Cloud computing, which was once viewed by some industry leaders as a marketing buzzword as much as a definable concept, has evolved into a clear and promising vision for a new era of computing. Today, cloud computing’s powerful potential both to enhance business performance and to increase technology’s accessibility for consumers has caused companies to embrace it on an unprecedented scale.
As defined by the U.S. Department of Commerce’s National Institute of Standards and Technology, cloud computing is “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage applications and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”
By permitting unprecedented mobility for workers, increased scalability and speed of deployment for organizations, and the potential for greatly reduced capital expenditure costs, cloud computing is changing the way that companies do business. It is also evolving the requirements for the leaders of companies that seek to both access and provide a growing variety of cloud services.
To further explore the leadership implications of this trend, Spencer Stuart recently interviewed several CEOs and general managers around the world from leading companies at the forefront of the cloud computing revolution. Their insights inform this study.
The Promise of the Cloud
Among cloud computing’s chief benefits is the broader
access to technology it enables by allowing the purchase of
software, platform and infrastructure services on demand
over the Internet. “Small businesses and businesses in
emerging countries that haven’t spent a lot on IT will be
able to leapfrog the big players in many respects and access
very good technology on the cloud without outlaying a
huge amount of capital,” said Andrew Greenway, global
cloud computing program lead at Accenture. “That will
enable them to compete on a much more level playing
field.”
Greenway also noted that even companies that previously
had the best technology will now be able to use cloud computing
to analyze huge quantities of data and relatively
cheaply get at nuggets of information that in the past were
just too expensive. Cloud computing additionally permits
greater business agility, both by increasing capacity at peak
periods without requiring expensive IT infrastructure additions
to facilitate it, and by allowing faster time to market.
“Why would any company spend the time or money to build a private data center when cloud computing offers such compelling financial and operational benefits?”
“In the old days, our project teams helping clients develop
new systems would often have to go out, buy a server, wait
six weeks for it to arrive, and then three more weeks to
configure it and get a test environment up and running,”
Greenway said. “Now we can provision a test server within
a half-hour through the cloud and have a development
environment up and running in a few hours.”
Cloud computing is being firmly embraced by large enterprises,
as well. “We are witnessing a rapid and permanent
shift in how corporations leverage the IT value chain,” said
Brooks Borcherding, president of NaviSite, a Time Warner
Cable company. “Companies, large and small, recognize
they no longer want to own or manage physical IT assets.
Instead, they are focusing their time, energy and resources
on the strategic core differentiators for their businesses.
The question is, ‘Why would any company spend the time or money to build a private data center when cloud computing
offers such compelling financial and operational
benefits?’”
Also intrinsic to cloud computing is the concept of mobility.
“Today, much of the functionality that people need is
saved in their computers and devices,” said Von Wright,
vice president of consumer digital experience at AT&T
Mobility. “But your device is always one mistake away from
being lost or obliterated. You want people to be able to
access their applications and data from any device — be it
their smart phone, iPad, e-reader or digital camera — and
have them all work together without systems integration.
Storing this information in the cloud can allow people to
access it, securely tied to their identity, regardless of where
and how they connect.”
This flexibility could change the nature of work itself.
“Cloud computing will give tomorrow’s workers an
unprecedented level of mobility and physical location
will become less and less important,” said Andrew Dutton,
VMware’s general manager for Asia Pacific and Japan. “It
will effectively give globalization its next boost by delivering
on the true promise of technology as a business
enabler. Today we are seeing IT departments rapidly transform
from cost centers to service centers, delivering ondemand
applications securely to users from both private
and public clouds.”
And while security concerns have traditionally been a barrier
to greater cloud adoption, and some companies may
continue to keep their most sensitive information out of
the cloud, many cloud experts see these worries as
overblown. “Not all cloud providers are created equal,” said
Francis deSouza, group president of enterprise products
and services at Symantec. “From a security perspective, a
cloud provider should at least be able to verify that they are
meeting an organization’s internal security bar. A good
cloud provider should be able to raise the bar.”
Changing Roles
As it changes the landscape of business, cloud computing
is also changing certain leadership roles within organizations
— with no position being more affected than that of
the chief information officer. “The CIO has changed over the last several years from an IT position to a business leader position,” said Nelson Fonseca, chief operating officer for Terremark Worldwide, a subsidiary of Verizon Communications. “Cloud computing allows the CIO to focus more on the productivity of the applications the company will need to be successful, as opposed to worrying about the infrastructure needed to support those applications.”
Meanwhile, CEOs and CFOs are getting more involved as
they see opportunities to cut IT infrastructure costs and
make technology into a competitive advantage. Many leaders
expect CEOs to be responsible for driving and orchestrating
the change, while also assembling a team to lead it.
And CFOs will be key players in decisions about when to
reduce capital expenditures and increase operating expenditures
by using cloud services instead of purchasing infrastructure.
They are also getting more involved because of
the risk and compliance issues related to cloud solutions.
“You’re definitely seeing more business heads weigh in a
lot more on IT than ever before,” said Steve McWhirter,
senior vice president of enterprise sales for Asia Pacific for
salesforce.com. “They are tired of software complexity, long
implementations, maintenance and upgrade projects that
add no value to the company’s bottom line. The business is
saying, ‘We can remove these headaches, be more agile,
and create greater shareholder value.' Cloud CIOs have the
freedom to meet the pace of innovation for their business
without compromising on enterprise class requirements
like privacy, security and performance."
View larger image
Some leaders additionally believe that cloud computing will
facilitate the advance of the chief technology officer role,
which tends to focus more on new technologies rather than
on enhancing existing ones. “CIOs are always worried
about taking on something new since they never seem to
have the budget they need,” said Bruce Richardson, chief
strategy officer for Infor. “If you go with a CTO, you’re saying
that we’ve got to do something big and bold. I think there is potential for companies to make mistakes
on both the cloud and mobile platforms. You really need someone
who understands all of these technologies.”
For cloud service providers, software development roles
have also become more critical as these companies realize
the need to continuously roll out new features and applications
for their products, while also integrating software
from other vendors. “Some things you want to do on your
own because they’re highly differentiated portions of your
business, but there are other areas where different providers
have the functionality we’re looking for,” said
Fonseca. “Who you partner with and what software you
integrate as part of your overall solution is becoming more
and more important.”
Sales and marketing roles are also evolving in the new
cloud environment. Sales departments are changing their
approach because of the lower margins associated with
cloud service offerings and because of the need to focus on
customer acquisition and retention in what are typically
subscription-based or pay-as-you-go billing models. They
must also be ready for an expanding customer base.
“In selling cloud solutions, companies are confronted with
more diffuse buying centers and different routes to market,”
said Gert-Jan Schenk, president of EMEA for McAfee.
“The CIO is no longer the sole technology buyer — the
marketing department and CFO are also purchasing and
running their own applications, as are the company’s partners
who host the services. It requires much more flexibility
from sales executives than before.”
Marketing likewise has to deal with these issues, and with
a fiercely competitive marketplace. “If you’re marketing to
businesses, you have to think more like you’re selling that
consumer application in terms of how you create that value
proposition,” said Richardson. “In every category except
CRM, which salesforce pretty much owns, it’s very cluttered,
so marketing skills are going to be everything.”
HR’s role will also be affected as the adoption of cloud
computing facilitates the creation of a highly mobile and
globalized workforce, while the data movement and international considerations accompanying this shift will also affect corporate legal departments.
The Seven Key Competencies for Cloud Leaders
According to the leaders we interviewed, several traits are
critical for cloud computing leaders across a variety of
roles. These skills include:
Broad technology and business savvy. As companies
strive to create new cloud computing business
models, they need leaders who understand
software, hardware and mobile technologies and additionally
offer a broad view of both product development and the
larger business. “There’s a lot of experimentation going on
right now, and I think having people with 360-degree perspectives
is going to be critical, instead of just viewing
things from the development side or the line side of
things,” said Steve Renda, senior vice president of global
sales and marketing for NTT/Verio.
Agility. “Leaders need to be flexible enough to
adapt to changing business models as companies
redefine their strategies for a cloud-oriented
world,” said Michael Väth, senior vice president of global
business innovation for Hitachi Data Systems. Several leaders
said that they expect the pace of change to just get
faster as cloud adoption continues — and that leaders who
embrace business change will do well, while those who are
stuck in a certain way of doing things will be bypassed.
Openness. Success in the cloud depends upon
leaders who are willing to be collaborative and give
up a measure of control. “One of the most important
things is to learn how to partner with other entities”
said Bill Chang, executive vice president of the business
group at SingTel. “Companies will need to focus on what
they do well and acknowledge that partners are better at
doing other things in the overall value chain. In this way,
we can best meet our customers’ needs together.”
Financial acumen. “While outsourcing contracts
would often run five years, service commitments
on the cloud are made for a year at most, sometimes
even just for quarters or months,” said David Milot,
managing partner for Unisys Technology Consulting and
Integration Solutions in EMEA. “Leaders need to under
stand the financial implications of these shifts.” Leaders
must also make many other choices around customer acquisition and business model that require a full
understanding of all economic ramifications. According to
Richardson, “You have to be fixated on all the costs
involved. The price of subscriptions keeps getting driven
down, and as soon as you have to send a team onsite to do
a demo or fix a problem, you can lose a year of margins.”
A consumer and service orientation. With its ondemand
and subscription-based approach, cloud
computing puts companies under pressure to provide
customers what they need, when they need it, and
places a constant focus on customer acquisition and retention.
“Cloud means understanding customer needs,” said
Chang. “It requires far more in-depth thought processes
than selling fixed-feature products. I look for sharp
thinkers who can anticipate customer needs.”
An innovation mindset. Given the sheer amount
of change going on right now, companies benefit
from leaders who have a history of innovation
experimentation in their background. “I’m looking for forward-
looking people with a strong bias toward people who
have been through multiple evolutions of technology,” said
Wright. “You need to have seen a previous version of the
basic principles of technology to understand some of the
basic elements that make the difference between something
having really cool technology and something actually
taking off from an adoption perspective.”
Vision. Leaders with the ability to think through all cloud-related considerations — including platform,
security, access, technology and economic issues — to arrive at a clear vision for the business are critical for cloud companies today. “Right now, we have a massively fragmented industry around cloud, from the infrastructure end of the spectrum to the SaaS end of the spectrum and a jillion companies in between and a jillion being formed every year,” said Mark Templeton, president and CEO of Citrix Systems. “It’s not going to be this way forever. Leaders with a vision and some ideas on how to be a survivor in such a crazy environment are going to be in demand.”
Where to Find Cloud Talent
As more and more companies seek to provide cloud services,
they are competing for a very limited pool of executives
with the requisite expertise to lead cloud efforts. While the
leaders we spoke with tend to prefer executives who understand
both the software and services sides of the cloud computing equation, they acknowledge that few
possess these traits. “There’s a body of people who have crossed
over from services to software and vice versa, but it’s not a
large body,” said Renda. “Until we get a few more years
under our belt, people will be contending for a small pool
of talent.”
Today, according to the leaders we interviewed, the U.S. is
the undisputed leader in cloud adoption. “Silicon Valley
leads in implementations, and the U.S. as a whole probably
represents 70 to 80 percent of the cloud markets, followed
by English-speaking Europe and Australia and New
Zealand,” said Richardson.
As a result, Silicon Valley is also the first place companies
look for cloud computing leaders. “It’s a relatively rare skill
set, even for a software company going out to recruit people,”
said Richardson. “Much of the talent is concentrated
in Silicon Valley, and there, despite California’s 10 percent
unemployment, you can quit a job at 9 a.m. and be in a
new one at 9:15. If you’re anywhere else, your No. 1
concern is going to be retention.”
“We have to understand the new business, not the business that was based on all those old assumptions that said it was all about the network.”
Over time, however, the talent pool is likely to become
more geographically dispersed. Most leaders agreed that
Europe was closely behind the U.S. in cloud adoptions,
and that the popularity of cloud services in other markets
depends on their existing levels of IT and telecommunications
network infrastructures.
“If you categorize Asia into mature vs. emerging IT markets,
many companies in emerging markets have a head
start because they have not been hustled into cumbersome
legacy IT investments. Whereas cloud services don’t
require big capital investments up front,” said McWhirter.
“Whether you are leading a large enterprise or a startup,
you can't afford to spend precious capital on IT that takes
years to implement, is difficult to use, and is barely used by
your employees. The cloud helps you to leap into the future
and evolve with the pace of change in your business."
As they look for cloud talent in an environment where few
executives possess the full suite of skills they desire, companies
tend to select executives whose main expertise is
most relevant to their specific cloud offerings. “The foundation
for cloud computing is virtualization, so clearly the
most obvious leaders come from companies that are strong
in virtualization,” said Dutton of VMware, the market
leader in virtualization technology.
“I look for people who are young, who are athletes and who have a deep love in their heart for doing this.”
“Our legacy coming into the cloud was as a managed service
provider,” said Fonseca of Terremark, which focuses primarily
on Fortune 1000 and federal government clients. “For our approach, we focus more on finding people with a
managed services background — people who understand
software, but at an enterprise and integration level. But we
now also hire pure software developers.”
Telecommunications companies, meanwhile, are seeking
executives accustomed with the fast pace and service orientation
of the cloud world. “I had to go to IT companies to
hire people who were more customer-focused and solutions-
oriented,” said SingTel’s Chang. “I also went for people
who valued partners and knew how to work with partners.”
These companies see leaders who can facilitate a paradigm
shift within their organizations as a critical component
of their competitiveness in the cloud. “We’ve got a
completely different asset base than the companies we’re
competing against, so we have to understand how they
operate and their mindset and move at the speeds they’re
moving,” said AT&T Mobility’s Wright. “We have to understand
the new business, not the business that was based
on all those old assumptions that said it was all about the
network.”
Leadership for a New Cloud Era
As they struggle to get their business models right and
scale up to meet increased demand for cloud services,
companies are also in the early stages of developing the next generation of cloud leadership. Many are starting to create their own training programs to develop future leaders for a field
that has only rarely been addressed at the university level in explicit degree-level cloud computing programs.
“We’re developing new training programs and internship
programs and other ways of bringing in fresh young
minds to develop our future leadership from within,” said
Fonseca. “It’s a challenge because at the same time, the
business is growing so fast that it puts pressure on the
organization.”
For now, the experienced senior talent pool remains
limited and in great demand and, in this age of experimentation,
even experienced leaders don’t have all the answers.
“In some ways, it’s like the early days of software,” said
Templeton. “You couldn’t go to school somewhere to learn
how to run a software business. Instead, what everybody
had in common was a love deep in their soul for software.
So I look for people who are young, who are athletes and
who have a deep love in their heart for doing this.”
As the nascent industry develops, companies looking to
take advantage of the cloud face a considerable challenge
today in attracting and retaining the right senior talent to
win in this intensive landscape of fierce competition and
constant innovation. While cloud computing promises to
make technology invisible and its advantages accessible to
anyone anywhere, getting there will take highly visible leadership
and considerable IT skills on the part of companies
in the cloud. Given the tremendous business and commercial
potential of cloud computing, this human capital challenge
is one that an increasingly number of companies are
more than willing to take on.
For information about copying, distributing and displaying this work, contact permissions@spencerstuart.com.