Pulte CIO Has Cloud Horror Story


by Tony Kontzer

You'll have to excuse Jerry Batt if he's a bit grouchy these days. Amid all the talk of cloud computing and its ability to deliver lower costs and unprecedented flexibility, and to free IT staff to focus on bottom-line impact, Batt, the CIO of Pulte Homes, has had enough.

Well over a year ago, Batt told me that his confidence in the cloud had been destroyed. He'd made an aggressive leap by deploying a large IT vendor's on-demand CRM application, imagining all the benefits he'd been told about, both by the vendor and his peers at other companies. He and his staff spent weeks ironing out all the integrations between the CRM application and several other IT systems, a process that proceeded smoothly. But when it came time to make changes to the CRM configuration, all the other applications went down, forcing Batt to uncouple everything and rethink things. It was easy to understand his frustration.

Well, I got to talk to Batt again this week, thinking that by now he'd have had his concerns assuaged by the vendor, and would at least be evaluating a renewed foray into the cloud. I couldn't have been more wrong. As it turns out, Batt is even more suspicious of the cloud today, and it's that same vendor that's shaken his confidence.

What, you ask, could possibly have been worse than his initial experience? Try this on for size: He'd originally signed a long-term agreement with the vendor, committing to pay for the service into 2011 and had paid for some period of time up-front. When the second installment was coming due, he reasonably asked to have it deferred since Pulte hadn't been using any of the capacity it had paid for anyway.

The vendor not only refused to defer the payments, it told him that if he didn't pay, it would shut down access to the service altogether. All of which has led Batt to question the messaging cloud providers have been putting into the market about being able to dial back a service when capacity's not needed. It especially irked him that the vendor seemed unsympathetic about the beating Pulte and other homebuilders have taken in this rotten economy. The episode has led Batt to conclude that the big vendors--or at least, the unnamed one in question--have decided that giving up the software licensing cash cow is too much to face, and that they have to extract their profits somewhere.

Make no mistake--the main thing preventing cloud computing from taking off among the Fortune 500 is that the offerings thus far from big IT suppliers are not thought to be up to snuff. And Batt suggests that IT industry consolidation has resulted in the vendors on that short list having way too much power when it comes to pricing.

It's impossible to conclude from Batt's episode that other large companies venturing into the cloud are experiencing similar nightmares. Most companies wouldn't say if they were having this experience anyway. But the inability of cloud vendors to offer up significant case studies involving big-name companies shows that the cloud isn't enterprise ready yet.

Batt's tale does, however, hold clear lessons for other large companies. For one thing, it highlights the need to negotiate every last detail of a cloud service contract, from asking for SLAs that cover integration issues to ensuring that scheduled payments can be adjusted if usage needs change downward. It also serves as a reminder that, as another CIO told me recently, "Pioneers take the arrows."

Perhaps someday, other IT leaders will tip their caps to Batt in appreciation. For now, such a prospect isn't enough to offset the bitter truth: Batt has been wounded by his experience in the cloud, and it'll be years before he's able to trust it again.

More coming: Look for my package pitting the hype behind cloud computing versus the reality in an upcoming issue of CIO Insight.