There are still sceptics who insist that cloud computing is not a viable IT delivery model for the enterprise; such unbelievers have clearly not paid heed to what's been happening at Siemens over the past year and a half.
The German electronics giant is 18 months into what most observers agree is the world's largest cloud applications commitment - over 400,000 subscribers, across 80 countries and 20 languages. With such scale of ambition, it seems almost like understatement when Siemens CIO Norbert Kleinjohann says, "I believe that cloud computing will change IT sooner than we expect."
Scroll back to the 2008 time frame and Siemens was undergoing a strategic transformation, driven by both internal and external pressures. "We faced a lot of challenges," says Kleinjohann.
"We had just come out of a restructuring that we could use to overhaul our cost position. I think ongoing work on IT productivity is a key hygiene point for any company. We have right-sized a number of things over the past two or three years. We used the opportunity of new Siemens organisational structure and the pressure of the economic crisis to right-size the IT organisation and streamline major parts of the services organisation," he says.
"We also saw a strong globalisation of our business which enforced the need for a common backbone to better enable worldwide transparency. We needed as an IT organisation to address the challenges of emerging markets, often with less sophisticated software, which meant changing from a one-size-fits-all mind set to a mix-and-match one. There were corporate initiatives to streamline processes towards one HR, one finance, and so on and that meant a need for standard IT solutions. We had a target to create an integrated solution that could support a high-performance culture which meant we needed a professional people management system."
This would become known as 4Success.
Siemens was - and still is in many business areas - a flagship SAP customer, but chose to go out to market to explore alternatives to provide this much-needed people management system. "We had to understand the trends in the HR IT market so we investigated the supplier market carefully," says Kleinjohann. "It was very obvious that a lot of vendors started small in recruitment or talent management, for example, while others were clearly leaning towards the integrated approach we needed."
During this evaluation period, Siemens' perception of its own needs shifted. "We assessed our business demand against the market standards, managing the IT selection process alongside the HR people," says Kleinjohann. "We also strictly reduced our 'must haves' so that the only 'must haves' we had were those demanded for legal or worker contract reasons."
Such pragmatism is echoed in Siemens policy when it comes to the question of build or buy. "We want to be best in class, but to only take an individual approach if there was a need to differentiate," says Kleinjohann. "In those cases where the best-in-class knowledge is with others, then we use best-in-class solutions from those others. For example, when it comes to IT infrastructure no great differentiation is possible or sensible.
"In this case, we decided to buy in market know-how because we wanted to be best in class in internal HR, but we were not going to be best in class to develop specific IT to support that. There was a huge discussion within Siemens about going outside in this way when dealing with our sensitive HR data. We had to ensure the security and the safety of Siemens' data so we could only work with vendors who had the right mindset and who could survive our penetration testing. We had to prove that Siemens HR data would be safe."
During the evaluation process, Siemens' IT team members worked with their HR colleagues to assess 50 possible suppliers, both on-premise and in the cloud. "We awarded the contract to SuccessFactors in March 2009, based on functionality and usability and the provisioning of an integrated solution with consistent data models," says Kleinjohann. "For example, we wanted to be able to identify candidates from both external and internal points which leads back to the need for a consistent data model. We can now run reports on a global basis that we couldn't do before because we never had this type of transparency."
Eighteen months later and a number of key milestones have been passed and benefits accrued. Kleinjohann says, "We have seven modules in place: target setting; performance management; compensation management; roundtables; career development planning; recruitment management; and employee profiles. Cloud computing means you can accelerate deployment dramatically. We went live within six months with the target-setting module, which we rolled out to 170,000 employees. We now have 400,000 employees' information loaded into 4Success and have 40,000 log-ins per day."
Inevitably there were some stumbles along the way. "On a project like this there was always some room for improvement and perhaps the enterprise functionality was not always mature enough, but I'm confident that those improvements will come," says Kleinjohann. "We had some performance issues with the roundtable module, but we were very impressed by the customer service we had which meant that we overcame any issues in an extremely short time frame. Most of our milestones were achieved on time."
For those organisations contemplating following Siemens' lead - albeit most likely on a less grandiose scale - Kleinjohann has some learning points to share that have emerged, particularly in relation to roles and responsibilities. It is not, he cautions, a case of handing over responsibility to others when adopting a cloud approach. "Compared to individual development you save time because you don't have to scale up systems or to develop functionality by yourself. But configuration and testing still need your attention and input, as does the project management aspect," he says.
"We also realised that you need highly skilled project management and change management people. You move from IT service management to IT service controlling whereby you're not providing the service to users but controlling the service being provided. It is a different approach."
Stuart Lauchlan will be chairing The Business Cloud Summit 2010 on 30 November at the Novotel London West, Hammersmith. The Business Cloud Summit promises top-level insight from industry experts, representing many leading organisations from Siemens to the Cabinet Office. For a full conference agenda visit www.businesscloud9.com/summit
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