Is it Already Time To Reinvent the Cloud?

Although cloud computing persists as a top priority for CIOs this year, cloud is still in its infancy and already is undergoing significant revisions to improve its value proposition for more discerning customers. By "more discerning" I am referring to businesses that are looking for more than generic IT resource rentals and provisioning during processing peak times. Instead, they are increasingly expecting cloud services providers to deliver solutions with the ability to make major operational and financial impacts on strategic areas of the business.

For cloud services providers to do this, they have to demonstrate that they can bring industrial strength solutions to the table that can meet the governance, security and product quality expectations of enterprises—and also deliver business value that is either going to make a difference for strategy or revenue, or can be used for cost cutting. These cloud services providers also need network architectures that network, database and application specialists in their customer IT departments can easily work with.

Let’s take a look at the strategy and revenue side of the equation first. When the volcano in Iceland struck earlier this year, company supply chains were disrupted because planes were grounded and other modes of transportation to and from Europe became clogged with an unanticipated demand that normally would have gone airborne. Companies that were on top of the transportation situation were those that had early visibility into their end-to-end supply chains and how the volcano was going to impact them. This kind of external visibility is not readily attained with internal supply chain systems like ERP (enterprise resource planning). Instead, companies with well-established external business processes andagility for the supply chain immediately acted upon the information they received. They were among the first to reroute traffic so their orders would stay on time. The end result was little or no interruption to the product flow into consumer markets, while some of their counterparts were unable to make the same transition.

How did they do it? In many cases, the key facilitator and new "difference maker" that provided all of the external supply chain visibility (and the ability to change supply chain direction rapidly) was a cloud-based supply chain solution. In these cloud-based solutions, which already contained a network of up to 80% of the world’s suppliers and logistics providers for a specific industry, companies were able to quickly onboard alternate suppliers and logistics providers as they worked through the natural disaster in Iceland. Together in the cloud, these parties become a kind of "social network," posting documents to each other and exchanging information using a common database. Because they were all using a single database on a shared network in the cloud, they were all working from a "single version of truth." This eliminated the extra coordination and discussions that often become necessary between companies when each has its own database, with its own records of how a particular order or transaction is unfolding.

Not all cloud providers deliver comprehensive business solutions like this. The cloud providers that are succeeding at this level tend to specialize in a particular industry (for example, retail, aerospace, automobile, oil and gas, health care, insurance and finance). They also have experts in these industries on their staffs. The cloud providers additionally understand the workflows and the security and governance requirements of the industries that they serve. They know which transactions must occur between companies and their business partners and customers. This combination of expertise and a network solution has the ability to bring business value to corporate strategy and revenue generation. In the supply chain alone, if youcan onboard new suppliers in days or in minutes using the cloud (versus in weeks or in months with a traditional EDI file transfer certification between the company and each of its suppliers), you can be helped in your quest to be first to market, or to nimbly respond to rapid changes in market conditions.

There are also arguments for best-of-breed cloud solutions on the cost-cutting side of the fence. If an oil and gas company characterized by thousands of relationships with different suppliers that it must pay on a regular basis finds a cloud-based services provider with oil and gas industry expertise with a central accounting database that enables rapid electronic transfers of orders, invoices and payments, millions of dollars per company per year can be saved because potential payment late fees are avoided. Or, if you are a retailer with large data centers of your own, and you discover that by outsourcing your application development and test environment to the cloud you can save on hardware purchases and softwarelicensing costs, this also becomes a compelling way to impact the bottom line.

The third prong of business value that best-of breed cloud services providers deliver on is a smooth working relationship with corporate IT and existing corporate technology. A separate network in the cloud has to mesh with the internal networks and systems of corporate customers. Network, database and application administrators within client companies will want to ensure that their own levels of security and governance are maintained in the cloud—and they expect that their cloud services providers will already understand this.

In the end, the enterprise-cloud relationship comes down to trust, and recognizable business value that impacts strategy, revenue or cost. Not all cloud services providers are delivering at this level—and this is a major reason why so many companies say they are considering cloud but have yet to deploy it. It is also the reason why some major cloud services providers in a number of targeted industry sectors have excelled with services and offerings that demonstrate a thorough understanding of the industries they serve, coupled with high quality of service. It is these cloud providers that are upping the ante and the potential of what cloud can deliver to businesses. They are already reinventing cloud while it is still climbing up the early portion of its growth curve.

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