In the latest installment of the Enterprise Cloud Forum, Stacy Williams, Director of IT Production Support, and I recently discussed how enterprises are leveraging a cloud business model to maximize ROI.

Click here for access to the presentation and mp3 recording of the discussion, in which Stacy and I answered these key questions:

• How should we think of ROI differently in the cloud?
• What are the Key Performance Indicators (KPIs) to measure your Return on Cloud?
• How can we integrate project-based accounting for real-time ROI?
• How does the cloud enable first mover advantage to maximize profits?

And, be sure to join us on May 21 when three C-level Rackers – Suaad Sait, CMO; Steve Mills, CIO; and Karl Pichler, CFO – challenge the status quo and discuss their shifting roles in a cloud world. Register now.

Calculating ROI is further complicated by the fact that every business is different and the impact of cloud computing on their processes will differ.

In the next installment of the Enterprise Cloud Forum, we will help you understand how enterprises are leveraging a cloud business model to maximize ROI and why traditional models that only focus on simple cost benefits often overlook the real value.

Join Stacy Williams, Rackspace Director of IT Production Support, and I at 11 a.m. CDT Wednesday, April 17 for “Maximizing ROI in the Cloud,” a webinar during which we investigate the costs, risks and benefits associated with cloud adoption, as well as discuss a framework for measuring its return.

You’ll learn:

• How to think of ROI differently in the cloud
• The Key Performance Indicators (KPIs) to measure your return on cloud
• How to utilize project based accounting for real-time ROI
• How the cloud enables first-mover advantage to improve profit margins
• How flexibility in delivery models can maximize your cloud ROI

Register now for “Maximizing ROI in the Cloud” and learn how to make it rain in the cloud through maximized ROI.

The previous post on Cloud Service Oriented Architecture (C-SOA) discussed what’s required to achieve a high level of agility in the enterprise. The net result of extending SOA architecture principles beyond the enterprise firewall to leverage cloud resources (C-SOA) will be very effective in achieving this goal.

To begin constructing valid C-SOA services, they must be [a] defined within a valid governance framework and [b] based on a sound information model. C-SOA principals require those services, processes, information model and the governance framework to have expanded context that includes both on-premise and distributed cloud resources. Let us have a closer look at some of the key elements of C-SOA …

I. The Information Model

The information model typically includes and references the data model, data dictionary, data catalog and its metadata (data structure, logical model, physical models, data definitions, etc.). With C-SOA, it is important to realize a single, not multiple, schema database which is consistent, distributed and inclusive of on-premise as well as service providers’ platforms. This can only be achieved thorough good understanding of data latency requirements (real time/near time), integrity requirements (integrity controls) and how the information is used within the context of applications rather than simply inspecting existing schemas and data structures. This is a prerequisite step on deciding which data and associated services should reside on-premise or in the cloud.

II. The Services Composer

C-SOA services are basically functions and each, as with any function, defines behavior for a given set of inputs. One of the most important features of these services is being loosely coupled. For example, they need to be independent of location, security mechanisms, communication protocol, semantics and state. This loose coupling allows for dynamic binding and the ability to compose new services or composite applications from existing services – including cloud services. Another advantage of designing loosely-coupled services is the inherent isolation characteristic so that one component’s failure does not affect, or cascade to, other services. This is particularly important when composing cloud-aware applications designed around availability, reliability, parallelism, redundancy, latency, resource consumption and recoverability of the underlying resources. This is the main motive for seeking interoperability between cloud providers, which will undoubtedly take center stage in due time. Since one of the most important SOA principals is to limit proprietary or dependencies on technology or services – vendor lock-in -, likewise, C-SOA principals advocate for open standards and interoperable services. For example, OpenStack, as an open industry-standard platform, is well positioned to address key interoperability challenges – at least for IaaS.

III. The Services Broker

Services need to be published, discovered and consumed. Today, this is achieved through intimate knowledge of the services provided, which is generally static in nature. As the cloud services market matures, a Broker as a Service (BaaS) will emerge and will implement Services Directory along with automated lookup mechanisms. For now, the enterprise services metadata repository should be kept to provide information about the services including semantics, security model, interfaces, dependencies, parameters, service level, error handling and associated cost. This way, a C-SOA architect has a reference point where services are accessed and deployed in a standard way to achieve best fit for purpose.

IV. The Process Orchestrator

Business processes will span multiple systems and potentially multiple geographies and take advantage of services both on-premise and in the cloud. The process orchestrator should allow the design and configuration of multiple services or applications to direct the flow of actions, events or data. For example, processing a credit card application for a credit card issuer may potentially involve cloud services (CRM customer acquisition, credit score lookup, fund transfer request and a cross-selling affiliate program invocation) and on-premise services (data validation, team assignment, approval system and decision-based system). The value of the process orchestrator is the automation of a process workflow to take advantage of cloud-based services. This level of agility in changing core business processes and adapting to available services without major development undertaking is very powerful.

V. Governance, Security, and Control

When leveraging cloud resources from service providers, enterprises relinquish some control. Strong governance is a mechanism to manage the risks associated with this dependency. This is traditionally divided into design-time governance (defining policies to services) and runtime governance (applying the policies on real-time behavior). In any enterprise cloud architecture, there is a multitude of services invoked to support the business operations. With a governance framework and a security model in place, enterprises have the ability to control when services are added, modified, stopped or accessed for C-SOA as an end-to-end architecture. Rackspace, for example, supports strong security and governance policies through the compartmentalization offerings, standardized equipment, robust access control, authorization, authentication, auditing, logging, monitoring, change management, patch release management and other thorough operational policies, to name a few of these elements. Governance elements should be defined for the entire C-SOA effort to provide important control over the design, discovery, monitoring, maintenance and support of these hybrid services.

VI. C-SOA Quality Management

A quality management plan should be in place to ensure that the services, applications and processes are meeting the defined business requirements and appropriately expanding the concept of SOA contracts to embody cloud services. This includes quality management for scalability, SLA, utilization, security, standards, etc.

IT, understandably, must provide services that are reliable, scalable, cost-effective and agile. While business leaders prioritize revenue generation in one hand, IT leaders prioritize process efficiency improvements and cost cutting on the other; and C-SOA can effectively address both domains of priorities. C-SOA provides a needed level of abstraction and isolation to reduce development costs and time for delivering these multi-sourced heterogeneous services. Correctly executed, the ultimate benefit is increased agility, speed and cost effectiveness that can lead to better pace of innovation, competitiveness and improved return on investment.

Previously related articles:

1. Cloud IT And Business Alignment: Building An Enterprise Services Architecture For Innovation, Speed And Agility
2. Cloud Service Oriented Architecture (C-SOA): Loosely-Coupled Highly-Orchestrated Service Delivery

Cloud Service Oriented Architecture (C-SOA) is an architectural approach to leverage cloud computing resources while utilizing Service Oriented Architecture (SOA) disciplines to drive substantial business value. In this convergence, SOA provides the underlying enterprise platform to consume cloud services. Historically, as business requirements evolved, enterprises continued to deploy new systems for almost every new application suite. These systems in turn were deployed with respective servers, storage, networks and processes. The constant additions of these systems — sometimes compounded by mergers and acquisitions — resulted in silos or islands of systems. Consequently, they are more difficult to leverage or integrate resulting in more complex tightly-coupled enterprise architecture. This complexity affected the ability to maintain these systems and was costly to change as business needs continued to evolve. The need of this level of agility is a key aspect of survival to many companies. C-SOA has the potential to prevent building silos again – this time in the cloud, which will be far more complex and difficult to reconcile. Service reuse, extensibility, abstraction, business value and agility are, not surprisingly, common shared attributes of both SOA and cloud computing. Let us explore…

SOA is simply an architectural pattern to guide the structure and assembly of systems to deliver business value. This level of service abstraction provides a genuine focus on structure for a valid design. SOA, as a framework, allows systems to be represented and further abstracted as services. Combined with a process orchestration layer and a monitoring capability, it is possible for these services to be reused and consumed without major integration or significant development efforts. This results in a core agility of the underlying architecture to respond to changing business requirements. With C-SOA, the focus is to bring value to business and achieving a true partnership between IT and business lines to advance the enterprise in the face of competitive pressures and changing business needs.

Some enterprises take undue risks by creating quick connections to cloud resources from enterprise systems in an ad-hoc fashion. These point solutions will further impact the realization of a true and flexible composite service layer. C-SOA advocates using a disciplined architectural approach to enterprise SOA and expanding its resource pools to include distributed cloud resources. Metrics like reliability, performance, recoverability, availability, security and dependency affect services delivery and should be taken well into architectural considerations. Cloud computing with its elasticity features addresses a core SOA design issue related to ubiquitous access and service scalability. Likewise, cloud-computing will benefit from SOA’s governance and sound architectural principals particularly for shared services. The results of a survey by Gartner research of CEOs and other senior business executives are depicted in the graphic below. The survey results show that 60 percent of the respondents indicated that they felt constrained by IT as they managed their enterprises out of the recent economic downturn.

The benefits of C-SOA include:

1. Increased collaboration and federation
2. Improved interoperability and agility
3. Aligned business and IT goals and efforts
4. Diversified choice of service providers
5. Increased ROI while reducing IT operating cost and overhead

The characteristics of SOA services (loosely coupled, abstracted, autonomous, reusable, stateless, compose-able, discoverable and standardized) can be fully supported by cloud computing mechanisms. The core of our C-SOA discussion is rightfully the spectrum of services delivered irrespective of source or location. Services are assembled into processes which then define behavior of business applications. Processes can be further orchestrated to support business workflows for an end-to-end business operation.

Clearly, Cloud IT transformation will involve people in addition to process, and technology. To successfully implement C-SOA in the enterprise, it is imperative that a dedicated team is established to:

1. Define, build and manage the creation of C-SOA shared services
2. Create standards, procedures and a governance framework
3. Develop a strategic plan for services to meet the business’ strategic goals

This is the team that will be charged with creating an agile IT foundation to enable the business to compete, adapt and capture market opportunities. But how do you measure the agility core of an enterprise? Agility can be measured by the speed at which your changes can be implemented, the extent of the changes that can be tolerated at a given point in time and the ease of implementing those changes.

In the next blog article, we will examine this topic further by taking a closer look into some of the key elements of a C-SOA composite model required to achieve this level of agility for systems and processes.

Previously related article:

1. Cloud IT And Business Alignment: Building An Enterprise Services Architecture For Innovation, Speed And Agility

According to Gartner’s report “IT Metrics: IT Spending and Staffing Report, 2011,” depicted in the pie chart below, only 14 percent of IT spending in 2011 was dedicated to innovation and new functions that can transform the business. That’s compared to 66 percent of IT budget spent on operations, maintenance and support, or on “running the business;” and 20 percent spent on migration, upgrades, enhancing IT systems or on “growing the business.” Additionally, IT is already stretched with aging datacenters, high energy costs and resource shortages. One can never underestimate the amount of work needed to operate the datacenter in order to keep the business running. Likewise, we cannot ignore the potential positive business outcomes that result from dedicating an additional few percentage points of the budget to innovation and addressing new business functions, challenges and goals.

It is only logical for IT to strategically drive towards better alignment with business while shifting operations to service providers that arguably have the economy of scale on their side. While cost containment and reduction are important, enterprises fundamentally pursue cloud computing for agility and speed. This is particularly true since adopting a cloud computing model is not without frontend expenses. It involves the cost of retiring systems, migrating, re-architecting, re-staffing and evolving many IT processes. This spend will ultimately yield a long-term competitive advantage and significant cost savings.

To successfully achieve this level of transformation and gain stakeholders buy-in, it is imperative to sustain deliberate programs to discover these transformational opportunities, identify critical success factors and articulate return on investment. Understanding the current state and future objectives, while developing an iterative approach to a clear roadmap, will improve business outcomes in specific and measurable ways including:

• Reducing time-to-market through quick opportunity capture and improved agility
• Freeing up resources for developing services to meet business demands in a timely fashion
• Improving productivity by standardizing on systems, tools and processes
• Increasing operational efficiency through service automation and orchestration
• Lowering and containing the cost of operations and delivering competitive business value

It is worth taking a closer look at how enterprise solution architecture is changing for the new service delivery model, and the implication it has on both IT and business. As depicted in the graphics below, enterprise architecture is shifting into highly componentized services that are not only integrated as a delivery unit, but are also orchestrated with additional services to deliver core business value.

This cloud services-based architecture will have a profound effect on service delivery and consumption for enterprises. Understandably, hybrid delivery is the practical delivery model since it is mainly a function of security, governance, control and performance, irrespective of source or location. In this model, distributed IT services are composed, delivered and consumed within the risk envelop of enterprise IT. As with any strategy, managing risk is its most important aspect, and a transformational IT strategy through strong governance is no exception.

It is important to undergo a process of defining the target IT Infrastructure along with a list of the services delivered, business cases and critical success factors that will help achieve the desired business outcomes and deliver cost efficiencies as part of this transformation program.  This program will also transform:

• People: Retrain, refocus, reassign for business-centric IT
• Governance: Improve and extend to service monitoring and compliance
• Enterprise Data Model: Consolidate, normalize and integrate
• Applications: Profile to retire, retain, re-architect, replace or host
• Compute Infrastructure: Centralize, consolidate, virtualize, automate or collocate

Enterprises will realize the value of the transformation quickly in these key categories:

1. Lowering of real estate cost, power and cooling, capital expenses and operational expenses
2. Acceleration of business growth through better alignment between business and IT
3. Reduction of the overall delivery risks and increased global outreach

Looking ahead, there are three areas of transformation taking place in the industry itself with intriguing dynamics and dependencies among them:  IT is transforming into a service-centric organization; service providers are developing new service offerings to address the growing demands of enterprises; and Independent Software Vendors (ISVs) are re-architecting their software as SaaS to capture the cloud delivery model. It is critical that enterprises recognize that cloud IT transformation is a journey and one should approach it iteratively. Enterprises must also identify opportunities that are relatively quick to deliver while providing the highest return on investments. Most successful enterprises start by looking at their business and IT strategies and services while profiling their applications to plan their cloud initiatives. Cloud computing is truly poised to help enterprise build differentiated services by actualizing a new level of IT service centricity. In the future posts, I will discuss various important aspects of this transformation in more details.