Cloud Computing Can Drive Business Innovation

Cloud computing is assumed to be an IT staff initiative at most businesses. But business strategists at IBM have concluded that it needs to be a top management priority.

Too many companies are experimenting lightly with cloud computing. They're using it to tweak existing operations, as opposed to thinking about how it could revise or re-invent the fundamental way they sell their goods and services, said Saul Berman, global strategy consulting leader in IBM's global technology services.

Berman based his remarks on a survey conducted by the Economist Intelligence research unit of the Economist magazine in the fourth quarter of 2011, based on interviews with 572 business and IT managers. IBM sponsored the survey, which will be released later this week, titled The Power Of Cloud: Driving Business Model Innovation. InformationWeek was given an advance look at its contents.

IBM strategists conclude that the cloud is an enabler of new business models, and all parts of the business, from the boardroom and CEO's office, down to the loading dock, should be re-thinking what they do in light of the cloud's capabilities. Accenture applied that thinking last year to technology companies; it said cloud technologies allowed them to rethink their business models and adopt new ways to expand their business.

[ Want to learn more about how Accenture said cloud computing changes business models? See Accenture: High Tech Firms Need Multiple Business Models. ]

"Although cloud is widely recognized as a technology game changer, its potential for driving business innovation remains virtually untapped," concluded IBM's summary of the survey results.

Many companies are using infrastructure as a service from public cloud suppliers or building out experimental, self-service, virtualized sections of their own data centers. But only 13% have "substantially implemented" cloud computing throughout the organization. "I don't think too many companies in the U.S. fall into the category of having 'substantially implemented' cloud computing," said Berman, the study's author, in an interview. In three years time, however, that figure will increase to 41%, the survey concluded.

Top management still tends to believe that cloud computing is a technology specialty best left to the IT department. "The CEO might ask, 'I've heard of it, but why do I need to be focused on the cloud? Isn't that something for IT to do?' But the power of the cloud goes beyond IT," he said.

At the same time, the study illustrated how some firms have seized on cloud computing to transform their business. Etsy is an online marketplace for handmade goods. It uses cloud-based analytics to analyze the one billion page views that take on its website each month, then make recommendations to visitors.

"Using cloud-based capabilities, the company is able to cost-effectively analyze data" and use the results to build its business of bringing buyers and sellers together, the study concluded.