This article discusses 3 key predictions about how cloud computing will change business and IT: 1. Cloud computing will enable more inter-company business processes and emergence of "business ecosystems" of companies with complementary strengths. 2. Cloud computing provides an "exoskeleton model" of sourcing IT capabilities externally rather than internally, allowing smaller companies and industries access to sophisticated IT. 3. Cloud computing will give rise to "business process utilities" - companies providing common processes like sales tax calculation on a massive scale.

1. This article originally appeared
in the October 2010 issue of
The journal of
high-performance business
On the Edge
Cloud computing:
Where is the rain?
By Kishore S. Swaminathan
Chief Scientist
Accenture
Cloud computing makes traditional IT faster, better
and cheaper—and it has the potential to change both
the business and IT landscapes in fundamental ways.

2. What’s not to like about cloud com- they can much more easily com-
puting? After all, among other things, municate and exchange informa-
it promises on-demand pricing, less tion with other IT systems from
IT overhead, lower cost and the ability other companies to execute busi-
to scale IT up and down quickly. ness processes that cross company
boundaries.
To be sure, all these are definitely
nice-to-haves. But in fairness, they Intercompany processes are not
don’t quite seem to add up to a pro- new. In the 1980s, Electronic
verbial paradigm shift. So is this Data Interchange was aimed at
just a passing cloud with no rain? communication between compa-
nies looking to exchange informa-
In fact, I think that anyone in the tion across a supply chain (most
C-suite (not just CIOs) should pay notably, within the automobile
close attention to cloud computing— industry). The travel industry
not because it makes traditional has integrated processes among
IT faster, better and cheaper but airlines, car rental companies and
rather it has the potential to change hotels to create business ecosys-
both the business and IT landscapes tems (the oneworld alliance, the
in some fundamental ways. Star Alliance, etc.) that offer pas-
sengers a single travel experience
Three predictions across multiple airlines, rental car
On a purely technical level, cloud companies and hotels.
computing blurs the line that
separates the IT that’s inside an Today, however, such processes are
organization from the IT that’s handcrafted and hardwired among
outside an organization. I predict systems involving a small number
that this is likely to lead to three of business partners or managed by
distinct classes of business and third-party “clearinghouses.”
wealth-creation opportunities.
Cloud computing in combination
I think these impending develop- with integration standards like
ments are significant because web services and service-oriented
the traditional data and process architecture has the potential to
isolation between and among enable inter-enterprise processes at
companies is about to break down, an industrial scale: complex business
and in its wake, new business processes that snake through
ecologies and value networks are multiple companies and their IT
about to emerge. Herein may lie the systems and that can be configured
proverbial paradigm shift inherent and reconfigured on the fly.
in cloud computing.
But you may very well ask: “Even
Prediction 1: During the next if this is technologically possible,
five years, we are likely to see what is the business driver for it?”
a dramatic increase in intercom-
pany business processes that, in Practically any human experience
turn, will lead to the emergence you can think of—whether it’s a
of “business ecosystems”—that is, vacation, a stint at the hospital or
groups of companies with comple- just living your average humdrum
mentary strengths that work seam- day—involves products and services
lessly with one another through provided by multiple companies.
intertwined business processes. Today, companies provide discrete
products and services that we, as
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Outlook 2010
The moment a company’s IT sys- individuals, manage and orchestrate.
Number 3 tems migrate outside the firewall, The ability to flexibly weave together

3. a business process with services and applications can support a com-
from multiple companies around an pany from outside its firewalls. This
individual and his or her life (as the simple change is significant for two
travel industry does today) seems reasons. Smaller companies can have
like a strong driver in the business- access to sophisticated IT capabilities
to-consumer world. without incurring the overhead of
running an IT shop; at the same time,
Much as an individual’s life involves enterprise IT companies—for which
touchpoints with multiple products small companies were not attrac-
and services, almost every process tive targets under the endoskeleton
Cloud computing in organizations also involves inter-
actions with multiple business part-
model—can now provide IT capa-
bilities such as hardware, software
makes it considerably ners. Today, each business partner and services to thousands of small
sells a discrete product or provides companies from outside and thus
easier for companies a discrete service, and organizations achieve scale.
to configure business manage and orchestrate these inter-
nally (procurement or supply chain Interesting, but how important a
processes that integrate management, for example). development is this for businesses
and the IT industry as a whole?
internal components and Cloud computing makes it consider-
many external compo- ably easier for companies to configure There are many fragmented
business processes that integrate industries and groups of public-
nents into complex yet internal components and many sector entities—construction, educa-
fluid processes around external components into complex yet
fluid processes around their business
tion, health care, legal and small
municipal governments, to name
their business needs. needs. This seems like a strong driver a few—where the industry as a whole
in the business-to-business world. is large but the companies that make
up the industry are relatively small.
Prediction 2: Cloud computing They are large in the aggregate but
provides an “exoskeleton” model fragmented to the point that they
for IT capabilities as opposed to are not an economically viable market
the “endoskeleton” model we use for large enterprise IT vendors.
today. As a result, fragmented
industries (which are collectively Consider construction. In the United
underserved by IT today)—con- States, for example, it accounts for
struction and education, to name approximately 4 percent of GDP. But
a couple—will become attractive it is made up of architects, builders,
white spaces for technology and workers, material suppliers, con-
service companies to fill. struction equipment makers, ware-
house operators, building inspectors,
The current IT paradigm may be and many other constituent parts,
called an endoskeleton model of all with significant dependencies
IT: Data centers and applications and a need for coordination. Cloud
support a company from inside computing, with its exoskeleton
its firewalls. As such, to a large model, can serve the entire ecosys-
extent, only big companies have tem by consolidating their process
had the need and the ability to run and data flows. In other words,
complex data centers and applica- individual companies are too small
tions. Consequently, large companies to need ERP-like systems, but the
have been the traditional targets industry as a whole does, and cloud
for large hardware, software and computing makes that possible.
service companies.
This means that there are lots of
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Outlook 2010
Cloud computing provides an exo- white spaces to be filled by IT and
Number 3 skeleton model of IT: Data centers a lot of wealth to be created.

4. Prediction 3: Cloud computing economical to source such business
will give rise to what could be processes from the outside. Because
called “business process utilities”— of their simplicity, these processes
companies that provide simple and will require no customization and
common business processes (say, can be taken for granted—essen-
sales tax calculation, collection tially a business process utility
and remission) but on a massive that one’s IT systems can plug into.
scale that will dwarf today’s For providers, the simplicity of the
software-as-a-service vendors. processes means there’s no need
for variations and customizations, so
Companies have many common they can achieve scale by providing
business functions. While complex the same business process as a utility
operations such as supply chain to thousands of customers.
management typically require pro-
prietary processes, simple business Today, a few such examples
functions such as sales tax calcula- exist. VeriSign provides credit-card
tion, collection and remission are authorization to millions of e-com-
relatively standard and fixed. In merce vendors, and PayPal provides
today’s endoskeleton model of IT, payment options to small vendors
these simple functions are replicated and for small transactions. Cloud
over and over in every enterprise. computing is likely to give rise to
hundreds of such utilities special-
Take sales tax, for example. While izing by industry and geography.
this may be simple as a business This, in turn, will make enterprise
function, managing the IT to systems simpler by avoiding the
support it is anything but trivial. replication and maintenance of
If your company does business common business processes.
internationally, your billing system
Outlook is published by Accenture. needs to maintain a table—and peo- In other words, cloud computing
© 2010 Accenture. ple to update it regularly—of sales is much more than on-demand
All rights reserved. tax tariffs for every province in pricing or lower IT costs. It provides
every country where you operate. a new model for sourcing computing,
The views and opinions in this article The sales tax must then be remitted which, in turn, will lead to signifi-
should not be viewed as professional
advice with respect to your business. to the appropriate tax authority, on cant changes in the business and IT
time and with the requisite docu- landscape. To quote film producer
Accenture, its logo, and mentation. Today, such functions Leonard L. Levinson, “A pessimist
High Performance Delivered are executed over and over again only sees the dark side of the
are trademarks of Accenture. (in-house) by every large company. clouds, and mopes; a philosopher
sees both sides and shrugs; an
The use herein of trademarks that may As companies move to a cloud optimist doesn’t see the clouds at
be owned by others is not an assertion computing model, it will become all—he’s walking on them.”
of ownership of such trademarks by
Accenture nor intended to imply an
association between Accenture and the Kishore S. Swaminathan is based
lawful owners of such trademarks. in Chicago.
For more information about Accenture, k.s.swaminathan@accenture.com
please visit www.accenture.com
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Outlook 2010
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