Once viewed primarily as a tool for cutting IT costs, cloud technology is now a strategic driver and enabler of business performance and shareholder returns. Increasingly, it is critical that company boards have a solid understanding of what the cloud makes possible and how their organizations can use it to build new competitive advantage, mitigate business risk, and strengthen their financial foundation.
With all the jargon-filled hype that has long surrounded cloud computing, it is little wonder many view cloud as an IT issue and not a board-level concern. Yet, when used effectively, the cloud can significantly enhance company performance—and even disrupt organizations and industries by enabling new revenue streams, greater profitability, enhanced resiliency, and increased customer responsiveness. Taking full advantage of these powerful capabilities requires a solid understanding of the business possibilities on the part of CEOs and boards of directors.
Some board members may have little direct experience with cloud computing beyond personal file-storage offerings such as the iCloud® online service. At its core, cloud is the concept of using a network of remote servers hosted on the internet to store, manage, and process data as well as provide application services, rather than doing so on local, or on-premise, servers. The cloud can provide incredibly low-cost storage, a high degree of business and technology flexibility, and access to the latest technology and security—including, importantly, new capabilities and tools that can drive innovation. As the cloud takes on an ever-greater role in business, it is critically important that boards of directors be well informed. CFOs and other company leaders can play an important role by helping boards focus on six critical areas: three related to new business frontiers—what might be called “above the line”—and three related to optimizing the organization.
ENLARGE Above the Line: New Business Frontiers
Synchronize the enterprise. The cloud can play a critical role in helping businesses achieve a long-sought-after goal: better integration and synchronicity across the enterprise. Using it, an organization’s supply chain, sales, and marketing functions, for example, can now work together more closely, share data, drive integrated decisions, and move more quickly to innovate or solve customer problems. Cloud helps to make this possible by creating common, connected data sets; enabling deeper, more sophisticated insights and analytics; enhancing collaboration through new sharing platforms and tools; and increasing the speed of decision-making. Today, the cloud is the critical and fundamental backbone enabling the next wave of enterprise synchronicity, arguably a critical competitive advantage in the current business landscape.
AirAsia, in becoming a data-first business, deployed cloud technology to help it capture, analyze, and report on massive volumes of data to address complex problems and create new opportunities. Various cloud-native services such as data dashboards, machine learning engines, and application creators have helped the company accomplish these goals.
Drive business innovation. Not only is the cloud helping to innovate IT strategy, it has become a driver of business strategy as well. Today, any company can use the cloud to quickly and inexpensively tap disruptive tools and capabilities such as machine learning algorithms, internet of things (IoT) platforms, augmented and virtual reality applications, image recognition, and natural language processing capabilities, among others. Increasingly, leading organizations are using these capabilities to curate and deliver new customer experiences, create and market customer-specific offers, optimize manufacturing and operations, and find and onboard better talent. Among the typical results from these efforts are higher revenue growth, lower costs, more consistent operations, and better retention.
Philips Lighting, rebranded as Signify, provides connected lighting and IoT systems and services using the cloud as a foundation. The company created new revenue streams through cloud-based products and services and developed distinct competitive advantages in a changing competitive landscape.
Unleash new talent and new ways of working. Optimizing an organization for cloud and aligning technology with business needs can bring benefits across all company functions. While this may require finding new talent and designing new ways of working, the outcome can be transformational. Leading-edge technology capabilities and inventive technology solutions attract new workers and provide access to alternative talent ecosystems with new skill sets. This means bringing in different types of professionals, such as DevOps engineers, Agile masters, and user experience designers, who bring a fresh perspective to innovation within the organization. In addition, cloud infrastructure enables process improvements, including the use of automation or human augmentation, that can improve the productivity of the workforce across the enterprise. Finally, as IT organizations become more closely integrated with business lines, agility, team connectedness, and the transparency of data and processes become key assets for growth.
Capital One has hired hundreds of technology staff to develop products like its new chatbot, Eno. Its curation of talent helps it provide products that match the experience customers can get in all other aspects of their lives. From an all-star, in-house AI design team to filmmakers, anthropologists, journalists, and designers, this collaboration gives the company a unique skill set and perspective to help it win customers.
Below the Line: Optimizing the Organization
Build resilient operations. One of the biggest business benefits of cloud computing is that it can enhance a company’s overall resilience, helping it to respond more quickly to changes ranging from physical outages to market-driven disruption or geopolitical crises. For these reasons, an important part of understanding the cloud is considering how an enterprise’s current infrastructure and capabilities may be limiting its ability to detect and address new risks and vulnerabilities—and how cloud technology can help. Moving to a public cloud provider means not only shifting away from the company’s own data center but also gaining the ability to replicate data and application services across more than a single data center or region. The result can be new resiliency, which helps to maintain continuous operations and safeguard people, assets, and overall brand equity.
Hess Corporation used the Amazon Web Services (AWS) cloud to focus on a growing volume of drilling data, seismic information, and other big data opportunities while positioning its infrastructure for improved disaster recovery and increased reliability.
Enhance security. Security concerns are top of mind for leadership given the publicity that follows most breaches. It is important to understand how security is different in the cloud because of the tools that are native to each cloud provider’s environment and the fact that cloud providers typically take responsibility for the security of the lower-level infrastructure layers. With thousands of organizations now hosted in the cloud and testing its security—many with extreme security standards—cloud providers have established a strong track record of supporting very secure environments. As a result, cloud environments can be as secure or even more secure than those on-premise—but only when implemented correctly by a skilled and trained security team. This shared security responsibility between cloud providers and the clients they host changes how organizations anticipate and prepare for security risks.
The CIA trusts the AWS cloud to keep its critical information safe. After signing a $600 million contract with AWS in 2014 to use its C2S cloud, the CIA is now using that cloud to take advantage of cutting-edge capabilities such as natural language processing and sentiment analysis to create innovative national security tools.
Scale compute costs as needed. One of the longest-standing benefits of cloud computing is its ability to help organizations alter the way they pay for tech—away from heavy upfront capital spending and toward operational-based spending. That can bring many advantages, including making it easier for companies to respond quickly to market shifts or changes in broader financial priorities. It also helps companies capture cost efficiencies in dynamic cloud pricing by increasing or decreasing computing capacity as needed. Employed effectively, it can facilitate granular spending control across dimensions including major systems and applications, divisions, or seasonality. Many companies in industries such as oil and gas, semiconductor design, and drug discovery use finely tuned dynamic cost management to tap previously unaffordable massive compute capacity while paying for it only when it is needed. Faster results at lower cost is a winning formula in any business, and there can be beneficial tax implications as well.
Dynamic computing has helped AlphaSense, an AI-powered business insights platform, reduce both costs and developer time. By using the public cloud, it can now reprocess its entire database in two hours rather than a week, for a cost of $80 rather than $5,000.
Cloud technology is no longer a new frontier; today, it is a mature and integral part of the IT landscape and a key driver of business performance. As such, it is an essential topic of conversation between boards and management. By ensuring it is a recurring part of the agenda in interactions with board and subcommittee members, CIOs, CFOs, CMOs, and other business leaders can build support for cloud efforts and ensure their organizations take full advantage of this critical capability.