Cloud computing is the latest technology trend to capture the attention of businesses, consumers, and investors alike. This emerging model in which software programs are accessed through the Internet is being touted as The Next Big Thing. But for corporate America, there’s much more to the revolution than outsourcing data, applications, or hardware. PwC’s technology leader Paul Horowitz and analysts Bo Parker and Vinod Baya introduce the vision of Evergreen IT, which builds upon cloud-computing principles. Gone are the typical technology barriers—high costs, complexity, and incompatibility—replaced by a technology foundation that is both enduring and flexible. Here’s what the future of true business agility looks like and how companies are taking the first steps toward getting there.
Even if you aren’t a techie, chances are you’ve heard plenty about cloud computing. Likened to previous technology revolutions— the personal computer, the Internet, wireless computing, and Web 2.0—that have changed the ways we live and work, it has made its way into the public consciousness via front-page news articles and magazine cover stories in the popular press. And with the likes of Amazon, Google, IBM, and Microsoft—among many other technology companies—getting in on the act, it’s certainly causing a stir.
After all, cloud computing may very well revitalize the tech industry, empower consumers, and level the playing field for smaller, Main Street businesses. But the real question is, What does cloud computing mean for your business?
It could mean the difference between a business that is agile and one that stagnates. But the path to agility is not the obvious one—often requiring a shift from internal to external Internet-based technology resources. Instead, we view cloud computing as the basis for a whole new approach to business technology. We call it Evergreen IT.1
Under this new paradigm, enterprise technology no longer results in a growing mountain of siloed, legacy systems that are so complex and costly that you can’t easily change the way you do business. Evergreen IT creates the potential for continually refreshing IT capabilities without distracting the business and for staying in alignment with business needs.
Understanding Evergreen IT
Evergreen IT builds upon the core concepts of cloud computing and addresses the unique pain points experienced by larger organizations. But just what is cloud computing? While the term has been defined in a number of ways, it is generally applied to a model in which a company outsources the ownership and management of some part of its IT—business applications or storage, for example—to a third-party provider like Amazon, Google, or Salesforce.com. This model changes business computing in a couple of important ways: (1) It is modular, effectively separating software applications from underlying infrastructure. And (2) it is standardized, relying on the same resources that many different customers share. With cloud computing, a business forgoes a hefty capital expense and ongoing maintenance costs, while the service provider benefits from economies of scale.
Cost-effective technology is a powerful promise, but Evergreen IT doesn’t stop there. The real story is that cloud-computing service providers set up and manage technology in a way that is disruptively more agile and more reliable than most enterprise environments, as well as more cost efficient. Evergreen IT, then, applies these principles inside a business, fundamentally changing the way technology supports the organization.
To your CIO, such an environment might seem like the Holy Grail. It represents an enormous shift from where we are now: Today, legacy technology soaks up much of the available IT budget and is a primary barrier to IT responsiveness and overall business agility. Disparate collections of aging technology are dedicated to individual workloads. And in order to support key business processes, companies often maintain ungainly servers and storage devices that are hardly used. And to keep these legacy systems running, the business must retain data center staff along with that staff’s idiosyncratic, nontransferable knowledge.
A major company transforms its technology
Evergreen IT changes things through a new mind-set as well as powerful software that avoids the creation of legacy complexities and costs. To really understand the promise of Evergreen IT, consider the technology transformation that engineering and construction giant Bechtel Corporation has begun. At Bechtel, big changes occur in two dimensions: the geographies where it operates, and an elastic workforce of 44,000 employees, plus contractors, subcontractors, and supply chain partners.
The company undertakes some of the world’s most daunting construction projects, including the Channel Tunnel linking England and France, the Hong Kong International Airport, and the Tacoma Narrows Bridge near Seattle. Each new multiyear, multibillion-dollar construction project is much like building a new business that has unique staffing needs, geographic challenges, and a sizable technology component.
Evergreen IT changes things through a new mind-set and powerful software that avoids the creation of legacy complexities and costs.
Some years ago, Bechtel required 60 to 90 days to get the technology ready for a new project. Today, however, the company can get the IT for most new projects going in a day or two—a vast improvement that illustrates how IT agility can support business agility. By adopting the leading practices of cloud-computing service providers for its own infrastructure, Bechtel has transformed its systems and processes.
“We were not in pain with the old state, but we did see that we would have to take a new approach to have the flexibility for what we needed to do going forward. We had already completed a comprehensive rationalization process and brought about other needed efficiencies. What we needed going forward was a global, flexible collaboration platform,” says Bechtel’s senior vice president and CIO Geir Ramleth.2
But getting there didn’t happen overnight. In fact, the company has approached this ongoing journey in several stages. Like most large organizations, Bechtel used to allocate dedicated servers and storage to specific applications, with little concern about utilization or technology standards, and its technology organization primarily used manual processes to manage and maintain the infrastructure. To reduce complexity and cost, Bechtel underwent a series of IT rationalization efforts, including the consolidation of 27 data centers into 7. The improvements were significant, but they did not address the fundamental business drivers that described where IT was falling down: flexibility and responsiveness to geographic and labor force diversity.
Ramleth was convinced that IT needed a new strategy. His staff had collected benchmark data from cloud-computing service providers—including Amazon, Google, Salesforce.com, and YouTube—and noted that, in comparison, Bechtel’s IT was much more costly and much less flexible. Ramleth saw an opportunity to learn from cloud providers and deliver radically greater flexibility. Although the transformation affected all areas of IT, Bechtel started by simplifying its infrastructure of servers, storage, and networking to create a new foundation for the company’s applications. In most cases, the applications need to be modernized; in all cases, they must be certified to operate in the new highperforming environment. Additionally, as part of this transformation, Bechtel again reduced the number of data centers—this time moving from seven down to three.
Bechtel now has a technology infrastructure markedly different from that of most organizations. The benefits are many: Total data center space dropped from 35,000 to 1,000 square feet in the three identical new data centers and locations. Standardization, consolidation, and virtualization of servers increased utilization from less than 3 percent to about 70 percent, resulting in a 30 percent savings on operations and management costs. By judiciously choosing its data center locations and opting to manage its own bandwidth, Bechtel IT moves 10 times the former amount of data traffic for the same networking expense. And the IT staff reduced the number of applications from more than 1,600 to about 230. Bechtel is now on a path to convert many of these applications to the software- as-a-service model, running a single version for all business units and projects.
Ultimately, Bechtel standardized its technology assets and processes to reduce complexity. The result is a foundation on which different layers of technology can be managed independently of one another.
Evergreen IT gives businesses the best of both worlds: the security, control, and focus of its existing systems and the flexibility, ease of management, and cost-effectiveness of cloud computing.
Defining the problem
Like Bechtel before changing its approach, many organizations think about technology solutions on a project-by-project basis. This gets the job done, but at a high cost. Operational expenses typically eat up the majority of the IT budget. Few companies look at the entire collection of systems that have sprung up in their organizations over the years and ask whether they still make sense.
If they did take stock, what they’d see is not a pretty picture. In simple terms, each technology solution, such as the company’s e-mail system or enterprise resource planning application, is made up of a vertical stack of three principal layers: (1) infrastructure, such as computing, storage, and network; (2) applications that enable business processes; and (3) devices that enable end users to access the applications. The stack is said to be “tightly coupled,” with deep interdependencies among the layers, and therefore no single part can be easily replaced or changed.
Collectively, these solutions represent a technology hodgepodge, with each one designed and funded for a specific business activity. Considerable resources and specialized knowledge are required to maintain each solution and make it work with other solutions. Changing any part of the delicate balance is difficult and costly. And those aren’t the only problems: A company’s IT operations—unlike its finance, sales, or supply chain—are often much more reliant on nonstandard manual processes.
Finding the Solution
Given these difficulties, many companies look to outsourcing to provide some relief. But in most cases, outsourcing simply transfers the problem from one place to another rather than creating any fundamental change. More recently, cloud-computing services have been offered as a solution. This works well for something like corporate e-mail, but for mission-critical applications that require specialized knowledge, that have unique security requirements, or that are subject to regulatory constraints, cloud computing is not an option.
Figure 1: Business technology: Comparison of the status quo and Evergreen IT
Most organizations have technology environments that are composed of collections of hundreds or even thousands of vertical stacks, each made up of a tightly bound application, its dedicated infrastructure, and end-user devices—all managed by manual processes. In the Evergreen IT model, those dependencies no longer exist, thanks to a software mediation layer that enables applications and end-user devices to take advantage of a shared pool of computing resources. Other intelligent software (data center modeling) automates these processes.
In light of these alternatives, the Evergreen IT approach makes a lot of sense. (See Figure 1.) It provides a business the best of both worlds in terms of the security, control, and focus of its existing systems and the flexibility, ease of management, and cost-effectiveness of cloud computing. Each application or technology solution uses common infrastructure resources, which are drawn from a commodity pool that is managed by intelligent software. Because there’s one standard for each component, as technology improves—or budgets expand or contract—the organization can more easily make changes. And staffing and skill sets can be standardized around a small core set of technologies.
As Bechtel’s Ramleth describes it: “The important thing is that we standardized. Now, we very much live by the power of one. Do it one way, in one place, using one mechanism, using one approach, and all operated by one group.”3
Enabling Evergreen IT
Today, Evergreen IT is made possible by two emerging classes of software: virtualization and IT operations automation. Essentially, virtualization is a layer that sits between an application and its supporting infrastructure. It mediates differences between what the application expects and what the infrastructure provides— in a sense tricking the application into thinking it is running on a dedicated computing platform configured to its specific needs when it is actually sharing the infrastructure with other applications. (For a more detailed discussion of virtualization technologies, see sidebar on page 4.)
The second type of software needed for Evergreen IT is used to automate IT management by modeling processes and operations. The goal is to replace labor-intensive, nonstandard processes with formally defined, automated processes that the software automatically runs and monitors. The main benefits are speed and flexibility because companies have the ability to provide the right mix of IT resources to handle changing workloads by on-demand configuration of resources. With routine data center tasks automated, the IT organization can add value in other ways, such as making strategic use of external resources when internal resources are fully utilized. (For more details on data center automation software, see sidebar on page 4.)
Beginning the journey
The cost efficiencies and improved agility afforded by Evergreen IT may be just what your business needs. But who can contemplate such an ambitious initiative during these challenging times? Actually, any organization can get started today by rethinking technology’s role in the business and looking closely at its infrastructure. First steps include consolidating resources and streamlining applications and hardware to reduce redundancy and variation. As a business adds new technology, it can take steps toward standardizing this key foundation. By starting there, organizations can reap short-term benefits and will be ready to realize the full advantages of Evergreen IT in the future.
Paul Horowitz is PricewaterhouseCoopers’ technology leader. Bo Parker is managing director, and Vinod Baya is director of PwC’s Center for Technology and Innovation. For an in-depth discussion of Evergreen IT, see Technology forecast, summer 2009 (www.pwc.com/techforecast).
1 PricewaterhouseCoopers, Technology forecast, summer 2009.
© 2009-2010 PricewaterhouseCoopers. All rights reserved. Reprinted by permission. PricewaterhouseCoopers (www.pwc.com) is a leader provider of industry-focused assurance, tax and advisory services.
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