Laying the Groundwork for Cloud

Chapter 4. Put the Plan into Action

You need experience of complex change programs for cloud and operating model transformation. In some ways, you could compare the transformation to transforming the engines of your aircraft while you are in flight. In this chapter, I’ll highlight your ongoing need for alignment of sponsorship and strategy to the direction of travel and associated funding for the journey. In terms of governance of change, we will look at risk avoidance and transfer of risk to those who should take responsibility, to either make or accept the change. You should now be thinking about getting the program in place with a strong program director and clear engagement with the sponsor and all stakeholders.

Secure Organizational Sponsorship

Now that you have defined your outline transformation plan, you need acceptance from the stakeholders, sponsor, and executive board before you move to implementation. They should all form part of your executive transformation team. You could be asked for clarification or adjustment and an iteration of the plan by any member of that executive team. Depending on your financial approval processes, you will need to use your plan to sharpen the business case or benefits case and finalize the commitment on performance targets. You will also need executive team approval for your implementation approach, especially if you require commercial and procurement processes to select the appropriate implementation suppliers. At this point, your strategic planning team should switch into a governance role over the implementation phase.

When you finalize your strategy and plan, it is important not to lose focus on the daily challenges that can also offer an opportunity. When possible, act early to stop a problem from worsening. You could need some early operational enablement work, but avoid new services being designed on legacy technology whenever possible; service owners need to justify any exceptions. Let’s now move from sponsorship to funding.

Establish Funding for Your Transformation

When planning a large transformation, you must keep your finances in control. Your transformation plan should address the following to ensure financial diligence:

• Early changes that can be initiated with the business as usual (BAU) organization, to help drive and support your strategy (e.g., enabling better reporting to support the performance and related TCO analysis).

• Modular transformation activities that hand back to BAU as quickly as possible (e.g., enabling more effective performance reporting).

• Transformation that moves in-house responsibilities to service providers or partners.

• Continuous improvement targets that can be assigned internally or to your supply chain.

• Opportunities to return benefit quickly (low-hanging fruit).

• Transformation horizons¹ that return tangible annual benefits to maintain momentum.

Most organizations will have an established process for business case generation. Your financial considerations to cover in the business case include:

• The current and target total cost of operation (TCO); this implies a complete view of the costs of a product or service and includes the associated operational costs around it. These costs may be very fragmented across internal departments and external suppliers. Your focus is to establish a complete representation and avoid scenarios where a product or service that may appear initially commercially attractive is outweighed by higher operational or maintenance costs. Establishing current and target TCO can be a significant exercise, but this is essential if a return on investment (ROI) model is required.

• The total cost of change (TCC); your organizational funding approvals for change could rely on the business case demonstrating a ROI. Some organizations who strategically are bought in (or compelled) to change, and perhaps focused more on the cost of change and benefits, can focus on a TCC model with associated benefits case.

The challenge with typical financial approval processes is that they can require a significant upfront effort to get started and often focus on a specific project scope and timing. This can lead to a protracted set of sequential stages (waterfall-style project) and it’s important that we instead seek to make smaller, more iterative steps, with a view on enabling ongoing service improvement.

Some of your financial dependencies and resulting timeline targets may need to align with contractual deadlines.

Establish Contractual Deadlines

The contractual frameworks of your suppliers can be a significant barrier to change. Your worst scenario is having to renew a bad deal because you are unable to unlock a technology or operational dependency. There are significant financial and performance impacts at stake, and these demand adequate supplier strategy and planning. You must start by assessing your existing contracts and if necessary, transition out of one contract, then negotiate a new one that is more aligned with your commercial goals and avoids subsequent technology or operational dependency lock-in (repeating the mistakes of the past).

Case Study: Contractual Deadlines

In the case of one European financial services organization, the target operating model depended on transformation of the service layering and associated contractual boundaries with support and service providers. The selection, negotiation, and contracts for outsourced deals needed a huge amount of time to prepare and execute (12–18 months). The timeline to exit existing outsourcers needed careful planning, as if a new one (or the organization) is not ready for transition, then the existing, possibly unfavorable, contract will need to be extended.

The organization made significant investment in both cloud technology and the new cloud operating model which depended on a transition of multiple existing outsourcers. The timeline for the commercial, legal, and governance work to drive the selection process was not in step with the transformation, which forced a situation where existing contracts had to be extended at significant cost and loss of benefit. These contractual deadlines must be very high priorities for scheduling with very clear ownership in the executive transformation team, which in this case failed. The cost of missing the contractual deadline was significant and the side effect was that the existing support-driven suppliers weren’t aligned to the service vision (and disrupted related objectives and performance benefits).

Caution

The contractual strategy of outsourcing based on support only must evolve toward buying a complete service. This is a significant step commercially and contractually. Both your organization and the outsourced suppliers must be ready; while the public cloud service providers are marching ahead at great pace by providing the whole package (as a service), traditional outsourcers are more reluctant to change from a support model; you may also find that your service governance teams are not set up to manage a true service provider.

Changing suppliers and contracts as part of your transformation can help you achieve your performance and financial objectives, but the change is also complex and carries significant cost and risk.

Establish Cost and Risk Priorities

Transformation business cases usually align with strategic objectives and performance benefits, then flows through to planning. Your transformation horizons should be designed with this in mind, but it’s important to also prioritize your underlying transformation projects and related work packages to avoid costs that aren’t aligned with your objectives. For example, prioritizing cloud application migration activity to avoid capacity investment in a non-strategic technology platform.

Your planning must also factor in the risk of delays with appropriate contingencies. Some fixed milestones demand a very definite timeline that cannot be delayed. Risk mitigation can only go so far and sometimes these milestones will need to override benefit and cost in favor of time.

Costs and risks relate closely to the transformation of your workforce (changing people and process is challenging). You need to position a competence model so you can train and scale your workforce to match the needs of the transformation.

Establish Workforce Competence and Scaling Models

Your people become part of your broader consideration on transformation (training and hiring) or transition (outsourcing and attrition).

There is a trade-off on the value of experience versus resistance to change. Technologists will generally embrace the opportunity to design and deploy a new product or service, especially if they see it as an industry in-demand skill set. Changing your operational processes and ways of working, however, will meet with greater resistance; this can be related to fear of job changes or losses. Operationally, there are cases where problems are an opportunity to test knowledge and experience, and as a result the individual may consider it more rewarding. You need to redirect this reactive mentality toward proactively designing problem resolution into the new processes and ensure that operational assurance becomes a design responsibility.

You need a profile of key stakeholders and departmental leads. Some of the following attributes may help you establish a competence model aligned to roles in the operating model, so you can decide how a team member may support your transformation goals:

• Is the role managed by another, or expected to self start?

• What responsibility does the role have?

• What reach does the role have across teams and departments?

• How complex and challenging is the role?

• Is the role emphasis aligned to business or technology?

• Does the role promote service awareness and reuse?

• Does the role specify what is needed, or how it is achieved?

• Does the role focus on proactive design, or reactive problem solving?

• Does the role drive automation versus manual process?

• Does the role have leadership and team management attributes?

• Does the role deliver service leadership or resource leadership?

• Does the role need technology competences related to support of products and services?

• Does the role need technology competences related to ability to develop or improve products and services?

The role and competence, balanced with the culture and political influences, will be indicators of the value of an existing role toward the target operating model. The scope of change is also a factor—if the service is greenfield² with new working processes, then you need to address a significant demand for training or hiring of new staff.

One of the most sensitive aspects of transformation is applying economics to people; if you have a large capability gap with a high cost of change, you need to hire people who are supportive of change or already experienced in the target operating model you want to transform to. Workforce attrition needs to be planned, either to avoid people leaving, or to encourage them to do so.

When thinking about your workforce and potentially people within the supplier organizations, it’s important to establish accountabilities and responsibilities for change. It’s important to avoid your transformation program taking on too much and to ensure that the existing organization is involved on your journey.

Assign Accountabilities and Responsibilities

The existing organizational structure often needs to change, but also needs to be included to bring about the desired change (organizational change is high risk). To engage with the existing organization you need to view the current structure, but with an eye on the goals for service layering and a simple hierarchy of governance, management, and delivery.

Keep the following in mind as you build an effective project team, comprising internal stakeholders and external service providers:

• In some eyes, all third parties will be viewed as suppliers, but you need to differentiate when establishing a trusted client-side transformation advisor.

• You need to invest in competence to strengthen your existing teams and may need to augment existing resource with externals to release their availability and benefit from their experience.

• Find the key roles and people from within where possible—drive them to focus on what the business needs first, rather than being bogged down with how they deliver it.

• Focus on enabling and utilizing business as usual (BAU) to avoid the transformation scope becoming unmanageable.

Summary

• If the strategy and planning foundations are solid, then implementing your plan needs a strong transformation executive governance team.

• Organizational challenges include sponsorship, ownership, funding, and contractual dependencies.

• Your transformation program must balance time and risk against target benefits and performance that your organization can both absorb and deliver.

• Workforce change needs special consideration and a competence model supported by human resources to help you direct investment toward hiring, training, and attrition.

¹ Transformation horizons are program milestones that reflect where multiple transformation activities deliver business value.

² Greenfield implies a fresh start to build something new; by contrast, brownfield implies you need to address and change what already exists.