Cloud and the Future of Business: From Costs to Innovation

With cloud computing becoming an increasingly important element of the IT function of most organizations, leading academics from The Outsourcing Unit, Department of Management at the London School of Economics and Political Science, undertook research to review the key features of cloud computing and its likely near-term and longer-term development trends.

The research was undertaken from late 2010 into 2011, including a survey of more than 1,035 business and IT executives and more than 35 interviews with key international players in the cloud computing ecosystem including cloud providers, system integrators and users of cloud services.

Accenture was the principal sponsor of this research effort.

The research has been organized into five key areas that emerged as highly significant.

Paper 1: Promise—Provides a commentary on the likely size and direction of the technological changes implicated by cloud, and analyzes their appeal for both service providers and business executives.

Paper 2: Challenges—Examines the perceived and real challenges cloud represents for business, IT and supplier executives. Different stakeholders weight the risks and challenges differently, and the authors provide a detailed assessment of what the significant challenges are, and what can be done about them. The emerging challenges include security and legal risks, defining the relationship, the lock-in dilemma and managing in the cloud.

Paper 3: Impacts—Details the meaning of cloud for IT suppliers, IT functions and businesses and separates near- and long-term impacts. It documents the drivers of near-term developments and assesses their significance as well as the long-term impacts for a range of sectors, the supply industry, and customers and users of cloud. A particular focus is the three areas of impact: service performance, cloud as a business service and radical changes in the supply industry.

Paper 4: Innovation—The authors describe potential innovations, including a detailed picture of moves we are already witnessing toward a cloud-enabled, agile, “ambidextrous,” organizational form—what they call the cloud corporation.

Paper 5: Management—Closely examines the management issues raised by cloud. Cloud technologies have far-reaching implications for client and supplier skills and capabilities, and also for the roles of senior executives and business managers in harnessing the potential of cloud for future business advantage. The paper concludes with a detailed assessment of the management capabilities required to give meaning to the radical possibilities inherent in cloud technologies.

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The five reports draw on four main sources of information:

• An interview base. Thirty-five initial interviews with CEOs, CIOs, marketing managers and service directors at leading industry players across the supply were conducted. This base will be expanded during 2011.

• Industry and academic reports. The authors reviewed the academic literature and associated industry reports.

• The Outsourcing Unit’s database of 1,600 outsourcing and IT services engagements.

• A large-scale survey. Conducted by HfS Research in conjunction with The Outsourcing Unit, this research surveyed IT industry practitioners. The survey ran between October and November 2010 and was conducted online. Respondents were drawn from a random sample of business executives, IT executives, and technology vendors/consultants and providers of cloud-based surveys.

Leslie Willcocks is professor of technology work and globalisation in the Department of Management at the London School of Economics and Political Science. He is head of the outsourcing unit at that institution, and is internationally recognized for his work on strategic sourcing, the management of information technology and innovation.

Will Venters is a member of faculty within the information systems and innovation group, part of the Department of Management at the London School of Economics. His main research interests include utility, cloud and grid computing; distributed work practices; and knowledge management and communities of practice.

Edgar Whitley is reader in information systems and member of the information systems and innovation group in the Department of Management at the London School of Economics. He has a particular interest in identity assurance and public sector IT as well as in outsourcing.