How to navigate your cloud journey

1Whitepaper headline goes here like this

How to navigate your cloud journey

A deep dive into the top four challenges of business transformation

2How to navigate your cloud journey

Table of contents

Cloud as an engine for business transformation 3-4

Challenge 01: Cloud and your team 5-10

Challenge 02: Cost misconceptions 11-15

Challenge 03: Organizational modernization 16-20

Challenge 04: Business and IT misalignment 21-26

What’s next? 27


What makes a high-growth company in today’s always-

connected world? As the digital revolution continues to

permeate every industry, all companies are now essentially

technology companies, looking to transform their businesses

and operating models in order to remain relevant and

competitive

Within pharmaceutical companies, for example, we see a

growing investment in leveraging digital channels to directly

connect with consumers in an effort to retain market

share after their patents on blockbuster drugs expire and

generics enter the market And across the financial services

industry, we see clients unconventionally diversifying revenue

streams by repackaging capabilities, such as sophisticated

risk management and regulatory compliance practices, and

offering these as digital products and platforms across a

wide range of industries What those strategic shifts have in

common is the underlying foundation that cloud technologies

bring to broader business transformations

Cloud technologies are no longer the future of technology

Cloud is here and successful businesses everywhere are moving

beyond the cost benefits of migration and looking at cloud as

an engine for business innovation


These companies still benefit from the technical advantages of

cloud—high availability, fault tolerance, scalability, and elasticity—

while also taking advantage of emerging technologies such as

artificial intelligence, machine learning, and augmented reality

to help evolve core capabilities and open new revenue streams

through innovative solutions they were previously unable to build

As companies progress on a transformational journey, we’re

seeing a host of common challenges that prevent or delay

companies’ transformation objectives The top four challenges

we see are related to operational and organizational challenges,

not technology Approaching a business transformation enabled

by cloud with a comprehensive—i e , strategic, operational, and

technical—mindset helps organizations foresee and overcome

these roadblocks, accelerating the journey to the cloud and the

business value that comes with it

Top four cloud challenges

01 Lack of relevant cloud skills and resources

02 Funding and financial planning constraints

Let’s dig a little deeper into the top four challenges of cloud

transformation: skills and resources, funding and budgets, culture

and organizational structure, and IT-business alignment

03 Siloed organizational structure and legacy culture

04 Limited IT and business alignment


Cloud and your team

challenge 01

Upskilling people

and resources


Let’s unpack that top challenge regarding skills and resources

A move to the cloud requires new ways of thinking, organizing,

and working From a people standpoint, companies that

employ a product ownership model have the least amount

of friction as they navigate this seismic shift in talent

alignment and workforce enablement In a product ownership

model, teams organize around a product or suite of products

and the team contains all the skills and capabilities required

to develop and deliver that product end-to-end This breaks

the traditional organizational hierarchies where teams from

multiple silos come together to deliver a project, and it requires

members who can flex across multiple disciplines while

maintaining deep expertise in one or more areas

At the same time, this requires a dramatic shift in the way

we think about reporting relationships, product oversight,

and talent management Instead of a manager overseeing

an employee’s overall performance, work quality, career

pathing, skill development, training plans, and more, a product

ownership model breaks those responsibilities across product

and talent, or “practice ” In this model, the product team lead

focuses on performance and quality relative to the product,


and the practice lead oversees the more people-focused

functions of talent management,

such as career pathing, skill development, and training

Decoupling these dimensions of an employee’s work

experience provides a deeper level of engagement at the

employee level, and that has a measurable impact on

employee satisfaction, retention, performance, and overall

quality of delivery

Still, it’s not just the organizational structures and ways

of working that shift with a move to the cloud In many

areas, the fundamental knowledge, skills, and abilities

needed to deliver technology solutions have changed For

example, administrative roles focused on configuring and

maintaining infrastructure will most likely get “cloud-sourced”

away Conversely, skillsets focused on IT procurement and

integration with cloud services will be greatly rewarded

Further complicating the complexity of the cloud journey is

the fact that workers with cloud-related skillsets—business

management, development, security, infrastructure, and

operations—are in short supply At Slalom, we’re seeing

demand far outstrip supply for cloud resources in markets

such as Seattle, New York, and Los Angeles And recruiting

is the first challenge of many

Ask yourself the following questions:

• How much are we willing to pay for these skills? How much should we pay?

• How are career paths and leadership development initiatives impacted for the people we have?


• Where should we invest in building these skills internally?

• What skillsets and experience do we need to recruit externally?

• How do future automation efforts play into our talent model? How can we get ahead of that?

Determining the right mix of talent can be intimidating

And the mix will vary for every organization We work

with clients to define the organizational talent strategy

by mapping the organizational capabilities, talent, and

long-term goals across our 4Bs of talent: build, buy,

bots, and borrow

Build Develop team members to learn and apply new skills

Buy Source key roles and skillsets to help jump- start your progress

Bots

Automate high-volume,

business-as-usual activities

to create capacity for

delivering value

Borrow

Use consulting services

to help fill gaps or

accelerate progress

The 4Bs of talent


Build, buy, and borrow are not new concepts in talent

management In a product ownership model, however, they

take on new importance The mix is what matters, and there’s

no “right” mix for cloud success Drivers, cloud entry point(s),

and current talent composition, as well as the speed with

which you want to move, will determine what mix is right for

your business

And then there are bots An organization moving to the

cloud should consider the mix of build, buy, and borrow talent

required, as well as how bots can automate routine tasks,

freeing up capacity within your organization to focus on

delivering value

Regardless of whether your organization is at the start,

middle, or end of its cloud journey, thinking about talent via the

4Bs framework will help Consider whether your talent needs

are permanent needs that you can develop within your existing

talent through training and skill development (build), strategic

needs where you need to recruit from the talent market (buy),

short-term skill gaps where you can leverage third party labor

(borrow), or automatable “skills” that you don’t need a human

for (bots)

While all four require investment, building talent requires the

most complex internal commitment One popular method of

upskilling talent in more technical, development-focused roles

is that of a cloud “Dojo” popularized by Target


The Dojo model is a dedicated, immersive learn-by-doing

construct where participants progress through three

levels of mastery: Grasshopper, Ninja, and Zen Master The

Grasshopper is concerned with getting a handle on the

fundamentals of cloud (flexing across multiple disciplines),

while the Ninja and Zen Master branch out and develop depth

within specific areas of the product team’s competency

(building deep expertise)

Whether you’re cloud curious and beginning to learn about

how cloud might be useful to your organization, cloud native

and ready to disrupt your industry, or somewhere in between,

you shouldn’t underestimate the impact of cloud on your

organizational structures, talent alignment, and resource

plans Address these areas of uncertainty early and revisit your

assumptions and conclusions often to avoid being blindsided

by talent-related roadblocks

“ Address these areas of uncertainty early and revisit your assumptions and conclusions often to avoid being blindsided by talent-related roadblocks.


Cost misconceptions

challenge 02

Aligning on total

cost of ownership


The promise of cost efficiencies when moving to the cloud

are often overinflated and provide only a narrow view of the

financial implications that come with a move to the cloud In

fact, we see three core stumbling blocks that senior leaders

across both IT and the business are experiencing:

Blocker 1: Underestimating total cost of ownership

When total cost of ownership is underestimated, time to

realize savings will be longer than expected In fact, many off-

the-shelf calculators only account for the basic cost of cloud

hosting They compute cost and ignore the cost of migration

and training

A great example of this is a life insurance company that was

looking to the cloud to broaden its capabilities and redirect

resources to transformation activities more quickly Not

surprisingly, after conducting a financial analysis, we found

that the cost of migration alone accounted for 67% of the

overall investment that would be required to move and

operate in the cloud

what our client thinks it costs

what it really costs


Additionally, the savings were forecasted to be realized three

years into the cloud journey—only if they met the assumed

timeline and retired the data centers accordingly

Blocker 2: Ignoring the organizational impact of new accounting requirements

Major cloud providers and integrators promote the strategic

benefits of shifting from a Capex to Opex but typically ignore

the implications of that shift on organizational, accounting,

and operational structures

Traditionally, budgeting for infrastructure is akin to buying

a building You buy the building and capitalize it over its useful

life Cloud, however, is analogous to an electricity bill

• Number of applications• Virtual machine (VM) server count• VM maximum storage• VM utilization• VM operating system

• Number of applications• Application profile (built/bought)• Level of refactoring/

rebuilding of apps

• Upfront costs paid to training provider per session

• Level of organizational experience working with each cloud provider

Cost drivers

Full

Cos

t Po

tent

ial

Trad

itio

nal

calc

ulat

ors

end

Cloud Hosting & Compute Costs

Migration Costs

TrainingCosts


You only pay for what you use That somewhat-simple shift

requires different accounting treatments, for example, due

to changes in tax structures and a change in how leaders

develop operating plans Commonly, clients who have not

thoughtfully architected their accounting structures have

unintentionally over-consumed cloud services and incurred

unnecessary material costs—often in the millions These costs

are then charged back to the business units, an unforeseen

impact on their P&L

Blocker 3: Neglecting to formalize budget accountability

If budget accountability is not formalized, cloud migration

can be delayed Cloud benchmarking tells us that most cloud-

related costs are incurred at the time of migration However,

what we repeatedly experience with clients is that ownership

of the cloud budget is not clearly outlined, formalized, and

agreed upon early in the planning process When it comes

time to migrate and the migration financials are presented,

this results in a sort of budgetary panic which delays the

migration activities


To overcome these challenges, companies need to take a

thoughtful yet decisive approach to assessing and planning for

a cloud investment This begins with a strong why:

01 Before staffing your migration or setting up your

landing zone, you need to clearly understand if the

return is worth the investment

02 You should determine the level of fidelity required in

determining your total cost of ownership The off-the-

shelf calculators provided by the large cloud vendors

do not account for the total cost of ownership, such

as the cost of migration To get a holistic total cost

of ownership calculation, you’ll need a more detailed

discovery of what you’re looking to migrate

03 Ensure that an accountable executive is assigned

to the budget

04 Lastly, assess the impact to the accounting and

operational structures and include mitigation

plans for these impacts into your organization

change management efforts


Organizational modernization

challenge 03

Transforming legacy

ways of working


Cloud technologies are fundamentally changing the way

companies do business By taking advantage of the speed

and scale cloud has to offer, we’re seeing companies releasing

features more often and interacting with customers more

dynamically, in near real-time While these benefits ultimately

generate more value for the company and its customers, they

also significantly disrupt organizational culture and structures

There’s no “correct” operating model for a move to the cloud

The right answer for your organization will depend on a variety

of factors, as discussed earlier in this paper Therefore, to

prepare for this disruption, we recommend that senior leaders

reflect on these core questions before beginning the journey

to the cloud:

What should my cloud operating model look like?

Imagine the advances in the assembly line In 1913, Henry

Ford introduced the first moving assembly line that broke the

process of manufacturing a motor vehicle into discrete steps

and trained each worker to do just one step As the process

became more streamlined and sophisticated, the human

hand was required less and less Today, through advances

in technology, most assembly lines are automated and only

require a human worker at the end of the process to monitor

defects

Legacy technology organizations often still operate similarly

to the older assembly line process Many still have a plan-build-

run operating model that requires siloed skillsets and multiple

handoffs throughout the process


To take advantage of the cloud, companies should embrace

new ways of thinking, working, and doing business A great

place to start is DevOps Like the assembly line advancements

that brought us to today, DevOps emphasizes better software

delivery and automation of commoditized tasks so that

software engineers can be focused on continuously integrating

and developing new features

What are the culture shifts when moving from infrastructure as hardware to infra-structure as code?

When it comes to the shift in culture, we typically see two

common causes that contribute to clients’ successful business

transformations enabled by cloud

The first is moving from siloed, specialized, functional-based

teams (i e , application development, release management,

operations, infrastructure, etc ) to full-stack engineering

teams with cross-functional representation from each of

those respective areas of expertise


These teams are no longer focused on completing a specific

activity and “throwing it over the wall” to the next function

Rather, they work as one collaborative team, with a shared

understanding of the product goals and objectives for each

work iteration They must work in concert to develop, release,

and manage a product for the end-user, and they should be

structured at the outset to be more high performing in the

pursuit of that goal There’s a different level of coordination

and speed expected from these teams

The second cause is a mindset we call “data-center brained”

which is a traditional infrastructure mindset that engineers

apply to the cloud The “data-center brained” mindset tries

to apply a hardware approach to infrastructure as code

which works best with software engineering disciplines

For example, clients we’ve worked with focus heavily on

contracting the right service-level agreements This mindset

is the opposite approach to site reliability engineering (SRE)

In SRE, software engineering methods are applied to legacy

approaches While focusing on service level agreements is

important, the focus of infrastructure should be working with

software engineers to architect the application for fail over

Is there change fatigue from past “transformations”?

There will be organizational anxiety around the cloud

There will be anticipated stress from “another large-scale

transformation we need to live through ” Companies that

have been around since the 1960s have seen significant


changes in technology from IBM’s mainframe to the rise

of cloud and now the innovative Everything-As-A-Service

offerings that are made possible with cloud Operationally

and organizationally, we have seen the move from

information technology infrastructure library (ITIL) and

Cobit-based methods to new frameworks such as Agile,

DevOps, and SRE And that’s just on the technology side

Operating model changes, business line transformations,

reorganizations, and more can lead your people to collapse

from change exhaustion

The reality is, change is the new normal for today’s

organizations, given technology innovation and the speed

of business The organizational—and human—ability to cope

with change, however, has not kept pace The impact of a

cloud transformation on your organization must be viewed

through this lens

Still, the possibility of change fatigue doesn’t mean

you should delay or abandon your cloud pursuit Cloud

is here to stay, foundational to remaining competitive

in the digital world It does mean that you should have

strong organizational change management strategies,

plans, and resources to guide your efforts Focused

leadership alignment activities, strong and transparent

communications, federated and influential change

ambassadors, and comprehensive upskilling and training

resources—as well as a comprehensive measurement

approach that allows you to monitor the organizational

pulse by measuring what matters—can all help reduce the

impacts of your organization’s change fatigue


Business and IT misalignment

challenge 04

Creating a unified

organization


Misalignment between the business and IT is not new and is

certainly not unique to cloud transformation In fact, it’s the

expectation The reason for this friction is not black and white,

and it’s not simple to solve With our clients, we see several

contributing factors that drive misalignment between the

business and technology

Factor 1: Lack of alignment on the why

A common driver of misalignment is a rushed executive

imperative to close the company data centers This type

of hasty move, typically inspired by a desire to save costs, is

certainly disruptive–not necessarily in a good way A rush to

exit your data centers inherently means a rushed planning

process, or little planning at all This means closing the data

centers can actually increase your costs, as you experience

unplanned downtime, missed deadlines, and ballooning costs

because of unforeseen challenges

For example, a large pharmaceutical company, in an effort to

rush out of its data centers due to upcoming lease expirations,

decided to take a large lift-and-shift strategy After a year of

migrations, it found its cost inflated because it could not get

all of its application out of the on-prem environment without

impacting the business This led to duplication of cost because

the company had to operate both in the cloud AND continue

its on-prem operations


The reality is that when the business neglects to collaborate

with technology to define their strategy, particularly when

their strategy needs to be enabled by technology, the result is

a gap between the strategy and the IT capabilities required

to deliver it Additionally, this creates a demoralized IT

organization that is not particularly motivated to deliver

Factor 2: Lack of business understanding of required cloud capabilities

If you’re cloud curious, odds are that your legacy technology

organization lacks the skills and capabilities to deliver

your cloud vision As discussed in the section on the 4B’s

of talent, cloud skills are newer, in higher demand, and

severely lacking in many markets Yet, many business leaders

are underestimating this challenge and looking to their

IT organizations to quickly be able to deliver the enabling

technology for their future growth objectives This is an early

sign of misalignment

For example, a large credit rating agency was looking for

ways to digitize and enhance its customer touch points in

order to manage its growing product portfolio The team

decided to engineer a portal that provided a historical

view of customers’ credit ratings, investor statistics, and

external research and events The efforts were focused on

architecting and engineering the solution without thinking

about the required capabilities to support the roll-

out of the portal


They didn’t have a defined incident model that allowed them

to detect if there were bugs that users would experience This

led to a two-month delay in making the technology generally

available, incurring additional unexpected costs

Factor 3: Lack of clarity in decision making authority

Where does the buck stop? Because the business typically

owns the costs, applications, and customer experience,

it’s logical to assume that the business makes the decision

to move to the cloud And yet, once the rationalization of

applications is complete, migration decisions are often made

by the technology organization—or worse, by the consultants

hired to manage the migration Cloud offers many unique

benefits such as the ability to tag and track the usage of

services down to the user level However, most companies

aren’t used to this level of granularity and authority around

the technology decisions


For example, a large asset management company

historically charged IT spend back to its IT cost centers

With cloud, they had the ability to set up charge codes that

allocated the spend directly back to the business This meant

that they were then in the chargeback business, which required

dedicated personnel that could understand, forecast, and

ultimately make decisions on the cloud spend Companies

will have to decide to weigh the benefit and cost of having

the business versus IT owning the decision-making, as it will

come with a cost

While the problem of misalignment is age-old, cloud is a

technological enabler that provides the opportunity to re-

draw the relationship between the business and IT Whether

you’re early on your cloud journey or in the middle of one, it’s

important that the entire organization spends time aligning

and documenting these high-level factors

Here are some key questions to ask your team to gain alignment:

Align on the why:

• Why are we moving to the cloud?

• What are the business drivers?

• What are the business benefits of cloud outside of technology?

• What are the business benefits beyond cost?

• Are the benefits of cloud apparent outside of technology?


Align on the what:

• What will the true cost of cloud ownership include?

• What capabilities do we need to serve our customers? Are there gaps?

• What are the organizational impacts? Operating model impacts?

• How do our ways of working need to evolve?

• How will we measure success?

Do we have a baseline?

Align on the how:

• How are decisions made? Who has authority? How are decisions communicated?

• How does technology consult the business on technology capabilities?

• How do we get our people speaking the same language?

• How mature are we today? What is our target maturity? How will we get there?

• How do we monitor and report on program success?


At Slalom, we help our clients accelerate or get unstuck on the journey

to the cloud Our approach is to proactively address these challenges

and to bring a codified, experience-based set of insights and assets

that enables our clients to quickly realize the ROI We believe that the

cloud is a strategic advantage that allows companies to quickly build

capabilities and products with scale and speed The key to successfully

transforming into a cloud-first company is in how business and IT

work together to modernize their organization and ways of working

What’s next?

“The Target Dojo ” The Target Dojo, https://dojo target com/

References


Slalom is a modern consulting firm focused on strategy, technology,

and business transformation In over 30 markets across the US, UK,

and Canada, Slalom’s teams have autonomy to move fast and do

what’s right They’re backed by regional innovation hubs, a global

culture of collaboration, and partnerships with the world’s top

technology providers Founded in 2001 and headquartered in Seattle,

Slalom has organically grown to over 7,500 employees Slalom was

named one of Fortune’s 100 Best Companies to Work For in 2018,

and is regularly recognized by employees as a best place to work

Learn more at slalom com

About Slalom

About the authors

Ash Epp

Ash Epp is a seasoned Change Management professional with over 17 years of international

Program, Change and Communications leadership Ash has a proven track record of

helping senior leadership and the C-Suite execute transformation initiatives in over 25

countries around the world Prior to joining Slalom, Ash spent 15 years at PwC working

with technology executives around the world in her role as Director of Transformational

Change Management During her time at Slalom, Ash has helped multinational clients with

technology-enabled business transformation and serves as a business advisory lead for cloud

enabled business transformation in Denver Ash’s passion is helping clients tackle complex

analytical questions, define and communicate strategic vision and goals, drive executive and

stakeholder alignment, and infuse collaboration across the organization


David Lam

Tom Caron

David is a management consultant within Slalom’s strategy and operations practice His focus is on helping clients deliver new products and services or drive greater profitability within the existing business through leveraging cloud-based technologies He has experience delivering large scale business transformations or strategic cost reduction programs within multiple industries including airlines, technology and consumer packaged goods David Lam is no longer with Slalom.

Tom Caron is a Principal Consultant in Slalom’s Boston Office He is frequently engaged to plan, design, develop, and implement complex business transformation programs for Slalom’s largest and most important clients His list of delivered projects has addressed various business problems including IT behavioral risk, IT security policy, technology portal development, ERP implementation, and compliance In addition to his client contributions, Tom leads the development of the Learning Services area within Slalom Boston’s Organizational Effectiveness practice, helps organize Slalom’s global Business Transformation Enabled by Cloud efforts, and serves as a people manager to up-and-coming Slalom talent Prior to Slalom, Tom was most recently the Vice President of Operations at Information Mapping, where he oversaw finance, technology, human resources, and service delivery for the U S firm

Ahad Hosseini

Ahad is a management consultant for Slalom with a focus on business architecture, competitive business strategy, and organizational effectiveness His teams and clients use him as a subject matter expert for strategic value realization and cloud transformation efforts Before joining Slalom, Ahad co-founded SigNeuro, a precision medicine company Prior to his entrepreneurial work, he worked as a management consultant for Black & Veatch, a sales engineer for Rockwell Automation, and as a business specialist for Apple He has a B S in Industrial & Manufacturing Systems Engineering

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