You must go beyond buying an instance of AWS or Azure and refactoring or reposting your existing technology stacks in a cloud-based architecture. The investment will fail if you do not accompany it with adopting cloud native operations, in which you must blend the constant curiosity of an engineering mindset with the collaboration of DevOps culture. Becoming cloud native is a fundamentally different way of working and collaborating. It goes much deeper than just accessing information from anywhere. Thus, we need to refocus the discussions on the understanding that underlying change needs to be anchored in business outcomes.
There is a fundamental disconnect in how the industry discusses organizations moving toward the cloud. The supply side is evangelizing technology and capabilities with containerization and Kubernetes as the focal point for that marketing noise. Conversely, the buy side is struggling to capture the value of their cloud investments, as very few clients have a well-defined cloud transformation strategy at an organizational level, which can lead to transformations done in silos. Furthermore, using multiple cloud providers can lead to a fragmented approach and lost financial benefits. Thus, let’s start by outlining what we understand as the characteristics of “cloud native.”
We have discussed those characteristics in a previous report in greater detail. To sum up, being cloud native is predominantly about people, culture, and change—not technology and capabilities. Our friends at ContainerSolutions described this succinctly: “Cloud native is about a set of architectural and cultural principles. Ultimately, cloud native transformation is about how we create and deliver, not where.” Therefore, we need to drive the discussions back to data-driven outcomes and link those outcomes to business objectives. Thus, service providers must help clients work through the implications of cloud target operating models. Without envisioning new models, the cloud will remain a horizontal and largely infrastructure-centric play.
Here is where many organizations struggle, both in terms of envisioning new outcomes and operationalizing them. All too often, we see infographics for cloud target operating models. Yet, each organization is unique, and one size does not fit all. Furthermore, there is a disconnect between aspiration and reality as the engineering and delivery teams too often have no clue about the business objectives. Executives at Accenture summarized the direction of travel for cloud native transformation aptly: “How do you take business objectives and apply technology objectives to get there? Cloud native is about transformation, yet achieving it remains elusive for many organizations.”
To succeed with their cloud journey, organizations must change their approach from infrastructure and system optimization to progressing toward an enterprise-wide strategy for the cloud and value creation model. All too often, we see cloud migrations stutter to a halt as costs explode and controls fail. A European bank’s transformation leader crystalized the dichotomy between cost and transformation crisply. For him, cloud transformation is not a cost reduction exercise; rather, cost benefits are a nice by-product of the transformation. The value lies in a cultural change leading to the capture of new value: “We are focusing on the business benefits and the change cloud brings to the organization. The motto we like to use is that the cloud is an Agile technology for agile teams. In previous years, we went through a big Agile transformation. And it is difficult to be Agile; if you are not fully DevOps, you cannot be fully DevOps without cloud.”
To help envision and articulate the outcomes for cloud native transformation, we have identified six vectors to help shape those outcomes. Exhibit 1 visualizes those vectors that enable cloud transformation and cloud target operating models:
Data-centric strategy: Achieving data-driven outcomes is at the heart of the HFS OneOffice concept. Organizations increasingly seek experience-led outcomes ranging from customer to employee to ecosystem experiences. They must align their data needs to deliver on business strategy to achieve those outcomes. To succeed with this transformation, organizations must run data and application modernization in parallel. Suffice it to say, the demands on IT and business operations to deliver those effects are extremely challenging.
Product-centric experimentation: To support those outcomes, delivery is shifting from a project focus toward a product focus, where you no longer have clearly defined starting and endpoints; rather, operations align with product lifecycles. Therefore, we see much more experimentation, ranging from design thinking to hackathons. While, in our view, the suggestion of “failing fast” is often oversimplified, it implies a culture where the team has the freedom to fail but can learn something from each failure to help the team succeed faster the next time.
Continuous goals: Those learnings are blended with the broader cultural change that DevSecOps brings to operations. To deal with this operational complexity of cloud native, development and operations teams increasingly collaborate in a highly fluid environment. In line with the goals of continuous integration and continuous delivery (CI/CD), the goals for that collaboration progressively adapt and change. Put another way, the goals are no longer fixed, and the non-linearity of the process is inherent in cloud native operations.
Talent transformation: Unsurprisingly, these shifts accelerate an unprecedented talent transformation as workforces need to be trained on those new technology skills and equally on completely new forms of collaboration. With that, we see talent transformation being stipulated in larger transformation projects. The buy side struggles to access and retain talent with those cloud native skills. Therefore, retraining and reskilling are becoming the cornerstone of organizations’ journeys toward becoming cloud native.
Velocity: What all too often gets lost in translation is that cloud native is about working and collaborating fundamentally differently. It is about having access to all relevant data assets and enabling a high data throughput. To get to the desired velocity and, ultimately, time to value, automation becomes a crucial enabler. Take the example of a large European chemical company that wanted to develop digital farming solutions that integrate with multiple systems and provide accurate yield prediction and disease forecasting, highlight product benefits, recommend products to improve farmers’ yield, and reduce growers’ risk. No single digital platform existed to address the needs of the entire farming ecosystem. Progressing toward an ecosystem meant overcoming silos that were outside the company boundaries. Therefore, it needed to move away from a monolithic system to be able to respond to the dynamically changing agriculture sector. The solution was a microservices-based architecture based on AWS to enable independent faster releases, zero downtime, and scalability. The lever for velocity was a self-sustaining, distributed, scaled DevOps model with test automation and a DevOps CI/CD stack for a faster release cycle.
Time to value: Last, since the pandemic shock, organizations have been looking for tangible outcomes in narrowly defined time windows. Lengthy projects with lofty outcomes are a thing of the past. At the same time, as suggested, many transformations fail because technology objectives don’t align with business objectives. Here, cloud transformation kicks in. Take the example of an NBA team that was taken over by a different owner with a completely new vision. The new owner hadn’t owned a venue before, but now the club had built a new arena. The business objective was to build a mobile app to connect a global audience with the arena, thus creating a new space, a new business, and a new experience. In a nutshell, the club went from renting to owning and operating a physical place. It needed a new operating model that could handle a vast amount of data in extremely compressed periods. That is what velocity and time to value can mean.
Source: HFS Research, 2022
Our discussions with stakeholders confirm there is no end state for cloud native transformation. This is a world of permanent change, and succeeding in it requires enabling a state of constant adaptability. Yet, organizations need a strategic mandate or even a North Star to communicate the change required to achieve the business objectives. Here, we are going full circle on the central argument that cloud native transformation must be anchored in business objectives.
While we constantly hear from service providers that they must meet clients where they are on their journey with cloud, stakeholders on the buy side tell us consistently that business objectives must always precede technical demands. Customizable reference architectures and composable building blocks may help accelerate the time to value, but we should not consider cloud target operating models as templates. Rather, enterprises need help envisioning new operating models, and they often struggle to define enterprise-wide cloud strategies. The clarity in those models guides the building of future-state architectures—not the other way around.
Against this background, we must drive the discussions back to outcomes and business objectives. Yet, we must shy away from simplistic suggestions of organizational change. No two cloud native transformations are the same; each is unique. Therefore, as Exhibit 2 outlines, regardless of where organizations are on their cloud journey, they need clarity on their data-driven strategy and the desired outcomes. Crucially, this must be underpinned by a new cloud target operating model. Retrofitting cloud innovation into existing operating models will fail to capture value. The technology transformation needs to support these objectives, not the other way around.
Cultural change must bolster this technology transformation. The collaboration culture of DevSecOps and Site Reliability Engineering (SRE) needs to transform IT operations and progressively infuse business operations. Becoming cloud native must mean bringing IT and business operations together to progress toward the OneOffice. Overcoming internal boundaries and silos is difficult enough, but we see a shift toward complex ecosystem engagements. In those ecosystems, overcoming external boundaries to collaborate becomes as crucial as overcoming internal silos. Thus, organizations must double-click on envisioning outcomes and identifying the unique value proposition to create a North Star vision for transformation.
Source: HFS Research, 2022
HFS’ thought leadership on the OneOffice mindset has helped many organizations assess their operational strategies and provide color for their operational North Stars. And, as cloud native capabilities emerge as the central change agent for operations, we can blend in new insights from organizations that have transformed their operating model by embracing cloud native principles. Those cultural challenges get further exacerbated by the generational shift, where employees from Generation Z, digital natives by default, represent the largest section.
What can organizations learn from those that are further along the maturity curve? How are they bringing IT and business operations together? How are they establishing a new operational culture? What are the outcomes that converged operations can support? And how do we need to think about business assurance to deliver those transformational outcomes? We will address these questions in a companion report on The Seven Pillars of Cloud Native Operations.
Enterprise leaders must demand a reset in their conversations with cloud providers. The supply side must stop leading with technology transformation. Without tying the technology strategy to business objectives, organizations will continue to struggle to capture the value from the investments in the cloud. Many of those objectives are underpinned by the cultural change of establishing SRE practices and industrializing DevSecOps. This support drives the cloud discussions back to outcomes in line with OneOffice narratives. Enterprise leaders must prioritize defining business objectives and design their cloud target operating model accordingly. It can’t be said often enough: successful cloud native transformation is more about culture and people than technology capabilities.
There is much to learn from organizations that have successfully transformed their operating model to take advantage of cloud native operations. We need the insights and best practices from constructing the cloud business case and designing the cloud target operating model. The upcoming cloud native transformation Top 10 will provide plenty of those; stay tuned for details.
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