that SaaS can deliver. These systems offer a consolidated view of real-time data, which can support analytics, planning and seamless report generation to information business strategy, as well as facilitate compliance. With this information, management has greater transparency and visibility into operations, enabling proactive management. Since employees are typically more mobile and use a range of devices, these applications provide round-the-clock accessibility to data and work tools. Further, the cloud can support collaboration among employees through embedded social media capabilities. As the needs of companies evolve, the cloud gives them the agility to implement specific functionality to address current gaps and challenges.
However, companies can pursue a more strategic, incremental implementation that enables them to derive the benefits from the cloud in high-value areas — all without having to mount an enterprise-level initiative. An organization’s existing cloud applications represent an important foundation on which to build. By understanding which departments or functions are already benefiting from the cloud, the CIO can use these areas as a starting point to extend cloud solutions to similar tasks in other parts of the organization.

To develop a cohesive vision for the phased rollout of the cloud, companies should follow three steps. First, companies should perform an audit of all systems and applications to create an inventory of where the cloud currently resides in the organization. Next, the CIO can use this information to identify departments or tasks with well-defined, established processes that are naturally aligned with cloud solutions. Since accounting or HR must perform certain tasks (such as generating budgets or completing benefits administration) according to established guidelines, they may be a natural place to start. Last, this exercise also uncovers functions that can be moved to the cloud with minimal transactional effort. In larger organizations, particularly those that have grown through acquisitions, individual business units might have their own systems. Implementing a unified solution for such discrete functions can deliver myriad benefits (see sidebar, “Capturing value from the cloud”).

A phased rollout in three steps
To move to the cloud while maximizing the return on technology investments, companies should seek to identify easy wins, build on these early successes, and then expand strategically across the organization. We have seen companies implement the cloud into their operations in three phases.
 
1)  Experiment

The primary goal of this phase is to enhance functionality of an existing on-premise system by replacing a function or adding to it with a cloud solution. The best opportunities are discrete functions with systems that serve a smaller group of stakeholders; examples include recruiting, sourcing, project management or revenue recognition. These tasks have mature, field-tested software as a service (SaaS) solutions that are already delivering well-defined benefits for companies that have adopted them.

A large financial services company, for example, used a cloud-based recruiting platform to substantially improve efficiency and eliminate substantial manual processes. With the platform, the company was able to consolidate all candidate information — from experience and prescreen assessments to reference checking and other background materials — which enabled a unified view of the recruiting talent pool. This platform also enabled managers to have a more active role in the hiring process by providing access to an intuitive user interface and sharing common practices across business units, which enabled the organization to hire best-in-class candidates for active jobs more quickly.

From an organizational standpoint, the transition should be fairly seamless: Minimal IT resources are required for implementation, and only the employees using the solution need training to get up to speed. Often, business units or departments can make the switchover in a few months after purchasing a cloud application.

2)  Expand

Once a company has had some success in moving specific tasks to the cloud, it can build on the experience and capabilities it has developed to implement a holistic suite of solutions to manage a specific function (such as procurement or accounts payable). Opportunities in this phase are characterized by an expanded group of stakeholders, as well as multiple users and data inputs.

As a result, companies have the potential to capture far more value by unifying adjacent or complementary functions. For example, transitioning from an on-premise system to a cloud offering can give users greater transparency into entire business processes courtesy of access to real-time data. This information also supports collaboration across business units on strategy and more informed decision-making. Achieving these results typically requires a little more effort so that all the components work together.

A midmarket company implemented a cloud-based platform to automate its procure-to-pay process. The single platform improved communication among accounting employees, the procurement team and their larger supplier pool. With this improved solution, suppliers were able to submit invoices and track payment status, which led to a drastic improvement in service levels, faster payment cycles and better invoice matching. Within the company, the team was able to complete tasks 50% faster by automating their legacy process, and eliminated thousands of paper documents such as invoices, purchase orders and approvals. Overall, the company captured more than $1 million in cost savings from greater efficiency — money it invested to expand the cloud-based pilot to other functions.

3) Embrace

At this point, companies will be ready to undertake a more ambitious, enterprise-wide implementation. Managers can draw on the results of previous efforts to build a compelling business case for the cloud, and then mobilize support among numerous business units across geographies that will be involved in and benefit from the cloud initiative. From an organizational standpoint, implementations on this scale resemble a change management initiative: To drive adoption and get the most from investments, companies will need to win the hearts and minds of employees. This outreach can identify employees who can serve as evangelists for the wide-ranging benefits these solutions can deliver.

A large global manufacturer, for example, has driven a global HR transformation program by selecting and implementing a new, fully cloud-based HR platform that includes U.S. payroll. The company’s top executives, recognizing the importance of attracting and retaining top talent, made a major investment in this enterprise-wide initiative. Due to the platform’s enhanced capabilities, the company has transformed their global HR function, standardizing processes while creating a new service delivery model that is consistent across the organization. One of the results has been an improved company culture, as the HR function is now able to recruit candidates with desired attributes more effectively.
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An overly aggressive cloud initiative — one that outpaces internal capabilities to support the transition — will likely fail to deliver the expected benefits. In contrast, companies that take an approach that’s too tentative could unnecessarily delay cloud implementation in key departments or functions. To unlock the full potential of the cloud, companies must make an objective assessment of their organizational readiness, and then proceed in a gradual, strategic manner. By pursuing a phased rollout, executives can begin to integrate the cloud into their operations and avoid falling behind the competition.

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1 King, Ian. “Cloud spending by companies outpaces predictions, Forrester says,” Bloomberg Business, April 23, 2014.