Cloud operating models – an essential ingredient for organizations

December 1, 2022

The cloud has become an undeniable reality. Something that seemed like another trend 20 years ago that many CIOs refused to consider turns out to be one of the most profitable and disruptive technological movements worldwide.

In Europe alone, 41% of companies have already incorporated cloud services, more than double the number five years ago. Finland ranks highest, with 75% of companies hiring cloud computing services, followed by Sweden with 70%. Every year more companies are considering migrating their data to the cloud. So much so that by 2024 the number of companies using cloud services is expected to reach 90%

But before starting a migration to the cloud or developing applications all over, it is necessary to have a cloud strategy document, including goals, principles, architecture blueprints, risks, and organizational impact. And it will be essential that said document be published and agreed upon by the impacted areas of an organization, including those related to information technology (IT), digital communication, and business. 

Among such key pillars of the cloud strategy is the definition of an operating model. The operating model is a framework that determines how the different areas are related to guarantee that cloud adoption is not only a reality associated with technical aspects but a cultural change that requires accurate and efficient processes.

What is a cloud operating model?

A cloud operating model is a structured framework that comprises processes, capabilities, and relationship models, which are required to shape the organizational structure that will support the adoption of cloud services in a company.

Not all organizations require the same cloud operating model format or structure. A company where urgent decisions prevail and no executive layer may have different needs than a company with very defined hierarchical and structural orders that base its operation on specific strategic and operational plans.

However, all our clients agree that the initial definition of the cloud operating model must evolve in the same way the company matures throughout its cloud journey. And just like any other operating model, the business plays a relevant role, since direct customers will be those using the cloud services offered by IT.

Three considerations for creating a cloud operating model

It is a mistake to directly start a migration to the cloud without considering the operational aspects of how the services operate, who is responsible for said function, and how or who determines the technical evolution of the cloud services that support the business applications. That’s where the cloud operating model comes into play. There are three key aspects to take into account in its definition:

  1. Explicit definition of the operating cloud functions

The operating model is based on processes and relationships between key players, who must have specific capacities. Before opening the debate on the organizational structure, it is more than necessary to shape the 2 essential functions that will support the entire cloud operating model in an orderly manner:

a. Governance function:

It can be understood as the function of an architecture area, which designs the cloud strategy, standardizes the reference architectures, manages the cloud vendors, and transforms the organization, so that cloud adoption is a success. Said transformation must occur at all levels, including the business, before which it will have the challenge of offering a greater added value in said administration, which is more attractive to it than if it opted for an independent adoption and in shadow mode. The identification of roles, necessary skills, training, and cultural adoption strategies will be additional issues to be addressed by this function.

b. Engineering function: 

It will be in charge of the more technical tasks around the implementation, management, and operation of the services, ensuring that security levels and regulations are complied with and that there is internal compliance.

The above functions will be related to other areas that already exist in most organizations, for example, the IT financial management area for cloud cost control and the PMO (Program Management Office) area, which will intervene in many of the cloud initiatives, such as migrations or others. Both these and additional ones must be part of the operating model to guarantee success in cloud adoption.

 2. Model an appropriate organizational structure

Based on processes, capabilities, and roles, an organizational structure must support each of the functions described above. This structure’s format will be highly dependent on the organization’s context and its rigidity or flexibility when it comes to including new teams and defining new relationship models.

In the case of the cloud governance function, there are multiple ways to materialize it, either through a Cloud Center of Excellence (CCoE) or a Cloud Competence Center. Regardless of the name assigned, the relevance of this function is undeniable, as well as that of the team that represents it, in terms of divulgation to both IT areas and the business. They represent the greatest exponent in adopting cloud services, taking responsibility for defining the associated strategy, using standardization, and offering advisory services to both IT areas and the business.

The materialization of the engineering, operations and administration function in organizational terms results in an even greater degree of freedom. However, we don’t recommend inserting these in the traditional operations area. The methodologies and work models do not usually align with product strategies, maximum automation mindsets, or agile and DevOps practices, which are the ones that prevail in the cloud context.

Within the degree of freedom mentioned, some organizations decide to outsource the cloud operation to a managed service provider and adopt different strategies, whether closer to pure support and administration of IaaS services or even opt for DevOps practice approaches close to development.

In the same way, other organizations decide to handle these functions in-house and establish frameworks for development. They do this either through SRE methodologies or structures close to the motto “You build it, you run it” or teams that are constituted as true product or platform groups, offering cloud and DevOps products even in self-service mode.

3. Integrate other organizational areas into the operating model

For the cloud operating model to work due to its impact, there must be close collaboration between some organizational areas and those directly involved in the life cycle of cloud services. Some of these teams will be the financial or procurement departments, program/project management, and the culture and training area, which will participate fully in particular projects as well as in the identification of skills, professional careers, and role capacity management in the medium-long term.

The adoption of the cloud and the different organizational entities that support the process would evolve according to the diverse needs arising from business requests and the political, economic, and technological context surrounding the organization.

In the first instance, we can define only some things because the shock at the organizational and cultural level is too big to be digested by traditional companies entering the cloud environment (or even the multi-cloud environment). However, entering the cloud services world without a strategy and based on a thoughtful and agreed-upon operating model to support it can be risky.

Learn more about how Globant can support the development of your own cloud operating model.

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