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Volume XII, Number 10, October 2012

E I:
S I P Y C C C
John G. Mooney, AssociateProfessor
Graziadio School of Business and Management, Pepperdine University
Jeanne W. Ross, Director&PrincipalResearchScien st
MIT Center for Informaon Systems Research
Jarrod Phipps, MBAClassof2011
MIT Sloan School of Management
The distinguishing characteristic of the digital economy is speed. The
accelerating pace of business processes and information exchange is
creating ever higher expectations for faster delivery of IT-based capabilities. Unfortunately, speed has rarely been the trademark of IT units or
the nature of IT projects.
Enter The Cloud. While there are many types of cloud computing, MIT
CISR research has focused on externally provisioned IT and business
services accessed
Its not just efficiency that is important via the Internet.
We have found a
its business capability enablement. growing number of
But of the various business capabilities companies are uscloud services
we are currently enabling, agility is key. ing
to reduce the time
Sue-Jean Lin, CIO, Allergan to deploy new applications and augment existing systems. We
sense that a significant shift to cloud
computing is inevitable. However, it is clear that some companies are
better positioned to embrace this new environment than others.
In this briefing we describe how one companyAllergan, Inc.has
adapted to and benefited from cloud computing. We then summarize the
findings from this case, as well as interviews at forty-five other companies,
to provide a list of six imperatives for preparing your company to benefit
from cloud computing.

Allergan: Driving Business Agility from Cloud Compung


Allergan is a multispecialty health care company based in Irvine, California,
operating in more than one hundred countries. Total revenues in 2011
were USD $5.3 billion, an increase of 11% over 2010. But leadership has
set an ambitious growth target in its five-year strategic plan, which will
require accelerating growth through product innovation, market expansion,
and depth of customer relationships. To that end, CIO Sue-Jean Lin
believes that the company must focus on pursuing its most important

business opportunities, and that IT can help by


facilitating business agility:
Its not just efficiency that is important; people
take that for granted. Its business capability
enablement. But of the various business capabilities we are currently enabling, agility is key.
Sue-Jean Lin, CIO
Allergan Information Services created the capabilities to drive business efficiencies by implementing a single, global ERP over the 19972006
period. To enhance business agility, Allergan I.S.
adopted a Cloud First policy in late 2010. This
policy means that before Allergan buys or builds
additional systems, it first reviews whether a
viable public cloud option exists:
Im building a loosely-coupled architecture based
on providers. Were looking to be remarkably
flexible; were looking to be plug and play; and
were looking for an exit strategy to the next
technology or service provider if required.
Fred Orensky,
Senior Director, Enterprise Architecture
Since 2005, Allergan business units have been
adopting a range of cloud-based capabilities including field sales effectiveness, travel and expense
processing, talent recruitment, HR performance
planning and review, learning management, external collaboration, and identity management.

Implemenng Cloud Services at Allergan


Allergan I.S. executives describe their move to
cloud computing as shifting from delivering IT
solutions to brokering business capabilities.
Until 2010, cloud computing was deployed to
support only business competencies that management considered non-core and carried low
data security risk. Over the past two years,
Allergan has expanded the range of competencies enabled by public cloud services to
include those that are non-core with high data

2012 MIT Sloan CISR, Mooney, Ross, and Phipps. CISR Research Briefings are published monthly to update MIT CISR patrons and
sponsors on current research projects.

CISR Research Briefing, Vol. XII, No. 10

Page 2

security requirements. This expansion was possible because Allergans


comprehensive cloud vendor assessments found vendors with data security
processes as thorough as its own. In addition, because many core competencies rely on some non-unique services, Allergan has also expanded
cloud services to include support of some core competencies with low data
security requirements. (Figure 1 shows the changing landscape for cloud
computing at Allergan.) Ultimately, the CIO estimates that Allergan may be
able to rationalize more than half of its application portfolio into the cloud.
CIO Lin is addressing three challenges as she works toward successful
implementation of cloud computing. The first challenge relates to data,
particularly customer data. Head of enterprise architecture Fred Orensky has
observed that rapid deployment of services requires a carefully designed and
executed data architecture. Individual countries unique rules about transporting data impose additional demands on Allergan to manage data that
could otherwise be accessible to widely distributed cloud services. Moreover,
data integrity depends on clarifying data ownership.
I look at our Technology Steering Committee and say, The enterprise owns
the data. And its not that the CFO owns all the finance data and its not
that sales and marketing owns the marketing data. We really need to democratize data from an enterprise perspective.
Sue-Jean Lin, CIO
The second challenge is in reskilling the IT professionals. Allergan will
increasingly rely on external
At Allergan, the real benefit of vendors for IT services that
cloud, on the cost side, has were previously provided by
company-owned or -licensed
been to provide long-term systems. Consequently, IT perfinancial predictability. sonnel must develop skills
around architecting, brokering,
and orchestrating services to
provide key business capabilities and drive
effective information use:
I see more resources focusing on cloud services and the integration of the services.
I see more resources shifted toward the data management, business intelligence,
and social networking to improve collaboration, decision quality, and speed.
Sue-Jean Lin
The third challenge is governancespecifically, addressing the constant
tradeoff between the needs both for stable enterprise-wide platforms and
responsive localized plug and play services. Business Relationship Managers
(BRMs), with strong alignment to business unit heads and the CIO, have
primary responsibility for ensuring that business units obtain the functionality
they need. The enterprise architecture team clarifies the architectural requirements for that functionality, and identifies when existing platforms should be
reused or new cloud-based capabilities should be considered.
In addition, Allergan has implemented an enterprise-wide Technology Steering Committee that gives business executives the majority voice on
prioritization and approval of new platform and business capabilities. I.S.
has just two votes on the eleven-person committee, as well as veto power if
the CIO believes an individual initiative could have transformational effects
on the firms long-term performance. These governance arrangements have
solidified accountability in decision making.

October 2012
In the past, we had fragmented IT solutions.
While the business units appreciated I.S. for
their execution, there was no coordinated longterm approach. Now the governance bodies
work together to establish a global technology
portfolio. We all get to where we get, together.
The decision of going cloud or staying with
on-premise follows the same governance
process.
Sue-Jean Lin

Outcomes of Cloud Compung


at Allergan
Very early in its journey, leaders at Allergan
envisioned that the primary benefit of cloud
computing would be cost savings. But the real
benefit of cloud, on the cost side, has been to
provide long-term financial predictability. Allergan has shifted costs from CapEx to OpEx.
Thus, the company is not tying up resources in
long-term legacy assets that inevitably constrain
responsiveness to new business opportunities. Instead they are directing resources to enabling
these opportunities. In addition, cloud computing
offers an elegant solution to the persistent need
to upgrade systemsa time-consuming and costly process that adds little value.
As anticipated, Allergan is finding that cloud
computing is a significantly faster way to deliver
new capabilities. This has been particularly true
with infrastructure services:
We delivered Oktas cloud-based Identity
Management in seven weeks. We have thirty
other services in queue to be delivered on that
platform in the next six weeks. When have we
been that responsive with traditional development approaches? So, it really is a plug and
play activity. As these cloud providers all design
their services to plug in, my time to delivery
continues to shrink.
Fred Orensky,
Senior Director, Enterprise Architecture
The greatest impact of cloud has been the way
plug and play allows Allergan to rapidly respond
to unique business needs. Allergan can standardize processes across the business where it
makes sense, or it can deliver specialized services to support unique business requirements
of different parts of the business:
In Spain, for some of our products, individual
pharmacists are only allowed to deliver to four
doctors. So you provide them a plug and play
solution without retooling the enterprise solution

October 2012

Page 3

for the enterprise platform. The end result is a


flexible business solution delivering a totally different effect without negatively impacting an
enterprise approach.
Fred Orensky,
Senior Director, Enterprise Architecture

Imperaves for Preparing for the Cloud


As Allergan demonstrates, many of the practices
central to effective deployment of cloud computing are the same practices that drive value
from digitization in more traditional IT environments (e.g., architecture, governance, cost transparency). However, the tendency for business
users to adopt public cloud computing on their
own, despite its requirements for data integration
and service orchestration, exacerbates the risks
of undisciplined IT management. MIT CISR
research and the experiences of companies like
Allergan suggest six imperatives that can help
your company prepare for cloud computing:
1. Rethink the IT value proposition. The
competitive need for business agility is
driving organizations to identify options for
accelerating the deployment of digital platforms. This requires firms to focus IT
business cases on fast deployment (and
retiring) of digital capabilities that enable
business agility, not just business efficiency.

CISR Research Briefing, Vol. XII, No. 10

2. Re-architect your digitized platforms. The cloud model involves


reducing the scope of your core enterprise platforms to essential
enterprise-wide end-to-end processes and shared data. Architecture will
increasingly focus on designing interfaces between those more
minimalist enterprise platforms and external cloud services.
3. Redesign your IT governance. Effective adoption of cloud services
will depend on the ability of IT and business leaders to decide which
capabilities should be local and which should be global. In many cases,
this will push the centralized governance models of recent years toward
more distributed models, which may extend to include vendors.
4. Reallocate IT budgets. Moving funds from CapEx to OpEx requires
a shift from investment management to value management.
Transparent IT costs will be essential to that shift.
5. Refocus on user needs and preferences. Digital platforms must go
beyond supporting (or enforcing) standardized enterprise processes
that have been the focus of ERP deployments; they must also empower
employees and accommodate their personal work styles. Corporate
computing platforms must now also respond to the high usability
expectations and device preferences that users have experienced with
consumer technologies.
6. Redevelop the IT organization. IT people no longer design, build, and
runthey now broker, orchestrate, and exploit. Thats a new set of skills.
Many companies are treading carefully as they ponder the move to the
public cloud. This is understandable because, while the march to cloud is
inevitable, the practices for realizing significant business value from that
march are not. The competitive necessity for business agility, however,
requires that all businesses prepare to adopt public cloud services.

2012

Focus mostly on SaaS

Focus on SaaS, PaaS, SIaaS, HIaaS,

Cloud Sweet Spot

High

Experiment

Cloud Expanding
BoxDocumentMgmt
Salesforce Chatter
IDentity asaService
DocuSign eSignature
ManagedFileTransfer
IntegrationasaService
CloudFaxService
CloudasaStorage

Experiment

High/Unmanageable

Low/Manageable

Data Security Risk

Cloud Sweet Spot

Salesforce/Force
SuccessFactors
Taleo
eLoyalty
Ominture
WebEx
Akamai
Google/Postini

Cloud Expanding
ClinicalTrialsEnrollment
ClinicalTrialsRegistration
DataVision Publication
Tool
PerceptiveIVRS
PolarisCTMS
OBAIRMS

CallCenters

Low

Avoid

Salesforce/Force
SuccessFactors
Taleo
eLoyalty
Ominture
WebEx
Akamai
Google/Postini

High

Single Tenancy

Differentiating Core Competency

2010

Low

Differentiating Core Competency

Figure 1: 2010 to 2012Allergans Cloud Journey

High/Unmanageable

Low/Manageable

Data Security Risk


Source:FredOrenskyandTomaszKozlowski,EnterpriseArchitecture,Allergan