Success will go to those companies that combine business agility and cloud computing to continuously explore new opportunities. Attempts to pick winning opportunities by doing lengthy analysis do not work in our unpredictable real-time economy.
Volatility is here to stay. Companies that create a foundational business strategy based on agility will do best in this real-time global economy we now live in. Companies that emphasize continuous exploration of potential opportunities followed up by rapid expansion into new markets when an opportunity proves to be successful are the ones that will thrive. This calls for skillful use of cloud computing and related technologies such as software-as-a-service (SaaS), social media and consumer technology devices such as smartphones and tablet computers.
The future belongs to those companies that figure out how to do continuous exploration of opportunities without spending a lot of money and wasting a lot of time. Since most new business ideas do not work out, companies need to try a lot of ideas to find the winners. Many companies still try to pick the winners by doing lots of analysis up front and then investing lots of money to bring a few selected ideas to market. In the high change and unpredictable economy we live in now that approach does not work anymore. It’s better to do a little analysis to identify a lot of good ideas, and find ways to bring them to market quickly and inexpensively and see what happens.[ms-protect-content id=”9932″]
An Example of Business Agility
Here is a case in point; suppose a company, GrowMore Corporation, spots an opportunity to leverage its existing expertise and supplier relationships to launch a new product line for a market adjacent to its traditional markets. In order to do this, the company wants to set up a new business unit with branch offices in key geographical locations. It wants to have sales offices in these areas and it wants to support the sales staff in these offices with a customer relationship management (CRM) system that enables sales people to prospect for customers, create presentations and proposals and follow up with prospective customers in a timely and organized manner. GrowMore Corp. also wants to collect sales and prospecting information from all the regional offices and store it in a single database at headquarters to provide for overall reporting and tracking of sales and business development activities.
The new product line will need some customization for individual customers so that it best fits customer’s unique needs, but GrowMore Corp. does not want to staff all these offices with engineers to do this customization. Instead of sending engineers out with sales people to make calls on prospect companies, the company wants to set up video conferences. This way their sales person on site with the customer or prospect can arrange for video conference interaction between an engineer and a customer and the engineer can interview the customer and collect their information needed to configure the product.
In the old days management of the new startup business unit would have submitted a support request to the company ICT group. The ICT group would then have sent out a business analyst to evaluate the request and study the needs of the new business unit. Then the request would have been prioritized against requests from other business units and, since existing business units typically get priority in the allocation of available ICT resources, the startup unit would likely have to wait until the next budget cycle before it could get funding for the ICT services it needs.
Then when the funding and ICT resources became available there would be a process of designing and developing the needed software or evaluating possible packaged software solutions. Then there would be the purchasing and installation of the needed hardware and the communications networks and finally the rollout of the new system and accompanying user training. And during that time months or even years would have passed. In many cases the window of opportunity for the new business would have closed and the solution delivered would be too late or it would not effectively address business needs that had evolved and changed during the time it took to build and roll out the system.
Instead of all this, management of the new startup business unit can go directly to relevant cloud services providers and start using one of their software-as-a-service (SaaS) offerings within a matter of a few hours or a few days at most. And unlike the old days, there will not be any big up front cost involved (no capital expense allocation needed) and the cost of operating the systems will vary depending on the amount of usage. That way if the business idea doesn’t work out there is no sunk capital cost nor is there much in the way of system operating costs. And if the new business does work out, then operating costs can be paid for out of sales revenue.
Using cloud computing and SaaS applications the opportunity exists for this new business unit to put together a system by combining SaaS applications for their customer relationship management (CRM) needs and their video conferencing needs. And they can add other industry specific SaaS applications to their systems infrastructure as needs evolve. Or the new business unit can develop some unique custom applications if the value proposition justifies it and those applications can still run in the cloud so there is no need to buy computer hardware and staff up the new business with ICT people to operate that hardware.
Implications of Cloud Enabled Business Agility
This lowers the cost of sales for that new business unit in a way which then makes it possible and profitable for it to go after smaller deals that were not profitable before. The company can build a base of business from many smaller deals, which may be easier to get instead of having to go after only the larger projects and fight all the competition that goes along with getting those larger deals. These are some of the benefits of using an agile business strategy and the cloud-based technologies that enables such a strategy.
Cloud computing has great cost cutting potential in certain situations and at the same time it’s important to keep the larger business strategy in mind. The agility benefits far outweigh the purely cost saving benefits. If a company’s strategy calls for it to improve its ability to bring new products to market and improve its capability to expand geographically and open new offices, then cloud computing is a powerful technology for attaining these objectives.
Using cloud technology to enable new business formation and new product development creates what could be called multinational small and medium businesses (SMBs). With cloud-based technology SMBs can now be truly global where 10 years ago they could not afford the ICT infrastructure to support global operations in an integrated fashion. For instance, such businesses can open new sales offices in countries around the world and conduct local sales campaigns in a way unthinkable before. Opening new country sales offices simply means paying for more people to use a cloud-based CRM package and a cloud-based teleconferencing system.
Specialists at company headquarters can back up sales people with in depth technical support without having to fly people around the world to meet with clients.
Using the Cloud for Business Advantage
Companies are now at the point where they need to move on from an internal focus directed at maximizing use of ICT resources to an external focus on supporting collaboration and new product development through use of cloud computing. Companies are moving toward externally focused web-oriented architecture projects where they begin using SaaS applications and social media and combining them with selected internal application systems to support collaboration with other companies and attract new customers to drive their growth.
This is happening because cloud and SaaS and social media vendors are becoming more and more like utilities offering reliable computing power and basic applications like e-mail, video conferencing, ERP, CRM, and a growing array of industry specific applications. Over the coming months and years these vendors will develop economies of scale and expertise that enables them to offer their services at a much lower costs than what most companies would spend to deliver those services internally.
Because of this, companies will outsource more and more of their basic ICT operations so as to better manage their costs for these services. They can better align those costs with actual business needs because costs will fluctuate with usage. Costs will rise when usage rises but can be paid for by operating revenue and costs will drop when usage drops and there will be no need to renegotiate contracts or continue to pay for large technology investments when they are not needed. This will in turn enable companies to shift more of their time and attention to doing things with ICT that add value to their products and provide meaningful differentiation in the eyes of their customers.
Cloud computing offers significant advantages in its low startup costs and quick delivery of computing resources and its pay-as-you-go cost structure. In addition it offers ease of management and scalability of systems as needs grow. Cloud-based systems are also device and location independent so people can accesses these systems from anywhere using many different devices from PCs to tablet computers and smart phones like Blackberry, Android or iPhone. And finally, cloud computing enables rapid systems innovation in companies to respond to evolving markets and customer desires.
Many SaaS vendors and cloud service providers come to enterprise ICT from the mass market consumer side and that means they are already focused on providing customer friendly interfaces that make their software and services easy to learn and use. They bring the simplicity developed through their consumer experience and apply it to the corporate world and they are continuously updating their offerings to operate with mobile consumer devices such as smartphones, netbooks and tablet computers. These mobile consumer devices are quickly becoming the new interface between people and the online world.
A New Role for Internal ICT Groups
Adoption of cloud computing and mobile consumer devices are causing changes in the structure and operating priorities of internal ICT groups that are perhaps even more profound than those changes caused by the introduction of PCs 30 years ago and the emergence of the Internet 15 years ago. Up until now internal ICT groups have focused most of the time and resources on the maintenance and operation of existing hardware and software. As more and more hardware and software applications are outsourced to the cloud, the focus of internal ICT groups must change.
Smart ICT groups will not resist this new business reality. They will instead help their companies evaluate and select the right SaaS and cloud computing capabilities. This will lead to a growth in the demand for companies to have more business analysts, system designers and enterprise architects who can help spot opportunities and design the systems needed to explore those opportunities.
Business analysts and system designers will be embedded in line of business operating units and they will be responsible for working with the business people to design needed systems and oversee development of those systems. Development of new systems will be done by a mix of in-house developers working with outside consulting firms who bring special expertise with the application or technology being worked on. Enterprise architects will design and manage the overall technology infrastructure that is created from the integration of new cloud-based systems with existing in-house systems. This will be a constantly evolving mix of hardware, software and applications.
Technology groups that remain within companies will change their focus from data center operations to the design, construction, and constant adjustment of systems that meet ever-changing business conditions. The value of ICT groups within most companies will no longer be measured by how well they operate information technology, but by how well they combine technology with business processes to create a stream of responsive and profitable products and services for their companies and customers.
The debate over whether or not to use cloud computing has already been decided and the growth of cloud computing is now happening rapidly. Those companies that do not participate will simply be left behind.
Certainly, there are technical issues to be addressed and data security matters to attend to, but none of these are valid reasons to avoid cloud computing and the related technologies of SaaS, social media and mobile consumer devices. We are now entering a period of rapid evolution in technology and big changes in the business practices that this makes possible. It will be both exhilarating and relentless. Companies that learn to respond effectively to these challenges will thrive and those that do not will fade away.
About the author
Michael Hugos is an author, speaker and principal at Center for Systems Innovation [c4si]. He specializes in elegant solutions to complex problems with focus in supply chains, business intelligence, and new business ventures. Earlier he spent six years as CIO of a national distribution organization where he developed a suite of supply chain and e-business systems that transformed the company’s operations and revenue model. For this work he won the CIO 100 Award and Premier 100 Award. He writes a blog for CIO magazine called “Doing Business in Real Time” and is author of several books including his newest book Business in the Cloud: What Every Business Needs to Know about Cloud Computing. He can be reached via his website – www.MichaelHugos.com.