Cloud bound: A consumer goods company’s outsourcing journey

What will “outsourcing” look like when cloud becomes the dominant delivery model?

Opinions abound. So what’s a firm to do when the future is that uncertain? Here’s the story of a consumer goods company that believes flexibility is the answer.

Cloud Bound Study - http://www.ibm.com/ibmcai/cloudbound
Cloud Bound Study – http://www.ibm.com/ibmcai/cloudbound

As we ended our Cloud bound study interview with (let’s call him) John, his closing advice to CIOs who outsource was, “Fasten your seat belt. Cloud is coming. You cannot avoid it.”

John, the CIO of a global consumer goods company, feels strongly that one day all of his firm’s IT will be in the cloud. Nothing is off-limits. Today, there are some systems (like their manufacturing environment) that they cannot run completely in the cloud, due to technical limitations. “Will this be the case five years from now?” he asks rhetorically. “I really, really doubt it.”

So while waiting for the technology pieces to fall into place, John is busy revamping his outsourcing approach. Three years ago, he was tied up in long-term contracts with three outsourcing vendors that provided all of the company’s infrastructure and application support via a traditional on-premise model.

As these agreements came up for renewal, one thing was on his mind: future flexibility. “Not knowing exactly what would be ahead of us,” John explained, “I wanted to have the option to carve out pieces to run in a cloud environment rather than be totally bound for the next five to seven years to a traditional on-premise platform.”

He needed greater contract flexibility to deliver greater business flexibility. For his firm, the biggest motivator for cloud adoption was having access to systems and data from anywhere and any device – especially as they extended services into China and Eastern Europe. The cost savings from cloud computing were nice, but what sealed the deal was greater flexibility.

Have the tough talk

John’s outsourcing vendors were not all keen on moving things to the cloud, given their infrastructure investments. Moving workloads away would alter the financial make-up of the deal and affect their capital investments over the long term. Eventually there was some give and take: John agreed to leave the firm’s ERP system on prem (a fairly painless concession since the application wasn’t available on cloud at that time), while holding firm on the option to move other applications.

Although John’s current vendors were not proactively suggesting new ideas about what could be done in the cloud, others were. “Third parties are coming to us and saying, ‘Have you thought about this?’” John shared. “And I’m entertaining those options.”

“In the years to come, we’re not going to put everything in a single basket somewhere in the cloud. It’s not going to be like that,” he explained. “It will be a portfolio of partners as opposed to just one or two.”

Start with simpler transitions

Unlike some companies that are beginning their cloud journey with brand new applications, John’s firm started with existing workloads. “We only run things we’ve already run on premise, so we have that comfort zone during transition,” John explained.

As global CIO, John engaged the firm’s other CIOs worldwide in selecting which systems to move. They opted to start with more self-contained applications, like general utility software, and specialized apps with fewer users, like treasury and corporate tax systems. “This is a work in progress. We have to take the low-hanging fruit and gradually build going forward,” John stressed.

Learn from the bumps

Initially, the company’s HR and legal teams had privacy and security concerns. John invested considerable time educating his peers about cloud and the safeguards that would be in place. But he adds, “They also got educated by talking to their own counterparts from other Fortune 200 companies.”

(Click to enlarge graphic) Cloud Bound Study – http://www.ibm.com/ibmcai/cloudbound

In the early days, it was painful learning to share a public cloud. “The supplier could decide to upgrade versions or load a patch at any time,” he recalled. “It may be a good time for three clients but a bad one for me.” John’s team had to work with the supplier to make changes more seamless – and when that wasn’t possible, insist on advance notice to prepare.

John advises others to “measure what you have on premise – understand the challenges and benefits of what you have.” Otherwise, you won’t have a basis of comparison. An incomplete understanding of the current state could also lead to invalid expectations of what will change with cloud.

A new role as CIO

Despite the bumps, John is happy with their cloud results thus far. He also shared the positive impact cloud has had on his role as CIO. He’s now spending much more of his time delivering innovation for the business, as opposed to managing infrastructure. His words of encouragement to cloud bound peers: “You will have a lot of fun, a lot of enjoyment because you’ll be paying attention to solutions instead of worrying about data centers and networks.”


Stay tuned for more #CloudBound stories on the Center’s blog and check out the study, “Cloud bound: Advice from organizations in outsourcing relationships.”

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