Becoming a rainmaker
8 March 2018
Through its adaptability and cost effectiveness cloud services can provide organisations of any size with the ability to innovate at speed. In addition, the ever growing range and type of cloud service models which are available in the UAE, including public, private or hybrid, bare metal or managed, on premises or off premises have put cloud services at the forefront of the drive for digital innovation under the Dubai ‘Smart City Initiative’ and as part of the UAE’s wider Vision 2021.
So what does a true cloud innovation look like in practice? And how can customers ensure the right environment is in place both internally and with the cloud service provider, to embrace cloud service innovation?
Is innovation just change
It is easy to consider innovation as simply a way of achieving changes to the traditional cloud service model implemented on the go-live date. But this type of change can often be achieved simply by using a change control mechanism (usually set out in a contract) to alter the way a cloud service is provided. Is simply changing the way a cloud service is delivered from the method envisaged on day one a true innovation? Surely a cloud services innovation can be more than just doing things differently.
Improvement and innovation
Cloud service providers will often enthusiastically market their particular cloud’s ability to ‘improve’ a legacy service or business function, as an innovation. But is the adoption of a traditional cloud model to provide the same or a slightly better service at a cheaper rate truly innovative. If the service improvement and cost reduction has been achieved through increased business efficiencies or productivity as a result of a cloud services adoption, then arguably this could be considered an innovation. A far better measure of innovation though is whether the cloud service has been augmented for a particular business need, this often results in a far greater pay-off than simply cost efficiency and greater service volume.
“The cloud services arrangement, no matter how well designed, drafted or thought through, cannot drive innovation on its own.”
Since the primary goal of many cloud services procurements is the purchase of a high quality cloud service at a cost effective price, it is not surprising that cost efficiency is often labelled as a key indicator of a successful innovation achieved using cloud services, even though a project focused entirely on cost may not be providing real innovation
True cloud innovation can be far harder to track in terms of what ‘success’ looks like or what type of service impact means that an innovation has been created. As a result, it can also be far harder to create a business case for the development of a true innovation and can also be very difficult to articulate what innovation should look like with a cloud services provider.
Driving behaviour towards innovation
Cloud computing arrangements can be a useful tool in trying to drive the outcome of a cloud project towards achievement of an innovation by driving particular behaviour.
If customers find themselves in a strong position to negotiate the terms of the cloud service, they may ask for the inclusion of contract provisions which cover areas like continuous improvement of the services, automatic service level adjustments and benchmarking procedures in order to either achieve a price or a service level adjustment. But although on the service these types of provisions are often seen as being a ‘win’ for the customer, in practice they rarely achieve much in the way of innovation. This is because they can drive the cloud service provider towards focusing their behaviour on delivering cloud services as required to avoid contract sanctions and maintain profit, rather than innovate.
Instead, if innovation is truly a major goal, one of the best ways to achieve a positive outcome is to use the cloud services arrangement to introduce an additional incentive for prioritising innovation, rather than just penalising the cloud services provider for failing to adjust the services. A great example we have seen recently on a cloud services deal was the inclusion of a model which required the cloud service provider to identify and deliver a specific amount of innovation-related cost savings over a particular period, while also having a provision that allowed the customer and the cloud service provider to share those savings achieved over and above this specific amount. It is important to remember though that the development of the incentivisation model in any cloud services contract, is just the start. Once developed and agreed, the contract will also need to address how the achievement of the innovation is determined and how the parties can ensure any initial benefits, which are achieved, are not just delivered in the short term but are also maintained later down the track.
The cloud services arrangement, no matter how well designed, drafted or thought through, cannot drive innovation on its own. Cloud service innovation can involve additional cost, potential disruption, degrees of implementation risk, and uncertainty, all which go against the traditional (and much loved) cloud services model designed around price efficiency. To truly innovate using the cloud you often need a well aligned internal business strategy reaching all the way to the top, often with executive level sign off, particularly if there is a situation where day to day business activities can be effected while a specific innovation is being implemented.
Internal alignment is also important on the part of the cloud service provider. Engaging on a cloud services project involving innovation can often involve the implementation of new technology or undertaking bespoke activity, which are elements that carry risk in terms of revenue recognition and contract liability. These elements are not immediately attractive on a pure profit and loss analysis and the cloud services provider will often need, usually at a senior level, to take a longer-term view of their relationship with a particular customer before agreeing to undertake these types of project.
Technology is changing and the growing sophistication of cloud-based solutions available in the UAE combined with the current appetite for digital growth and transformation will see organisations looking to incorporate more innovative cloud service delivery models. The key to achieving the adoption of a truly innovative cloud service is to ensure you have not just the proper contract structure but also a fully aligned business strategy based around facilitating innovation, rather than just paying lip service to it.