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Where the cloud meets reality: Scaling to succeed in new business models

Read Accenture’s research on how technology companies can create and implement the right operating model to build a successful cloud business.

Overview

As technology companies scramble to develop “anything-as-a-service” business models to take advantage of cloud computing, significant challenges are emerging. In particular, determining the correct business model is extremely difficult. Accenture conducted research to help leaders sort through the challenges and chart a clear course forward.

Background 

Executives 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 2015. 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 is one of the most difficult challenges they face.

To help leaders, 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 entitled, 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.

Analysis

Our research confirmed 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. As the general manager of a cloud business unit explained to us, “We are going 100 mph and the cliff is 10 miles away. We go ‘kaboom’ in just a few quarters unless we get our operations functioning quickly.”

Recommendations

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:

Business model clarity. Business models are rapidly increasing in number. Recommendations include:

  • Agree on the business models first.

  • Define the business models holistically.

  • Wrestle with the risks early.

Distinctive XaaS capabilities. The challenge for existing technology companies is that capabilities supporting the current core business need continuous reinvestment too, and while XaaS changes significant aspects of how a provider must operate, many operational aspects should stay the same. Recommendations include:

  • Anchor around the customer experience.

  • Pay attention to the blind spots.

  • Focus on the differentiating XaaS capabilities.

Segmented operating models. Technology companies face enormous challenges in determining how to support new business models operationally. Recommendations include:

  • Segment the operating model.

  • Shrink the cycle time by embracing software as a service.

  • Invest in the building blocks to enable future agility.

Effective governance and leadership. Executives told us that governance and decision making is where the rubber meets the road in building successful cloud businesses. The recommendation is:

  • Create the new role of a chief operational architect.

These recommendations form a blueprint for operating successfully as an XaaS provider.

Contact Accenture to learn how we can help your organization develop a cloud strategy that delivers true business benefits.

Authors

Tim Jellison is a managing director in Accenture’s Communications, Media, and Technology management consulting group, focusing on software and other high tech clients. He has more than 20 years of consulting experience, advising clients on new products and services, operational processes, and organizational change. Based in San Francisco, California, Jellison is also Accenture’s global software industry sector lead.

Dave Sovie is a managing director in Accenture’s Communications, Media, and Technology management consulting group, focusing on high tech clients in Silicon Valley. His experience includes large-scale transformation, business model and product innovation and growth strategy. Sovie has worked with many high tech industry leaders in enterprise computing, software, IT services, and solutions during the past 20 years.

Sam Glick is a senior manager in Accenture’s Communications, Media, and Technology management consulting group, focusing on enterprise technology and services clients. San Francisco-based, he has been working in technology for more than 15 years, advising clients on business design, portfolio strategy, services industrialization, solution design and marketing and new offer engineering.

Industry & topics highlighted

Technology