Cloud delivering business value

Cloud implementations have moved beyond the pure vanilla applications like mail, to more complex and heterogeneous applications. Earlier cloud was looked at as a cost saving premise and not really looked at as a strategic investment for better business opportunity.

The First-generation cloud deployments were all about saving money by not having to run critical apps or manage servers. But now we're seeing cloud used to shift competitive landscapes by providing a new platform for creating and delivering business value.

Businesses are using cloud to increase collaboration with partners, enhance customer services, find new revenue streams, and more. As current application environments get more complex and heterogeneous, the respective data and application logic is spread across a multitude of different environments.

As a result, maintaining the consistency of business logic and data structures in complex IT infrastructure is becoming one daunting task. As a result organisations looked at a customized cloud environment that enabled improved interoperability of existing and new silos of application, B2B, and data integration.

Cloud more mainstream

Cloud computing has developed from being an ambiguous concept about what, when and how to a significant business deliverable. As more and more ‘as a service’ options are made available companies have been able to focus on leveraging the implementations and look at newer, faster to market business models. As the resources have been freed and being better utilized there is more analysis and intelligence taking place at the business processes and performance level. Business leaders in close association with IT are looking at alternate revenue generation through innovation and newer markets. 

With big data residing with the business-both structured and unstructured-there is a need to timely utilise this pool of data. Real time and predictive data analytics is what is giving edge to the business. Monetising these opportunities is what the cloud is enabling thereby transforming the existing business landscape. Data centric verticals for example telecom, ITeS, Financial Institutions are the ones lapping up the cloud opportunities faster compared to some of the other industry verticals. The next question is than how you reap the rewards associated with these cloud models.

Harnessing the power of cloud

In a recent study a leading technology group recommended organizations to carefully evaluate the various opportunities available to harness the power of cloud and find the right opportunity for their particular circumstances or product/service line.

To assist businesses in this regard, they recommend three key actions to help reap the potential rewards associated with cloud enabled business models:

1. Shared responsibility for cloud strategy and governance across the business and IT to help ensure cloud remains a top business priority.

• Place a senior executive business leader, in partnership with the CIO, in charge of your firm’s cloud business strategy development. This collaboration should help clearly formulate an optimal cloud strategy and link it with your business and marketing strategies. In the adoption phase, these leaders will communicate and drive cloud as a top business priority, as well as ensure that infrastructure and operational efficiencies are optimized and business objectives are met. This partnership ensures buy in not only from IT but from the business leaders too.

• Establish a governing committee of business and IT leaders to oversee cloud adoption and implementation. Determine which cloud business enablers should be leveraged and how they will be used. Develop and oversee the implementation of business changes (e.g., processes, outcomes) that cloud will enable within your organization and throughout your industry ecosystem.

2. Look within and beyond your organization’s borders to maximize the value derived from cloud adoption.

• Determine how your cloud strategy can impact your industry ecosystem, and identify new partners that cloud can help draw into your ecosystem. In addition, evaluate whether cloud can or should change your role in the ecosystem. What are the services best suited for private/public cloud. Do you need to support some business partners to bring them into the environment for better efficiency and increased productivity.

• Use cloud to respond to your industry’s end customers more effectively. Explore whether cloud can help enhance your value proposition with your current customers, and examine whether you can reach other customer segments by leveraging cloud.

3. Identify whether your organization seeks to be an optimizer, innovator or disruptor and use cloud to innovate your business model to realize that potential.

• Consider organizational and market factors – corporate strategy, competitive dynamics, customer strategy, your firm’s risk profile, how empowered your customers are, etc. – that impact your cloud strategy.

• Determine where – if at all – your organization is positioned in the Cloud Enablement Framework today.

• Determine where your organization should be in the next three to five years – should it be an optimizer, innovator or disruptor? In considering this, remember that the framework is not a maturity model – a company does not have to first become an optimizer before becoming an innovator or disruptor. Rather, each company has to evaluate the opportunities and risks inherent within each archetype and determine “who” they want to be and what works best for the company, industry and customer set.

• Build business and technology skills and capabilities to close the gap between your current and future cloud position or to maintain your current position if that is the goal. On numerous occasions doing away with certain applications and infrastructure does not justify the ROI for the new environment. It is important to make a calculated study and evaluate the impact on all the partners involved; would the gap be truly filled or widened. Relocation to another department or some partners in the business chain may also give better results.

•Determine whether your cloud strategy should involve becoming a cloud service consumer or a provider of cloud-based offerings – or include elements of both. Typically, cloud service consumers use cloud to enhance their business models and drive increased value for their customers or business. Cloud service providers, on the other hand, offer services via the cloud to enhance the business model of other organizations or their own. Cloud service providers might use cloud to engage in innovation within their own value chain or facilitate innovation within other value chains.
Having said this deploying the right service and get optimum utilization companies need to factor in the price rightly.

Pricing cloud

One size or type does not fit all and businesses have to evaluate aligning IT and business processes to get the best desired results and business enhancement. Number of premises need to be closely looked at to maximize utilization of the cloud environment and understand the ROI as they progress.

Important cloud pricing and business model considerations

Maximizing asset utilization - Pricing programs must encourage customer behavior that helps smooth consumption peaks and valleys.

Granularly detailed services pricing - Enables customers to optimize service cost via their software design, but could increase vendor lock-in

Capital expenditure - Corporate preference to use traditional return on investment (ROI) measures in making capital expenditure decisions could apply downward pressure to cloud pricing SaaS customization - Because it requires non-standard, negotiated pricing, customization reduces the potential economic benefit of cloud models Functionality “menu” If providers make all functions available from a configuration menu, the possibility of differentiation via IT is diminished or eliminated.

Funding innovation relevant to customer subsets - Given shared infrastructure, the economic model is unclear for innovation that benefits only a few customers; clearinghouses or application exchanges may evolve to fill the need

National regulation, particularly of data location, security and privacy - Creates obstacles to optimal asset utilization of cloud infrastructure

Source: Ernst & Young analysis