Where the Cloud Meets Reality: Scaling to Succeed in New Business Models

Executives everywhere recognize there is money in the cloud and are investing in new “anything-as-a-service” (XaaS) business models.

Gartner forecasts that the market for applications, application infrastructure, and systems infrastructure delivered as public cloud services will reach $43 billion in 2015¹. Yet as technology providers scramble to stake their claim in this new frontier, many of them confront a sobering reality: Creating and implementing the right operating model to build a successful cloud business is far from easy. In fact, many executives acknowledge that it’s one of the most difficult challenges they face today.

¹Source: Gartner, Forecast: Public Cloud Services, Worldwide and Regions, Industry Sectors, 2010- 2015, 2011 Update, by Ben Pring et al, 29 June 2011, Calculations performed by Accenture.

Other articles in this series:

• Where the Cloud Meets Reality: Operationally Enabling the Growth of New Business

Learn more about Accenture’s research for the Electronics and High Tech Industry

To help leaders sort through this challenge and chart a clear course forward, Accenture recently completed a research study with more than 40 senior executives from 30 high tech and technology enabled companies. These discussions built upon the hypotheses outlined in our paper from early 2011 , “Where the Cloud Meets Reality: Operationally Enabling the Growth of New Business Models,” and sought to understand how companies were operationalizing new XaaS models alongside their traditional, non-cloud offerings.

Our research revealed that virtually all companies are struggling to deal with the operational complexity caused by XaaS, and by new business models more broadly. The reality is that building the new XaaS capabilities required to succeed and embracing a services-centric mentality is hard work that touches every corporate function. We found that in most cases the launch of new XaaS businesses far outpaces a company’s operational ability to deliver and scale.

Based on our research and years of client experience, we identified 10 recommendations across four major focus areas that industry leaders should embrace to launch and scale XaaS models successfully.

The four major areas are:

• First, the logic flow and order of these recommendations is critical. Success starts with achieving business model clarity as the necessary precursor.
  
  
• Second, companies must identify and build distinctive XaaS capabilities and incorporate them into a cohesive operating model; our research identified eight unique XaaS capabilities.
  
  
• Third, companies must develop and agree to a segmented operating model approach at the most senior levels of the company.
  
  
• Finally, companies require a new governance model to handle this complexity. A critical element of this model is the creation of a new role, which we call a chief operational architect.

Collectively, implementing these recommendations requires a dramatic departure from how most incumbent companies are run today.

But continuing on the current path is not an option, since customers are deciding with greater frequency that XaaS solutions can meet their needs in a superior manner to traditional models. In technology, growth is king, and every percentage point of growth a company fails to capture results in a measureable loss of shareholder value.

As such, the future demands attention to these challenges now, while cash is available to fund investments and create the new capabilities required to compete in the XaaS age.