GUEST BLOG: The cloud – a transformative business model?

By Keith Tilley, executive vice president, EMEA & APAC at Sungard Availability Services

Cloud computing has been touted as an IT game-changer for over 10 years, but it’s only now that businesses have become comfortable enough with the model that we’re starting to see real innovation in the market.

Cloud computing has opened up a whole world of possible industry disruptions – allowing start-ups and SMEs to compete successfully with long-established enterprises. For as long as entrepreneurs can re-invent business models the capacity of the cloud will continue to surprise us.

Netflix is often, and deservedly so, cited as one of the best examples of using the cloud to disrupt the industry. While competitors such as Blockbuster and HMV poured time and effort into working out the best way to sell DVDs via the internet, Netflix rewrote the question, asking ‘how can we use the internet to help people watch movies?’ Although its initial service was built on a traditional datacentre platform with no capacity for scaling up and down, it was the company’s decision to migrate to a public cloud that allowed such rapid growth – allowing Netflix to quickly expand its customer base and scale the business upwards while keeping expenditure to a minimum. As they say, the proof of the pudding is in the eating: last year Netflix reported revenues of $4.37bn and added 2.3 million new US subscribers between October and December last year alone.

Additionally we have businesses such as Transics, a SaaS provider which helps logistics companies to keep track of their trucks, drivers and deliveries. Cloud computing plays an integral role in the organisation’s business model, not simply because an organisation headquartered in Belgium is able to run its infrastructure from Ireland! The cloud allows Transics to offer a reliable and, most importantly, real-time overview that would be impossible on a typical physical on-site server farm. And because Transics itself is based on a cloud infrastructure it can offer its service to customers in the most attractive way where costs can be managed based on current needs and business demands: keeping overheads low in an industry which is currently battling through a low-margin economic climate.

While organisations have been previously forced to base their business models on the IT that is available (often with the priority placed on cost), the rise of hybrid IT solutions – which span across both traditional private data centres and the public cloud – mean that almost any business model can now be put into practice. Now, start-ups can potentially access the same level of IT sophistication as any enterprise – and with the ease of outsourcing, can ignore most of the operational issues and focus on improving the core product or using IT to open up new revenue opportunities. Meanwhile, the enterprises which invest in a cloud platform are able to re-discover the level of flexibility they enjoyed back in their day as a small business. In both instances, obstacles to growth have been removed.

What the examples of Netflix and Transics prove is that this type of business agility is the key factor in success. Cloud computing does not offer a straightforward victory but instead it eliminates (or at least reduces) the cost of failure and offers a way of future-proofing your business. Technology alone isn’t going to drive a business forward; much rests on the application of that technology.

Both Transics and Netflix have demonstrated this level of collaboration; showing that the IT department can work in tandem with the wider business to improve both internal processes and external customer engagement. Interestingly, we recently carried out research amongst Irish business leaders which revealed that 79% believe that a closer alignment of business initiatives with the IT department’s capability will yield some sort of competitive advantage.

For example, if the CMO spots a new potential market opportunity then having a close working relationship with the IT department can be vital in the race to get their business’ product or application out to the market as quickly as possible. The CFO can also benefit from this collaboration – we’re in uncertain economic times and an organisation’s growth projections are being revised on an almost daily basis. By working closely with the CIO, the financial department can scale infrastructure capacity up and down, ensuring that over (or under) provisioning is no longer an issue.

It may help to think in terms of a taxi and its passengers: although the passenger knows where they want to go (and even have an idea of the route), they need the driver to get them there. Similarly, the C-level may know what business outcomes they are looking for but it’s up to the CIO to offer advice on how it can be delivered from a technical and wider business perspective.
In the last few years every trend that we’ve seen (from BYOD, mobile working and big data through to business intelligence and analytics) has all been made possible thanks to the flexible and reliable environments offered through resilient clouds. The cloud represents a fundamental shift in the way businesses have to operate, allowing greater levels of cooperation and flexibility than ever before. The potential of the technology is still only realised, what is clear is that it is something that every organisation must embrace in order to stay competitive.