Sponsor’s Perspective: Interview with Atul Sood, Vice President for Advanced Technologies, Wipro
We know that the cloud has been great for start-ups. But how are established enterprises adopting the cloud?
To answer this question, let’s look back in time and reflect on a critical aspect related to high transaction costs being one of the reasons for the existence of large organizations as postulated by Nobel Prize winning economist, Coase. But when the transaction costs decrease or are removed, you would find large organizations being under attack from smaller, nimbler and more agile start-ups. So, we begin to see the rise of start-ups that set out to become bigger and better.
The established companies on the other hand made note, but they struggled because of the sunk costs in IT systems which, once served them well, but proved to be an impediment to growth in a connected world. On the other hand, business leaders within large organizations saw opportunities through the rise of new-age technologies, but were held back due to locked-down set-ups, processes, and engagement models that had been built by their company’s IT. In fact, the frustrated executive could not understand why the IT team would take three months to help launch a new product , when it could be done easily through the ‘always available’ IT systems through public cloud environment made available with the swipe of a credit card. And, this healthy tension between business and IT began to change things within the company. This pressure from the businesses and an understanding that IT needs to respond much faster to the market; to the external environment; and service the customer in a much faster way heralded the adoption of new-age technologies within large enterprises.
So, whether you are a start-up or an established company, the economics of cloud makes sense. Technology has played a big role as a disintermediary of businesses and we have seen examples where businesses have been totally redefined by new-age technologies like cloud.
How has the cloud helped companies preserve cash for a stronger balance sheet?
In a post-2008 world, companies have been holding onto cash and committing to new projects or to asset refresh only after much deliberation. To give you a data point, the time for refresh for an IT asset would run to three to five years in the late nineties. But after 2008, companies are holding on for five to eight years to refresh. More importantly, start-ups are now formidable opponents who use Pay As You Go (PAYG) IT from cloud service providers.
So what does it all mean? Businesses on one hand are under extreme pressure to innovate but they do not want to go down the old route. They are looking at technologies like cloud where a business division leader can swipe a credit card and get some of the best IT environments without up-front investment. So, you have a ‘pay and consume’ based cloud model which is defined not only by technology and its benefits, but also by the economics around it.
We now see complex workloads migrating to the cloud, as the cloud model is maturing even on the pricing front. This feeds more innovation, and more specifically around industry solutions. So, today, solutions for a bank could be different from a utilities company or an insurance provider. This in turn allows solution providers to come up with unique business models that serve the needs of an industry. For instance, in India, Telecom service providers, working with cloud providers, developed a model for timely onboarding of customers as opposed to spending millions of dollars to set-up and run the infrastructure. In the process, new partnerships were forged between the consumer and provider with new business models. My sense is that we are heading to an age where the ‘art-of-possible’ will define the intensity of partnerships.
What should companies do in order to take advantage of the cloud?
First, you have to look what is core and non-core to your company; and, not just in today’s context but say five years from now. Why? Because, what companies define as core might be completely non-core as we go along. Remember, we agreed that technology can be a great disintermediary. So, companies need to re-evaluate their models to identify what they want to hold on to, from a competitive advantage standpoint, and — leverage the forces of advanced technologies like social, cloud, mobility and analytics to make their organizations more agile, more dynamic and more responsive. A key aspect here is to look business process downwards to applications and then infrastructure. If you do not optimize your business processes, there is a high probability that you would fall into what Robert Solow calls productivity paradox. This is typical of a scenario where technology does not live up to its stated benefits because archaic processes still define the usage of technology. Post this; you should cut over to an agile, dynamic and infinite scalable IT. The icing — you consume on a PAYG model!