Are You Ready to Compete Against the Public Cloud?

by Robert Covington and Brad Goodwin

Part of the Oracle Experiences in Enterprise Architecture article series

Published January 2012

One of the stark realities of public cloud computing is that it offers an alternative to internal IT. Companies no longer need to wait for the IT department to provision hardware, software, and application resources. They can subscribe to and initiate cloud services from public providers such as Amazon almost instantly, whether it's to stand up a temporary Dev/Test instance or a major business application. If IT can't offer competitive services then the business might seek out other service providers.

These realities are motivating many organizations to create private clouds with many of the cost and flexibility benefits of public cloud services. IT organizations need to adapt by modifying how they provision and run IT resources internally, and they need to make sure that, over the long term, the services they provide are competitive.

The goal of these private cloud offerings should extend beyond merely protecting internal IT. Cloud computing offers an opportunity to surface the many hidden costs in IT—a consequence that creates efficiency, modernization, and room for continued innovation. Cloud computing also provides an opportunity to restructure IT so it becomes more valuable to the business. Could-based applications can expand and contract very quickly to re-direct processing to the areas of the company that need it. The focus is on keeping operational costs and capital costs down to get services to market faster.

In this article we examine two companies that have embarked on a transformational journey that embraces many core aspects of cloud architecture: Bank of America and PHH Corporation. We'll look at the technology ramifications and the business implications of these projects, with attention to how these organizations are creating flexible IT platforms that maximize both innovation and accountability.[Editor's note]

Starting the Journey

With thousands of applications in production, Bank of America's IT organization has embarked on an ambitious journey to standardize their hardware and software environments. Vinod Haval, Vice President of Infrastructure Standards and Governance at Bank of America, likens their existing IT environment to a Chinese dinner menu with dozens of items. He says they would like to adopt a leaner and more consistent infrastructure, more like a French menu with only a handful of items. They are building a private cloud to streamline the operation and increase client satisfaction.

PHH Corporation delivers world-class business solutions to its clients through two subsidiaries: PHH Mortgage and PHH Arval. Each of these two business units has spent years innovating and expanding its information systems, resulting in separate and diverse IT infrastructures. To increase agility and reduce costs, the company appointed Chris Brewer, Vice President of Platform Technologies at PHH, to spearhead an IT transformation effort and create a private cloud. PHH is moving from a decentralized to a shared services model and defining a Common Technology Platform that both business units can share.

During Phase 1, Brewer and his team of Enterprise Architects are defining the new platform, including the hardware and storage infrastructure, database architecture and application server environment. During phase two they will tackle individual application domains as they develop a services catalog and identify 14 key service centers within the company.

To get started, Brewer utilized the Oracle Infrastructure Maturity Assessment to examine the current state architecture and measure the maturity, adoption, completeness, and effectiveness of a future state that includes shared services.

cloud-architecture-fig01

Many Oracle customers utilize this service to identify potential inhibitors to cloud adoption. Remedies for the inhibitors are identified and prioritized based on the impact and costs. The results are documented in an assessment report that details the current state, the potential inhibitors, remedies, recommended initiatives, approaches, and priorities. This assessment provides a good starting point for evaluating your readiness for shared services or cloud computing.

Defining the Roadmap

Cloud computing requires a commitment by both the business and the IT department. Based on his experience at Bank of America, Haval lays out a strategic roadmap as follows:

  1. Sit down with the business leaders to establish a 3 to 5 year vision. Examine the current state of your environment: what you are doing, how you got there, and why. Analyze processes, organization, and technology.
  2. Envision what the future state should look like. In most instances you will be moving from a monolithic architecture to a shared services model.
  3. Determine how to transition the IT budget, keeping the entire enterprise in mind.
  4. Adopt a new mindset: instead of simply taking orders for products and services from the business, start selling those services.

Brewer agrees. He says selling the strategy may take some "packaging and marketing" so that the business understands the benefits. "When making a business case for a shared services model, be clear about how you will be enabling their business capabilities," he notes. "Challenge them to understand the strategic roadmap from a business perspective. The business often looks to IT to determine the strategy. It needs to be a collaborative effort, not only on a project-by-project basis, but at the core process level."

PHH created capabilities maps and associated them with standard IT resources. They also established company-wide governance processes to manage the allocation of resources. For example, once they had defined the processes to manage the mortgage business, they mapped the execution of those processes to specific applications and then to expected resource loads within the shared services infrastructure. This differs from the traditional approach, where a business unit selects an application and then tells IT to implement it. Now, before that decision takes place, there is an architecture review process and an application review process to make sure the desired solution is in line with the overall strategy.

Allocating Costs

Chargeback is not for everybody, but cost allocation is important to justify the value of what IT provides "beyond the dial tone" so business units don't flee to public cloud services. For organizations that do wish to charge back for cloud services, Haval says there are three primary considerations:

  1. Discover your costs
  2. Develop a chargeback strategy
  3. Recover your costs.

Some business owners might resist chargeback because they don't see the value in sharing costs with other business units. This is particularly the case when an infrastructure has evolved around unique silos. "If you didn't build your applications and infrastructure to fit the cloud model, then transitioning to a virtualized, shared services infrastructure will be difficult because the cost motive is not so obvious," he points out.

Bank of America solved this problem by categorizing its applications into six tiers. Each tier has assigned costs and SLAs so business units can see the value of various IT capabilities, whether it's a high availability server infrastructure or a replicated database.

This same methodology applies when an organization is reviewing budgets and determining how to allocate costs to existing business processes. Tools such as Oracle Enterprise Manager can monitor resource consumption at the business process level. These tools are important for cloud computing because they enable IT to govern shared environments to verify service levels and make sure everybody is getting their fair share of what they are paying for.

Gain Executive Buy-In

Successful cloud projects are driven by executives. They are top-down initiatives. These are precisely the projects that require Enterprise Architecture and consistent governance. Enterprise architects must step in to ensure consistent execution and reliable service levels. They are the logical group to drive cloud projects since they can provide a structure for assessing and improving the enterprise IT capability. They can take a step back and consider the overall technology portfolio to make sure everybody gets heard, nobody gets left behind, and the business requirements are met in the most cost effective way possible.

Enterprise Architects can help the organization adopt a new perspective that encourages the delivery of business services and capabilities with the overall goals of the organization in mind. EAs can also provide the technical underpinnings for chargeback, monitoring, provisioning and all the other fundamentals that enable a shared services infrastructure to function correctly.

In summary, to take the lead in Cloud and Shared Services initiatives, IT pros need to change their mindset. It's not just about delivering IT services. It's about delivering business services. Think about how you purchase public cloud services: you don't care about the infrastructure, the upgrade cycles, the management techniques, the capacity limitations. You make a payment and you receive resources that you can use to solve a business problem. IT pros need to mimic this same model with internal cloud services: delivering functionality, masking complexity, and making it easy for the organization to do business with you.

* NOTE: Chris Brewer and Vinod Haval shared their stories at Oracle's 2011 Enterprise Architecture Summit. Click here to download an audio recording of that presentation (mp3, 103MB).


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About the Authors

Robert Covington is a Senior Director of Enterprise Architecture at Oracle Corporation.  LinkedIn

Brad Goodwin is an Enterprise Architect with Oracle Corporation.  LinkedIn