Cloud’s potential for transforming business could be far-reaching. Over the next decade, cloud computing could become the foundation for business growth—for virtually all types of businesses.2 As more and more companies move internal functions or business services to the cloud, a new type of ecosystem will evolve. The ecosystem will make it easier for businesses to (1) partner with one another by seamlessly integrating via the cloud and (2) create and market new business services. Their internal functions can be made into versatile building blocks available to others, thereby creating new sources of revenue. Or businesses can create their own unique offerings by combining third-party services and functions that reside in the cloud.
To get a glimpse of how this potential might be realized, look no further than two of today’s business services—and cloud computing—leaders: Automatic Data Processing (ADP) and Amazon. These pioneers, which are already using cloud computing technology to grow their businesses, are examples of what we refer to as extensible enterprises. In an extensible enterprise, the business’s internal capabilities are viewed as potential business opportunities. These capabilities can function as a business platform, driving ecosystem interactions that are deeper and that happen at much lower costs than previously possible. (See Figure 1.)
Consider how ADP has fared during the recent recession. Double-digit unemployment would seem to spell trouble for a payroll services provider, but ADP managed through the recession with flat revenues—in part due to its cloud computing strategy. One of the company’s strategic goals is to provide a complete hire-to-retire HR suite. As such, ADP has entered into new partnerships to round out its services portfolio. Two such partnerships are with Cornerstone OnDemand, a talent management provider, and PreVisor, a pre-employment talent verification service. The success of partnerships such as these relies on quickly bringing to market differentiated services that go beyond mere data exchange—an ability cloud computing makes possible. Because each business was cloud based, the partners could quickly integrate the business processes of their platforms and reap new revenue—thereby offsetting a decline in ADP’s payroll services revenue.
In another example, Amazon used the cloud in a different way to extend its business prospects. In an effort to drive traffic to its retail site, the company opened up its proprietary product catalog so that the catalog could be used by other companies in different ways. In making its catalog, images, pricing, and other details available to potential partners via the cloud, Amazon found new value in extending its business to third-party sellers. Other companies—like Target and Marks & Spencer—have created their own online retail stores through the service, while others have developed new offerings, like a shopping comparison engine. This approach unlocked latent value that Amazon had not anticipated. The result: higher traffic to the Amazon site and more revenue created by its ecosystem.