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The Cloud Changing the Business Ecosystem The Cloud Changing the Business Ecosystem kpmg.com/in Foreword Technology has always played the role of a disruptive force that somehow connects discontinuities and changes business models, ecosystems, or even the world order. Paradoxically, it has sometimes created a level playing field, and at times 'unfair' advantages for some countries or enterprises. This is evident all through out history right from the stone-age, to the industrial revolution, to the silicon era, to the internet/dot com age and to the current age of convergence/mobility. Technology could transform the world into the virtual space, enabling endless cycle of innovation. Advanced economies like US, UK, Germany, and Japan have been at the forefront of combining innovation and technology. This has enabled them to become superpowers that have the economical, defensive and financial muscle. Same has been the case with enterprises like IBM, Microsoft, Google, Apple, Siemens, Sony, CISCO, Nokia, etc. At the same time, it has created a level playing field with the rise of telecommunications and the internet. This leveling has helped in creating emerging leaders like India and China who are leveraging favorable demographics with technology. Technology is often a savior during the downward economic cycles as it enables the creation of more efficient business models and ecosystems. Ironically, sometimes it also leads to economic downturns as the euphoria over technology powered business models cause unrealistic expectations in the capital markets, creating bubbles which inevitably burst for e.g. the dot com burst. The Cloud is another such phenomenon that has stirred up interests and investments in many parts of the world. Research has indicated that the worldwide Cloud services revenue is forecast to reach USD 68.3 billion in 2010, a 16.6 percent increase over the previous year.1 There are many challenges and questions ranging from data privacy and security to whether the time has come for the Cloud. The future belongs to those who will truly understand the present scenario, manage risks, and innovate with a vision to create a new order. Kumar Parakala Pradeep Udhas Head of IT Advisory Head of IT / ITeS Sector KPMG in India and EMA KPMG in India 1. Gartner, 'Gartner Says Worldwide Cloud Services Market to Surpass $68 Billion in 2010' © 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative © 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. (“KPMG International”), a Swiss entity. All rights reserved. Foreword Technology has always played the role of a disruptive force that somehow connects discontinuities and changes business models, ecosystems, or even the world order. Paradoxically, it has sometimes created a level playing field, and at times 'unfair' advantages for some countries or enterprises. This is evident all through out history right from the stone-age, to the industrial revolution, to the silicon era, to the internet/dot com age and to the current age of convergence/mobility. Technology could transform the world into the virtual space, enabling endless cycle of innovation. Advanced economies like US, UK, Germany, and Japan have been at the forefront of combining innovation and technology. This has enabled them to become superpowers that have the economical, defensive and financial muscle. Same has been the case with enterprises like IBM, Microsoft, Google, Apple, Siemens, Sony, CISCO, Nokia, etc. At the same time, it has created a level playing field with the rise of telecommunications and the internet. This leveling has helped in creating emerging leaders like India and China who are leveraging favorable demographics with technology. Technology is often a savior during the downward economic cycles as it enables the creation of more efficient business models and ecosystems. Ironically, sometimes it also leads to economic downturns as the euphoria over technology powered business models cause unrealistic expectations in the capital markets, creating bubbles which inevitably burst for e.g. the dot com burst. The Cloud is another such phenomenon that has stirred up interests and investments in many parts of the world. Research has indicated that the worldwide Cloud services revenue is forecast to reach USD 68.3 billion in 2010, a 16.6 percent increase over the previous year.1 There are many challenges and questions ranging from data privacy and security to whether the time has come for the Cloud. The future belongs to those who will truly understand the present scenario, manage risks, and innovate with a vision to create a new order. Kumar Parakala Pradeep Udhas Head of IT Advisory Head of IT / ITeS Sector KPMG in India and EMA KPMG in India 1. Gartner, 'Gartner Says Worldwide Cloud Services Market to Surpass $68 Billion in 2010' © 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative © 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. (“KPMG International”), a Swiss entity. All rights reserved. Each decade, since the 1970s, has seen the evolution of IT into a whole new ‘avatar’. Mainframes (1970s), Rise of the Personal Computer (1980s), Client Server Architecture (1990s), are a few well known avatars. Meanwhile, what helped the adoption of these advances in IT was that each new avatar was preceded by a recessionary phase. Recessions brought about a greater need for businesses to improve efficiency levels and increase profitability. As a result, businesses and individual users rapidly adopted the modern avatars of IT with the objective of realizing their benefits. The double dip recession, in the early part of the 1980s, was almost immediately followed by the Rise of the Personal Computer (PC). The number of PCs installed grew from less than 1 million in 1980 to over 100 million by the end of the decade1 . Similarly, the recession due to debt, rising inflation, etc. in the first half of the 1990s was followed by the growth of the Client Server Architecture and the internet. There were only a few thousand users of the internet at the start of the decade which ended with over 300 million users1 . Recently the world has gone through an economic downturn and there is an even stronger need for organizations to improve efficiencies by using collaborative solutions and real time information exchange. The Cloud could therefore be the next big thing with it gaining prominence during the recent credit crisis. The promise of the Cloud possibly lies in the flexibility, scalability and cost benefits made available through the ‘as-a-service’ paradigm. Impact of IT evolution The increasing use of IT brought with it overheads in the implementation and maintenance of computing systems. The amount of time and finances invested in managing IT, which has become complex over a period, has increased exponentially. This also resulted in the growth of IT companies and the outsourcing of IT management. The last century saw IT becoming a key business enabler. The dot com bust followed by the recession and financial crisis, saw an increasing demand from IT to do more with less. Technology and connectivity meanwhile evolved quickly with the introduction and adoption of technologies like XML, SOA, Web 2.0 and high speed internet connectivity. However, the impact of the computing evolution cannot be seen from the narrow lens of IT impacts only. IT has been one of the key disruptive technologies for the last many decades. It has changed how individuals and businesses function. The constant evolution of computing has helped businesses to automate and innovate providing them a competitive advantage in the global marketplace. A study of business history would reveal that the rapid rise of US-based organizations was due to their ability to quickly leverage IT for their business needs. On the other hand, organizations from other parts of the world were relatively slow in leveraging IT. However, over time IT has become a hygiene factor and large scale adoption has led to leveling of the playing field. Nevertheless, with the coming of the Cloud, organizations are once again at the crossroad of Setting the technology. Early adoption of the Cloud can provide organizations with an opportunity to transform their business models and gain a competitive edge. While cost reduction is one of the benefits, several other benefits accrue to organizations. Organizations would be able to concentrate on their core Context competencies while leaving the task of running IT infrastructure to the Cloud service providers. Further, through the adoption of the Cloud, organizations are expected to become more nimble. The Cloud would help them quickly provision resources for business opportunities, which could otherwise be lost. The Cloud also enables organizations to build virtual and "open" business processes, enabling its various stakeholders including customers, business partners, suppliers, etc. to connect and do business more seamlessly. Nitin Khanapurkar Executive Director Advisory Services KPMG in India 1. IDC, 'Whitepaper on 40 years of IT' © 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative © 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. (“KPMG International”), a Swiss entity. All rights reserved. Each decade, since the 1970s, has seen the evolution of IT into a whole new ‘avatar’. Mainframes (1970s), Rise of the Personal Computer (1980s), Client Server Architecture (1990s), are a few well known avatars.
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