SAP and UST explore hybrid cloud

Consensus has built in market research around the notion that for most organizations hybrid implementation is a long-term stop on the journey to the cloud. While many web-based startups launch on cloud alone, dodging the CAPEX involved in deployment of on-premise environments, hybrid environments that feature a combination of both on-premise infrastructure and cloud applications appear to be the norm for the vast majority of enterprises. The hybrid option addresses a number of business realities: it allows companies to leverage existing assets and migrate to new solutions according to internal refresh cycles and budgets, while take incremental advantage of the agility, efficiency and cost savings benefits that cloud offers. But does this approach to adoption introduce new levels of complexity for IT staff that are already challenged by the data deluge and new user expectations for mobile compute on demand?

To explore IT’s experience with cloud adoption, SAP contracted Wakefield Research this past April to conduct in-depth telephone interviews with CIO’s on their attitudes towards hybrid cloud. In view of the advanced deployment of cloud in U.S., the SAP/Wakefield study began with conversations with U.S.-based enterprises (22 respondents were from Fortune 1000 companies and, 30 respondents were from companies in the Inc. 5000 Fastest Growing Companies in America). According to Sven Denecken, VP of Cloud Solutions at SAP, “the U.S. was an early adopter of cloud, and there are different perceptions there from what you might find in emerging countries or in Europe. We wanted to look where cloud started.” Respondents were selected from a broad cross section of businesses that have implemented cloud, and from those that might still be considering cloud in order to capture information on potential obstacles to adoption. “Hybrid cloud” was defined as the combination of a solution that is owned by the respondent organization, either on-premise or in a virtualized environment (private cloud), with a public service delivered by a vendor (SaaS).

Researchers also focused on discussion with CIOs as these have ultimate responsibility for managing on-premise infrastructure and apps and for handling issues that arise with independent acquisition of cloud resources by line-of-business managers. As Denecken explained, “SaaS standardized solutions have large appeal to line-of-business managers, such as the VP of marketing, VP of sales or the chief of HRO, who are looking first to have their process solved and have OPEX budgets to spend. Many companies end up in a mushrooming environment made up of many cloud solutions and in-house resources. This is where the uneasineness begins for the CIO — sometimes SaaS is purchased and they don’t even know about it. But questions around integration inevitably pop up.”

Sven Denecken, VP, Strategy Cloud Solutions, SAP
Sven Denecken, VP, Strategy Cloud Solutions, SAP

Despite this potential unease, the survey showed that migration to hybrid environments is well underway within organizations surveyed. A clear majority of respondents (87 percent) indicated that cloud solutions are important to their business, while a similar share of CIOs (83 percent) attached importance to on-premise solutions. Most of the respondents that are currently using cloud applications (67 percent) have already adopted some hybrid tools, and a majority of hybrid users claim to have achieved greater efficiency through deployment of cloud integrated with on-premise solutions — three quarters described their company’s IT processes as  less complex after migration. One the drivers of the hybrid approach appears to be workforce mobility: CIOs noted that the hybrid approach allows employees who work off-site to more easily access data, an example that Denecken pointed to of reduced complexity in IT processes.

This increased efficiency appears to be a statement on the outcome of migration to cloud for the end user, which may extend to issues around integration of public cloud resources with enterprise back end systems. “With a cloud solution, there is simplification for the user,” Denecken explained: “If I can equip my sales guy with a mobile application that is easy to access, then I simplify his/her life… If I have an onboarding or learning tele-management solution that engages every employee, I can simply their lives. But the overall solution, if properly integrated, also simplifies the IT process” as it includes everyone in training, improves the efficiency of data usage, and shrinks the potential for emergence of separate, siloed systems. Combined solutions and data process integration, then, are the means to this IT simplification, which in Denecken’s view is most easily achieved when integration requirements are ‘forethought’: “prepackaged integration will deliver to the end user what he/she needs — ex. instant access to information on a iPad — but if integration is an afterthought, the result will be not only a mushrooming environment, but also the need for ongoing management of the next technology adoption. We [at SAP] do collaborate with Dell’s Boomi, or IBM’s Cast Iron [cloud integration tools], however, these require additional application knowledge. They represent other ecosystems, and additional complexity and cost as a result.”

For the user organization, this comment on the advantages of integration forethought begs several questions: what products and solutions might be more integration friendly, and how can a company take this into account when they are developing their cloud strategy? Denecken has argued that cloud cannot live up to its promise without consideration of “where processes start and where do they end.” For example, solution deployment may begin with adoption of a SaaS application that the end user accesses in a mobile context, but this will likely involve connection to other cloud-based applications as well as to on-premise financial or ERP systems. “Everyone can do a nice, shiny user interface on an iPad, but if they don’t think about this end-to-end process, the project can become lengthy, costly and prone to failure.”

Tony Velleca, CIO UST Global Inc.
Tony Velleca, CIO UST Global Inc.

So how can CIOs build and execute on the strategies needed to deliver cloud’s promised efficiency? Survey participant Tony Velleca, CIO at UST Global has shared some of the tactics developed within his Aliso Viejo, California-based IT services and solutions firm. UST specializes in the creation of client solutions for very large organizations in the retail, healthcare and financial services industries in particular, based on a model that combines local, on-site and partner resources with “the cost, scale, and quality advantages of off-shore operations.” According to Velleca, the firm focuses on “fewer clients; more attention” with the goal of acting as a strategic partner to clients. UST employs 1,200 people, having virtually “created, in cooperation with the local community, the IT industry in southern India,” and is now expanding training and development to Mexico, which will serve as a bulkhead to reach clients in South and Latin America. All told, UST operates in 24 countries out of 19 global locations and has a complex IT environment with security requirements that are as stringent as those of many of its financial and commerce clients.

UST strength lies in application outsourcing and next generation app development. Going forward, Velleca expects to see the outsourcing model move closer to SaaS — and away from the outsource of application, networking and infrastructure requirements to different vendors. As part of its service portfolio, UST will bundle software with managed infrastructure services, and has developed in newer technology areas what Velleca calls “a phenomenal capability around mobile apps and integration of those back in [to client systems],” building web-based, user experience applications that leverage legacy systems.

In terms of its own legacy environment, UST is a PeopleSoft shop on the backend, but implemented a number of best-of-breed modules from SuccessFactors, the cloud-based human capital management provider, prior to its acquisition by SAP at the end of 2011. As Velleca explained, several of these modules — performance management, for example — are used infrequently, but involve peak load when in use, making them an especially good candidate for cloud delivery. But since these need to be integrated back into core HR systems, UST has built integrations for the modules with PeopleSoft. Based on this work, UST is now a customer and implementation partner to SAP, SuccessFactors integrations serving as an entree to SAP sales looking to approach Oracle and PeopleSoft accounts. “SAP has built nice integrations back into the SAP environment for hybrid cloud,” Velleca added, “but they’re not going to spend a lot of time building integrations back into PeopleSoft. One of the business cases for me was that I could build this integration myself and then create a niche in that market.”

In its services portfolio, UST also offers SAP’s Cloud for Travel and Expense, a travel management solution that enables customers to manage travel policies, budgets and expenses, and which allows mobile access to the platform to improve user convenience. UST was an early adopter of the product, and is now the only professional services organization outside SAP that has completed an integration for the solution. Based on its rapid response and performance in customer service engagements, UST has developed a strong working partnership with SAP that is brought into play on virtually all Cloud Travel deals.

UST’s success as an SAP partner is based in part on the company’s extensive experience with its own hybrid environment. In addition to SAP for HR and Travel, the company runs a number of other cloud apps, such as, that are integrated with UST infrastructure. Velleca noted: “If you look at our internal IT stack, I think we’re ahead when it comes to hybrid cloud, which means to me that I keep certain apps running on-prem, certain apps in the cloud, and then I keep them in synch from a data standpoint. Our infrastructure includes an infrastructure broker (IBM WebSphere) to manage this.”

Today, the majority of UST compute runs on cloud — only core legacy HR and financial systems are run on-premise and Velleca anticipates moving these to cloud once the business case for migration from a functioning system is clear. Cloud services are critical from an operational perspective: UTS can service two primary development data centres in India, a facility in North America as well as data requirements in 24 country markets by providing access through cloud-based applications. Velleca’s early adopter goal in hybrid implementation has been to “stay one step ahead of my customers, so I can advise them.” And while some experimentation has proved more successful that others, Velleca explained, “we’ve integrated these systems, and we’ve put a good integration broker framework around them so that if we need to pull out one and put in another, it’s not too difficult due to the way we have built the integrations.”

The UST experience highlights many of Denecken’s recommendations for cloud adoption. In his opinion, companies should first ask if there is a business case for migration, and how innovation can be augmented through a cloud-based solution that is connected back into the existing environment. On a technological level, he advocates use of open APIs to connect cloud services and back end systems, as well as the leverage of existing systems — for which the organization likely has in-house skills or an ecosystem of partners with the necessary integration expertise. This approach will ensure a measure of vendor independence that will allow greater flexibility in building solutions that are well suited to business needs. In some cases, Velleca noted, this flexibility should be sacrificed on the altar of an end-to-end approach that offers increased simplicity through the use of standardized cloud application services, as some customizations are requested without sufficient consideration of long-term ends. Interestingly, Denecken also observed that differing levels of integration are required for various processes: “we also need to think about what process requires what technology integration and effort.” The key to finding real value in cloud, it seems, is found not so much in technology evaluation, but in understanding the benefits of cloud standardization as well as the need to integrate public resources with back end systems in the service of improved business process — when and when not to reinvent the wheel, and how to fit it on the car.

Complete survey results for the SAP/Wakefield CIO study, Hybrid: The Next Generation Cloud are available here.




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