Cloud may disrupt business practices in same way as advent of computing, says EIU

Out-Law News | 10 Jun 2014 | 12:34 pm | 2 min. read

Businesses should look beyond the cost benefits that can be derived from using cloud services to assess the "real significance" the technology has on their organisation, the Economist Intelligence Unit (EIU) has said.

In its new report into the impact of the cloud (21-page / 549KB PDF), the EIU said that it had been unsurprising to see "cost flexibility" as the "prime driver for cloud adoption" by businesses given the economic challenges that have presented themselves in recent years. However, cloud computing can have a much greater impact on businesses than on just cost, it said.

The EIU said that the cloud has delivered "a revolution in the way information is stored and shared" and that it "could prove as disruptive to business practices as the advent of computing itself".

"The rise of utility computing services, delivered over the internet (or internally, in the case of private clouds), will continue to disrupt markets, spawn new business models and revolutionise information-sharing and business management for years to come," the report said. "To assess its real significance to their organisation, therefore, executives should also pay close attention to how cloud computing is enabling new business models, transforming business processes, changing market dynamics and, in some cases, creating new markets altogether. It is here that the true revolutionary impact lies."

Expert in IT contracts Iain Monaghan of Pinsent Masons, the law firm behind Out-Law.com, said that moving from a ‘traditional’ model of IT infrastructure to a cloud model is disruptive in many ways.

"New businesses can adopt a cloud model from the outset," Monaghan said. "Established businesses have a legacy of existing infrastructure which cannot simply be abandoned, and, as the report suggests, using cloud as an ‘add on’, with the need to create effective interfaces to the existing infrastructure, is not going to offer the flexible long-term solution they require. Established businesses need to carry out a wholesale review of priorities, investments and contracts to establish the most efficient route from the old world to the new."

Dr Tua Huomo of the European Institute of Innovation and Technology (EIT) said IT suppliers need to become "more agile" when moving to delivering services through the cloud.

"When companies start providing services in the cloud, they also need to change their processes to be far more agile as real-time value delivery becomes increasingly important," Dr Huomo said. "This is especially true in the consumer market: if you don’t provide something new, something exciting, on a regular basis, you’ll probably be left just looking on as your customers switch to a competitor who does."

"When you go into the cloud, whether you are a customer-focused business or an ICT service provider, it’s really just the starting point in fundamentally changing your business from operational processes to organisational structures, from business models to partner networks," she said. "In order to keep your customers happy, you need to concentrate on the areas or segments that really bring value not only to your company, but to your customers as well. This needs to be done in a very systematic and comprehensive way. That equates to a strategy change for many companies."