Some companies still don’t “get” the cloud – they’d better learn fast

Many services are moving to the cloud. At the same time, many companies are still struggling to understand how to use clouds, and whether they are safe. There seems to be fundamental lack of knowledge of what it means when services are in the cloud, what kind of options exist and how to combine different options.

When talking about cloud-based services, a person from a large bank said to me that they “decided not to use any public cloud solutions or share data with vendors that use a public cloud”. Many people still often think services are either in the cloud or they’re not. The reality is typically much more complex, but also offers more opportunities and flexibility. We are not talking about simply moving services from private servers to public clouds, but combining private servers, private clouds, and public clouds, and trying to leverage and optimize the benefits of each of them.

We can consider the use of clouds in at least two dimensions:

1. What kind of server and cloud solutions do we use?
2. How to divide services and service components into separate locations?

The first dimension can be divided into four categories:

1. Private in-house hosted servers
2. Private servers hosted by a third party
3. Private cloud service (perhaps from a provider that offers also a public cloud)
4. Public cloud service.

The second dimension depends on the service, but we can take some examples:

1. Front-end application in a cloud near a user
2. Back-end service, globally centralized but with backups in a separate location
3. User data bases and personal data in a private cloud in the same region as the user.

These simplified dimensions and examples illustrate that cloud strategies include many options and combinations, and it is not an “all cloud” or “no cloud” type of decision. In some cases, it is smart to combine some cloud services and some in-house hosted services, especially to get new and old services to work together.

In some cases, companies are ready to use cloud services, but legal restrictions or regulations are a barrier. We have seen cases where some regulators don’t yet understand how the industry could use clouds, or even what “the cloud” is, and want to go with old-world physical restrictions for servers and access to them. This prevents the use of clouds in practice.

However, some regulators – e.g. in finance – are starting to use clouds as an important option to build new services, and with RegTech they also offer better options to regulate and monitor services. Government agencies, finance institutions and many leading global services already use clouds. That means IT departments need to seriously learn to live with clouds and how they can improve their own services in collaboration with cloud providers.

The API economy and the rise of distributed services make it possible to distribute services to many physical locations. For example, back-office functions could be centralized globally to a few key critical locations, front-end applications could be near customers in many locations, and customer data can be located in places required by privacy laws and other regulations. In this way, a company can optimize usability, operating costs, and development work of a service, as well as futureproof long-term needs and requirements that are in part unanticipated.

Clouds are not only a technical and data security issue. Top management must include them in their strategy planning. IT departments often want to protect their own assets, resources and services. This makes it sometimes more difficult for management to get cloud strategy input from their own IT departments.

Many advanced organizations now work with cloud strategies that include business implications, legal matters, customer experience and cost structure. Clouds, like most new technology solutions, must offer better and more cost-effective solutions. Each organization must find its own optimal way to use clouds – sometimes only for select services (or parts of a service), sometimes using private dedicated clouds, and sometimes applying different solutions for different modules. Either way, clouds – as well as open APIs and distributed service concepts – have become a crucial part of all digital services, and companies must know how to use them.