The next BriefingsDirect Voice of the Customer cloud adoption patterns discussion explores how integration of the latest cloud tools and methods help smooth out the difficult task of creating and maintaining cloud-infrastructure services contracts.
The results are more flexible digital services that both save cloud consumers money and provide the proper service levels and performance characteristics for each unique enterprise and small business.
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Stay with us now as we hear from a Tasmanian digital services provider, TasmaNet, about their solution-level approach to cloud services attainment, especially from mid-market enterprises. To share how proper cloud procurement leads to new digital business innovations, we're joined by Joel Harris, Managing Director of TasmaNet in Hobart, Tasmania. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions.
Here are some excerpts:
Gardner: Let’s start at a high level, looking at the trends that are driving how cloud services are affecting how procurement is going to be done in 2017. What has changed, in your opinion, in how enterprises are reacting to and leveraging the cloud services nowadays?
Harris: We're seeing a real shift in markets, particularly with the small- and medium-sized businesses (SMBs) in their approach and adoption of cloud services. More and more, there is an acceptance that it's okay to buy products off the Internet. We see it every day within personal cloud, iPhones, the Apple Store, and Google Play to buy movies. So, there is now the idea in the workplace that it's acceptable to procure business services online through cloud providers.
Because of the success of personal cloud with companies such as Apple, there's a carry-over in that there is an assumed equivalent success in the commercial sense, and unfortunately, that can cause some problems. What we're seeing is a willingness to start procuring from public, and also some private cloud as well, which is really good. What we're finding, though, is a lack of awareness about what it means for businesses to buy from a cloud provider.
Gardner: What is it that the people might have wrong? What is it that they've not seen in terms of where the real basis for value comes when you create a proper cloud relationship?
Hybrid and Private Cloud
Harris: Look at the way personal cloud is procured, a simple click, a simple install, and you have the application. If you don’t like it, you can delete it.
When you come into a commercial environment, it’s not that simple, although there can a perception that it is. When you're looking at your application, the glossy picture, it may talk about functionality, business improvement, future savings, and things like that. But when you come to the implementation of a cloud product or a cloud service into a business, the business needs to make sure that it has met its service levels, from internal business requirements or external business requirements, and from customers and markets.
But you also need to make sure that it has also married up the skills of your workforce. Cloud services are really just a tool for a business to achieve an outcome. So, you're either arming someone in the workforce with the tool and skills to achieve an outcome or you're going to use a service from a third-party to achieve an outcome.
Because we're still very early in the days of cloud being adopted by SMBs, the amount of work being put into the marrying up of the capabilities of a product, or the imagined capabilities of a product, for future benefits to internal business processes and systems is clearly not as mature as we would like. Certainly, if you look into the marketplace, the availability of partners and skills to help companies with this is also lacking at the moment.
Then, comes the last part that we talked about, which is removing or changing the application. At the moment, a lot of SMBs are still using traditional procurement. Maybe they want a white car. Well, in cloud services there’s always the ability to change the color, but it does come at a cost. There’s traditionally a variation fee or similar charge.
SMBs are getting themselves in a bit of trouble when they say they would like a white car with four seats, and then, later on, find that they actually needed five seats and a utility. How do they go about changing that?
The cost of change is something that sometimes gets forgotten in those scenarios. Our experience over the last two years is companies overlooking the cost of change when under a cloud-services contract.
Gardner: I've also heard you say, Joel, that cloud isn’t for everyone, what do you mean by that? How would a company know whether cloud is the right fit for it or not?
Harris: Simply look for real, deep understanding of your business. Coming back to the ability to link up service levels, it's the ability to have a clear view into the future of what a company needs to achieve its outcomes. If you can’t answer those questions for your customer, or the customer can’t answer the questions for you as a cloud provider, then I would advise you to take a step back and really start a new process of understanding what it is the customer wants out of the cloud product.
Change later on can cost, and small businesses don’t have an amount of money to go in there and continue funding a third party to change the implementation of what, in most cases, becomes a core piece of software in an organization.
Gardner: For the organizations that you work with that are exploring deeper relationships to private cloud, do you find that they're thinking of the future direction as well or thinking of the strategy that they’d like to go hybrid and ultimately perhaps more public cloud? Is that the common view for those that are ready for cloud now?
Harris: In the enterprise, yes. We're definitely seeing a huge push by organizations that understand the breakdown of applications between suitable for private cloud and suitable for public cloud.
As you come down into the SMB market, that line blurs a little bit. We have some companies that wish to put everything in the cloud because it’s easy and that’s the advice they were given. Or, you have people who think they have everything in the cloud, but it’s really a systems integrator that has now taken their servers, put them in a data center, and is managing them as more of a hosted, managed solution.
Unfortunately, what we are seeing is that a lot of companies don’t know the difference between moving into the cloud and having a systems integrator manage their hardware for them in a data center where they don’t see it.
There's definitely a large appetite for moving to the as-a-service model in companies that have a C-suite or some level of senior management with ownership of business process. So, if there is a Chief Information Officer (CIO) or a Chief Technology Officer (CTO) or some sort of very senior Information Technology (IT) person that has a business focus on the use of technology, we're seeing a very strong review of what the company does and why and how things should be moved to either hybrid or 100 percent in either direction.
Gardner: So, clearly the choices you make around cloud affect the choices you make as a business; there really is a transformational aspect to this. Therefore, the contract, that decision document of how you proceed with your cloud relationship, is not just an IT document; it’s really a business document. Tell us why getting the contract right is so important.
Harris: It’s very, very important to involve all the areas of a business when going into a cloud services contract.
Ecosystems of Scale
Gardner: And it’s no longer really one relationship. That is to say that a contract isn’t often just between one party and another. As we're finding out, this is an ecosystem, a team sport, if you will. How does the contract incorporate the need for an ecosystem and how does TasmaNet help solve that problem of relationship among multiple parties?
Harris: Traditionally, if we look at the procurement department of a company, the procurement department would draft a tender, negotiate a contract between the supplier and the company, and then services would begin to flow, or whatever product was purchased would be delivered.
More and more, though, in the cloud services contract, the procurement department has little knowledge of the value of the information or the transaction that’s happening between the company and the supplier, and that can be quite dangerous. Even though cloud can be seen as a commodity item, the value of the services that come over the top is very much not a commodity item. It’s actually a high-value item that, in most cases, is something relevant to keeping the company operating.
What we found at TasmaNet was that a lot of the companies moving to cloud don’t have the tools to manage the contract. They're familiar with traditional procurement arrangements, but in managing a services contract or a cloud services contract, if we want to focus on what TasmaNet provides, you need to know a number of different aspects.
We created an ecosystem and we said that we were going to create this ecosystem with all of the tools required for our customers. We put in a portal, so that the finance manager can look at the financial performance of the services. Does it meet budget expectations, is it behaving correctly, are we achieving the business outcomes for the dollars that we said it was going to cost?
Then, on the other side, we have a different portal that’s more for the technology administrator about ensuring that the system is performing within the service-level agreements (SLAs) that have been documented either between the company and the service provider or the IT department and the big internal business units.
It’s important to understand there are probably going to be multiple service levels here, not only between the service provider and the customer, but also the customer and their internal customers. So, it’s important to make sure that they're managed all the way through.
We provide a platform so that people can monitor end to end from the customers using, all the way through to the financial manager on the other side.
Gardner: We've seen the importance of the contract. We understand that this is a complex transaction that can involve multiple players. But I think there is also another shift when we move from a traditional IT environment to a cloud environment and then ultimately to a hybrid cloud environment, and that’s around skills. What are you seeing that might be some dissonance between what was the skill set before and what we can expect the new skill set for cloud computing success to be?
Harris: We are seeing a huge change, and sometimes this change is very difficult for the people involved. We see that with cloud services coming along, the nature of the tool is changing. A lot of people traditionally have been trained in a single skill set, such as storage or virtualization. Once you start to bring in cloud services, you're actually bundling a bunch of individual tools and infrastructure together to become one, and all of a sudden, that worker or that individual now has a tool that is made up of an ecosystem of tools. Therefore, their understanding of those different tools and how they report on it and the related elements change.
We see a change from people doing to controlling. We might see a lot of planning to try to avoid events, rather than responding to them. It really does change the ecosystem in your workforce, and it’s probably one of the biggest areas where we see risk arise when people are moving to a cloud-services contract.
Gardner: Is there something also in the realm of digital services, rather than just technology, that larger category of digital services, business-focused outcomes? Is that another thing that we need to take into consideration as organizations are thinking about the right way to transform to be of, for, and by the cloud?
Hybrid and Private Cloud
Harris: It comes back to a business understanding. It's being able to put a circle around something that’s a process or something we could buy from someone else. We know how important it is to the company, we know what it costs the company, and we know the service levels needed around that particular function. Therefore, we can put it out to the market to evaluate. Should we be looking to buy this as a digital service, should we be looking to outsource the process, or should we be looking to have it internally on our own infrastructure and continue running it?
Those questions and the fact-finding that goes into that at the moment is one of the most important things I encourage a customer looking at cloud services to spend a lot of time on. It’s actually one of the key reasons why we have such a strong partnership at Hewlett Packard Enterprise (HPE). The hardware and infrastructure is so strong and good, the skill set and the programs that we can access to work with our customers to pull out information and put it up into things like enterprise nets to understand what the landscape looks like in a customer is just as important as the infrastructure itself.
Gardner: So, the customer needs to know themselves and see how they fit into these new patterns of business, but as you are a technologist, you also have to have a great deal of visibility into what's going on within your systems, whether they're on your premises, or within a public-private cloud continuum of some kind. Tell me about the TasmaNet approach and how you're using HPE products and solutions to gain that visibility to know yourself even as you are transforming.
Harris: Sure, so a couple of the functions that we use with HPE … They have a very good [cloud workload suitability] capability set called HPE Aura with which they can sit down with us and work through the total cost of ownership for an organization. That’s not just at an IT level, but it's for almost anything, to look at the work with the accounting team, to look at the total cost, from the electricity, through to dealing with resources, the third party contractors in construction teams. That gives us a very good baseline and understanding of how much it costs today, which is really important for people to understand.
Then, we also have other capabilities. We work with HPE to model data about the what-if. It's very important to have that capability when working with a third-party on understanding whether or not you should move to cloud.
Gardner: Your comments, Joel, bring me back to a better understanding of why a static cloud services contract really might be a shackle on your ability to innovate. So how do you recognize that you need to know what you don't know going into cloud, and therefore put in place the ability to react in some sort of a short-term basis iterate, what kind of contract allows for that dynamic ability to change? How do you begin to think about a contract that is not static?
Harris: We don’t know the answer yet. We're doing a lot of work with our current customers and with HPE to look at that. Some of the early options we are looking at is that when we create a master services agreement with a company, even for something that may be considered a commodity, we ensure that we put in a great plan around innovation, risk management framework side, and continuous service improvement. Then there's a conduit for information to flow between the two parties around business information, which can then feed into the use of the services that we provided.
I think we still have a long way to go, because there's a certain maturity required. We're essentially becoming a part of another company, and that’s difficult for people to swallow, even though they accept using a cloud services contract. We're essentially saying, "Can we have a key to your data center, or the physical front door of your office?"
If that’s disconcerting for someone, well, it should be equally disconcerting that they're moving to cloud, because we need access to those physical environments, the people face-to-face, the business plan, the innovation plan, and to how they manage risk in order to ensure that there is a successful adoption of cloud not just today, but also going forward.
Gardner: Clearly, the destiny of you and your clients is tied closely together. You need to make them successful, they need to let you show them the tools and the new flexible nature and you need to then rely on HPE to give you the means to create those dashboards and have that visibility. It really is a different kind of relationship, co-dependence, you might say.
Harris: The strength that TasmaNet will have going forward is the fact that we're operating under a decentralized model. We work with HPE, so that we can have a workforce on the ground closer to the customer. The model of having all of your cloud services in one location, a thousand kilometers away from the customer, while technically capable, we don’t believe is the right mix in client-supplier relationships. We need to make sure that physically there are people on the ground to work hand-in-hand with the business management and others to ensure that we have a successful outcome.
That’s one of the strong key parts to the relationship between HPE and TasmaNet. TasmaNet is now a certified services provider with HPE, which lets us use their workforce anywhere around Australia and work with companies that want to utilize TasmaNet services.
Gardner: Help our readers and listeners understand that your regional reach is primarily in Tasmania but you're also in Australia and you have some designs and plans for an even larger expansion. Tell us about your roadmap?
No Net is an Island - Tasmania and Beyond
Harris: Over the last few years, we've really been spending time gathering information from a couple of early contracts to understand the relationship between a cloud provider and a customer. In the last six months, we put that into a product that we actually call TasmaNet Core, which is our new system for delivering digital services.
During the next 18 months we are working with some large contracts that we have won down here in Tasmania, having just signed one for the state government. We certainly have a number of opportunities and pathways to start deploying services and working with the state government on how cloud can deliver better business outcomes for them. We need to make sure we really understand and document clearly how we achieve success here in Tasmania.
Then, our plan is, as a company, to push this out to the national level. There are a lot of regional places throughout Australia that require cloud services, and more and more companies like TasmaNet will move into those regional areas. We think it’s important that they aren’t forgotten and we also think that for any business that can be developed in Tasmania and operate successfully, there is no reason why it can’t be replicated to regional areas around Asia-Pacific as required.
Gardner: Joel, let’s step back a moment and look at how to show, rather than tell, what we mean, in the new era of cloud, by a proper cloud adoption. Do you have any examples, either named or generic, where we can look at how this unfolded and what the business benefits have been when it’s done well?
Hybrid and Private Cloud
Harris: One of our customers, about three years ago, moved into a cloud services environment, which was very successful for the company. But what we found was that some of the contracts with their software services, while they enabled them to move into a cloud provider, added a level of complexity that make the platform very difficult to manage ongoing.
Over a number of years, we worked with them to remove that key application from the cloud environment. It’s really important that, as a cloud provider, we understand what’s right for the customer. At the end of the day, if there's something that’s not working for the customer, we must work with them to get results.
It worked out successfully. We have a very strong relationship with the company. There's a local company down here called TT-Line, which operates some boat vessels for shipping between Tasmania and Mainland Australia, and because of the platform, we had to find the right mix. That’s really important and I know HPE uses it as a catch phrase.
This is a real-world example of where it’s important to find the right mix between putting your workloads in the appropriate place. It has to work both ways. It’s easy to come in to a cloud provider. We need to make sure it’s also easy to step back out as well, if it doesn’t work.
Now, we're working with that company to deeply understand the rest of the business to see what are the workloads that can come out of TasmaNet, and what are the workloads that need to even move internally or actually move to an application-specific hosting environment?
Gardner: Before we close out, Joel, I'd like to look a bit to the future. We spoke earlier about how private cloud and adjusting your business appropriately to the hosting models that we’ve described is a huge step, but of course, the continuum is beyond that. It goes to hybrid. There are public cloud options, data placement, and privacy concerns that people are adjusting to in terms of location of data, jurisdictions, and so forth. Tell me about where you see it going and how an organization like yours adjusts to companies as they start to further explore that hybrid-cloud continuum?
Harris: Going forward, the network will play probably one of the biggest roles in cloud services in the coming 10 years. More and more, we're seeing software-defined network suppliers come into the marketplace. In Australia, we have a large data center, NEXTDC, which started up their own network to connect all of the data centers. We have Megaport, which is 100 percent software-defined, where you can buy a capacity for up to one hour or long term. As these types of networks become common, it enables more and more the fluid movement of the services on top.
When we start to cross over two of the other really big things happening, which are the Internet of Things (IoT) and 5G, you have, all of a sudden, this connectivity that means data services can be delivered anywhere and that means cloud services can be delivered anywhere.
More and more, you're going to see the collection of data lakes, the collection of information even by small businesses that understand that they want to keep all the information, and analyze it. As they go to cloud service providers, they will demand these data services there, too, and the analysis capabilities will become very, very powerful.
In the short term, the network is going to be the key enabler for things such as IoT, which will then flow on to support a distributed model for cloud providers in the next 10 years, whereas traditionally we are seeing them centralized into key larger cities. That will change over in the coming years, because there is just too much data to centralize as people start gathering all of this information.