Earlier this year, IBM’s Institute for Business Value published a very good report - The Power of Cloud: Driving Business Model Innovation. Along with the Economist Intelligence Unit, the IBM study surveyed 572 business and technology executives around the world to learn how organizations use cloud today and how they plan to use it in the future. “Recent technology and social connectivity trends have created a perfect storm of opportunity for companies to embrace the power of cloud to optimize, innovate and disrupt business models,” is the study’s overriding conclusion.
“Although cloud is widely recognized as a technology game changer, its potential for driving business innovation remains virtually untapped. Indeed, cloud has the power to fundamentally shift competitive landscapes by providing a new platform for creating and delivering business value. To take advantage of cloud’s potential to transform internal operations, customer relationships and industry value chains, organizations need to determine how best to employ cloud-enabled business models that promote sustainable competitive advantage.”
The survey finds that cloud is still in the early stages of deployment, but its use is expected to grow over the next few years. Almost three quarter of the surveyed executive said that they have cloud initiatives underway, but only 13 percent said that they already have substantial cloud implementations. In three years, over forty percent expect to have such substantial implementations, while 90 percent will be involved with cloud initiatives in one way or another.
According to the report “cloud empowers six potentially game changing business enablers”:
- cost flexibility - reduce fixed IT costs by shifting from capital to operational, pay-per-use expenses;
- business scalability - provision IT resources as needed and thus easily scale business operations without limits;
- market adaptability - rapid prototyping and innovation to quickly respond to rapidly changing market conditions;
- masked complexity - timely introduction of sophisticated products and services while hiding the complexity from the end users, including upgrades and maintenance;
- context-driven variability - customize products and services to deliver a more user-centric experience based on each user’s preferences; and
- ecosystem connectivity - bring together disparate groups of people, thus facilitating external collaborations with partners and customers.
The report brings together its various findings and recommendations into a Cloud Enablement Framework, which classifies the use of cloud in business into three main categories: optimizers, innovators and disruptors.
Optimizers focus primarily on IT flexibility and scalability - the best recognized cloud benefits and the main reasons why most companies consider cloud computing to begin with. This enables them to significantly improve their current products and services, as well as to attract many new customers without major investments in additional IT infrastructure.
Netflix's use of cloud computing for their rapidly growing video streaming service is one of the best examples in this category. Over the past couple of years, the company made the decision to migrate its web site and streaming service from a traditional data center to a cloud environment, - Amazon Web Services. This enabled Netflix to significantly expand their customer base without having to build and support additional data centers, as well as the cope with the large surges of capacity the video streaming puts on the system during peak times.
Innovators, the second Framework category, look to leverage cloud computing to lower the risks involved in exploring new revenue streams through new products and services, new channels to market and the pursuit of adjacent business opportunities.
As this recent Forbes article succinctly points out in its title - How Cloud Computing is Fueling the Next Startup Boom, - “today’s entrepreneurs have an incredible resource available at their fingertips at minimal cost - cloud computing.”
Ten years ago startups required serious capital, upwards of $1 million, to buy the computers needed to develop and prototype their new ideas. They also needed to hire a variety of skills to support key business functions, including marketing and HR. Today, both the required IT infrastructure and business functions are available as cloud-based services at far lower costs. This makes it much easier to get a new venture off the ground.
Disruptors, the last category in the Cloud Enablement Framework, leverage cloud computing to create new markets and customer segments, as well as new business models and revenue streams. This is the aspect of Cloud that is most exciting and full of promise.
There are already a number of disruptive, transformational cloud-based services in the market. Web mapping and navigation applications, like those provided by Google Maps and MapQuest are among the most widely used such cloud-based services. Users get maps-as-a-service and navigations-as-a-service over a variety of devices. The apps are really easy to use because all the complexity has been pushed backed into the cloud, as well as the bulk of the computations required to generate directions in near real time.
e-books is another widely used, game changing cloud application that is already transforming the book publishing industry. Users get easy to use books-as-a-service over a variety of devices, with all the complexity masked from them in the cloud.
Over the next decade, advances in cloud computing will enable critical societal and business applications in a number of industries, including health care, learning and finance. Digital money is one of the most important and transformational such application being enabled by the power of cloud. Digital wallet apps have been developed for a variety of mobile devices. Payment data centers are being transformed into highly scalable cloud infrastructures, handling not only the actual payment transactions, but key related services including security, privacy, the management of personal identities and financial information.
Just about every aspect of the world’s economy is involved. Over time, mobile devices will truly become the gateway to the digital economy for just everyone in the planet. This will take decades to fully play out. But, it is most definitely underway, with an increasing number of market pilots and research studies already taking place around the world.
The report concludes by observing that beyond its now well recognized use in the IT world, “cloud has the power to open doors to more efficient, responsive and innovative ways of doing business.” It urges business leaders to reflect on the potential of cloud-enabled business models by asking themselves a few simple questions:
- What if you had access to unlimited computing resources to scale your business?;
- What if you could inexpensively and rapidly pursue new customers and markets with new products and services?; and,
- What if you could easily and seamlessly collaborate with business partners and customers, and thus redefine your role and competitive positioning in your industry?
I could not agree more that the potential for game changing business innovation is the true power of the cloud.