Last year, Forbes columnist Steve Denning (I’m a big fan) ran an article with the headline “It’s Official! The End of Competitive Advantage”. What his article was actually saying is that sustainable competitive advantage is dead – a concept with which I wholeheartedly agree. Competitive advantage today is transient. It’s all part of our brave new world where big no longer beats small, where seemingly disparate markets are now interconnected, and where those with the ability to innovate and execute the fastest will trump the competition.
Technology has always had a traditional role in supporting business, but even this role is now changing. Take cloud computing, for example. The primary driver for cloud adoption was once all about lowering costs, and reducing total cost of ownership. Today, there’s a marked shift from economics to innovation as the primary driver for moving to the cloud. Leading-edge companies are figuring out pretty quickly that by investing in cloud services as the very foundation for their new competitive offerings, they can innovate and execute faster, fulfilling the Holy Grail of delighting customers profitably
I believe we are sitting smack bang in the middle of an unprecedented time of innovation. Thanks to Big Data, Cloud, Mobility, and Social, low cost go-to-market models are fuelling growth. New interlinked ecosystems of suppliers, customers and industries are blurring what were once traditional corporate borders. It’s everywhere you look. Music, technology, communication, travel, consumer electronics, automobiles, and even education are facing competitive new situations in which commercial advantages are quickly copied. The industry giants taking profits from a deep well of long standing, loyal customer relationships are a dwindling minority in the context of wider commerce.
By changing the way companies consume and use technology, cloud computing is playing a crucial role as an actual foundation for innovation. The exponential growth in computing power, data storage and networking capabilities is the result not only of a new delivery model that lowers total cost of operations, but of new innovative engagement models for the business itself. That’s a huge shift, and I think we’ll start to see some really interesting advances in the way we do, use and consume things.
In fact, IDC predicts worldwide spending on public IT cloud services will reach $59.5 billion this year, and is expected to be more than $107 billion in three years’ time by 2017. That’s a public cloud CAGR of 23.5% – five times that of the IT industry!
Whilst cost undoubtedly remains an attractive driver, innovation and competitive advantage is the real prize. IDC’s latest report, ‘Innovation in the Cloud’, delivers a quick and easy read if you’re looking for a short synopsis on the role of cloud computing as an innovation platform.
Innovation is not an option: it’s an imperative. The only question for your organisation is how you’re going to support it.
Steve Hurn Senior Vice President and General Manager Cloud and Line of Business, SAP