When the subject of cloud computing is raised, there is
often a healthy suspicion from IT buyers that cloud is a marketing term which
is used as a new way of selling complex, unproven solutions to them. This is
not surprising, considering the history of the IT business. There is an
alarmingly high incidence of IT projects failing to meet expectations and
running massively over budget.
Cloud commentators, myself included, tend to focus on the
transformative and disruptive impact of cloud computing. We tend to talk a lot
about Apple, Amazon and Google and how they have completely disrupted the media
and music industries, using cloud technologies. This makes a lot of sense when
engaging with executives from these industries. However, executives in other
industries have yet to see a profound disruptive impact caused by cloud
computing and few of them truly believe that their industries will be impacted
in the same ways as businesses that involve the trading of digital content.
This is a huge mistake on their part.
Within most enterprises in mature markets, cloud computing
is still at an early stage of adoption. Technology infrastructures within these
enterprises are characterized by the increasing use of virtualization and ad
hoc public cloud use. This public cloud use is usually driven by business units
and not IT departments. For these enterprises, cloud services augment their
existing non cloud-based technologies.
There is increasing evidence to suggest that this is the
first stage of cloud computing adoption and that most of these organizations
will soon shift sizeable workloads onto cloud platforms. In this phase, cloud
use permeates throughout the organization, supported and enabled by IT departments.
IT departments may initially seek to block the ad hoc use of cloud services by
business units. But, over time, as senior executives become exposed to cloud
services that offer them benefits, IT departments are usually forced to find
ways of enabling the use of cloud services across the enterprise. As this
happens, IT departments typically develop policies and procedures relating to
the use of cloud services within the organization. These policies and
procedures enable more extensive penetration of cloud services. Extensive use
of cloud-based technologies, in many cases, creates more complexity for
enterprises as they need to find ways of integrating these technologies with
their legacy investments.
The third phase of cloud computing is characterized by
cloud-based technology becoming the norm, and business agility being realized. In
this phase, cloud technology has worked its way through the organization. It
underpins innovation and is used to differentiate one organization from another.
It can be termed the innovation phase. For example, in this stage,
organizations discover that cloud technologies can automate more processes and
engender more self service. A great example is the low cost airline business.
Low cost airlines such as Jetstar are constrained by assets in small airports.
They have limited space to manage the check-in process. Their business model
also drives them to ‘sweat their assets’ as much as possible so they seek to
maximize the use of their aircraft by limiting the amount of time that they are
idle. Jetstar aims to be a 100% self
service airline as soon as possible and pioneered self service check-in. Self
service check-in enables the airline to optimize limited space in smaller
airports and hence to maximize the use of its aircraft. It is cloud-based
technology that enables this. Cloud-based technology can enable the airline to
handle increases and decreases in demand seamlessly. It can eliminate queues.
It also allows the airline to provision new products and services such as
insurance products or gourmet meals much more easily than would be the case
with traditional IT implementations. Progressive organizations across
industries are using cloud-based technology to transform the ways they engage
with their customers. This is leading to significant innovation.
The fourth phase of adoption is characterized by cloud
technology disrupting industries. As mentioned earlier, this has already
occurred in the media and music industries. How will it disrupt other
industries? It is clear that the agility which cloud computing offers can
significantly lower barriers to entry across industries. Legacy infrastructures
and inflexible processes paralyze organizations and make them unable to
innovate and create new opportunities. Google, Amazon and Apple each show a
healthy disrespect for the boundaries between industries. Each one of these
companies continues to cause disruption in other industries. Recently, Google entered
the credit card market. It can use its brand, scale, customer relationships and
agile technology to do this. Some in the financial services industry are aware
of this threat and already see Google as a potential competitor. Indeed, the
technology used by Google makes it increasingly easy for non financial services
firms such as retailers to enter the financial services industry. The financial
services industry is ripe for disruption. Expect to see some financial services
firms enter the ‘innovation phase’ soon. This will act as a precursor to
disruption in that industry. Other industries including healthcare, education,
utilities and retail will also be disrupted by technology over the next few
years.
In summary, most enterprises are at a phase where cloud
computing is being added to their existing technologies. This is the beginning
of a process that will inevitably lead to significant disruption in most
industries. Executives across industries should take note.
