Savvy executives see cloud computing as an opportunity to fine-tune costs, strengthen capability and lift innovation. They recognise way to build more responsive IT department and, ultimately, better organisation. It’s another tool in their strategic toolkit.
In technology terms, cloud computing uses the internet – the cloud – to deliver IT capability, whether it be for CRM applications, data storage, productivity tools or enhanced business collaboration.
And while much conversation focuses around the technology, it is sometimes hard to appreciate the business potential the cloud opens up.
“It’s really about change in business models rather than technology models,” says Ben Kepes, managing director of Diversity, consultancy specialising in cloud computing, collaboration and business strategy.
“Right now cloud is massive buzz-word… It’s for everyone but not for everything. Pretty much every organisation is going to have some use for cloud but it’s an incremental process.”
To Phil Sheehan, an IBM cloud specialist with 36 years’ experience in the New Zealand IT industry, cloud is best seen as new consumption and delivery model.
For those looking for business transformation, it allows businesses to scale up operations easily and enables faster time to market. It can be used to store information about user preferences, enabling the product or service to be customised.
Sheehan says people are experiencing Facebook, Skype and Google Mail at home and now expect the same type of connectedness at work.
“[With cloud], we’re seeing social collaboration but in business sense. We can have instant messaging at an enterprise grade quality, do Facebook-style interactions with our colleagues, and collaborate on documents and spreadsheets. The people I’m collaborating with can be on the other side of the world – it really doesn’t matter.
“That’s the sort of thing that companies need to be thinking about. What can cloud computing do to help drive their business forward?”
According to Kepes, one of the cloud’s core benefits is how it enables companies to initiate proof-of-concept style projects.
“In the old days if you wanted to set up social media application you’d have to put in requisition for servers and development time before you could even start building an application.
“With the cloud it’s simple: just set up with provider. If an initiative is successful, you can scale up rapidly. The cloud reduces the barriers to entry for projects which formerly might have been marginal.”
Industry observers say New Zealand is two or three years behind the US in terms of uptake of the cloud but there’s sense we’re accelerating and it will take less than three years for us to catch up.
“We do need to move fast on this,” says Kepes. “The great thing is we can utilise the lessons and the mistakes of those in early-adopter countries to make the right decisions.”
IBM’s CIO Index has seen the number of CIOs planning to implement cloud computing in the next five years jump from 39 percent in 2009 to over 60 percent last year; significant shift in very short space of time.
Common misconceptions about cloud computing abound: notably that it’s cheap, easy to set up and manage, always works, will put IT professionals out of job and, in particular, that security is major headache.
“People are really worried about security and where their data is going to be stored,” says Kepes. “However, all but the biggest organisations in New Zealand are going to have poorer security than the large cloud vendors.”
Data sovereignty is also problematic. The IRD currently requires that New Zealand tax data remains within this country. However, IRD recognises that in this case technology has moved faster than the law and is reviewing the situation.
With cloud computing, data may be physically hosted on server in Singapore or the US, but going to cloud does not necessarily mean going offshore. IBM has invested around $80 million establishing new data centre in Auckland.
Kepes believes cloud computing enables an IT department to become real strategic partner of the business. “Rather than simply cost centre, IT can become value-adding department that is actively involved in delivering solutions that drive benefits,” he says.
“As with any major technology shift, however, this change also introduces challenges that need to be proactively managed.
“The key thing is finding people who understand the technology landscape but are business-focused, which is challenging in small market like New Zealand. If I were to give any advice around cloud, it’s not around adoption or where you want to go or what products you want to use.
“It’s around making sure that you’ve got team on board that can both understand the technology landscape and also be strategically aware. It’s rare to have that mix of skills and abilities.
“A lot of the issues around cloud computing come back to education. So it’s simply matter of an organisation having enough knowledge so they can ask the right questions and make informed decisions. Use the resources out there – many of them are free – and get an impartial idea of what it all means. Then just try some stuff out.
“Don’t be scared. This isn’t about technology. This is about allowing you to deliver on what your managers, board or CEO are demanding; which is increased agility and reduced cost.” M
To boldly go
Cloud computing provides platform for innovation which may have similar productivity benefit to that of steam, electricity and microprocessor technology. Businesses that previously did not make economic sense can now be created or expanded.
We can think of cloud computing as supercomputer at the end of credit card. Literally thousands of processors can be orchestrated to act in unison to address single problem, and then turned off. Only what is used is paid for.
A start-up can tap into virtually unlimited levels of computing resource. Established firms such as Eli Lilly perform new drug research on Amazon’s cloud.
In five years, computing power will likely be around 12 times greater than today, at similar cost. Business leaders must identify early on how massive enhancements in information technology capability will create opportunities.
Radically new innovative business models will be made possible. Business model innovation is seen as primary source of innovation, according to majority of respondents to IBM’s 2010 Global CEO Survey.
Existing and rising competitors will disrupt current business models with newly enabled information technology. Disruptive innovation may be described as wolf in sheep’s clothing, unthreatening until it is too late.
How should business respond? One approach is to constantly re-examine an existing business model to understand how it creates value for customers and where emerging information technology offers opportunities to improve that value.
Framing suitable response and having it adopted within the business is, of course, significant challenge.
There are four major information technology trends currently driving innovation: namely, mobility, social media, cloud computing and analytics. However, close behind is the evolution of the “internet of things”, which is intertwined with each of these trends and offers enormous potential for innovation.
The “internet of things” refers to sensors embedded in products or resources which transmit data, usually wirelessly, for processing into actionable information.
With an ability to collect prodigious volumes of data, slice and dice it with business analytics software, all delivered from the cloud using supercomputing resources paid for with credit card, businesses have an opportunity to invent new ways of doing business and create value for their customers.
Any business which doesn’t want to be caught in the headlights needs to be continually aware of new and emerging IT capabilities, test and experiment with newly-enabled business models and be bo
