A CIO's Giant Leap into the Cloud

In 2007, I was brought in as CIO for a company that was about to spin off from a much larger organization. The CEO and I had a number of discussions about where we wanted IT to go – and how much money I was going to have in order to get there. The amount reflected was right at 1% of revenue.

That would, of course, change the calculus of what we were trying to accomplish. The existing ERP system alone cost .6 % of revenue and the existing network charge for a fourteen-site, four-country organization was about the same. Something had to be done differently.

AAaaS: Almost Anything-as-a-Service

Thus began an unanticipated journey into the Cloud and AAaaS (Almost Anything as a Service). At that time, the concept of service based systems and networks were really just being discussed by many organizations. This is particularly true in some of the “true” SaaS environments – running on a provider’s system sharing a database with other customers in a multi-tenant environment.

With over twenty years of experience in IT, I was reluctant to bet our infrastructure and systems on such new technologies. The cost imperative kept raising its ugly head making it impossible to stay the traditional course.

As a spinoff, we were staffed very lightly with only a handful of people in the organization. While this made for many challenges as we started up, it provided an opportunity to do things very differently without impacting headcount.

Promise of Huge Savings

An ERP evaluation was performed to look at a number of options, including the possibility of keeping the large system the parent organization had. The cost and support models for onsite or hosted solutions could just not come close to the numbers from the multi-tenant option. The support model of the system was also designed to allow us to not have any application developers in-house, providing the funds to focus on business analysis.

There were compromises that had to be made to gain this efficiency. The new system was very manufacturing plant-focused, unlike the existing system that was primarily designed to manage corporate functions such as Finance. The goal of driving accountability down to the operating sites helped sell the new system. A significant reduction in cost was the clincher.

The next major spending category was the Wide Area Network. The former parent had sold all of the WAN equipment and telephony systems to the provider years before we spun off. Therefore, we either had to stay with the current provider or find someone who could provide circuits, hardware, and support – and come in at a lower price point. Being a startup company with limited financial history did not help in our search.

Fortunately, we were able to find a NaaS (Network as a Service) provider that met the criteria we had and offered the chance to keep the onsite network administration to a minimum. The partner had global reach, able to leverage redundant local last mile connections at all of our sites. They brought in new hardware, from phones on the desks to WAN routers. All services, such as IPT, web filtering and network monitoring were provided as well, all at a reduced price compared to the incumbent.

Fast forward six years…

As the story above implies, we did not test the SaaS and NaaS waters – we jumped in head-first. What lessons have we learned – and would we do it over again?

To start with, I am still employed at the same organization, so things obviously did not derail. We implemented the ERP system on time (in twelve months) and on budget. We have implemented some new processes based on the capabilities of the system, particularly with process management and workflow. Since the system is not user based, there is no charge to add as many users as we wish.

We have also incorporated a number of new modules from the system over the past several years. The system was originally designed for manufacturing companies and fits well in our industry, so Quality, Plant Maintence, and Engineering support have been areas that have been incorporated or are being implemented. They also provide a number of Human Resource options that we are exploring

Being a multi-tenant environment, we have also benefited from an always current release environment. With the previous system, we were looking at a major upgrade in year three – bringing the net present value (NPV) difference between the two systems into the > $10 million range for five years.

The network provider has done an outstanding job. We are refreshing circuit technology in some locations, such as Mexico, to take advantage of recently added capabilities – increasing capacity dramatically while keeping operating costs in check.

Beyond these two systems, we have added other Cloud based solutions to our portfolio. We have replaced our internal help desk and Change Management systems with SaleForce.com solutions.

Beyond cost, this approach has also allowed us to keep our infrastructure team to a minimum. Because of that, we have a larger than normal percentage of business analysts on staff. Their goal is to work with the business – imbedding themselves in the larger organization to understand and meet the challenges of the organization.

The model was really put to the test two years ago when we acquired a company that expanded our base to 42 locations in 18 countries. The ERP model and network model were flexible enough to meet the challenge. The network solution in particular was an overwhelming success as we added all of the new locations in nine months – and still had a lower cost than the parent’s provider for the smaller network.

While unanticipated, the journey has been successful for us. No, I don’t advise everyone to rush off the cliff and move all of your business critical applications to the cloud – or you could end up in a cloud of dust. But, if you haven’t looked at any cloud services, consider them.