In an increasingly competitive market, cloud, big data and social media continue to dominate boardroom discussions. Matthew Sainsbury explains what boards need to know to stay ahead of the game.
The cloud — an internet-based model in which groups of remote servers are networked to allow centralised data storage — has gone from being a simple way to host and manage email to a core technological tool of businesses both large and small.
The rise of social media can be summarised using the following two statistics. Eleven years ago, Facebook did not exist. It now has 829 million daily active users. Twitter only launched in 2006, and now there are over 500 million tweets sent every day.
The growth of big data — a term used to describe collections of data sets so big and complex that they require new forms of processing — has been even more exponential. According to a 2012 study by IBM, around 80 per cent of all unstructured data has been created in just the last couple of years.
This trinity of technological developments continues to dominate boardroom discussions and investments by organisations, and with good reason — they are essential to finding advantage in an increasingly competitive environment.
The biggest cloud technology challenge facing many organisations is choosing the right provider. The growth in demand for cloud technology has naturally led to a growth in cloud-based services, and picking the wrong provider can create headaches for a business.
“The best practices around cloud do not directly involve the cloud solution itself, but rather the relationship with the provider,” says Paul Bakker MAICD, lead partner and head of business advisory at Crowe Horwath (Twitter @CroweHorwath_AU).
“Many of the cloud solution providers are growing, just like their customers, and choosing a provider that is willing to build their product for a customer is key to the customer gaining the biggest advantage.
“For the bigger cloud solutions, such as Xero, it is important to build relationships with their channel partners to gain better access to the cloud solution providers. These channel partners provide additional solutions and support to the overall business,” he says.
Company directors in many sectors continue to resist the cloud for some critical components of their business, considering it to be a security risk, but this is a perception that is slowly starting to change, argues Bakker. Indeed, many sectors now see the reverse to be true — it is the organisations that try to keep all their critical data internal that run the security risks.
“Cloud providers invest a considerably higher amount in security than any individual organisation can do or does,” Bakker says. With strict service level agreements (SLAs) now in place with all good cloud providers, an organisation can have as much faith in the security of the cloud as any other approach available.
Rather than security, company directors need to look elsewhere when it comes to risk management within the cloud. “It is an ironic truth that the amazing growth in cloud offerings has given business units the ability to deploy IT capabilities on a credit card without having to involve the IT department or be controlled by any IT governance. However, these solutions are the most in need of governance and oversight,” says Dr Greg Spencer MAICD, principal consulting partner at Beyond Technology Consulting. “That is not to say that a traditional bureaucratic IT department response can be accepted, but it is critical to have an IT department focused on facilitation of business solutions rather than the control of them.”
He adds: “It is more important than ever to have a deliberate IT strategy that seeks to leverage cloud technology rather than have it develop organically. Independent external advice is critical as organisations have no internal experience with the challenges and issues that are arising from these evolving technologies.”
Company directors are often presented with the argument from the executive management that adopting a cloud solution will reduce total cost of ownership by as much as 65 per cent, says Spencer. While this seems like a sound investment on the surface, especially for smaller businesses and start-ups, without the requisite expertise and background in technology it is all too easy to jump in without due diligence and fall into a trap that Spencer has seen repeated numerous times.
“[There is] an example of one organisation that migrated Enterprise Resource Planning (ERP) into an Infrastructure-as-a-Service (IaaS) offering. The cloud provider was renting data centre space from a high quality provider, however when the provider went into receivership, the organisation’s ERP and data became the innocent bystander in a legal battle between the data centre and the cloud provider over non-payment,” says Spencer.
“I have seen other organisations adopt cloud services, and then realise too late that there was no effective way to migrate to another platform or provider,” he says.
These risks have been known for some time now, however the continued discussion shows that for all the growth in demand for cloud, the understanding of the risks it introduces into the business is still inconsistent among organisations and company directors.
Big data getting bigger
The raw explosion in demand for big data is only going to get exponentially larger as organisations come to realise the real value that making use of big data can bring.
Organisations tend to look at big data from the point of view of its marketing applications, but the value of big data is not just about capturing customer data for promotional purposes. “Another example is managing the effectiveness of sales teams by analysing and tweaking the sales process, with top and bottom line improvements results. One client was able to change their sales process from 12 months to three months by analysing their data in their cloud based customer relationship management (CRM),” says Michael Lang MAICD, managing director at SG Partners (Twitter @sg_partners).
However, for all its benefits, big data also represents significant risk to organisations. The obvious risk is the security and ethical issues around the capture of data. “Once trust is broken due to breach of customer data, the ramifications are huge; just ask any credit card provider, bank or online service provider, or government body and consider the impact of what happened with Snowden and Wikileaks,” says Lang.
But directors need to be aware of other data-related risks and how a data strategy can fail internally, he adds. “You are only as good as the parameters that data is aggregated against. We had one client whose whole premise of decision-making needed to change due to the misalignment of the team’s understanding of the data parameters.”
Big data, as a competitive opportunity and for risk management purposes, is also going to create some issues for organisations around recruitment and skills, according to Craig Broadbent GAICD, CEO of Stonebridge Systems. “There are expectations that mathematicians and data scientists will become highly sought after skill sets in the coming years,” he says. “Building algorithms to make sense of the huge amounts of unstructured data in an organisation is no easy task and there are quite a number of technology companies looking at ways to help with the data explosion.”
Executive management and the board alike also need to be comfortable with taking the responsibility for big data away from just the IT team, because it offers greater value to the organisation in other areas, Broadbent adds. In 2012, technology research firm Gartner made the prediction that by 2017 the chief marketing officer (CMO) will spend more on IT than the chief information officer (CIO), and while it remains to be seen whether this will pan out to be true across all businesses, big data is certainly one area in which every marketing team should be involved.
“CIOs are having to change the way they partner with other executives in the organisation,” says Broadbent. “They need to ensure they are not losing control of the technology frameworks, and the budgets to deliver on those frameworks, that they may have spent hundreds of thousands of dollars implementing. Directors need to be aware that while supporting the departments that want to be nimble in delivering products and services to market is critical, they are not locking out the experts in information management from the discussion. Some enterprises are employing a chief digital officer to act as a facilitator and ensure that executives understand digital and what these new technologies can bring to the organisation,” he says.
An organisation’s social media strategy is often related to its big data strategy as a consequence of social networks representing a huge percentage of an organisation’s unstructured data. “The exponential uptake of social media also transfers the prevalence and power of the word of mouth to advertising and marketing like never before,” says Dr Ian Tho, executive director, analytics, at Azurium, a specialist provider of enterprise improvement and advisory services (Twitter @AzuriumAU).
Many organisations try to mine all the data they can from social media sources, but the sheer scale of such platforms makes mining initiatives problematic, he adds. Rather, directors should ensure that their businesses are being strategic about how they use the wealth of data at their fingertips. “Not all data is needed; and organisations are best advised to follow the Pareto principles, where the minimum amount of data needed is 20 per cent to deliver 80 per cent of the requirements,” he says. “The remainder should then be de-prioritised. The trick is in understanding, selecting and curating the 20 per cent that is most needed,” explains Tho.
The demands of social media also force organisations to change the way they approach how the process is managed, says Jean-Marie Abi-Ghanem, partner, cyber risk services at business advisory firm Moore Stephens (Twitter @MooreStephensAU). With the immediacy that social media allows, Abi-Ghanem argues that organisations need to take a broader approach to its management than they would traditionally.
“Many organisations have adopted a strategy that includes their marketing department, executives and all staff to manage their brand, offerings and media,” Abi-Ghanem says. “But many organisations focusing on a top end approach include the marketing department and/or executives only in the strategy, and those businesses are missing a real opportunity, as sometimes the messages echoed by the staff in their own social media send a disconnected and contradictory message about their organisation’s culture, brand, strategy and vision.”
Abi-Ghanem adds: “Social media should be considered as part of an organisation’s business strategy to include and involve all staff. Training, guidance and clear policy should be developed to target all staff. Training and awareness should be provided to enable sensible and secure usage of the media in order to manage some of the potential risk that it may pose.”
What About The SMEs?
Many believe that cloud, big data and social media investments are exclusively the province of enterprise organisations. Small to medium enterprises (SMEs), limited as they are in both resources and technical skill, are often intimidated by the jargon and wary of making investments in something beyond the day-to-day operational technology that they can manage internally.
But, according to Greg Bader, chief business officer at iiNet (Twitter @iiNet), the truth is the opposite. He says SMEs benefit from having access to the expertise of their cloud, big data and social media providers, and can make use of enterprise-class technologies for a fraction of the cost of in-house installation.
“It was not that long ago that if a small business wanted an enterprise email service they needed to set it up in the office and find someone with dedicated technology skills to run it. Now they can have a full enterprise service for a couple of dollars per month.
“Email is a good example of that. If an organisation is running a mail server in their office and it is pulled offline for some reason, it has gone. Our mail clusters are across multiple data centres with built-in redundancy, so if one goes down, we can continue to deliver the service. That is the advantage of building to scale that SMEs do not usually have the capacity to achieve.”
Some SMEs and directors continue to have resistance to these kinds of services due to security concerns, but Bader points out that they would be at an advantage to partner with a provider for critical applications. Where the security landscape is mandating ever-greater investments in best practice technology, the service provider will make these investments as a matter of course, and the SME can have security guarantees written into the service level agreement that will effectively pass the responsibility for the protection of the data to the trusted partner.
Ten Things To Consider When Planning Cloud, Big Data And Social Media Projects
1. Find The Right Cloud Partner
There is a difference between the cloud environments designed for consumer use and the cloud designed to serve the demanding needs of a business. Not all cloud providers are equally skilled. Look for a cloud provider that has highly-skilled and certified engineers, provides remote infrastructure management and has a customer services help desk with acceptable operational hours.
2. Watch The Service Level Agreement (SLA)
Ensure appropriate and clear SLAs are negotiated and spell out a well-defined response and issue resolution times. Look to partner with a cloud provider that is able to customise SLA terms to your own unique business needs.
3. Look At System Integration
Cloud and big data technologies do not remove the need for a CIO and technology team to think about the integration. The integration of data in the cloud with the in-house enterprise data allows organisations to look at the new insights in the right business context.
4. Make Security Front of Mind
Integrated cloud computing involves moving sensitive data between cloud and on-premise networks, so security is a very important issue. All security policies and procedures should be built on industry standards that address regulations relevant to your industry. They should also focus on risk management, audit compliance and vulnerability analysis.
5. Data Quality And Integrity Is Important
Data quality and integrity consideration are the same as when working with the in-house enterprise data. Your data governance plan should include basic guidelines on processes to handle data quality issues, adopted standard and common tools.
6. Provide Access To Data To A Wider Business Population
The ability to tap into the data you collect to support your business decisions is the key competitive advantage of your business. So if the information is the key strategic weapon then it must make sense that you should empower the broader user population to access and analyse that data.
7. Visualise Your Big Data To Discover Trends
An effective and simple-to-use visualisation tool is especially important at the beginning when users are learning to ask questions of the data. They need to be able to explore and ask questions that will lead to other questions.
8. Handle Change Management Well
An effective change management program involves understanding the change that is being implemented, analysing people impacted by the change and creating plans and action that will help drive the successful implementation from the people and organisational culture perspective (training, sponsorship, communication and resistance management).
9. Do Not Forget Mobility
Mobile, big data and cloud computing are the three cornerstones of today’s business environment and should be considered as one. Cloud allows work and data to be accessed anywhere from multiple devices, which in turn makes it much easier for teams to collaborate on shared data. Therefore mobile strategy needs to be part of the planning for cloud and big data projects.
10. Consider All Costs And Not Just The Initial Purchase
Costing for cloud and big data is commonly based on the computer power and storage an organisation needs. However this is not the full story. Often overlooked is the data transfer (traffic) cost, both inbound and outbound, depending on the application and data architecture being implemented. The additional cost may include extra services like diagnostic and monitoring, application programming interface management and the directory.
— Elzina Hodzic, information value strategist at Professional Advantage (Twitter @ProfessionalAdv)
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