Blog post

Whose cloud? The business strategy question every CEO should consider.

By Mark Raskino | October 01, 2017 | 0 Comments

Before we get into this important issue I have to declare a disinterest. I’m not a cloud analyst at Gartner. I don’t cover the vendors or their offerings. I can’t tell you which one is best under different circumstances. I have many colleagues who can help you with those decisions. What I do know is this – deciding which cloud(s) your company will become reliant on is a strategy question that cannot be left to technical thinkers alone.

“There’s no such thing as cloud – only someone else’s datacentre” – Randy Mott

The CIO of GM restated this provocative position at the Renaissance CIO award event, held at Berkeley, that I had the privilege to speak at last week. Mott was there to accept the Fisher Hopper prize for lifetime achievement in the CIO role. You might not agree with his view of cloud, but the voice of someone who has previously been CIO of HP and of Walmart should not be ignored. GM and Mott took a big bet in 2012, to build and operate their own cloud, to connect all those increasingly autonomous vehicles, store the colossal amounts of data generated and analyse it.

GM is continuing down its path of internal build and independence. Of course, with its vast scale and engineering centric culture, this is an option it can choose to take. But not all companies of similar clout concur. At the same event I met a technology leader from General Electric who confirmed something that is already public knowledge, about their approach. A few years back when Jeffrey Immelt invited Bill Ruh to build a strong central data and analytics capability for the firm, he also started building GE’s own datacenters. Now, however GE has changed tack.  It’s increasing its reliance on cloud computing from major external providers.

So what’s the issue?  Most companies cannot build their own cloud infrastructure. They have no choice but to rely on someone else’s. That’s fine if the provider sticks only to the role of B2B technology service provider. It’s a bit more challenging if the provider also operates in business areas that compete with you – or it might choose to do so in future. Think about how your business model might change as a result of your digital business strategy. Today your revenue might not depend so much on pay-per-sip cloud based API services. However in the not too distant future it could become very reliant on AI based pattern recognition in the data generated by your products, services and operating activities.

“Co-opetition” and “Frenemies” are terms that the tech sector has coined to describe the two-way tension of being dependent on another powerful player for supply while also competing against them for the same customers. It’s certainly doable – for example Apple relies on Samsung and Netflix is hosted on Amazon’s cloud services – but it’s something you have to manage actively and carefully. It’s a culture and competency of its own that your management team will need to master. They have to develop it thoughtfully and deliberately.

The concern I have is that some firms may be drifting into complex future digital frenemy situations without sufficient forethought about the implications, at the board of director’s level. Mott’s pithy aphorism could be a useful wakeup call. So what can a CEO do about this?  Very few are in a position to build their own world class cloud datacenters but they can reduce the strategic dependency risks. Consider asking the following questions of your CIO:

  • Which parts of our digital services will be our source of differentiating competitive advantage?
  • To what extent can we isolate those elements from depending on external cloud providers?
  • Which cloud providers might become our competitors in future?
  • Would it harm the quality of our offerings if we avoid those and use others instead?
  • What would be the additional “insurance” cost to architect our systems so they give us the option to switch between providers in future, if we had to?

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