The Shifting Cloud Landscape: From Cost Savings to Innovation Driver

Prasad Thrikutam Features

AirBnB, Netflix, Uber, Salesforce.com — by now we’re all familiar with these prominent cloud-based companies. They utilize cloud as a central part of their business model to differentiate themselves and disrupt the markets they serve. And while these brands all leverage cloud in their own unique way, they share common attributes present in highly successful, cloud-based delivery models: extreme agility, flexibility, and most importantly, an uncanny ability to create and deliver innovative customer experiences.

After all, isn’t that what business is all about?

Perhaps no recently established brand has gained success faster, or caused more disruption to its industry, than Uber. The popular on-demand transportation startup, and its cloud-enabled marketplace for quickly getting you where you want to go with just a couple of taps on your smartphone, has quickly taken market share from taxi and car service providers. Backed by the likes of Google Ventures and Fidelity Investments, Uber is now valued at $40 billion just five years after its founding — placing it ahead of more than 70 percent of the Fortune 500 — with operations in 272 cities and 55 countries.

If that’s not technology-enabled disruption, I don’t know what is.

Uber and other “born-on-the-cloud” (BOTC) companies never set out to use cloud as a means to save money or optimize their technology stack. For these companies, the power of cloud runs far deeper than a set of features and benefits. Instead, cloud serves as the primary enabler for innovation, growth and winning over customers in ways competitors can’t match.

A new direction for cloud

IT leaders have been tasked with cutting costs for as long as I can remember. Moving applications from on-site data centers to the cloud is still a great way to save money over the long-term, a move which also enables organizations to quickly ramp up computing power and storage as growth occurs.

As companies like Uber and Netflix illustrate, however, cloud computing is shifting from being a scalable and cost-effective infrastructure play — which offers a powerful value proposition on its own accord — to a game-changing enabler for completely new business models. In short, business is changing rapidly due to cloud-enabled delivery. And the opportunities for innovation are endless.

While tech-savvy consumer brands get most of the attention, less obvious (but no less disruptive) business to business (B2B) examples abound. These range from cloud-based electronic health records (EHR) companies in healthcare (Athenahealth) and property management solutions in real estate (RealPage), to solution providers in the automotive market that enable car dealers and lenders to run their businesses more profitably (Dealertrack). These three young companies alone are already worth more than $9 billion based on their combined market caps.

There are literally thousands of new cloud-based delivery models turning business upside down. And with new models appearing almost daily, the message is clear: every market or industry can benefit from the fast-moving, highly disruptive wave of cloud-based innovation.

Traditional companies are taking notice

Given the high degree of innovation and disruption that BOTC companies are driving, and the need to keep pace in the digital age, traditional companies are examining their own approaches to doing business. This has resulted in a flurry of “reborn-on-the-cloud” attempts, with companies launching everything from pilot projects to major corporate initiatives in hopes of gaining the same levels of agility and innovation that BOTC companies enjoy.

Fortune 50 bellwether General Electric, for instance, has been accelerating its move to the cloud to not only cut IT costs, but to more quickly take advantage of innovation in the cloud, as GE CIO Jamie Miller commented last year. Another long-standing industry pioneer, media conglomerate Time Inc., is in the midst of a massive shift to the cloud as part of its turnaround effort. Time is betting big on big data and specialty content, decommissioning data centers and moving operations to the cloud in order to enable its refreshed business model.

Companies like GE and Time are among dozens of industry icons that are rapidly moving to the cloud to drive key corporate initiatives and customer-focused innovation.

Moving to a cloud-based delivery model isn’t easy

As anyone who has adopted cloud in the enterprise knows, embracing cloud isn’t as simple as buying computer storage off a public cloud. The challenges encountered by traditional organizations that wish to embrace a cloud-enabled model can be significant. Moving large amounts of legacy and business-critical apps to the cloud, then developing, rolling out and securing new apps in this new environment, can be complex and confusing for even the most adept business technology teams.

The heart of the transformation lies in migrating existing applications, business processes and data and developing new applications that can take advantage of cloud capabilities. A big part of such a move requires the migration and re-architecting of all impacted applications and legacy systems to new cloud-based platforms. Then there is the added imperative around ensuring customers and internal stakeholders have the right levels of security and governance—making this a quantum step for most companies.

Equally challenging, most traditional businesses trying to make the move to cloud have IT operating models with infrastructure, staff, and workflows aligned with a centralized model—not to mention broader organizational silos that don’t lend themselves to exclusive or even extensive cloud-usage models.

For these reasons, and the lack of standardization in the cloud world, most initiatives at large companies are still relatively immature. Proof-of-concept pilot projects involving lower-profile, non-business critical applications are common, often followed by only-slightly broader initiatives involving a specific business unit or function. Looking at the shifting cloud landscape, we are only scratching the surface in terms of what’s possible.

Setting your sights on cloud-based innovation

A recent Dell survey predicts that 40 percent of Fortune 500 companies will disappear in just 10 years because they will be out-innovated. Organizations need to figure out how they can innovate in order to stay relevant in today’s fast-moving digital world. Fortunately, there has never been a better time to start, or expedite, your cloud journey. The high degree of flexibility and variety of choice offered by today’s cloud providers, which include a mix of private and public solutions, enable business leaders to choose their own journey to the cloud.

Here are six steps to expedite your organization’s transition to a cloud-based delivery model and unlock innovation.

1. Conduct a thorough assessment focusing on your user base

As with any transformation journey, understanding your user base — both internal and external — is a critical first step. What form factors do users need to access? Are there latency considerations or unique user behaviors that could be impacted by a more distributed environment? Answering these questions will help you determine your top-line solution criteria, which feed directly into your cloud strategy.

2. Re-examine the structure of your teams and their workflows

One of the objectives of moving to a cloud-based environment is decoupling applications from specific hardware. You shouldn’t have to know where a particular application is running at any given time. If your teams are seated in a traditional manner — with a networking lead, hardware lead, and so forth — the lines between those roles start to blur when deploying and managing apps in a cloud environment.

You can’t depend on the historical handoffs between individual teams because it’s not efficient or effective in a distributed model. So you need to take a hard look at how your IT department is structured and look for ways to make it compatible with this dynamic new world.

3. Remember, it’s all about application design

Living in the cloud necessitates a specific set of application design requirements and considerations. BOTC apps, for example, have fault tolerance built in. It’s non-negotiable, and it’s a completely different way to design software. You also want to move applications as near as possible to those who need to use it in order to optimize responsiveness — which could make or break the usability and success of the program whether your users are internal, external or both.

These are just a couple examples of the nuances of cloud-based software design, but they stretch much further as you start to consider enabling true innovation. Your teams should be asking what improvements can be gained by designing key applications differently, which is a significant mindset shift beyond just thinking of the cloud as a hosting tool. The real value is when you can design (or redesign) applications to accomplish something altogether new.

4. Ensure your security requirements are addressed up front

We’ve all heard the concerns about security in the cloud. While applications can actually be more secure in the right cloud environment, security is undoubtedly a key consideration of any organization’s move to the cloud. Industry and business-specific compliance requirements and policies will largely guide the discussion.

If you have one, involve your Chief Security Officer at an early stage to ensure that you are taking all security considerations up front — from initial proofs of concept and prototyping all the way through to when vendor contracts are evaluated. Industries like healthcare and financial services – where security is mandated and strictly monitored — will obviously require regulation-compliant vendors with a proven track record keeping information safe and secure.

5. Think like a BOTC company

In contrast to long-standing, traditional businesses, most BOTC companies are entrepreneurial startups unbound by previous technology eras or organizational structures. They don’t carry the same baggage or mindset that existing organizations have to contend with. This provides BOTC companies with a major advantage when it comes to quickly trying new approaches with agile development processes, evaluating what works and what doesn’t without expending a lot of resources, and releasing updates and all-new products at break-neck speed.

While you can’t snap your fingers and make this happen in your organization, you can borrow from the BOTC playbook in smaller bites. Advocate for processes that enable quick decision-making and minimal bureaucracy, and focus your resources on your core competencies without getting distracted by internal initiatives that don’t directly impact the customer experience. BOTC companies typically spend a lot of time working with and listening to customers, often directly involving them in product development. Set up programs that enable you to use this best practice in your organization, knowing that a customer-first mindset will always lead to the best answer.

6. Consider a “bimodal” approach

Gartner has recommended that CIOs create a “bimodal” IT organization, with one part of the organization responsible for applications that emphasize safety and efficiency (non-disruptive IT) and another part responsible for driving speed and flexibility (transformative IT). Each style requires different skill sets, processes and tools with cloud adoption viewed differently depending on which mode an application is part of. A bimodal approach can help overcome “all-or-nothing” challenges that may result from differing application needs across areas of the business. Don’t be afraid to separate parts of your application portfolio, knowing they may converge over time as cloud-based transformation gains momentum and spreads to different parts of the organization.

Conclusion

It’s no longer enough for IT to cut costs and deliver reliable systems. CEOs and other business leaders demand innovation. The cloud presents a virtually limitless playing field for delivering value and new customer experiences, and should be viewed as the “new normal” by which business is conducted. By applying the six steps outlined above, you and your organization can move to the future faster than your competitors. Because if you don’t, surely they will.

Griffith, Erin, “Uber is now more valuable than at least 72% of the Fortune 500,” Fortune, Dec. 4, 2014. http://fortune.com/2014/12/04/uber-valuation-40-billion-fortune-500/

Bort, Julie, “The 25 Most Valuable Cloud Computing Companies Are Worth Way More Than You’d Think,” Business Insider, Jan. 28, 2015 http://www.businessinsider.com/25-most-valuable-cloud-companies-2015-1?op=1

Boulton, Clint, “GE CIO Accelerates Cloud Transformation Strategy,” Wall Street Journal, May 13, 2014. http://blogs.wsj.com/cio/2014/05/13/ge-cio-accelerates-cloud-transformation-strategy/

Norton, Steven, “Time Inc. Pins Turnaround on Big Data, Specialty Content,” Wall Street Journal, Feb. 12, 2015. http://blogs.wsj.com/cio/2015/02/12/time-inc-pins-turnaround-on-big-data-specialty-content/

Leong, Lydia, “Best Practices for Planning a Cloud Infrastructure-as-a-Service Strategy — Bimodal IT, Not Hybrid Infrastructure,” Gartner, March 3, 2015.