IBM Partnering For A Smarter Planet Exploring The Role Of Ecosystems In Evolving Cloud Markets
SmartCloudThought Leadership White PaperExploring the roleof ecosystems inevolving cloud marketsIBM partnering for a smarter planet™
2 Exploring the role of ecosystems in evolving cloud marketsContents The effect of the cloud-enabled shift can be felt in many areas: • A standardised and virtualised style of IT delivery 2 Introduction • Increased focus on the customer or user experience 3 Cloud computing and the shift to customer centric services • Shifting focus to service (business) outcome • Flexible pricing models through self-service 6 Cloud computing and the blurring of traditional market and • Reshaping of commercial/business models. partner boundaries 9 Differentiated cloud service catalogues It could be argued that cloud computing simply reflects the accelerated adoption or increased popularity of virtualisation,10 In summary specifically server virtualisation. Yet virtualisation, first 11 Author implemented in the 1960s by IBM, is not new. Instead we need to look beyond IT and the infrastructure to see what is causing the cloud disruption.Introduction Cloud enables organisations to deliver IT without boundaries.The signs of a smarter planet are all around us. Smarter Through cloud provisioning an organisation can obtain andsystems are being implemented and are creating value in deliver services and business processes wherever and wheneverevery major industry and across every region in both the their users want. It can hide complexity whilst making moredeveloped and developing worlds. This idea isn’t a metaphor, cost-effective use of limited resources, enabling new IT andor a vision, or a proposal – it is a rapidly emerging reality. business processes that break down traditional silos and simplify access to information or services – all resultingCloud computing is changing the IT landscape, impacting in the delivery of better business or social outcomes.core technology and business directions; reshaping therelationship between service, customer, information Cloud is both a customer centric IT transformation and atechnology and the provider of business or social outcome. new market model. At the heart of cloud service provisioning is a shift towards the wants and needs of the end customer.Cloud computing is providing visible acceleration towards a This increased focus on service outcome and the customersmarter reality, a reality that is radically changing the nature is reshaping the traditional buyer/supplier market model.of traditional partnering and channel management models. This paper considers three areas of cloud influence on anSo what is cloud, why is it accelerating this shift and increasingly non-traditional or ‘asymmetric’2 market:what does it mean for partnering models of the future? 1. Cloud computing and the shift to customer centric servicesAccording to NIST (National Institute of Standards and 2. Cloud computing and the blurring of traditional marketTechnology)1 cloud computing is a model for enabling and partner boundariesconvenient, on-demand network access to a shared pool 3. Creating cloud ‘stickiness’ – differentiated cloudof configurable computing resources (such as networks, service catalogues.servers, storage, applications and services) that can be rapidlyprovisioned and released with minimal management effortor service provider interaction.
SmartCloud 31. Cloud computing and the shift to The IBM research concludes that within three to five years:customer centric servicesIt all starts with the customer – a generally accepted Customers will expect to get access to what they want, whencentral pillar of business. So what is new? Why is and how they want it – enabled by invisible flexible technology.the customer coming so sharply into focus now? With cloud, a new breed of customer is dictating a new setIBM’s Institute for Business Value research ‘What of terms, which in turn is changing the dynamic betweenthe Customer Wants’3 highlights five trends that buyers and sellers.are expected to unfold over the next few years: Customers in a ‘buy’ position are empowered by cloud• Customers will gain even more control over how with more availability and access to information, data they interact with organisations and each other and choice than ever before. In addition, cloud customers• Relevance will be key for attracting and keeping determine their own usage patterns, opting in and out at loyal customers their convenience and deciding how much they want to• The more expensive and traditional channels will use, when and for how long. be marginalised by mobile technologies focused on relationship building• Organisations will have to provide consistency as channel distinction will disappear for customers who instead converge around mobile devices• Trust and security will be basic customer requirements.Aspirations from end users increasingly set the demand for cloud-enabled service ecosystems Service availability Service catalogue Compliance Human resources Branding Call centres Quality Back office Supply chain service Customer service Indirect procurement Customer Finance and experience accounting Convenience Multichannel ExperienceFigure 1: Information flow ChannelsSource: IBM ‘Advocacy: Building customer trust in the new economy’
4 Exploring the role of ecosystems in evolving cloud marketsIn the early provisioning of cloud services there has been an Two dominant customer patterns of ‘club clouds’ haveinteresting customer shift towards ‘club clouds’ – a hybrid emerged to date:cloud model similar to the community cloud model referredto by NIST4. Type one: Regional ‘club clouds’ – cloud provisioning for a group of customers who are bound by a geographic area suchThese ‘club cloud’ patterns start to emerge when the as a city.cloud discussion goes beyond the technology as a service,infrastructure purchase or IT replacement level and instead The New York Municipal Shared Services Cloud5 is onefocuses on business outcome and the services required by example. This ‘club cloud’ improves municipal operationsthe end customer. by integrating services from multiple providers on an easy- to-use shared government platform, adding web-basedCustomers have a tendency to come together in social citizen services, and enabling integrated data analysis toclusters or groups based on common interest or need. provide better transparency.Within the public, private and hybrid cloud environmentsthese ‘self-selected clubs’ meet both customer need as wellas representing the logical groupings of user, workload,process or data. Federated/collegiate 1 Single 2 Regional 3 Common interest 4 Public enterprise ‘club clouds’ ‘club clouds’ clouds Service model • Single enterprise • Shared process and shared • Extended ‘club’ and • Commodity services only • Commodity, core and data across many enterprises affiliate model • Create stickiness and specialist services • Core, commodity and • Shared services or traded customer retention with ‘club’ • Secure hosted inside specialist services services on a PAYG basis look and feel client firewall • ‘Club cloud’ model • More focus on specialist • Security and data privacy • Secure access to services e.g. weather/ is harder PAYG service crime/retail Enterprise Enterprise User A User B User A User B Enterprise Delivery model Enterprise User C User D User C User D Hosted private cloud Private owned Hybrid (public/private) Hybrid (public/private) Public cloud and operated Cloud services Cloud services servicesFigure 2: Four dominant cloud models have emerged in the United Kingdom and Ireland to date
SmartCloud 5Another regional ‘club cloud’ example is the WUXI iPark Peer networks or ‘clubs’ form around a common social,Cloud6. This rural regeneration cloud offers flexible and shared economic or service outcome, often connecting public,computing resources for Small and Medium Enterprises, private and not-for-profit organisations around thelowering the barriers to market entry for new companies, common shared outcome.local government projects and software development start-ups. This customer led approach to ‘club cloud’ formation canType two: Common interest ‘club clouds’ – where a group increase the outsider perception of ‘asymmetry’. Traditionalof organisations have a common shared service outcome, social sector or industry allegiances between public, private or thirdneed or business requirement. IBM is creating smarter, more sector do not seem to matter as much to the customer whenconnected healthcare systems that deliver better care with forming ‘club clouds’ to meet a pressing, common need.fewer mistakes, predict and prevent disease, and empowerpeople to make better choices. This includes integrating This customer shift is starting to touch all of our markets anddata so doctors, patients and insurers can share information is accelerating with the adoption of cloud, social business andseamlessly and efficiently through ‘club clouds’. IBM also helps mobile technologies8.clients apply advanced analytics to improve medical research,diagnosis and treatment in order to improve patient care and With this cloud enabled customer shift comes the increasinghelp reduce healthcare costs7. democratisation of data, the adoption of social computing, increased collaboration between sectors, small and mediumIn addition some common interest ‘clubs’ want to trade sized business, not-for-profit organisations and much more.services not just consume them, effectively creating a virtual In turn, purchasing power devolves to increasingly fragmentedmarket or trading place for ‘club members’. and smaller customer units.This tendency towards forming ‘club clouds’ is not driven From a supplier perspective, responding to thisby the supplier but instead by the customers’ wants, needs challenge requires:or required outcomes such as financial efficiency or • Greater insight to meet and exceed customer expectationregeneration and growth. ‘Club clouds’ do seem to address • More brand flexibility to maximise market presencea number of cloud adoption drivers not only cost but deep • Increased speed in bringing new self-service offerings andseated concerns that customers have over identity, trust services to market.and security in virtualised markets. This is not an IBM, nor a single sector issue, but represents a seismic shift in response to a number of convergingIn addition some common interest technology and social levers.‘club clouds’ want to trade servicesnot just consume them, effectivelycreating a virtual market or tradingplace for ‘club cloud members’.
6 Exploring the role of ecosystems in evolving cloud markets2. Cloud computing and the One response seems to be ecosystems that seamlessly tether orblurring of traditional market aggregate customers and suppliers. As the ecosystems grow in size and diversity, the cloud-enabled value-nets contribute toand partner boundaries increasingly intelligent and interactive environments andChanging customer demands, combined with technology shifts generate enhanced collective value.to cloud provisioning, enables and accelerates new ways ofoperating. This creates dynamic environments that support the How much of this is realistic or achievable only time willemergence of cloud ecosystems or value-nets. tell – but there are indications that different types of partner, alliance or ecosystems are already forming within the cloudCapturing the value generated along the supply chain is a well market where parties converge to offer an enhanced range ofunderstood approach taken by many management strategists. services to the market.Applying this thinking to early market experiences of cloudcomputing indicates that interesting cloud value-net patterns The Smarter Energy® Cloud partnership announced betweenare likely to become the new norm. IBM and Cable & Wireless is one example9.With cloud flexibility, where fixed-term contracts are replaced Cloud ecosystems take cloud platform thinking one stepwith opt-in and opt-out behaviours, the trust and loyalty that further as they enable partners and third parties to participatetraditionally binds customers, buyers and suppliers together in and include their services within an ecosystem.into value chains is diminished. 1st era of IT 2nd era of IT 3rd era of IT Cloud 4th era of IT Mainframe Personal computing Internet computing computing Smarter Planet Supply centric Buyer centric Global ecosystem Asymmetric value net • Supply driven • Shifting buyer patterns • Global networks • Localised viral networks market alliances • Shift reach and range • Static models with fixed • Customer centric and partnering of partnering, routes term lock-in • Decentralised control • Limited market and channels to reach • Centralised control • Maximise local competition the buyer • Massive increase brand value on new to market • Joint go-to-market suppliers • Parties collaborating on strategy • Shared performance outcome responsibilityFigure 3: Shifting partnering and alliance models
SmartCloud 7IBM’s SmartCloud Ecosystem brings new services for According to Alex Williams in his blog, Technology PartnersIBM partners and independent software vendors to help And What They Say About the IBM Cloud11, “The IBMthousands of small and medium size business clients adopt Cloud is a prototype of the ecosystem we expect to see emergecloud models and manage millions of cloud-based transactions in the world of cloud services…. It is the partners that tie intoin areas as diverse as banking, communications, healthcare the larger ecosystems, often existing on multiple platforms.and government10. The healthy platforms will resemble coral reefs in which the partners are (as) important to the cloud ecosystem asThe collective capabilities and services from multiple the platform itself.”organisations, spanning multiple platforms and cloudenvironments together form a tethered or hybrid ecosystem IBM has created an approach to enable larger cloudthat continues to grow and evolve. This may be viewed by multi-supplier ecosystems. Part of this approach – IBM’ssome as simply the natural evolution of platform paradigms, cloud speciality programme – enables a broad ecosystem ofwhere the platform with the largest and most diverse companies to work together and deliver a wide range of cloudecosystem, gets to ride the paradigm shift and enjoy a computing services and technologies to clients of all sizes anddominant position for that particular generation. across all industries.However these cloud value-nets or ecosystems have introducedsome new elements to the traditional partnering constructsas well as offering more flexible terms of engagement.We are seeing new cloud partner types emerge that blur traditional partner definitions and models Cloud technology provider Cloud builder Cloud infrastructure Cloud application provider provider Cloud service providerFigure 4: The IBM cloud specialties
8 Exploring the role of ecosystems in evolving cloud marketsThis programme introduces five cloud partner types and In addition to this progressive channel evolution someoffers accreditation for the ecosystem to grow cloud capability. even more disruptive cloud value-nets are forming.It also provides market support in five solution areas for Asymmetric value-nets are the market and competitionbusiness partners who demonstrate their expertise and client disrupters enabled by cloud, partnering or customersuccess in cloud computing. constructs convene and reconvene to rapidly serve new and emerging customer requirements and market needs.As a value-add extension IBM is also widening accessto its global expertise and industry insight. IBM is On the sell side – providing the parties with newenabling developers to build, test, sell and distribute cloud opportunities to expand faster into new and vastlyservices and applications. With eight million developers in larger markets than most could hope to enter alone195 countries, 28 cloud innovation centres and extensive or with smaller ecosystems.training and development, this approach creates a differenttype of in-market value12. On the buy-side – parties can extend the reach and range of service beyond the purchase power of a single entity.Disrupting traditional organisational and competitive constructs, asymmetric markets are represented by new, unorthodox,surprising, urgent and unfamiliar market shifts ‘Symmetric’ market and channels ‘Asymmetric’ market and channels Operate model shifts… Asymmetric value net Demand is anticipated Demand is viral Top down sector driven strategy Emergent and iterative client strategies There is a clear hierarchical structure Shifting control outside ‘known’ structure Centralised or corporate control Fragmented and collaborative control Sequential value drivers Rapid incremental value drivers Winning outright is possible Co-operation is best outcome Tightly coupled Loosely coupled Few known participants Many diverse participants Profit focus Regeneration/growth focus Led from the front Proxies/syndicates or intermediariesFigure 5: Cloud market and channel shift
SmartCloud 9Defying traditional organisational 3. Differentiated cloud service catalogues In these rapidly changing times, as markets shift and reform,and competitive constructs, how can organisations, agencies and companies achieve theasymmetric value-nets are market traction required to establish themselves asrepresented by new, unorthodox, differentiated service providers?surprising, urgent, and unfamiliar Getting actionable insight about your customers and setting upmarket shifts. As the boundaries of collaborative value-nets are not the only challenge – the issue is how to create a commercially viable and sustainable cloudcloud-provisioned IT and services operating construct, offering compelling services, built onare removed, organisations are partner trust and safeguarding against opportunism.by-passing intermediaries and Creating cloud ‘stickiness’ – so that customers and partners cancreating new, highly responsive, opt (rather than be forced) to stay together because it makesbusiness models by exploiting commercial, business or social sense – is the imperative. As we’ve seen from public cloud start-ups such as Twitter, ‘sticky’the upstream and downstream clouds are often those that ‘attract’ new customers that enableinformation flowing along the their own ‘auto-sustained’ growth. The same principles applyvalue chain. to private or hybrid clouds.Cloud has increased the focus on creating vibrant and Just as cloud itself is evolving up the stack from infrastructuresustainable value-nets. Information is moving in real-time as a service (IaaS) through platform as a service (PaaS) toacross co-operating businesses, relationships among partners, software as a service (SaaS), business process as a serviceis dynamic and varies with changing conditions, and the (BPaaS) and beyond into the information and insight businessoperating targets of the business include not just efficiency intelligence as a service (BIaaS) layers so the cloud servicebut, perhaps more importantly, market agility. catalogue is evolving.No one organisation dominates, owns, leads or drives these Early-to-market cloud alliances and ecosystems have favouredasymmetric value-nets. They are highly responsive to market commodity cloud service provision that offers cloud serviceneed, often localised around country or regional requirements catalogues stacked with IaaS technology offerings or commodityand can convene and reconvene based on scaleable common component products. With little clear differentiation to hostedcloud components, rapidly serving new and emerging service provision the early IaaS offerings fight for market sharecustomer requirements. on price point.Early-in-market success from these new cloud value-nets are As the cloud market matures, cloud buyers are posing thealready being seen and will be explored in detail in subsequent questions of how provisioning can support mission-criticalpapers in the IBM Partnering for a Smarter Planet series. and specialist cloud services that drive core business growth against assured outcomes.
10 Exploring the role of ecosystems in evolving cloud marketsThis focuses the demand on deeper and broader service In summarycatalogues tuned to the industry or defined market – a From observations and experience gained through manychallenge in a market where the mantra is ‘standardisation’. cloud transformations that IBM has been involved in worldwide there is increased focus on service outcome andIBM indicated its own move into core business services the end customer. As new cloud-enabled markets, channelswith global alliance partner SAP. The SmartCloud for SAP and patterns for consumption emerge, the traditional buyer-Application leverages IBM’s experience in managing over supplier market models are reshaping.1.5 million users of SAP to significantly reduce the cost andlabour associated with SAP cloning, refreshes and patching13. It is clear that the organisations, agencies and companies who are able to understand and meet the changing demands of theirEarly indications suggest that industry-specific cloud offerings customers and through partnerships, establish themselves asthat require targeted or specialist partners will be ‘business as differentiated service providers in these new cloud-enabledusual’ within the next few years. markets can achieve the market traction required.In September 2011 IBM announced Smarter Commerce™ Simply looking at buyer/supplier models or channelon the cloud to help organisations respond automatically strategies is not enough – a step change is required. Oneto shifting customer and business market trends with new solution is to enable a multi-vendor cloud ecosystem thatsolutions for commerce-as-a-service and social media seamlessly integrates the products, expertise and brandsmarketing. Such capabilities are based on technologies from of complementary organisations into compelling solutionskey acquisitions such as Unica®, Coremetrics® and Sterling to serve the shifting needs of a smarter planet.Commerce™ combined with IBM research and development14. This paper offers two thoughts on how to exploit theAs the market focus moves to the provisioning of enterprise- enormous opportunities with cloud:grade, mission-critical cloud services, the customer desire for • Choose a smarter partnering approach – put cloud-enabledpay-as-you-go commercial models needs to be balanced with channels on the strategic agenda and align your investmentrequired service level assurances and compliance requirements. in customer analytics, brand positioning, target customerThis then needs to be measured against the ‘benefit/risk’ ratio segments and the cloud product/service set.of opt-in and opt-out services. • Consider your cloud ecosystem supply or buy-side and plan for a differentiated service catalogue. Consider the impact thisCloud value-nets enable organisations to combine effort to has on security, information and data handling as you movebetter serve this changing market need. into the mission-critical and specialist cloud services essential to driving your business or social outcomes. Simply put, get refocused on your end customer and consider the business and service outcome of your cloud provisioning.
SmartCloud 11Author 7 ibm.com/press/us/en/pressrelease/28753.wssLaura Colvine is Cloud Strategy Leader for IBM UKfocusing on identifying, developing and delivering new 8 http://www.internet.com/IBM_Cloud/Article/46919/market growth capabilities. Laura has been with IBM for With-a-Boost-from-Mobile-Cloud-Computing-12 years working in Europe, USA and the UK leading, Continues-to-Matureselling and consulting on business solutions, commercialgo-to-market shifts and strategic transformation. Prior to 9 ibm.com/smarterplanet/global/files/uk__en_uk__smart_joining IBM Laura was Head of Commercial Strategy for energy__ibm_smart_meters_feb_2011.pdfa UK University. 10 ibm.com/press/us/en/pressrelease/35593.wssIf you would like to respond to this white paper or askfor further information on how IBM can help you 11 readwriteweb.com/cloud/2010/03/the-ibm-cloud-is-a.phpnavigate the ecosystem challenge, please send an emailto email@example.com. 12 http://thoughtsoncloud.com/?p=70 13 ibm.com/press/us/en/pressrelease/35593.wssReferences1 nist.gov/itl/cloud/upload/cloud-def-v15.pdf 14 ibm.com/press/us/en/pressrelease/35459.wss2 oxforddictionaries.com definition: having parts which fail to correspond to one another in shape, size or arrangement, lacking symmetry.3 ftp://public.dhe.ibm.com/common/ssi/ecm/en/ gbe03391usen/GBE03391USEN.PDF4 Community cloud. The cloud infrastructure is shared by several organisations and supports a specific community that has shared concerns (e.g. mission, security requirements, policy, and compliance considerations). It may be managed by the organisations or a third party and may exist on or off-site. *nist.gov/itl/cloud/upload/cloud-def-v15.pdf5 With a unique combination of advanced data analytics and software-as-a-service technology, government employees will save time, increase productivity and help citizens quickly get the information they need. ibm.com/press/us/en/pressrelease/32909.wss6 ibm.com/software/success/cssdb.nsf/CS/STRD-7YJM5P? OpenDocument&Site=default&cty=en_us