In this issue of the Technology Forecast, we are asking our readers to look beyond all the excitement that cloud computing is creating as a change agent for cheaper and better IT. We are convinced cloud computing can transform IT. Surely IT organizations have the hard work of getting it done; no small task indeed.
But what if we look a step or two ahead? What does cloud computing mean for business strategy? What does it mean for the finance organization? In short, what is the answer to the question, “Yes, it’s better IT, but how will cloud computing impact the enterprise more broadly?”
We try to answer that question in this issue by focusing on the top concerns facing all CEOs: where to create more profitable revenue growth and how to position the enterprise for long-term success. After cloud computing has “reformed” IT, does it have an answer to these concerns?
We conclude that it does, and the answer is: cloud computing enables the extensible enterprise. An analogy with highly successful restaurants explains what we mean by extensible enterprise.
A traditional restaurant has a singular business model and product proposition. Patrons come to the restaurant and enjoy good service and restaurants have recognized that their internal “value chain” comprises components that could be valuable if packaged differently or on a standalone basis.
For example, the fabulous salad dressing served at the restaurant could be sold on a wholesale basis to markets or at a retail window. Or the entire kitchen and food preparation process could be duplicated in a warehouse setting and dedicated to a catering operation. And the restaurant may go further. Since selecting the best fresh ingredients is a core capability of great restaurants, why don’t they pick for the rest of us and open a fresh produce market? In short, the core competencies of great restaurants are often modularized, incorporated into other value chains, and in doing so extend the revenue and profi t potential of the business.
As we looked at the potential for cloud computing to change the very fabric of the enterprise, we saw early signs that this opportunity for modularizing and extending the reach of the business is already occurring. Business services are being fully encoded in software, provisioned in the cloud, and opened to third-party business partners in the ecosystem to incorporate (via software application programming interfaces [APIs]) their own unique customer value propositions. This creates a very low cost of sales for extending your reach to new customers, and a very low cost of delivery for high profit margins. We think the best description for this new strategy is the extensible enterprise.
In an extensible-enterprise strategy, the business’s own internal capabilities are viewed as potential business opportunities. Cloud computing allows these internal enabling capabilities to be made accessible in the cloud. These capabilities can function as a business platform, driving ecosystem interactions that are deeper and that happen at a much lower cost than previously possible.
This issue of the Technology Forecast covers the cloud-computing phenomenon not from a how or where perspective but from a starting assumption of yes, cloud computing is becoming the IT fabric of the future. What should CEOs, CIOs, and CFOs do with it beyond making IT perform better? The first article addresses this question from the CEO perspective, describing the extensible-enterprise concept and what it takes to become one. The second article describes the changing role of CIOs as CEOs engage with the extensible-enterprise concept. And the third article describes the impact all this will have on the CFO.
As always, our articles are supported by in-depth interviews with leading executives and thought leaders who are defining the future of business and IT:
Please visit pwc.com/techforecast to find these articles and other issues of the Technology Forecast. If you would like to receive future issues of the Technology Forecast as a PDF attachment in your e–mail box, you can sign up at pwc.com/techforecast/subscribe.
And as always, we welcome your feedback on this issue of the Technology Forecast and your ideas for where we should focus our research and analysis in the future.