CIOs will be fired if they get the cloud wrong, warns HP

HP cloud guru Pete Karolczak welcomes the end of traditional outsourcing and embraces the disruption of cloud computing.

In the future, CIOs will get fired for becoming beguiled by the tyranny of choice offered by cloud computing. They will lose control of which applications are running where and where servers are physically located. Costs will run out of control as systems are spun up and left running. And when outages are suffered and the CIO doesn’t know about it, that too will lead to a swift and ignominious exit.

But it is not all bad news. These things can be avoided.

Pete Karolczak, senior vice president and general manager of Infrastructure Technology Outsourcing at HP Enterprise Services, welcomes the end of traditional outsourcing and embraces the disruption of cloud computing. He says he believes HP’s Enterprise Cloud Services is positioning the company to deliver against real requirements in the market while avoiding the pitfalls that will befall the unwary (at least for the parts that his clients entrust to him).

You will be fired as a CIO if you don’t know where things are running.

What the cloud means for wholesale outsourcing is nothing more than an end to the traditional “mess for less” contracts that have dominated the industry since its inception. The challenges of traditional outsourcing contracts, the longevity, the controversy, the legacy and the contract negotiations or renegotiations are about to become yesterday’s war. With wholesale outsourcing, the issue was often about how many processes and their supporting technologies and people would shift to a single third-party supplier.

Today, the cloud does not mean there will be less outsourcing but the landscape will be very different. This landscape will consist of clusters of services. And from a supplier’s perspective this means choosing to operate in markets that guarantee a win.

New world order

Karolczak welcomes the end of traditional outsourcing.  “I recognise it, I’m leading it; I embrace the end of comprehensive outsourcing. It will be replaced by more discreet clusters of services. For my end user [of the future], the application hosting environment, the web hosting environment, the back office enterprise resource planning (ERP) will all be with different suppliers while the network could be at another supplier,” Karolczak says.

“Let’s take data centre hosting. You could run your apps in someone’s public cloud.  You could try three providers and decide which one you prefer and after one year choose a preferred supplier. The switching costs are relatively low.”

Karolczak advises providers to think as the customer would. “They will be seduced by choice and fragment their operations so entirely that they will regret it within two years. The good news is that we’re going to help them and some will be enlightened enough to help themselves.”

Take for example infrastructure-as-a-service (IaaS) and network service provision. Within these offerings there will still be a lot of areas the customer will want to manage itself. Karolczak says as a result he believes we’ll see more and more customers adopting a multiple choice approach when it comes to services.

Dangers of change

But here’s the rub: “You will be fired as a CIO if you don’t know where things are running. You will be fired if something goes down and you don’t know about it. If you are a CIO and some of your apps are running on Amazon and you don’t know about it then your costs are running out of control. If they are running a mission-critical app and it gets breached, you will get fired.”

Much of this comes down to service management and security. “Those horizontals must traverse this fragmented world of choice. Service management in the New World Order changes dramatically,” Karolczak says. “In the cloud you had better know which applications are in the cloud and which cloud they sit on. One of the delusions of the cloud is that you have unlimited bursts of separation. But you can’t, in most situations, separate the apps from the cloud.”

No one jumps to the future state instantaneously, and there are key differences between the traditional outsourcing deal and the cloud options, he says.

“The beauty of the cloud is that you don’t need to move all 2,000 applications at once. You move one app at a time, pilot one and then move three. This is the perpetually hybrid model. You’ll never be in a future state because once you get there, there will be a new future state.”

This acceptance of forever being in flux appears to be a major, if little recognised, aspect of moving to the cloud.

More and more customers will take this route, Karolczak says. Within large suppliers every major service line will expose its new generation as a service offering. Every new customer or renewal of existing deal is looking at going discreet.  “I will try to win seven out of seven, or I will look to win three out of seven [cloud deals from one company],” Karolczak says, highlighting the fragmentation that is about to become a major part of outsourcing.

Rethinking software

The attraction of all of this disruption is the promised reduction in cost and introduction of flexibility. Karolcak says the beauty of cloud is that it is a destination that is so much cheaper than anything ever seen.

“By the nature of the destination this is a pennies on the dollar offering,” Karolczak says. But then you must think of how you get there.  “You need to transform your apps to get there,” he says. “There is no such thing as free cloud. The annuity business is cheap, and you need to rewrite your apps to get to the cloud. You need to stop expecting customized infrastructure for every app. You need to change your apps not to care. If you need high availability you need to build it into the app.”

“We (HP) are also focusing on the journey to help customers take advantage of the annuity price point. But the next time you install SAP you can’t run it on Amazon, it doesn’t work that way. Even on a hardened cloud, it is more standardised than anything before in order to hit the price point,” Karolczak says.

“In the past we have trained our application teams to have the infrastructure customized for them and now we need to wean them from that. The apps need to run on standardised infrastructure which is the nature of cloud.” It is not ‘one size fits all’ and there are options in configurations which mean you most certainly can’t say: “I want it exactly the way I always had it.” The apps need to modernize to fit on the cloud.

From chaos…

“The beauty of cloud — this spill and fill —changes what was operation’s worst enemy. You can pay as you go (because you don’t have to put the 1,000 servers in the cloud).” Managing change more methodically means your journey to thecCloud is not as chaotic. “It is risky,” Karolczak says. “But pay-as-you go is really good for you and really good for me. I don’t inadvertently sign up for a fixed contract and lose money because I guessed wrong. You don’t put me out of business and I don’t put you out of business because I’m milking you dry. It is a natural intuitive commercial model. Commercials are tough enough and whenever you have a predictable commercial model it is actually a good thing.”

“It is also outcome based. The phone bill isn’t a $1bn black-box bill, but it is a line item — if you turn the knob to the right the volume goes up.” The cloud also promises repeatability. The more consistent, the more reliable, the more scalable means the better the quality. Suppliers will be happy to have fewer escalations, and customers will as well. The cloud also gets outsourcing suppliers out of the ‘mess for less’ outsourcing model. “We actually get to become really good at certain things we do well multiple times. Mess for less is a hard business,” he says.

The cloud for HP

So where is HP with its cloud goals?

“When you set up an enterprise cloud instance — it is like a hotel — I can’t sell rooms until I build the hotel and I can’t build the hotel until I own the land. The good news is I own a lot of land, a lot of data centres around the world. I first need to build the core then I can start adding blades,” Karolczak says.

HP is going to set up 10-plus cores around the world - “We’re still doing business planning.” He says: “That will include an equally large number for messaging collaboration cloud services. So by the end of 2012 we’ll have global presence in cloud and those customers who are able to move will start the journey. Will anybody be 100% moved by the end of 2012, I doubt it.”

This article was first published in DatacenterDynamicsFOCUS magazine.

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