Providing a superior digital customer experience or a superior digital product increasingly depends upon enormous amounts of computing horsepower. And increasingly, the immediate answer to that horsepower requirement is found in a public cloud mega-vendor’s systems – such as those owned by Amazon, Google, Microsoft and IBM.
Regardless of the industry sector, the ability of companies to embrace cloud will soon separate the winners from the rest. The reason is it will determine who comes first and best to market with new digitally-powered product innovations, as well as digitally based process innovations.
Here’s how the cloud enables innovation:
Creating new products and services
The cloud has already been harnessed in industries such as media, entertainment and banking, whose products have been fully digitized into bits for more than a decade. Take streaming entertainment content provider Netflix. It came to the realization 11 years ago that it needed to shift its computing infrastructure from its own data center to a public cloud vendor’s data centers.
In rolling out its streaming video service, Netflix discovered that developing its own data-serving infrastructure was prohibitively expensive. By switching to the Amazon Web Services (AWS) cloud platform, it was able to scale its streaming service at a fraction of the cost. Today, Netflix no longer owns any data centers, although streaming generates 90% of revenue, and Netflix accounts for 37% of all peak internet download traffic in North America. And even though Amazon now competes against Netflix in streaming video, Netflix has remained on AWS’ cloud systems. Switching to AWS also freed up resources to invest in the wildly popular content creation that is differentiating its business.
Building collaborative ecosystems
Like Netflix, many other innovative producers of digital products today face the same reality. Take the product of money. One bank in particular, ABN Amro, sees much of its future to be digital banking offered through public cloud. In the first quarter of 2018, some 59% of the Dutch bank’s retail banking business was done online, and the percentage was increasing.
What has led so many consumers to do business with the bank through its mobile apps? Innovations such as those that breakdown personal income and expenses, financial planning, and other valuable consumer banking services. And to accelerate these innovations and keep improving that digital experience, the bank has built a strong community of outside software developers.
Critical to getting these fintech software developers to work with ABN Amro in the cloud is something called “API-fication”. Simply put, APIs obviate the need to reinvent the wheel. Rather than programming common functions from scratch, and re-design data integrations, developers can embed an API to perform the function for them. API-ification can quickly create a tech ecosystem that lets partners and vendors collaborate and innovate.
ABN Amro leveraged API-fication to establish a cloud-based open-banking platform. The bank’s APIs now provide a way for third-party apps to securely access customer data (with necessary customer permission and control). The bank also built a developer portal that helps external developers use the bank’s APIs.
In essence, the bank is adopting new technology rapidly and inexpensively, by empowering programmers to co-innovate with them.
Realizing new revenue streams
Companies that embed digital sensors in their products and deploy Internet of Things (IoT) technologies, too, are increasingly turning to the cloud to process the terabytes of data. Rolls Royce has been an early adopter of IoT-enabled technology. Digital sensors in its aircraft engines, factories and distribution net works collect and process data rapidly, and reduce manufacturing and supply chain inefficiencies. Cloud technologies that enable real-time data analysis allow Rolls-Royce to offer consultancy services that provide previously unavailable granular corporate insights, producing new revenue opportunities for the industry leader.
Rolls Royce is far from alone in deploying IoT to create value. According to a survey of more than 900 decision-makers at companies ranging from healthcare and manufacturing to retail, transportation and logistics, 48% are on their way to becoming “intelligent” enterprises. Fifty-three percent expect IoT-generated data to increase revenues in the near future. By 2020, more than 20 billion connected devices are predicted to be online.
With its enormous computing power and flexibility, the cloud facilitates the development and deployment of IoT applications. The cloud approach enables IoT by providing a platform to host data and applications and also supplies the computational muscle needed to process the large amounts of data generated by the IoT.
Laying the foundation of innovation
These days, virtually every company needs to be thinking about how to digitize their products and processes and put them in the cloud.
As technology evolves, a skills shortage in running legacy on-premises systems will make it difficult for many companies to keep those systems running, leaving little bandwidth for adopting new technology. In some cases, legacy IT infrastructure can’t keep pace with customer demands and is frequently overtaxed by distributed and mobile workforces, so it serves as a poor foundation for innovation.
The most effective way to address this problem is for companies to take a ‘default-is-cloud’ strategy, capitalizing on the advantages offered by hyper-scale providers through a transformation continuum. The cloud liberates companies from their legacy systems, offers flexibility of ‘hybrid’ options for intermediate co-existence wherever required, the first to usher in latest innovations at production-grade, thereby enabling enterprises adopt a digital-first mindset, to win new customers and create growth at accelerated pace. Companies are increasingly seizing the opportunity.
Every company that intends to compete on the basis of new products, services and processes must now decide whether their application and data infrastructure will be able to support such enterprise-wide digital innovation.
About the author(s)
Suranjan Chatterjee is Global Head, Cloud Apps, Microservices & APIfication at Tata Consultancy Services (TCS). In this role, Suranjan helps the world’s leading enterprises leverage cloud services to fuel innovation, accelerate technology adoption and realize speed, agility and scale.
He leads strategic initiatives for cloud-based application modernization and integration service offerings and is focused on driving growth related to cloud-native application development, migrations, hybrid cloud integrations, microservices design, “API-fication” and containerization.
Suranjan has over 21 years of experience in IT solutions, lending his expertise on many enterprise transformation projects as both a consultant and business leader. Prior to his current role, he held multiple positions at TCS involving the Oracle business, where he oversaw areas such as emerging business opportunities in India and other growth markets, and the management of presales and numerous client engagements.
Suranjan currently resides in India with his wife. Outside of work, Suranjan is an avid reader of thought leadership articles from leading publishers and is a connoisseur of world cinema.