The word ‘cloud’ has been literally hanging over executives’ heads for the past two years — in the form of massive banners hanging from the ceilings of almost every hub airport they travel through. To date, the focus of cloud has been on the delivery of IT-related capabilities from IT-related providers, largely for things that the IT department is responsible for managing.
Cloud computing is expected to grow to 20% or more of the total IT budget by 2013. Gartner research shows that there is already significant non-IT involvement in decision making about cloud services, with finance, marketing, HR and other business units acting as key stakeholders 25 to 30% of the time and actually funding cloud services between 10 and 30% of the time. Although largely a technological development, many of the pertinent questions today about the usefulness of cloud computing as a business platform are non-technical. We believe over time businesses will better understand the principle that cloud computing is a means to deliver IT-enabled capabilities, not just simple IT capabilities.
As this thinking evolves, the focus of cloud computing will shift toward exploiting it as a service delivery mechanism for the provision of non-IT capabilities, such as such as payroll, printing, logistics and e-commerce. In this context, cloud computing enables these services to be delivered from organisations that are not traditionally seen as IT companies, nor have any intention of ever being seen in this way.
By 2015, Gartner predicts that 20% of non-IT sector global 500 companies will be cloud service providers. We are already seeing examples of this emerging.
Large retail, financial service, government and media organisations have begun to recognise that supply chain competencies do not need to be commercialised solely through their stores, either physical or online. As discrete capabilities, they have their own revenue potential. We’ve also seen distribution businesses undertaking the same strategy. This trend is not being wholly enabled, or strictly defined, by cloud computing.
There are several related trends that are actually fuelling the business mandate behind this, such as the accelerated digitisation or ‘hyperdigitisation’ of many industries that are largely information based, such as financial services, education, communications and media, government and industry-specific intermediaries, such as the travel and insurance sectors.
These industries deliver non-physical digital services, increasingly mostly online. Additionally, many businesses have been exploring the move toward process externalisation driven by activities such as open innovation.
The move by non-IT organisations to provide non-IT capabilities via the cloud will mean even more technology decisions will be made outside the IT organisation. Ultimately these services are bound to service-level agreements that will be understood best by the owner of the specific process. Yet, while the barriers that historically prohibit these groups from directly provisioning these services drop, the need to manage data and integration requirements remain.
Far from being a problem, this represents another opportunity for IT departments to redefine their value proposition as service enablers — either through consumption or provision of cloud-based services.
As non-IT players externalise business competencies via the cloud, they will compete directly with IT organisations that have traditionally served in this capacity.