Institute for Business Value - Power of Cloud study Overview

How will companies use cloud computing to gain an edge over rivals in an increasingly competitive business environment? An upcoming study from IBM and the Economist Intelligence Unit shows how. Based on a global survey of 572 business and technology  executives, the study makes clear that cloud technologies will be a major force behind some of the best new products and services in 2012, as companies take it beyond the IT department and tap it to develop new revenue streams and business models.

The survey reveals that while 16 percent of the executives indicate they are already using cloud capabilities today to enhance their revenue and profits through business model innovation, in the next three years 35 percent intend to use it in this way. What is causing this shift? A number of external factors are driving the need for new business models, including:  

- "Big Data" - 70 percent of survey respondents indicated the rapid increase in available data was a key factor
-  Mobility - 64 percent of the executives saw this a major force
-  Social Media -55 percent of respondents cited increasing popularity of social media platforms


Power of Cloud - OVERVIEW:

1.  While few organizations are actively embracing cloud technology today to drive business model innovation – based on our research -- that is going change quickly and across the board -- with significant ramifications for growth/bottom line.

· Only 16 percent of survey respondents currently utilize cloud for sweeping innovation, such as entering new lines of business or industries, reshaping an existing industry or transitioning into a new role in their industry value chain. However 35 percent plan to rely on cloud for business model innovation within the next three years.

· Today companies are focused on improving operational efficiency, but focus is shifting to growth and competitive initiatives in the future. (55 percent of respondents indicated "improving organizational efficiency as a top business challenge today, but only 31 percent anticipate it will be a top challenge in three  years)



2. Cloud provides a way for businesses to exploit the capabilities borne of digital trends (mobility, social media, smart devices, “appification” and data digitization…) to better meet customers’ needs and drive future growth.

· Cloud provides a way for businesses to exploit these capabilities by offering cost flexibility, business scalability, market adaptability, context-driven variability, ecosystem connectivity and the ability to mask complexity.

· Our respondents’ number-one objective for adopting cloud is an external capability – that of increased collaboration with external partners. The second ranked objective is to drive competitive and cost advantages through vertical integration.

· Only one of the top seven objectives cited for adopting cloud focused on internal efficiencies.  



3. IBM sees three organizational archetypes that characterize the impact of an organization's cloud-enabled business strategy:

· Optimizers- use cloud to incrementally enhance their customer value propositions while improving their organization’s efficiency.

· Innovators - significantly improve customer value through cloud adoption, resulting in new revenue streams or even changing their role within an existing industry ecosystem

· Disruptors - rely on cloud to create radically different value propositions as well as generate new customer needs and segments – and even new industry value chains.



4. IBM recommends three key actions to help companies reap the potential rewards associated with cloud-enabled business models:

· Establish shared responsibility for cloud strategy and governance across the business and IT to help ensure cloud remains a top business priority.

· Look within and beyond the organization’s borders to maximize the value derived from cloud adoption

· Identify whether the organization seeks to be an optimizer, innovator or disruptor and use cloud to innovate the business model to realize that potential.




Study and Executive Overview
www.ibm.com/gbs/powerofcloud





Power of Cloud: STATS-AT-A-GLANCE

All types of companies are embracing cloud - Organizations – both big and small, across geographies and in virtually every industry – are embracing cloud as a way to reduce the complexity and costs associated with traditional IT approaches.

While a higher percentage of large organizations (those with revenues more than US$20 billion) are experimenting with cloud, smaller organizations are not being left out of the game: 67 percent of companies with revenues less than US$1billion and 76 percent of those with revenues between US$1 and $20Billion have adopted cloud at some level.

Almost three-fourths of the leaders in our survey indicated their companies had piloted, adopted or substantially implemented cloud in their organizations – and 90 percent expect to have done so in three years.

Today over 60 percent of companies in all industries surveyed are actively experimenting with or implementing Cloud.

The global cloud computing market is forecast to grow 22 percent annually to US$241 Billion by 2020 (According to Forrester Research)

Focus is Shifting -Today companies are focused on improving operational efficiency, but the focus is shifting to growth and competitive issues in the near future.

55 percent of respondents indicated “improving organizational efficiency “as a top business challenge today, but only 31 percent anticipate it will be a top challenge in three years.

Only 16 percent of survey respondents currently utilize cloud for sweeping innovation, such as entering new lines of business or industries, reshaping an existing industry or transitioning into a new role in their industry value chain.  However, 35 percent plan to rely on cloud for business model innovation within the next three years.

Respondents’ number-one objective for adopting cloud is increasing collaboration with external partners (62%); the second-ranked objective is competitive/cost advantages through vertical integration (57%). Only one of the top seven objectives cited focused on internal efficiencies.

Cloud powers business model innovation - Survey Respondents rank importance of how cloud’s attributes can be used to power business model innovation:

More than 50 percent of respondents cited “addressing fragmented user preferences” (context-driven variability) as important for their organizations.

Ecosystem Connectivity - is recognized by a third of the respondents as a major benefit.

More than 31 percent of executives surveyed cited cloud’s ability to reduce fixed IT costs and shift to a more variable “pay as you go” cost structure as a top benefit.

 20 percent of the business leaders cited “masking complexity” as a top benefit




Study and Executive Overview
www.ibm.com/gbs/powerofcloud