During many of the interactive CIO sessions that K2 Advisory runs, it has become clear that CIOs view public Cloud delivery as something that is of most use for non-differentiated system areas of the organisation. These are areas where it is possible to reduce IT costs without constraining organisational development. Parts of the organisation which need to be more highly differentiated in order to continue to deliver high added value are seen as less of a good fit for standard Cloud delivery, and are areas where it may be easier to justify more expensive IT delivery.
But this is not the only aspect of Cloud delivery that needs to be considered: Cloud delivery can also allow new cost-to-value ratios by enabling you to work more nimbly within relationships of buyers and suppliers to create value for your organisation in ways that were more difficult to achieve before the arrival of Cloud. This is what we mean when we talk about Cloud ecosystems. A Cloud ecosystem is a set of organisations that share and/or exchange Cloud services to serve a common goal such as: reducing costs, accessing best practice, or fast-tracking technology solutions for business.
K2 Advisory's view is that when sourcing IT services it should be a strategic requirement for buyers to be able to access or join the supplier ecosystem. And yet 44% of CIOs in the UK say an outsourcing supplier has never mentioned the value of such an ecosystem to them, while 48% say that the phrase may have been used but they either have no idea how this will benefit their organisation or assume it means the supplier simply has a traditional sales relationship with the main technology suppliers.
Our research Sourcing IT services "for the journey": the impact of Cloud on outsourcing, suggests that there is far more work that needs to be undertaken in this area in terms of developing these ecosystems and clarifying the benefits they bestow.
At Business Cloud Summit last month, it was clear that some CIOs are beginning to plan how to use Cloud to deliver shared services within their organisations. At this stage they are primarily developing a shared private Cloud infrastructure and putting some thought into setting up shared platform services.
But one of the market development challenges for Cloud service ecosystems going forward would seem to be a tension between the existing development of shared services and the advent of Cloud delivery. This challenge is two-fold:
- existing shared services are viewed as an internal cost base, and are not charged on a pay-per use basis. So there is a lot of work to be done in moving the organisation to viewing Cloud-delivered shared services as a value-based mode of operation.
- when providing shared services from a central IT perspective, the challenge has been pulling the lines of business back from using their own IT, and Cloud further complicates this as it is so easy for lines of business to access their own Cloud solutions without reference to central IT.
While acknowledging that organisations can create new business models by forming peer networks or 'clubs' around a common social, economic or service outcome and that Cloud delivery makes it more feasible to take advantage of this, CIOs were cautious about the practicalities. Organisations are continuing to discuss possibilities with other players in their sector for sharing back office data.
But the feeling at the Summit was that a shift in vendor licensing models would be required to really get Cloud Service ecosystems up and running and that buy-side organisations have not yet "cottoned on" to the business opportunity this might provide. The development of Cloud service ecosystems is not on many CIO "to do" lists next year.
