“It is a fait accompli—it's already happening,” he said. “The lesson for IT is that, while change is difficult, they must adapt or be swept aside. If they try to obstruct it, business will move around them just like water around a boulder in a river.

“IT has spent a long time telling business how things can't be done—and that has to change with cloud computing,” Hugos added. “There's a huge opportunity for IT if they learn to embrace it.”

FACT VS. FICTION

A cloud-computing and technology expert, former CIO, agile-systems architect, IT industry columnist and author of the book “Business in the Cloud,” Hugos sought to separate hype versus reality in cloud computing.

Hugos' interactive presentation explored where and how cloud computing could be utilized, starting by making the budgetary case for it. IT departments that argue cost-savings of in-house deployment, he explained, are missing the point.

“In the intellectual rigor around budgeting, you need to consider the indirect costs of [in-house solutions],” he said. “It may appear cheaper to own and operate systems, but people often forget to add indirect costs that accompany owning and operating in-house platforms.”

Those costs include procurement and disposal, insurance, electricity and supporting infrastructure, and vendor support, among other hard-dollar line items. It also includes the opportunity cost of having capital tied up in owned systems. Cloud allows companies to pursue a flexible cost structure.

“With cloud computing and software as a service (SaaS), you're not saddled with a massive infrastructure cost. Instead you have month-to-month, pay-as-you-go, cost-effective structures,” said Hugos. “Also, particularly in the shorter life cycle of today's business, how can you afford to allocate your capital to traditional purchases? We no longer have that long-term predictability. When was the last time anybody talked about a five-year plan in IT?”

BUILDING NEW INFRASTRUCTURE

Hugos illustrated cloud deployments within insurance companies using specific examples such as payment processing.

The session also featured an interactive, iterative exercise exploring how to use the cloud at a typical insurer faced with a common business problem: He offered the scenario of a company wanting to launch a new product. The exercise included sketching a conceptual design for IT infrastructure and application systems to support a new venture and deciding whether and how to leverage existing systems or use cloud-based systems. It looked at how to build the proposed infrastructure and to handle common challenges, including security.

GOING HYBRID

During a discussion on costs, Hugos detailed the “hybrid architecture” that most insurers require to utilize the cloud.

“Almost all companies are going to wind up with some sort of mix of traditional in-house and cloud-based systems. Nobody will be entirely one or the other, particularly in insurance,” he says. “As a result, you need a coordinated way of interfacing house with cloud systems.”

That includes creating an orchestration layer between both types of systems. However, it will be a challenge for insurers to link between slower-moving in-house and rapidly evolving cloud platforms, he noted.

Companies also need to deal with traditional concerns of performance and security. “Using cloud doesn't mean opening up your systems to the world,” he noted. “You still need to control the borders and establish APIs with a security mindset. The key is for IT to maintain or even expand its relevance by guiding systems evolution, not obstructing it.”