Business Transformation with Cloud Computing

Business Transformation with Cloud Computing

In “The Big Switch,” author Nicholas Carr argued the fundamental change currently happening in corporate computing mirrors the shift that happed with electricity 100 years ago. Back then, companies used to have to generate their own power to propel machines and tools. Thus, in addition to competing in business, companies also had to compete on the sophistication of their power systems. However, once electricity started to be supplied by centralized utilities, companies began to abandon their internal systems because it was more efficient to purchase power as a service.

Fast forward 100 years, companies continue to compete in business, but also on the sophistication of their corporate IT. Similar to power, companies have needed to be in the internal IT business. However, with the proliferation of broadband networks, companies like Amazon, Google and Microsoft are now able to provide computing to corporate customers over the Internet from centralized datacenters. Instead of building, managing and maintaining in-house IT, companies can now efficiently access computing, including both applications and infrastructure, as a service.

Transformation is about driving fundamental change in how business is conducted. How then is cloud computing driving business transformation within the enterprise? There are many ways, but the two primary ones include: Increased agility and reduced costs. Increased agility is about having the ability to move easily and quickly to capitalize on changing business environments. Decreased costs is about asking, how do we take what we are doing today and do it more efficiency? Neither increased agility nor reduced costs can be delivered with yesterday’s corporate IT.

Agility. Companies today are sitting on legacy investments in corporate IT that were designed to deliver “narrow” experiences and services to both customers and employees.  These designs are no longer acceptable. For example, it can take an average of 10-18 weeks for IT to provision a new server. If you are a VP of Marketing and want to launch a new campaign, 10-18 weeks is a lifetime and creates a significant opportunity cost. What if you could provision the same server with the cloud in minutes? Now you can. The ability to respond quickly to change is the key to survival.

Cost. According to IDC, a typical server uses 15% of its capacity. That means 85% of the investment is waste. To make matters worse, companies have to forecast demand for specific periods; e.g., the holiday season. If they buy too much capacity, they overspend and create waste. If they buy too little, they create customer experience and satisfaction issues. The elasticity of the cloud removes the need to forecast demand and buy capacity up-front. Companies can now scale their IT systems up and down as needed for better customer experiences and lower costs.

Business transformation driven by cloud computing should not happen in a vacuum. The CIO and business unit (BU) leaders must both be involved, so initiatives are not perceived as “IT projects.” BU leaders must understand how they can use technology to change or improve the business. CIOs must advise the BUs on how IT services can be used to enable or enhance the organization. Corporate IT must then carefully plan for and work to balance what legacy investments to hold onto and what new services to invest in to meet the changing needs of the business and market.

All contents copyright © 2014, Josh Lowry. All rights reserved.


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