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KPMG recently released the 2013 edition of its annual cloud market research study. Among the many findings, several that stood out highlighted that adopting and exploiting the potential of cloud is often not as quick, cheap, or easy as market hype would lead one to expect, at least among larger organizations with extensive legacy IT environments and more complex and customized IT requirements.
The rise of cost and complexity are inevitable major challenges to cloud implementation, in part because of some common misconceptions and hype surrounding cloud. Cloud is not simply a “buy, bolt on, and go” solution. Rather, it requires organizations to fundamentally transform the way they procure, manage, and use their IT applications and services, which, in turn, drives up the cost and complexity of implementation.
In the context of the hype, confusion, and simplistic vendor models, (too) many organizations have assumed that cloud could be implemented within their existing business and IT architecture without recognizing the significant transformation that must occur before cloud benefits can be fully realized. However, as organizations gain more experience in the cloud they are increasingly starting to recognize that it is not simply a case of flipping a switch and reaping the wonders of cloud benefits. Addressing the needs and requirements of cloud-related business process redesign, IT management capabilities, systems integration, infrastructure and configurations are all part of the transition process from traditional to cloud based operating environments. Figure 1 illustrates the most common challenges organizations are facing with cloud adoption efforts.
Many organizations also tend to underestimate the costs and complexity of integrating multiple cloud provider platforms and traditional systems into cohesive and interoperable business services that span functions across the organization. The reality is that most organizations will engage with many cloud service providers to support different business processes and functions, but with no clear industry standards yet in place, will find the process of ensuring interoperability to be rather complex. This is especially true for organizations that have already adopted alternative service delivery models such as shared services and outsourcing, which also must be integrated into the mix and managed alongside cloud efforts.
The ability to develop and deliver an integration capability within IT will be a key success factor for CIOs and their organizations going forward. So, while some observers suggest that cloud will diminish the role of the CIO, particularly as IT decision-making and budgeting move further into the business, we see the CIOs role as becoming ever-more critical as the business’ service integration broker on a commercial level, a process level, and a technical level. KPMG client experiences and this market research find that control and governance risk have moved up the IT and business agenda as more of the core processes move into the cloud. Given that the ownership of cloud within the organization is often fractured within the separate business functions, the lines of risk ownership are rapidly becoming blurred. As such, it will be critical that organizations address and understand the various elements of loss of control—whether that be technical, legal or regulatory—as part of their implementation and integration planning.
Visit the KPMG Advisory Institute for the latest thought leadership from Management Consulting and KPMG’s microsite to learn more about guiding the CIO agenda.