Using The Cloud Computing For Business

Using The Cloud For Business
Dan Woods, 12.29.09, 06:00 PM EST
Why the cloud is much more than a technology phenomenon.

Jan Baan, founder of Baan Corp., was present at the creation of enterprise resource planning. While leading the ERP software company from 1978–98, Baan observed what worked well and what failed as companies automated their business processes using a datacentric approach. For the past 10 years, Baan has spent his time and more than
250 million euros ($360 million) of his money on Cordys, a software company that creates what Baan calls a business operations platform. In this Q&A, Baan examines what the cloud means for business, what went wrong with ERP, and how a business operations platform delivers flexible automation of business processes that can be optimized through cloud computing.

Forbes: Why are companies getting the cloud wrong?

Baan: If you want to get the cloud right, put away the slide decks on virtualization and infrastructure and start thinking about who you should be working with and how to work with them, and then think about how you can support that better than ever before. Too many people look at the cloud as a technology phenomenon when they should look at it as a business opportunity and an accelerator for collaboration. The cloud is an environment for creating ways of doing business that are radically different from monolithic ERP-based processes. The age of command-and-control in business technology is over. You empower the knowledge worker through collaboration.

What does the cloud really mean for business?

Business processes should be the core element in the cloud, not Word documents or e-mail. Everything in the cloud should grow out of an inherently collaborative business process. You have to think beyond the business processes in your company to linking your customers' customers to your suppliers' suppliers, and draw them all together in a common end-to-end business process. You can create those relationships much faster now, but people aren't taking advantage of it. They are still very much in the ERP paradigm, which can be limiting. The cloud allows everyone to focus on their own processes, share them with others, and add some individual elements to their own processes and optimize them.

Some of these same promises about end-to-end business processes were made about ERP when it was new. What went wrong?

In the ERP world, everything is data-centric. Data is king, and business processes became embedded in data silos. Many big companies have created stovepipes that are isolated from each other, with business processes stored in the data. The vendor's best practices are then overlaid on the processes. Those stovepipes are still isolated, trapped on premise. That inhibits innovation.

What is your vision of making the cloud work for business?

I don't want to imply that everything has to be on the cloud. The optimal situation is a combination--a kind of composition between legacy systems and the optimized business process from the business and its partners, and it lives in the cloud.

I call it a business operations platform, a bridge between traditional service-oriented architecture and some of the heavy-duty infrastructure and standard components from ERP. Business components are decoupled from underlying technology. The concept of "programming," in which a businessperson conceives of an idea and technologists program something that achieves it, gives way to describing a business process, and the IT landscape responds in kind. There is much more of a "what you model is what you get" feeling to this new paradigm.

What is the role of ERP in this scenario?

Your ERP system, along with a product life-cycle management system, logistics systems and others, can be integrated and used as vanilla components, while being further enhanced by best practices or best processes, achieving a state of operational effectiveness. Take what you have learned through years of experience with ERP and apply it to the cloud.

What are the benefits of getting this right?

Dramatic improvements in business processes, reduction in IT costs, and a radical expansion of partners to help you run your business. Applications in the cloud cost less than 10% of an on-premises application. That means double-digit-percentage cost savings, and, more importantly, a boost to the value stream. Lead time for product creation can be reduced from 60 days to one or two hours. It's already happening. Instead of building a car in six weeks, we can do it in a day.

What stands in the way of this transformation?

First of all, the role of CIO sometimes seems afraid of its own shadow. The CIO should become more of a business leader. Maybe we should change the title Chief Information Officer to Chief Process Officer (CPO).

CIOs with guts are crucial to change. The CEO is too isolated and unaware of the development of these trends, but now the CIO, in the new role of a CPO, could be a tremendous asset to the CEO, providing leadership for changing the company and improving business processes. The value is in aligning IT and business, and the CPO is much more on the business side, not just on the IT side.

Too much attention is focused on technology innovation and not enough on business innovation. When that happens, we add functionality, but also complexity. The technology innovations with real impact are those that reduce complexity.

IT should be democratized in the same way Henry Ford democratized the car. Currently, fully functional IT is only for Fortune 1000 companies with a big budget. In the future, the benefits of IT will be available for everyone. Small and medium-size enterprises are, with the new technology wave of a business operations platform, able to connect their supply chain much faster than Fortune 1000 companies can. Agility is the mantra for today's smart companies.

Social media and cloud computing are exciting because they foreshadow this future.

Dan Woods is chief technology officer and editor of Evolved Technologist, a research firm focused on the needs of CTOs and CIOs. He consults for many of the other companies he writes about. For more information, go to evolvedtechnologist.com.