Cloud at the core of disruptive business models

Cloud computing has reached a tipping point as buying IT on demand has moved to the core of technology provision with businesses using it to transform their operations

Excitingly, the cloud is providing a platform for organisations to develop new products and services. As many as 44 per cent of enterprises already buy IT on demand to launch new business models, according to research from Oxford Economics. That figure is expected to rise to 55 per cent through 2017.

The reason for the increase, says former chief information officer (CIO) turned digital adviser Ian Cox, is the cloud complements the rapid change inherent in modern markets. Digitally engaged customers now have access to more information than ever before, and they can use this information to find better deals and services.

Smart executives are aware of this new era of flexibility. Rather than being hamstrung by the slow-moving nature of traditional IT, entrepreneurial individuals are using the cloud to develop and launch business models far more quickly than was possible previously.

“Executives can use the cloud to scale up these models to meet a surge in demand in a matter of days or even hours,” says Mr Cox. “The brand, scale and resources of an established company do not necessarily provide the protection they were once used to when a disruptive new competitor or business model appears on the scene.”

Finding a gap in the market

Such flexibility creates an advantage for organisations that are able to identify new openings and exploit such gaps quickly. Research from BCS, the chartered institute for IT, reports that fleet-of-foot startups have been able to move into territory that is traditionally owned by larger enterprises. Unencumbered by legacy systems, processes and markets, such startups have used digital technologies to offer new services and products to customers.

Think of how online letting specialist Airbnb has redefined the accommodation rental sector. Then think about Uber, which has created similar levels of disruption in the transportation sector, creating a technology giant that has been valued at as much as $50 billion.

cloud adoption benefits

Finally, think of Netflix, which disrupted the relatively young video and DVD rental market through the use of on-demand streaming. Other examples abound. The Economist refers to classified ads (Craigslist), long-distance calls (Skype), record stores (iTunes), research libraries (Google), local stores (eBay) and newspapers (Twitter).

Organisations that are sharp enough to enter a market first will undoubtedly have some success, agrees independent consultant and author Ade McCormack. Yet originality is no guarantee of exclusivity and executives should expect other organisations to move into their nascent space quickly. At best, firms that move first have a “cash calf” or a product or service that provides a temporary monopoly in a specific niche.

Be radical

CIOs and senior managers in organisations of all sizes must use the cloud to help their colleagues generate new and novel routes to market. Executives should look to make the most of their traditional capabilities, but also to explore radical ideas. “Don’t be scared to experiment – if you don’t try things, you don’t learn,” says Mr McCormack.

Chris Hewertson, CIO at hotel group glh, is a good example of an IT leader who has pushed a cloud-led business transformation. The firm began its IT change programme three years ago. Executives wanted systems that were always available, easy to set up and intuitive for users. Mr Hewertson says the cloud became the natural mechanism to support business change and growth.

Today, the firm does not run any in-house servers and 95 per cent of IT services are delivered through the cloud. “It helps that our CEO was passionate about the revenue-generating part of the business,” says Mr Hewertson. “He wanted to give the hotels all the systems and services they needed to be successful.”

Such examples, says Andrew Marks, former CIO and now the UK and Ireland managing director for energy in Accenture Technology Strategy, prove the cloud has matured in terms of its capability and people’s trust in it. Rather than simply offering another means to host services on a third-party hardware platform, the cloud represents a new, more flexible way to access and consume IT services.

Mr Marks encourages IT leaders to focus on one key question: if you started your organisation today, what is the only work you would do? Asking that question to the internal stakeholders, he says, allows modern CIOs to focus on the concerns that will actually help the business to meet its objectives.

Accessing information

It is a focused approach that chimes with Dan Probert, head of IT innovation at charity Camfed. The organisation helps marginalised girls in sub-Saharan Africa to go to school, succeed and lead. More than 3.5 million children in Zimbabwe, Zambia, Ghana, Tanzania and Malawi have benefitted.

Camfed has created detailed records of more than 220,000 pupils and is adding more every day. These records are completed on mobile devices and stored in the cloud. Mr Probert says the charity uses Salesforce as its base platform and iterates as new projects come along.
44 per cent

“The cloud plays a crucial role in regards to access to information,” he says. “The development team on the ground can report back to us centrally, so we really have great data on tap. We have data protection to ensure the right people have access to the right kinds of information.”

Mr Probert says the charity’s use of the cloud is not novel as such but, more importantly, on-demand IT plays a crucial role in supporting the vital work of the organisation. “Technical innovation allows us to drive social innovation,” he says.

Such is the transformative power of the cloud that the use of on-demand IT is extending into previously unchartered territories. Business leaders in highly regulated sectors, such as law and finance, have traditionally been reticent about holding sensitive client data externally.

Running businesses through the cloud

Smart executives are turning that perception on its head and using technology to offer new services to key customers. Rather than just picking elements of enterprise IT to run on demand, researchers at Forrester say we are entering a new stage of the cloud, where executives are able to run entire business ecosystems in the cloud.

Amba Hotel
Amba Hotel CharingCross, part of the glh hotel brand which delivers 95 per cent of its IT services through the cloud

Take Alex Hamilton, co-founder and chief executive of Radiant Law, an innovative and high-tech commercial contracts firm that uses the cloud to communicate and collaborate with staff and clients. When he established the business a few years ago, Mr Hamilton made a conscious decision to use on-demand technology.

“The cloud is critical to the way we run our IT infrastructure, but it also allows us to compete with larger organisations,” he says. Radiant Law uses a range of tech startup tools, such as collaboration platform Slack, to help staff communicate and generate new ideas. The firm also uses the cloud to scale up IT resources quickly as new business demands become apparent.

Such agility means the firm can be experimental without expending too much cost or effort. Innovative ideas include using the cloud for a model that allows client businesses to create new contracts quickly. The firm also uses on-demand IT to allow its customers to monitor the workflow and value of contracts.

“We’re continually looking for better ways to serve the needs of our clients,” says Mr Hamilton. “The cloud provides the base layer that allows us to run our firm effectively, but it allows us permanently to experiment. The future of our business is tightly linked to the cloud.”

Also found in Business Model Cloud