Cloud applications providers have often entered organisations by the back door. The "land and expand" approach is well-tested and has been used to considerable benefit by most of the leading software as a service (SaaS) applications firms with the (albeit often unaware) assistance of the IT department.
The scenario is simple: the head of sales is impatient waiting for that long-promised, but never quite scheduled, upgrade to the on-premise customer relationship management (CRM) system.
Rather than make yet another call to the IT team to ask when it's coming, he or she picks up a credit card, browses the internet, and subscribes to a SaaS CRM provider instead – if the corporate CRM system will not meet the sales team's needs, then the sales team will run its own CRM system in the cloud.
From that initial foothold, use spreads as other teams get wind of the benefits of the new SaaS offering, until IT faces a stark set of choices: force everyone off the cloud applications and back onto the corporate on-premise system (unlikely to succeed); live with a rogue IT strategy evolving alongside the official one (just asking for trouble); or start formalising the cloud alternative as part of the official IT portfolio (the most likely option – and the one that's going to best serve everyone).
But, as cloud computing has entered the mainstream, this "land and expand" tactic is becoming less common. It has been reborn in the form of "two-tier enterprise resource planning (ERP)", espoused by the likes of NetSuite to describe situations where a cloud application is layered onto an existing on-premise ERP investment to service a department or a subsidiary without ripping out the existing software.
In the main, however, the engagement strategies between customers and providers in the cloud have entered a more mature phase, more akin to the formal procurement processes that characterise traditional software adoption.
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Technology choices in the cloud
"There are always going to be some customers who like to get on the net, fire up a virtual machine and get a trial underway, but equally there will be other customers who are a bit confused about where they're going, or those who just want more hand-holding," suggests Owen Rogers, senior analyst digital economics at research firm The 451 Group.
This, in turn, brings to the fore new questions and considerations that organisations contemplating the move to the cloud need to take into account.
"C-level executives inside companies are now much more aware of cloud computing and of the changes it can bring," says Rogers. "The issue is how they compare different providers’ offerings, as it's often not apples and apples. Ten years ago, you'd have gone through a formal procurement where you'd write up your requirements and make a decision based on the responses from vendors to your RFP [request for proposals]. In the short term, with cloud computing it's up to the customer to engage and demand more."
So how are users engaging with potential cloud providers? Are they asking the right questions? Do they understand that the procurement process is different to the traditional model? And is security really the main bugbear that every cloud adoption rates survey suggests?
With consolidation in the cloud applications market ramping up, choosing a provider that will endure needs to be factored into the procurement process
Trunki wheels out NetSuite
UK business Trunki is a good case in point. The children's luggage firm is famously one of the few to have the last laugh on the investors in Dragon's Den, having been turned down by all of them but going on to supply retail giants such as John Lewis, Argos and Sainsbury’s, as well as expanding into other markets around the globe.
The firm is also a good example of a fast-growing organisation inhibited by its existing IT. Trunki used the on-premise Sage Line 50 applications, owned and run by the internal finance team, as well as a hotchpotch of Excel spreadsheets and Outlook.
When Phil Bagnal joined the firm in 2010 as head of supply chain operations – with a remit for overseeing IT as well – it was immediately apparent to him that the infrastructure could not support the company's growth rates or ambitions.
Moving to the cloud quickly became the option that would best meet Trunki's objectives. "We didn't want to have a server with everything stored on it, and we wanted the ability to work from anywhere and in any environment," says Bagnal.
The solution it chose was NetSuite. A deal was signed off in November 2011, following a series of face-to-face meetings with NetSuite personnel to go through all the requirements that Trunki had and to allow the firm to satisfy itself that its expectations would be met. No on-the-hoof credit card swiping went on with this procurement.
Following the deal sign-off, a basic, vanilla version of NetSuite went live six weeks later, just in time to meet Trunki's recently revised year end in December. From that basic first instance, Trunki added more and more modules, to the point that it is now using almost the entire suite.
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Enthusiastic about cloud computing
Overall, Trunki is increasingly a cloud enthusiast. "We use Google Apps, and we've signed up to Box as we have 15 distributors around the world and we need a way to collaborate and share files," says Bagnal.
That said, the company was not necessarily wedded to the idea of the cloud. "We did look at on-premise," says Bagnal. "The cloud element was not initially the fundamental reason that we made the technology choice, but for me it was the eye opener. A lot of businesses in the UK still do not realise that this level of software functionality is available on the cloud."
One reason for considering an on-premise option was the prospect of cultural resistance. "It's often the case that finance teams are very loath to change and don't want to move off of a system that they've used for so long," says Bagnal. "There has been a transition period, but it really wasn't as scary as we thought it might be for the finance guys."
Security concerns did not really play a significant part in the procurement process. "I'm one of the oldest people in the company, and I'm 34. Most of the guys at Trunki trust the internet anyway," says Bagnal, adding that there is an implicit trust that suppliers such as NetSuite will provide robust security. "I'd be more concerned about sharing something on a server for which I am responsible."
There also has to be trust that the chosen supplier will be around for the duration. It's a safe bet that Oracle and SAP will still be here in 10 years’ time, but with the consolidation in the cloud applications market ramping up, choosing a provider that will endure needs to be factored into the procurement process.
It is also important to think about what happens to your data if a provider does collapse or if your relationship goes sour.
"We have the ability to back up all our data so that we can pull all our information out," says Bagnal. "It is understandable to be concerned about entering into a relationship on what is akin to a mobile phone-style contract. But you take risks with the standalone model on a server. You buy SAP or Oracle and you buy into massive updates that you need to manage."
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Reed.co.uk employs SAP By Design and Salesforce
Another firm that has made the move to a cloud applications infrastructure is online job site Reed.co.uk, which uses SAP's Business By Design as its ERP platform and Salesforce.com for CRM.
The firm was spun out of the wider Reed organisation, and as such wanted to have its own IT systems instead of being tied to those of its parent. "We inherited IT systems from the parent company, which had 3,000 staff," says Mark Ridley, technology director at Reed.co.uk. "Having only 25 staff, we didn't really get much say into what systems we were using."
Unlike Trunki, there was an element of "land and expand" with Reed.co.uk, as staff moved off the incumbent Lotus Notes system and dabbled with Google Apps. "My team adopted Google Apps early on and we started moving across under the hood," admits Ridley.
But a more formal and structured approach was taken when it came to selecting a CRM solution and later an ERP platform. "We had to make a call on the CRM. We didn't want to run it ourselves, so we said 'let's buy Salesforce.com'," says Ridley. "We knew we could bring in people who had been exposed to it elsewhere. That and Google Apps evolved into our browser-first strategy."
The largest cloud shift came with formal board approval in January 2012, however, when the Reed board signed off on what had become a long-running desire to move Reed.co.uk onto IT systems that were more suitable for a sales and web development organisation than those chosen for a traditional recruitment business.
While a solid business case had been drawn up for the planned move, sign-off from the board was as much a matter of timing as anything else. "The point at which the light bulb went off was the point at which we did research and found vendors which could do what we needed through the browser," says Ridley.
"The IT was going to be run by other people and consumed through the browser, and that took a little while for people to completely understand. We said, 'It can be achieved and it can be done cheaper'. But understanding only really happened in May 2012, when the pricing came back in. That's when we went from cynicism about how IT can be run in this way. It took five months to get to that tipping point where people realised that there might be something here. It snowballed from there."
We have a team of seven people with a very strong remit not to represent technology but to represent the user and understand the business processes they have
Mark Ridley, Reed.co.uk
Making the leap to the cloud with user input
Once the decision was taken there was, Ridley confesses, a moment or two of 'be careful what you wish for'. While there was an absolute desire to move onto their own IT systems and to make the leap to the cloud, once permission was granted the realisation of quite what that entailed sank in. "I do remember walking out of the board meeting and thinking, 'I'm not so sure about this'," he recalls.
His response to this was to sit down and draw up a full list of exactly what he thought would be needed to achieve the goals and to be upfront about this to senior management. "I wrote an email saying, 'It's great you've decided to do this, but if you do want to do it then these are things we will need'."
From the get-go, Ridley wanted to include the users in the procurement and selection process and to take on board their needs and questions throughout.
"We started with an internal business consultancy piece, and then we went out to all of the users and started a steering group," he says. "This was not a decision taken by IT and then rolled out to the users. We wanted the users to be embedded in all of the selection process, even when it came to making representations to the board about the purchase.
"We did a lot of workshops on the end user experience. We'd sit down with the users and we did a lot of work on mapping out internal processes. We had statements of the situation as it was, and statements of how we would like it to be."
While this focus on the user experience and expectations is highly commendable as a mechanism for improving adoption rates, there must also be some traditional formal structures in place. "We had to pick technology that would work, of course, and I represented procurement," says Ridley. "There was commercial and legal involvement, and a focus on return on investment and total cost of ownership."
But the user consultancy approach is now an integral part of Reed.co.uk's ongoing commitment to procuring new cloud applications. "I've created a team inside my own team which is almost an internal business consultancy unit," says Ridley. "What we're trying to do is create a team that is there to continually work with the people in the business.
"The focus last year was human resources and finance, this year it is customer experience. It's all about an ongoing mission to understand what the processes are and how to improve them. It's seven people with a very strong remit not to represent technology but to represent the user and understand the business processes they have."
It's an approach to engagement with technology and technology providers that is very much of the cloud age. It's also one that suggests that "land and expand" incursions of comparatively recent times are already being replaced by a more formal process of selection that brings together traditional procurement elements with an increased focus on the business needs of the user.
This was first published in May 2013