Title of Enterprise What the brochure Needs to Know about Cloud Computing 2 Cloud computing is heralded as the next big thing in enterprise IT. While corporate data centers and on-premise software are not going away anytime soon, “the clouds” will likely have a growing impact on enterprise IT and business activities in many large organizations. CIOs and other business leaders must look beyond the hype to see what opportunities and challenges lie in the cloud—and how this approach can be used to further the organization’s strategy to achieve high performance. 3 Although the term “cloud computing” is Infosolve Technologies, a provider of (for example, hardware, software or quite recent, elements of the concept data quality solutions, relies on Sun’s services) from third parties over a have been around for years. For instance, Grid to scrub customer data.4 Semi- network. By combining virtualization timesharing and virtual machines date conductor maker Advanced Micro and one-to-many architecture with a back to the mainframe era in the 1960s. Devices (AMD) turns to the same pay-as-you-go business model, cloud The notion of “the network is the cloud from Sun for product testing computing represents a new paradigm computer” was first coined by Sun and simulation to achieve faster time that will significantly impact the way Microsystems in 1982. Grid computing, to market.5 IT infrastructure, platform, application, in use by the scientific community and business processes capabilities since the early 1990s, has been widely Cloud computing should be considered are procured, delivered and supported. deployed in financial services for the another important step forward in the past five or six years, especially in continuing industrialization of IT and • At the infrastructure level, companies securities and trading operations. Even could thus play a future role in enabling have already begun to source raw the on-demand business model dates high performance. The changing busi- computing resources—processing power, back to the late 1990s, when it was ness model, underlying technologies network bandwidth and storage—from served up by organizations known as and architecture will likely create a new the outside on an on-demand basis. In application service providers, or ASPs. wave of innovations. For enterprise IT most cases, these resources are cur- users, the cloud holds great potential rently used to augment rather than What makes cloud computing real now in delivering lower-cost services, greater replace existing in-house infrastructure, is the maturation of the Internet as an IT agility, more flexibility and better which itself is increasingly virtualized (a IT platform, virtualization, hardware user experiences. Indeed, Accenture phenomenon known as “internal cloud.”) commoditization, standardization, and High Performance Business research Unlike traditional hosting services, which open source software. A key catalyst is identifies virtualization—a major enabler provide dedicated hardware to each the success of major Internet companies for the cloud—as a key contributor to customer, infrastructure cloud providers like Google, Amazon and Microsoft. The high-performance IT.6 draw from a vast pool of shared highly global and scalable infrastructure resources and dynamically expand and these companies have built to power The cloud also presents a number of contract to accommodate fluctuating Internet search, electronic commerce, new challenges in data security, privacy, demand from different user organiza- social networks, and other online ser- control, compliance, application inte- tions. As a result, they provide far vices forms the core of the current gration, and service quality. To be greater elasticity, economies of scale cloud phenomenon. successful, companies should take and cost advantage compared to small, incremental steps toward this standalone datacenters. Amazon’s Early evidence shows that cloud new environment so they can reap Elastic Compute Cloud (EC2), Sun’s computing is clearly upon us. Citigroup early benefits for applicable business Grid Compute Utility, and VMware’s recently purchased 30,000 seats of situations, and learn how to deal with vCloud are prime examples. Salesforce’s customer-facing software- the associated risks. as-a-service (SaaS) applications for its 1 Computerworld UK, “Citigroup signs 30,000 seat financial advisors worldwide.1 Contract The evolving enterprise IT stack deal with Salesforce.com,” November 16, 2007. 2 BusinessWeek, “Workday: The Next Software manufacturer Flextronics has said it The term “cloud computing” is known by Power?” August 19, 2008. will use human capital management many other names, including on-demand 3 InformationWeek, “Coke's Largest Bottler Taps solutions from SaaS newcomer Work- computing, elastic computing, utility Microsoft For SaaS,” July 19, 2008. 4 InfoWorld, ”Early experiments in cloud day for its 200,000-plus employees computing, grid computing, and computing,” April 7, 2008. around the globe.2 Coca-Cola is moving everything-as-a-service. While each 5 ChannelWeb, “AMD Taps Into Sun Utility Grid,” 35,000 knowledge-workers from Lotus captures facets of the phenomenon, September 7, 2006. 6 “High Performance IT 2008: There’s No Notes to Microsoft Exchange Online. 3 these terms fail to tell the whole story. Substitute for Substitution,” Accenture, 2008. NASDAQ turns to Amazon.com’s S3 to Here, we define cloud computing as the store historical data on stocks and funds dynamic provisioning of IT capabilities and a lightweight rich Internet appli- cation to generate new revenues. 4 4 • At the platform level, cloud-based • At the application level, the first wave • At the business process level, cloud- environments provide application devel- of cloud-based services (also known as based solutions, also known as business opers similar functionalities as in the software-as-a-service or SaaS) falls process utilities or platform-based busi- traditional desktop settings. Specifically, broadly into the areas of CRM, human ness process outsourcing (BPO), offer these include tools and other support capital, and financial management. an Internet-enabled, externally provi- for development, testing, deployment, The second wave focuses on desktop sioned service for managing an entire runtime libraries and hosting. The productivity tools, including word business process, such as claims pro- emergence of such platforms allows processing, spreadsheets, e-mail and cessing, expense management or independent software vendors (ISVs) Web conferencing. Today, application procurement. Unlike traditional BPO, and IT staff to develop and deploy clouds span across all major enterprise which requires the service provider to online applications quickly using the solution areas, from procurement to take over an existing software installa- third-party infrastructure. In the case enterprise resource planning and con- tion, the process cloud uses a common, of force.com, for example, developers tent management. These applications one-to-many platform to automate can also take advantage of the existing run on the third-party infrastructure. highly standardized processes. It differs data and customer base from the core User organizations subscribe to these from application clouds in that it pro- customer relationship management services based on the number of users vides end-to-end process support, (CRM) application. Google App Engine or seats. Since these services are covering not just software but also and Coghead are two other examples. available via standard browsers, they processes supported by people, such as Microsoft recently announced its support device-independence and contact centers. These processes are Windows Azure service platform, anywhere-access. Major pure-play typically priced on a per-transaction which extends its leading desktop vendors include Salesforce, NetSuite, rather than per-seat basis. Early exam- capabilities (such as .NET) into the Workday and Google (Google Docs). ples include PayPal (consumer micro cloud. Traditional enterprise software providers payments), ADP Employease (payroll), such as Oracle, SAP and Microsoft have and Amex-Concur (business expense also begun offering their own hosted management). applications. 5 As shown in Figure 1, cloud-based The rise of a disruptive emergence of cloud platforms will services are available at all levels of the technology significantly ease the entry barrier for enterprise IT stack. So far, each layer Cloud computing is a classic disruptive such small players to develop, deploy, has evolved independently. Application technology. As such, it has its origin scale and integrate their services. clouds are perhaps mature, while busi- in the fringe of the IT market, i.e., the ness process and platform clouds are small and medium-sized enterprise The battle between pure Internet still at a nascent stage. Most applica- (SME) and consumers, whose need for players like Google, Amazon and tion cloud pioneers (for example, simpler and lower-cost or even free Salesforce and traditional enterprise Salesforce.com) rely on their own home- solutions is underserved by traditional vendors has just begun. Incumbents grown infrastructure. As infrastructure packaged software. As cloud-based such as SAP, Oracle, and Microsoft and platform clouds continue to services matured, they started to win have been investing aggressively to mature, this scenario is likely to change. broader acceptance from mainstream extend their on-premise capabilities New application players will be able enterprise customers. Now, they com- into the cloud. For example, Microsoft to turn to these providers to achieve pete directly with on-premise and has launched online services to offer better cost structure, elasticity and packaged software. its software in the cloud. It is also faster time to market. For instance, investing billions in datacenters to thanks to Amazon EC2 and open The significance of the cloud, however, help confirm quality and availability. source software, the upstart Coupa lies far beyond cheap computing. The Microsoft has developed a Software + successfully launched an on-demand Web-enabled, variable cost model Services hybrid model to offer its cus- e-procurement solution six months represents a huge departure from exist- tomers a choice between on-premise, after closing its first round of funding.7 ing practice, and carries far-reaching partner-managed or Microsoft hosted Potential process cloud providers may implications for IT providers and users solutions. follow a similar path to offer virtual alike. A new wave of venture-funded BPO without owning their own hard- startups are likely to appear, offering an ware and software platforms. This array of innovative solutions ranging reinforcement effect is likely to accel- from niche applications to cloud middle- erate the uptake and the long-term ware and infrastructure services. The success of the cloud ecosystem. 7 www.coupa.com/about/press-releases/ e-procurement-software-innovator-recieves- seriesa-funding; www.coupa.com/about/ press-releases/first-on-demand-e- procurement-software. Figure 1. The enterprise IT stack: traditional solutions versus cloud-based solutions Traditional solutions Cloud-based solutions BPO offerings from Accenture, IBM Process PayPal, ADP Employease, Amex-Concur SAP ERP, Oracle CRM, IBM Lotus Application Salesforce.com, Workday, NetSuite, Notes MS Exchange Online Microsoft Windows/.NET, Platform Force.com, Windows Azure Linux/Solaris/J2EE Google App Engine IBM BladeCenter, Sun Fire X4100 Infrastructure Amazon EC2, VMware vCloud, IBM Blue Cloud 6 For IT organizations, the cloud means Accenture believes that the IT depart- businesses no longer have to wait for that more IT functions will be accounted ments of large organizations will the provisioning of servers or worry for as variable costs. This change from continue to supply the majority of IT about project delays. By tapping into “buy-and-own” to “pay-as-you-go” has services, especially those enabling core the right cloud capabilities, companies broad implications for activities such business functions. Nevertheless, these can quickly enter new geographical as procurement and staffing—and it departments must still be ready to markets or launch new products or could lead to a new role for the IT accept a gradually shrinking footprint services in existing markets. As demand department. As the cloud continues while dealing with new challenges grows, they can quickly scale up. Con- to gain momentum, more business associated with the emerging hybrid versely, when demand eases, they can units and users will turn directly to environment, including service quality, just as quickly scale down and, if neces- cloud-based solutions to meet their data and integration. sary, exit the market entirely with infrastructure and application needs. minimum loss of time and capital. As a result, the IT department’s role In general, cloud computing will act as as the sole provider and operator of IT an accelerator for enterprises, enabling will slowly diminish. At the same time, them to innovate and compete more the IT department will likely see a grow- effectively. With elastic and theoreti- ing demand for security, procurement, cally unlimited IT resources on tap, data, and other similar services from the business units. 7 Why now? Another factor pertains to the growing On the technology front, a number of Several forces are converging to create demand for seamless collaboration. recent developments have combined to the recent surge of interest in the cloud. As the globalization trend continues, make the Internet an emerging enter- On the business front, today’s macro- coupled with rising energy prices and prise IT platform. At the center is the economic conditions continue to put widespread concerns about climate widespread adoption of Web services, pressure on overall business spending, change and traffic congestion, distrib- allowing easy publishing, access and which drives ongoing IT rationalization, uted work has become an everyday integration of application functional- datacenter consolidation, outsourcing reality in large organizations. Many ities and infrastructure capabilities from and now cloud computing. For orga- existing on-premise applications were different organizations. For instance, nizations eager to delay, reduce or originally designed to support individu- the entire Amazon cloud is accessible eliminate capital spending, especially als or same-time, same-place work through Web services. The second is on one-off or marginal projects, the styles. By contrast, cloud-based pro- Rich Internet Applications or RIAs (for pay-as-you-go model provides an ductivity tools (for example, Google example, AJAX, Flash/Flex, OpenLaszlo) attractive option. Increasingly, compa- Apps, Microsoft Office Live Workspace, which support desktop-like client-side nies also are turning to cloud-based Intuit’s QuickBase, Facebook) are functionality within a browser, includ- solutions as a way to counter the high inherently collaborative and accessible ing local persistence for offline use, licensing costs of enterprise software. anywhere. These same applications are enriched graphics processing, integra- also used by many younger employees tion with local devices and enhanced outside of work, making them a more user experience. Without RIAs, appli- natural fit for tomorrow’s workforce. cation clouds such as Salesforce.com and Google Apps would not have been possible. In addition, other advances such as hardware virtualization, multi- tenant architecture, parallelization engines (for example, MapReduce, Hadoop), and grid architecture are essential to support for the elasticity and scalability of the cloud. 8 A business case for using the cloud A global logistics company world. Among its requirements software licensing, and the ESB handles tens of millions are large data volumes and near time lost to setup and testing. of packages each day. To help real-time response. The table The result ($130,000 annual prevent millions of dollars in below shows a cost comparison operating cost versus $4 lost revenues each year due to among three different solutions. million upfront capital cost) fraud, ESB looks for a solution clearly favors using Amazon that is capable of detecting These numbers represent a EC2 over buying, installing and duplicate barcodes on the conservative estimate since operating one's own servers. shipments originated from they do not take into account different locations around the other costs, including energy, On-premise approach Using Amazon EC2 public cloud Buying internal cloud • SUN E25K: 72CPU + 1 TB memory • 150 virtual servers • 150 servers • TimesTen In-Memory Database • Capital cost = $4-plus million cost = $131,000/year • Variable • Capital cost = $150,000 • License cost = $1-plus million/year assuming 24x7x365 • Powercost = $70,000/year • Power cost = 0 • Powercost = $39,000/year • 40kW/hour + 40kW/hour • 45kW/hour Five major challenges with its proprietary disk virtualization providers, each specializing in a specific Just like other technological advances layer that automatically cleans up every vertical market. Even though consoli- in the past, cloud computing brings block of storage used. The fact that dation among providers is inevitable, major challenges as well as opportuni- major financial services firms like Citi- most companies will most likely end up ties to IT organizations and businesses. group have embraced cloud solutions using multiple clouds. As a result, they While some of these issues are techni- suggests that the cloud has success- will have to deal with data scattered cal (for example, performance), others fully passed early tests. However, there across clouds, not to mention the data are more organizational (for example, are still many open issues such as data residing behind the firewall in their own data location). How well and how soon control and certification. The pace of data centers. To further complicate the these issues are resolved will determine the future uptake will depend heavily situation, cloud operators must also whether cloud computing will eventu- on how soon these issues are resolved, meet government regulations that ally live up to its lofty promises. and when cloud providers will be able require customer data (for example, to obtain official certifications of their banking and health) to reside within For most companies, the single most security practices from independent specific geographic jurisdictions. This important near-term concern is secu- third parties. fragmentation of data presents huge rity, namely, how enterprise data is integration challenges. It also empha- safeguarded in a shared third-party The second significant problem is sizes the importance of developing a environment. Since their core business around data, including data location, comprehensive enterprise architecture. is based on securing customer data, compliance and integration. Current major cloud providers have made strides cloud solutions require data to be in this area. In fact, many of them offer stored in the cloud. This approach more sophisticated end-to-end, base assumes that a company relies on level security and privacy protection one or two providers at a time. Yet, than do the data centers in any single the current market is extremely frag- enterprise. For example, to preserve the mented. By some estimates, there are privacy of a customer’s data, Amazon about 700 cloud-based application augments the standard hypervisor 9 The third major challenge pertains to The fifth challenge concerns the actual The emergence of platforms represents service-level guarantees. Many enter- purchase process of cloud-based a new phase in the evolution of cloud prise applications require certain levels services. On the face of it, using computing. Just as in the desktop envi- of service. In the traditional on-premise pay-as-you-go IT services should be ronment, this new development will setting, these requirements are rela- highly attractive from a procurement lead to improved tooling, programmer tively easy to satisfy because the IT standpoint, moving payment and productivity, market consolidation department controls the physical and authorization processes from capital and, perhaps most importantly, a sus- software environment in which the expenditure to operating costs. In tainable developer community. At the application runs. But this is not true for theory, this could be accomplished same time, it can result in incompatible the cloud. Application cloud providers, by having individual users pay with ecosystems and customer lock-ins. As which have control over the running their own credit cards, expensing the more companies start to embrace the environment, cannot guarantee response costs much as they would expense cloud, they will need to ensure the times because the data has to travel business meals or taxi fares. However, long-term viability of their chosen through the Internet. The challenge few corporate finance or procurement platform(s). Table 1 provides a com- becomes even greater for the infrastruc- processes are set up to support such parison of the main features offered ture cloud, since it essentially supports levels of flexibility. The procurement by the six leading cloud providers. the software code from other organi- of the cloud, and the whole concept zations. Despite steady progress made of what an enterprise agreement looks Even though early cloud players enjoy by major providers, this lack of service- like in a cloud environment, are stick- clear advantages, it is worth noting that level guarantees will prevent critical ing points that will not be resolved the competitive and technological enterprise applications from migrating overnight. landscape is likely to change dramati- into the cloud anytime soon. cally over the next few years. It is A comparison of major cloud therefore far too early to predict which The fourth major challenge is related to platforms players might eventually succeed. How- legacy systems. Legacy applications in One of the latest trends is that cloud ever, those uncertainties should not general do not adapt well to the cloud. service providers are moving beyond prevent businesses from using the Since such systems are often critical to specific verticals to offer integrated cloud to meet their near-term IT needs. core business functions, today’s cloud platforms to support other developers For example, companies with one-off infrastructure simply lacks the service to create new services. Salesforce, applications can immediately benefit levels to support them. In addition, many which first introduced the concept, from Amazon EC2 and S3. Existing or legacy applications are tightly coupled has gradually transformed itself from prospective customers of Salesforce to the underlying hardware. Without a CRM specialist into a full-fledged should consider leveraging force.com costly redesign, they cannot benefit application development and hosting and integrated Google Apps to further from the virtualization and paralleliza- platform. Its force.com currently has extend core CRM capabilities to other tion features of the cloud. The mere more than 70,000 applications devel- application areas, such as collaboration.9 presence of legacy applications means oped by third parties, ranging from ERP Large enterprises may find that, over that a significant portion of IT in large and human resources to compliance the long run, the hybrid approach from enterprises will not be part of the tracking and billing.8 Through the App Microsoft and IBM offers them the cloud anytime soon. Engine, Google also offers a suite of most sensible way to accommodate tools that enables developers to develop their on-premise legacy and growing and deploy their Web applications onto cloud-based applications. Google’s infrastructure. Microsoft recently announced the Windows 9 Google, “Salesforce.com and Google Introduce Azure service platform that extends Salesforce for Google Apps,” April 14, 2008: http://www.google.com/press/annc/ its rich desktop integrated develop- 20080414_salesforce_google_apps.html. ment environment (IDE) capabilities into the cloud environment. 8 Salesforce.com, “Salesforce.com Announces Force.com Cloud Computing Architecture,” January 17, 2008: http://www.salesforce.com/ company/news-press/press-releases/2008/ 01/080117-2.jsp. 10 Table 1. A comparison of six major cloud platforms Description Strengths Weaknesses Amazon Infrastructure An à la carte list of infrastructure Ready-to-go, Web-scale infrastruc- • No IDE support Cloud services: ture shared by Amazon.com, true • Limited service level agreements • Elastic Compute Cloud (EC2) pay-as-you-go usage model, • New to enterprise market • Simple Storage Service (S3) standard Web service interface, • Simple Queue Service (SQS) language agnostic • SimpleDB Google App Engine A tightly integrated development and Existing, mature Web-scale Request-driven, page-oriented hosting environment for Web applica- infrastructure; rich set of Google model; no direct access to Google tions: dynamic runtime, persistent services application programming infrastructure; no service level storage, user authentication, e-mail, interfaces, low entry barrier (free agreements service monitoring, log analysis, etc. to try) IBM Blue Cloud A family of hardware and software for • Strong position in back-office and Vendor-specific hardware; building a private cloud: BladeCenter development environments complexity; high cost with Linux-based servers, grid-comput- • Open source components ing engine, Xen and PowerVM, Hadoop, • Customizability and Tivoli Microsoft Windows Software + Services hybrid model, same Scale of investment and complete- Limited time in market, complexity Azure functionality accessible through a set ness of vision, large developer due to option of business model of core Online Services (for example, community, existing development storage, identity, data service), same tools and skills, easier integration application programming interface for especially with other Microsoft- desktop client and the cloud based apps Salesforce Hosted development platform evolved Existing customer base for core Proprietary language (Apex Code), Force.com from AppExchange with new tools like CRM application, multitenant scalable but not Web-scale Visualforce (custom user interface architecture, relative maturity infrastructure creation) and Apex Code (Java-like language for manipulating business logic and data) VMware vCloud A virtual datacenter operating system Support portability between Still just an initiative with a lineup comprising of a set of representational on-premise virtual infrastructure of service partners—it is not clear state transfer-based application and external VMware-enabled when it becomes a reality programming interfaces for managing in-the-cloud data centers virtual machines running in a cloud environment, and a set of services (vServices) such as charge-back and service-level-agreement tracking 11 Three ways CIOs can use the cloud today Under the current economic mature enough for non-business- For example, workers at contact conditions, CIOs face more critical projects including research centers and offshore locations pressure than ever before to and development and software are good candidates for using cut cost and to do more with development and testing. They desktop clouds. less. The “pay-as-you-go” are also well suited for compu- model of the cloud provides tation-intensive jobs, such as • Take small steps toward an them with an attractive option to data cleansing, data mining, internal cloud: One of the CIO’s defer, reduce or even eliminate risk modeling, optimization top priorities is to continue certain capital spending without and simulation. improving the utilization of sacrificing service level. Below existing IT resources through are three steps for CIOs to take • Target the right users for virtualization and datacenter advantage of the cloud. cloud applications: Instead of consolidation. The same effort buying or renewing software will eventually lead to an • Use the cloud for the right licenses for every employee in internal cloud. jobs: Today’s infrastructure the company, CIOs may want to clouds such as Amazon EC2 switch some workers to lower- offer a relatively inexpensive cost, cloud-based solutions based and flexible alternative to buying on the type of work they do. in-house hardware. They are A guide for action • Software development and testing. In fact, IBM’s Blue Cloud has its origins Even though cloud computing is still at For companies with large in-house in an initiative that supports internal a nascent stage, businesses and govern- software projects, moving to a cloud- research and development projects. For ment agencies should take steps now based development environment (for the same reasons, advanced product to experiment, learn, and reap some example, CollabNet) may make sense development groups may also take immediate business benefits. Here are because it can provide more intuitive advantage of the cloud to shorten a few guidelines on how large organi- support for distributed projects and time to market. zations might proceed without undue global collaboration. Since project teams • Business continuity and disaster risk: can obtain development resources on recovery. Large providers of cloud ser- the fly, it can also help reduce potential vices rely on highly distributed, robust • Batch and data-intensive applica- project delays. As a “virtual test lab,” a and scalable infrastructure. For exam- tions. Today’s infrastructure clouds cloud-based testing environment (for ple, Amazon, as part of its services, (for example, Amazon EC2 and Sun example, SOASTA) has a clear advan- stores customer data redundantly in Grid) provide a relatively inexpensive tage for supporting realistic load and multiple physical locations. In the event and flexible source of raw computing performance testing without requiring of a natural disaster, such data will be power for batch-oriented jobs with a cost-prohibitive infrastructure. more easily recovered than it would be self-contained datasets. They are • Research and development. in an enterprise data center that only especially suited for data-intensive Research and development projects stores data in one physical location. applications that require heavy CPU in large companies may also be good Thus the cloud may also be used to cycles but not necessarily real-time candidates because they are often back up critical business data in exist- network response. Examples of such highly iterative, demanding fast ing enterprise systems. This type of projects include data conversion, cleans- ramp-up and quick scale-up and solution could support quicker retrieval, ing and mining, data compression and down—both hallmarks of the cloud. faster recovery and lower cost. encryption, simulation, risk modeling and graphics rendering. 12 • Desktop productivity tools. Companies • Peak load demands. There are two is not yet ready for widespread use. might be tempted to move commodity broad types of peak load demands: As these products mature, companies applications like e-mail and personal predictable and unpredictable. A good should be able to plan for their internal productivity tools into the cloud to example of predictable peak demand data center capacities based on stable save money and to meet the demands comes up when IT groups at financial demand instead of peak numbers. of younger employees. However, cur- service firms have to handle the rush Together with the broad adoption of rent desktop application clouds are of year-end statements. Similarly, IT virtualization, this trend could lead to still not mature enough in terms of departments at large retailers must drastic improvements in the utilization feature sets and service levels for such plan for peak demand during holiday of data center resources. heavy business use. At this stage, they sales periods. In such cases, the cloud may be best used to augment rather can be used to accommodate demand. than replace existing productivity suites. Depending on the type and style of Unpredictable peak load is more com- work, it makes sense to target select plex. It requires dynamic load balancing groups within an enterprise for such between the applications running on applications. For example, offshore in-house data centers and external and contact center employees may be clouds. While such software exists, it good candidates. Groups that already use other cloud applications may also find desktop clouds appealing. 13 Three reasons why CEOs should care about the cloud To compete effectively in today’s or services in existing markets. partners and even the public multi-polar world, CEOs need As demand grows, they can around the globe so that they every edge they can get, from quickly scale up. Conversely, can harvest better ideas faster. low cost to speed and employee when opportunities dry up, productivity. As IT becomes a they can just as quickly scale • Improving worker productivity: utility, it is now possible to focus down with minimum waste of To attract top talent and stay more attention on using IT to time and capital. close to local markets, most create business value. CEOs may companies must deal with a find that the cloud in particular • Faster and better innovations: globally distributed workforce. can contribute to their agenda CEOs increasingly recognize that Since cloud-based applications through the following three the traditional closed innovation are inherently global and collab- areas: model is no longer adequate to orative, they are essential in keep up with the rapid pace of helping companies enable • Faster entry into new markets: today’s market. By using distributed teams to work One key advantage of the cloud cloud-based solutions such as together more effectively. is elasticity. By tapping into crowdsourcing, companies are right cloud capabilities, compa- able to open up innovation to nies can quickly enter new more employees, customers, markets or launch new products • Public versus private clouds. A common repository of electronic patient records misperception about cloud computing (such as Microsoft HealthVault or is that, eventually, there will be only Google Health) would bring together a handful of clouds, all of which are payers, providers, drug companies and public. That is highly unlikely given the health care consumers. Some large complex IT needs in large enterprises. multinationals may opt to build and While some general-purpose public operate their own “private clouds” or clouds will exist, two other types of “internal clouds” while continuing to cloud are likely to emerge. One type, tap into external cloud sources. That “specialty clouds,” will cater to the way, they could achieve both elasticity particular needs of a select group of and control over service quality, data organizations, an industry or even a and other important variables. country. For example, a health care cloud based on a central or federated 14 Cloud computing will have significant Just as the shift from isolated power The message for large enterprises is impact on enterprise IT as it trans- generation to an electricity grid took stark. Although many leading businesses forms to fulfill its role of enabling high several decades to make an impact and government organizations are performance within a rapidly changing nationwide, IT’s migration into the starting to experiment with the cloud, business environment. With the unprec- cloud will take years. Significant a more comprehensive approach should edented economies of scale and elasticity uncertainties and challenges still lie be considered. Unless they seriously of the cloud, companies will no longer ahead—both technological and orga- consider making the cloud a part of be limited by their in-house capabili- nizational. What’s interesting is that their strategy, these companies may ties. Instead, IT will become a dynamic the ranks of the early adopters include find themselves disadvantaged when resource that adapts automatically to many emerging-market enterprises.10 competing in today’s increasingly business demand. By relying on the Gaining access to the cloud may further multi-polar marketplace. standard Web platform, the cloud will add to the advantages these companies also help improve collaboration, access already have in cost and nimbleness. and overall user experience. Business users will be able to buy, share, cus- 10 The Vietnamese government is among the tomize, and even create their own first users of IBM cloud computing infrastruc- ture. IBM’s first Blue Cloud Center was built applications directly. Collectively, and went live in early 2008 in Wuxi City, China. these capabilities will help reshape Of the 13 such IBM cloud centers, eight are IT into a true utility that enables located in emerging countries, including China, India, Brazil, Vietnam, South Africa, and South businesses to innovate faster and Korea. compete more effectively. 15 About Accenture About Accenture To find out more, please contact: Technology Labs Accenture is a global management Accenture Technology Labs, the dedicated consulting, technology services and Kishore S. Swaminathan technology research and development outsourcing company. Combining firstname.lastname@example.org (R&D) organization within Accenture, has unparalleled experience, comprehen- +1 312 693 1033 been turning technology innovation into sive capabilities across all industries business results for 20 years. 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