TCO savings are great, but it is time to redefine the true success metrics of your cloud transformation.
An article from CTP.
Who is disrupting your market…your competitors or you? When small teams of aggressive entrepreneurs can compete with legacy, industry dominating companies, the whole paradigm of stability is turned upside down. When well established companies lose market share to new startups, gone are the classic metrics for technology success. Counterintuitively, when these companies find themselves in a fight for survival, a thorough justification for a game-changing technology is often cast aside.
Following our Q4 2017, “Secrets of the Cloud Leaders” report with CloudHealth Technologies, we recognized that too many leaders were measuring success solely on simple TCO calculations. Why? Upon further review, we discover these leaders find it easier to defend TCO calculations. While this is true, it is also lazy and quite dangerous.
Leaders who are leveraging the speed, safety and agility of cloud must go beyond the procurement death-spiral of cost justification. Without a fundamental shift in focus to the key drivers of change, your business will be consumed by the highly confident, less encumbered professionals who know how to sell solutions to those who have the necessary funding. For without the necessary funding, your cloud program goes nowhere!
We must redefine what success looks like to your company. If success is measured only in straight-line economics such as TCO, the Cloud Leader is missing the powerful, strategic objectives that elevate the conversation to a matter of life and death. This is no exaggeration. Consider, for example, how SmileDirectClub is disrupting the orthodontics industry with cloud-based tools and services that eliminate the need to visit a dentist — for 60% less cost than traditional methods. Stories like this now happen every day and there is not enough room in this article to list them all.
Therefore, a new measure of success must be adopted. To do this, we must employ a framework of maturity, whereby a team can self-assess their current capabilities and plot a course to the more critical objectives — the higher levels of maturity. The goal is that with each new level of cloud maturity, the organization will operate at a higher velocity, add more value to the business and do it all with less.
Success Measurement #1 — Maturity of the Enterprise
Agility is the new business currency. We can hardly overstate the importance of your organization’s ability to alter its course and adjust to new market demands. No one can predict what direction the winds of change will take. The capability to shift gears and provide new services along with the technology that delivers them, are the most critical skills your teams must acquire. If you are only looking at technology as the enabler of speed, you are missing the boat. Control and deep insights are also essential. Your people and processes must change to take advantage of the new cloud paradigm.
DevOps becomes a steaming hot mess when teams bring old processes and behaviors to this new world. Therefore, the maturity of your team members, and the processes they follow, must improve to gain the highest outcome.
Start with baseline assessments of your maturity, before, during and after each phase of your program. Assess your teams across these categories:
- Client Services/Help Desk
- Financial/Cost Controls
- Vendor/Partner Management
- Service Portfolio
- Process Operations
- Staff/Talent Skills
For each category below, establish a scale of maturity that is accepted within your organization as a good measure of success. Keep in mind that the average maturity of the organization does not necessarily equate to the maturity of each business unit. Your scale of maturity should be simple and easy to understand. Start with a scale of 1 to 5, with 1 representing a manual process and 5 representing a fully auto- mated one. Map the maturity scale to each category, and have your teams confirm that their maturity level is representative of their current state. Then have them agree to a path of action to raise that maturity to the next level.
The results of higher maturity are straightforward — faster performance of processes, and reduced cost in the performance of those processes.
KPIs for Maturity of the Enterprise:
- The number of categories your team scores a Level 3 or above
- The amount of time it takes your team to move between levels, to close maturity gaps
Success Measurement #2 – Time to Innovation
To speak of cloud is to speak of innovation, which is why every Cloud Leader thinks about innovation. With the cloud, innovators escape the hardships of legacy thinking and become the tip of the disruption spear. They are set free to create.
There is one problem — how does the Cloud Leader measure innovation? For those who live in the real world of business, we must talk about return on investment (ROI) and provide tangible evidence that innovation leads to cash. We must connect the dots of creativity with the reality of revenue and operating profit, for without optics on this key result, our fancy words and dream-stage realities will be sent to the IT scrapheap.
At the heart of innovation is your client, either your target buyer or internal business unit. Understanding the client’s preferences enables you, through rapid innovation, to offer more options tailored to their needs. Best practices suggest that high frequency code releases facilitate A/B testing to determine client behaviors. Rapid A/B testing, through a strong CI/CD process, leads to code changes that drive revenue and improve operational profit. Therefore, a leading indicator of cloud program success should be number of software code releases per time period.
Waterfall release cycles on legacy platforms are difficult to manage and lack the framework for A/B testing. Your born-in-the-cloud competitors are free of legacy platforms and processes. They build tool chains that enable one-click code deployment, and release hundreds of software changes in the time it takes to roll out the next version of a legacy platform.
Measure your code releases. It is key to innovation, and critical to revenue and profit.
KPIs for Speed Innovation:
- The number of code releases your team produces per time period
- The amount of rapid A/B testing per time period
- Share of voice in marketplace related to new product releases and updates
Success Measurement #3 – Spend Transparency
Cloud Leaders must bring transparency to the IT budgetary process and review. For most organizations, the cost of IT is divvied up among business units and application owners. This process, affectionately called “spreading the peanut butter,” calls into question the value of the central IT team, and is a source of pain for every enterprise IT group.
The pivot to cloud enables true cost transparency. When done correctly, the chargeback model of pay- per-use places the focus on the consumer, not the provider. Once established, the investment vs. results conversation can occur with data based on the group’s actual usage. The optics on spread are now appropriately placed on returned business value.
Measure the money. A well-run organization knows that it has to invest in the future to compete; how- ever, the amount that investment should be is the unknown. If the organization has transparency into its IT investment, the decision makers can drive the business with a high degree of confidence. Couple accurate IT spend with rapid innovation (code releases), and you have a foundation for success. Now you’re ready for the final component of success — the people!
KPIs for Spend Transparency
- Reporting Percentage — Identify what percentage of the business units can report their technology investment spend, and then mandate continuous reports.
- AI/ML Optimization — Track results of artificial intelligence/machine learning to determine business unit effectiveness related to spend. Running third party ML tools against spend logs provide optics into behaviors that yield considerable opportunities for savings.
- Comparison with forecasted ROI — Be sure to track the spend of the applications that make the trip to cloud. Our experience suggests that once the doors to cloud open, many more people than anticipated start to use the platforms. Be sure to compare the spend against a controlled set of apps, not the total spend within the cloud program.
Success Measurement #4 – Talent of Team
Cloud, and the resulting innovation, has leveled the playing field. No longer is supercomputing a luxury for those who can afford the equipment. Tonight, a bright entrepreneur will launch a data analytics application on 10,000 cores to solve a bond trading problem — and have a viable solution available to the market the next day. The tools to do this are ubiquitous and inexpensive, so everyone has access.
What makes the difference is the talent using the tools. When the weapons are cheap, the battle is won by the team that attracts and retains the best people. The best people will not tolerate legacy processes when there are organizations that offer a faster, more satisfying work experience. The savvy Cloud Leader knows that attracting, training and retaining good people is the ONLY true competitive differentiation.
Therefore, measuring the number of skilled cloud practitioners in all domains should be the focus of every Cloud Leader.
Engage your Learning and Development team early in the program. Its members are eager to help and want to bring relevant education to the organization. Finally, keeping your trained people should be the highest priority. This is where savvy Cloud Leaders must really dig in and sharpen their leadership skills. People want to follow good people, so if you are weak in leadership skills, reach out and get help. Leader- ship is a practice that can be improved. The quality of your leadership will show up in your ability to both recruit and retain top talent.
You have what you need. Time to go use it.
KPIs for Talent of Team:
- Number of certified cloud engineers
- Certifications in third party tools
- Number of hackathons, meet-ups and community gatherings
- Educational levels of non-technical team members, including procurement, HR and finance
- Monitor and report on the retention of your technical staff
- Recruiting success – number of offers to number of acceptances
- Number of service tickets related to programming errors and system problems
Important Note: As a Cloud Leader, you’ve chosen to travel into uncharted territory. Your strength of vision and dedication to your team will be tested at every step. Success lies in gaining key stakeholder alignment on the true definition of success in the cloud. Raise the level of the conversation to basic survival, and you’ll break the logjam that seems to hinder even the best cloud transformation programs.