AWS Cloud Enterprise Strategy Blog

The Devolution of IT: How SGN, A Major Utility Provider in Europe, is Modernizing IT using the Cloud

©Anna-Maria Oléhn https://www.flickr.com/photos/agrajag42/5044627532/

Many people believe that decentralization means loss of control. That’s simply not true. You can improve control if you look at control as the control of events and not people. –Wilbur Creech

In my role as Head of Enterprise Strategy for Amazon Web Services (AWS), I’m very fortunate to have the opportunity to learn how the most forward-thinking and innovative executives from the largest companies around the world are transforming their business using modern technologies. Meaningful transformation requires strong leadership, and in my recent conversations with Paul Hannan, the CTO of SGN, I’ve found his drive, passion, and perspective on leadership, transformation, and organizational change infectious. I thought that others would agree, which is why I’m grateful that Paul agreed to blog about his experience below!

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Utilities, just like many industries, are undergoing a huge amount of disruption, driven by a wide variety of sources, such as changes in the make-up of energy (natural gas continues to expand its role while the shares of coal and oil decline1), renewable energy sources become more economically viable, dramatic increases in electric vehicles, new market entrants, evolving cyber threats, and new operating models, among others. As a result, the way that Utility companies use technology needs to change to keep pace. The use of ‘smart’ grids, real-time network monitoring, robotics, artificial intelligence, and analytics are becoming the norm. The increasing dependence modern-day Utilities and other organisations have on technology is often described as the fourth industrial revolution (see World Economic Forum).

Expectations of our users, stakeholders, and regulators have rightly soared. For IT to respond to this expectation, we have had to take a very different path to our traditional approach of providing technology.

I’m a great believer in the importance of devolution. As a CTO for a major utility, I’ve adopted a technology strategy centred around the devolution of IT out to the business — enabled by the wholesale adoption of cloud services…. utilising standardisation, infrastructure patterns, automation, and orchestration.

Whilst this may be at odds of with the traditional ‘command and control’ approach of some CTOs, I believe it’s essential to ensure we offer our business the shortest possible path to achieving value through use of technology, and to ensure that the IT function remains relevant in our future organisation.

18 months ago, SGN decided that the right thing for our business’s future was to drive a wholesale adoption of cloud technology. Rather than being driven by the IT department, this was driven solely by our corporate strategy and cold, hard economics. The only way we could achieve the challenges our board had set out for the business was to adopt a far more agile, secure, cost effective, and durable way of delivering IT services — Cloud.

The associated costs and complexity of trying to build our own bespoke capabilities with these characteristics was simply not viable — from an economics or a time-to-market standpoint. We focused on the wholesale, ‘all-in’ migration to avoid a hybrid model, running two different operational, commercial, and security models was too big a risk for us!

Stephen Orban, Head of Enterprise Strategy for AWS, recently described how Cloud is helping IT organizations give greater autonomy to the business rather than control them, which I wholeheartedly agree with.

However, I also think the level of change that the wholesale adoption of cloud services drives is far wider reaching within the business and offers us a 1-in-25 year opportunity to drive far wider business transformation. Recently, a good friend of mine described the need to consider that the “cloud enables you to sort out IT while also shining a light on all of the other process inefficiencies that have been masked for years”.

Don’t let anyone tell you that the adoption of cloud services is solely a technology project. Cloud is a catalyst for a wider transformation programme, both within IT and beyond — as such, its essential that the programme is driven and supported from board-level downwards, rather than from IT upwards.

I’ve referred to our cloud programme as ‘pulling the thread of transformation’, let me explain…….

The principle here is that a single change will cause a wider reaching knock on impact, changing one element will cause other legacy processes to unravel. Our experience has been that if you are committing to Cloud technology and adopting best practices around automation, consumption of standardised services, buy don’t build, commercial and technical portability, etc. it will have a massive impact to the IT organisation. Everybody’s role will be impacted to a lesser or (more likely) greater degree, as well as much wider areas such as legal, procurement, finance, accounts payable, audit, corporate risk, and business programme delivery.

For example, within our own organisation, the areas of change that cloud has directly or indirectly made possible include:

  • A reorganisation of the entire IT department — new target operating models have changed to focus away from build and run towards direct business engagement and consultancy. Adoption of SIAM — Service Integration and Management or MSI — Multi-supplier Integration operational models.
  • A move toward significantly improved security — adoption of best practice security models such as zero-touch, zero-trust, zero-patch, and no-fix.
  • New ways of working with our business — the ability for the business to deliver IT solutions without the need for engagement or ownership by IT has totally changed the balance of the relationship. Business-led programmes are ideal for ensuring continued business sponsorship, engagement and accountability.
  • With lower barriers-to-entry, new commercial ventures and projects become more economically viable for our business to trial and adopt, driving operational and commercial innovation.
  • A change in the focus of legal and procurement — away from bespoke, lengthy contracts to acceptance of standardised, often non-negotiable terms and conditions.
  • A focus on the full lifecycle of procure-to-pay delays in payment of suppliers in a utility computing, cloud environment pose a risk for service availability. If you don’t pay your bills in time you will get cut off!
  • New financial models — a move away from capitalisation of IT spend and a move towards operational expense needs to be understood by your finance and tax teams.
  • New corporate risks which are tracked at board level, for example, data residency.

These are only a set of the wider changes an adoption of cloud based services will help to drive within your business. Each business is unique, however if I can share one piece of advice from our cloud adoption journey so far it would be to align your cloud programme to the corporate strategy…. it is the only irrefutable document in the company. Any initiative which will positively impact the delivery of this strategy will have the attention of your executives, if it is clearly defined and well thought out.

I would also urge you to invest in the partnership with your cloud service providers — develop a mutually beneficial relationship. Its fundamental to de-risking the adoption of new technology and really getting the most out of your investment. The old, confrontational Customer / Supplier model just won’t work moving forward.

The adoption of cloud services can be a real ‘agent of change’ within an organisation to drive new ways of working, new business models and the adoption of best practice processes — I wish you the best on your journey, just don’t let anyone tell you it’s just an IT project!!