How to become an accidental cloud service provider

It’s always tough to generalize about which customers are betting heavily on the cloud and why, because the use cases are all over the place. I made an attempt recently to nail things down in an interview with Scott Sanchez, director of strategy for Rackspace Open Cloud, asking him to admit that the real target for the OpenStack cloud platform was the service provider market.

Sanchez’s pushback was enlightening: “You’re right that our target market is service providers. But what we’re seeing is large enterprises that want to become service providers.”

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Sanchez meant that in a broad sense — large IT departments are demanding the cloud automation necessary to deliver IT as a service, mainly to internal customers. But I think many companies that make a major commitment to either the private or public cloud end up becoming cloud service providers to a variety of customers, whether or not they planned it that way.

A great example of that transformation emerged from a conversation I had with Van Beach, product manager at Milliman, one of the largest independent actuarial and consulting firms with 55 offices around the world. I interviewed Beach in a cloud panel discussion at the Microsoft U.S. CIO Summit on the Microsoft campus last week.

“If you talked to me four years ago, I suspect I would not have envisioned myself sitting on stage today saying I’m a cloud service provider,” Beach told me. “But that’s really what we are and I think we’re doing pretty well at it.”

Getting in on the ground floor Beach’s journey began in 2010 when Milliman worked with Microsoft to move its flagship application, MG-ALFA, to the Windows Azure public cloud — the same year Azure officially launched. Originally offered as licensed software, MG-ALFA is a highly processing-intensive application that insurance firms typically run on a grid infrastructure for risk management analysis, employing simulations with randomly generated economic scenarios.

The initial attraction of the public cloud was the spiky nature of the workload. “At year-end or quarter-end you’re dealing with high levels of demand, and off-peak it’s very low,” said Beach. “So to meet that challenge, you either have to … balance those workloads more evenly across the entire year, or you buy resources for peak demand and you’re dealing with low levels of utilization and ultimately have a very costly solution.” Such variability is often considered an argument for turning to the public cloud, which features both near-infinite scalability and pay-per-use pricing.

But a funny thing happened along the way. According to Beach, rather than simply porting MG-ALFA to the cloud, Milliman saw new opportunities to “elevate” various functionality to the cloud as the project progressed:

We started down a path, and we’ve just continued to evolve. At each point we’ve asked ourselves, “What’s the problem we’re trying to solve?” and “What can we do with the cloud?” And we’ve continued to build more and more cloud-based solutions. The first problem we addressed was capturing the scale, the compute power of Azure. Once we had that problem solved, then we were faced with: We’ve got all these projections, all these runs that we need to execute, how do we get them to the cloud efficiently? So we developed a workflow automation and scheduling system. Once that problem was solved, we dealt with all the assumptions, all the inputs, all the people who need to come together to get these projections constructed before you can execute. That’s highly collaborative, needs to be centralized, needs to be version-secure — so use the cloud. When our clients move to MG-ALFA in the cloud, we’ve set it up so they need to do a lot less work. It’s really just a matter of making the business case and flipping the switch.

The net effect, Beach says, is that moving to the public cloud has changed the game Milliman is playing: “We’ve gone from providing a single solution through a product to really a broader solution set, and tackled the problems that our clients faced at a much broader level rather than just specific calculations. Now we’re talking about infrastructure and really a more complete package.”

Elevating to the public cloud Beach calls this comprehensive approach the “industrialization” of the entire actuarial workflow from end to end. He cites an impressive payoff for one Milliman customer in particular. “That first client we worked with, based in the U.K., went through a process to deliver results that used to take 165 days; now it takes 10. The man-days were in the neighborhood of 180, which is now 5. The calculation time was 50 days to get all their models to process; now it’s 2½ days.”

In Milliman’s case, what began as public cloud approach to address a problem of variable workloads quickly morphed into an opportunity to take multiple activities related to the actuarial process — previously scattered across client desktops — and centralize and secure them in the public cloud. As a result, Beach said, Milliman can now offer a solution that exists nowhere else in the industry today.

That full-service scope has enabled Milliman to become a more valuable partner for its clients, and Beach isn’t done yet: “If we’ve learned anything it’s that we have to keep a really open mind to every challenge, because the pace the technology is evolving so quickly and we have to stay nimble.”

This article, “How to become an accidental cloud service provider,” originally appeared at InfoWorld.com. Read more of Eric Knorr’s Modernizing IT blog. And for the latest business technology news, follow InfoWorld on Twitter.