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Cloud A Commodity? Let's Not Draw Wrong Conclusions Again

Oracle

Is it becoming harder for companies to derive a competitive advantage from cloud computing?

That’s indeed one of the conclusions drawn from a recent study conducted by Harvard Business Review's Analytic Services unit and written by HBR research editor Angelia Herrin.

The study, which is otherwise very positive on the opportunities cloud services provide, finds that only 16% of the 452 business and IT pros it surveyed think the cloud is giving their organization a significant competitive advantage, compared with 30% a year ago.

Meantime, the percentage of survey respondents who think the cloud is providing “none” or just “a little” competitive advantage jumped to 35% this year from 19% a year ago.

So while the cloud remains a critical technology platform for business innovation at digital speed, it “will naturally become less of a source of competitive advantage” over time as more companies adopt software, infrastructure, and platform as a service, according to the report, sponsored by cloud provider Verizon Enterprise Solutions.

This line of thinking is queasily reminiscent of Nicholas Carr’s thesis, first argued in an HBR article published in 2003, that "IT Doesn’t Matter" because its compute, storage, bandwidth, and other building blocks had become ubiquitous rather than scarce.

“Their very power and presence have begun to transform them from potentially strategic resources into commodity factors of production,” Carr wrote in his infamous HBR article. “They are becoming costs of doing business that must be paid by all but provide distinction to none.”

Likewise, the most recent HBR study suggests that cloud computing is also becoming a commodity. It quotes a survey respondent in making its case: “Cloud is no longer a differentiator. However, not being on it would be a significant disadvantage.”

In other words, cloud services are becoming table stakes. But let’s extend that commonly used poker metaphor a bit.

Players make the real money after they put their antes into the pot and start betting and raising, as they bring to bear their deep experience, their knowledge of the other players’ tendencies, their ability to read other players’ “tells,” and their own selective aggressiveness.

The table stakes are the same for all players, of course, but players still derive competitive advantage and additional value by applying their hard work, talents, and unique approaches in innovative ways.

Competitive Advantage

Companies will always derive competitive advantage from cloud services, regardless of their ubiquity, to the extent that they apply those services in unique ways. All automakers use robots, all search engines employ algorithms, but that doesn’t mean every car manufacturing process and internet search yields very similar outcomes.

Competitive advantage doesn’t come from the simple act of buying and using cloud services against rivals that don’t; it comes from using them in business-driven, coordinated, and, yes, customized ways.

In fairness, the recent HBR report doesn’t suggest that cloud computing is on a par with electricity, bandwidth, and running water. It acknowledges that companies can still work on "developing a more strategic approach to cloud adoption, management, and use” to maintain a competitive advantage, and that “advantage in the future will come from how well organizations adapt to the new, much faster, and more collaborative way of doing business that the cloud makes possible.”

This is the point that needs to be shouted from the rooftops, not the point that more widespread use of cloud services limits the opportunities for differentiation.

Even the idea that practically everyone is adopting cloud services is overstated. Enterprise use of certain software-as-a-service (SaaS) applications, such as e-mail and sales force automation, is indeed maturing.

But it’s still early days for infrastructure as a service (IaaS) and platform as a service (PaaS), as well as for supply chain management, ERP, and other, industry-specific enterprise SaaS apps.

Agility Is the Key

Consider the main business benefit of the cloud: agility, according to the HBR report. Survey respondents define agility in different ways. One respondent says cloud services have “decreased time to market when entering a new area or customer segment,” while another says they have increased the speed with which “we exchange data between operations and clients,” allowing for “faster turnaround on decisions, fewer project delays, and increased cash flow.”

But a new Oracle study finds that most businesses worldwide overestimate their agility and still have a long way to go to improve it—and will thus need more time to extract competitive advantage from it.

The study, based on a survey of 2,263 employees of large global enterprises, notes that companies aren’t capitalizing on the agility benefits of PaaS in particular.

For example, nearly half (49%) of survey respondents say their companies either can’t, or they don’t know if they can, shift workloads between public, private, and hybrid clouds, as well as migrate on-premises applications to the cloud.

Additionally, only half of respondents say their companies can develop, test, and deploy new business applications for use on mobile devices within six months; just 30% can do it within one month.

“Businesses clearly know agility holds the key to their success, but there is an awareness gap around exactly how this agility can be realized through the right technology investments,” says Oracle Group Vice President Robert Shimp.

“Today, PaaS can enable businesses to build new applications quickly—in as little as two weeks—allowing them to launch new internal and customer-facing applications rapidly. This capability allows organizations to react almost immediately to market conditions and get their products and services to customers ahead of the competition,” says Shimp

Everybody can buy the same SaaS applications; doing that alone isn’t a competitive differentiator, he says. "The key is the platform and your ability to put creative effort into that platform to generate new and interesting products and services for your company, as well as new processes that can address new business opportunities and competitive threats.”

The cloud will matter for many years to come as companies not only get up to speed and increase their usage, but also apply those technologies in innovative ways. Cloud ubiquity isn’t the enemy of competitive differentiation; it’s an ally for companies to build on.

Read more on Oracle.com:

How to Get the Cloud You Need

The Wisdom of the PaaS Crowd

How the Cloud Helps Oracle Embrace Change