Is cloud computing the innovator’s best friend?

Most CIOs now have at least a basic understanding of cloud computing and an appreciation of its ‘utility’ features. These of course include the essential ‘pay-as-you-go’ element that gives cloud its similarity to utilities such as gas or electricity, and the idea of gaining new IT services without the traditional massive investment in infrastructure, software licensing or staff training. For many people, however, cloud is essentially nothing more than the latest chapter in the long history of outsourcing – a way to rent rather than buy, and a means of getting the services you need under contracts than easily be changed whenever a more attractive offer appears on the market.

But in my view this is only half the story, and the less important half. The key benefit which the maturing technology of cloud offers (at least to far-sighted CIOs) is the potential it provides for rapid innovation in response to business needs and opportunities, and innovation at affordable cost and low risk. In other words cloud can be a significant contributor to business agility, by providing the ability to quickly create innovative solutions that bring together different components and exploit a software-as-a-service (SaaS) model. And, as CXOs in most sectors of the economy now appreciate all too well, agility is now key to success amid the turbulence of the recession and post-recession times we are now experiencing.

Factors such as ongoing globalisation, new competition, new regulatory environments and growing customer sophistication are impacting industries from banking to steel, supermarkets to motor cars. And as a result, boards of directors are having to look at their business models with fresh eyes, searching for new and better ways to respond to profound change, supported by IT that can fully keep up to speed with the pace of change required.

This is precisely where cloud computing comes into the picture. It has the potential to provide a rapid solution at relatively low cost, to provide genuine scalability both for longer-term trends in service usage and for short-term variations between peak and non-peak levels, and to integrate services from several sources. In consequence, cloud computing can offer rapid support for business innovation of many kinds, but perhaps above all for innovations impacting – even transforming – the way in which organisations interact with their customers.

For both B2B and B2C organisations, there are currently three big challenges in winning customers, keeping them, serving them and maximising value from them. First, customers increasingly want and expect a fully joined-up approach to sales, marketing and service – the kind they are already used to getting from the best online businesses. But for organisations with a traditional departmentalised or divisionalised structure, this can be a tough challenge for the business – and an even tougher one for a CIO who thinks in terms of conventional systems integration.

Secondly, the economics of customer acquisition and retention increasingly dictate an urgent need to understand who your customers are, which ones are worth retaining, and why and how people switch suppliers. All of which, for many companies, means finding, integrating and using information sources additional to the ones you already have.

Thirdly, people are increasingly looking for suppliers able to respond to customer ideas on what they want rather than the products and services prefers to push at them. It is a shift from supplier push to consumer pull that can clearly be seen impacting many areas from travel and retail to banking and utilities. It is a trend aggravated (or enhanced, depending on viewpoint) by the arrival of new entrants, with new ideas in many markets such as financial services. And it is a development that companies ignore at their peril.

What has all this to do with cloud computing? Simply that for all three of these challenges, we are now starting to see more and more companies that have successfully deployed the cloud model as a centre-point of the solution. They have rejected yesterday’s massive systems integration and new systems development projects with their big budgets, army-style teams and protracted timescales in favour of cloud solutions offering rapidity, cost-effectiveness, scalability and low risk.

Of course not every IT department or CIO is in a position to embark on a cloud project. It is, after all, a new and somewhat strange world, and perhaps one that your organisation has not, till now, seen any reason to explore. But I suggest that next month, next week, or even tomorrow, you might have to respond mega-fast to a board-level request to support the kind of new venture so many organisations are trying as turbulence in the economy continues and as post-recession planning takes hold.

So if you are one of those CIOs with little or no hands-on experience of cloud computing, I advise you to get that experience under your belt, fast, and make sure the same goes for your senior staff. That way, you won’t be caught napping when push comes to shove.