Business Heads for the Clouds

Stephen DeAngelis

November 10, 2011

Rolfe Winkler writes, “After burying its head in the sand, Oracle is finally looking skyward. Better late than never for shareholders.” [“Oracle Embraces Cloudy Future,” Wall Street Journal, 25 October 2011] Winkler was responding to Oracle’s “$1.5 billion acquisition of RightNow, a cloud provider of customer-service software.” Winkler notes that it is not surprising that Oracle is coming late to the cloud-computing game. After all, he writes, “Chief Executive Larry Ellison famously pooh-poohed cloud computing, calling it ‘complete gibberish’ in 2008.” To be fair to Ellison, I suspect he was referring more to the “cloud” illusion than to the concept behind on-line services. His actual quote was:

“The interesting thing about cloud computing is that we’ve redefined cloud computing to include everything that we already do. I can’t think of anything that isn’t cloud computing with all of these announcements. The computer industry is the only industry that is more fashion-driven than women’s fashion. Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?”

Much to Ellison’s chagrin the term “cloud computing” has stuck and it is unlikely to fade away any time soon — nor, unfortunately, are his comments about it. Winkler notes that one reason Ellison might have wanted to downplay cloud computing is because Oracle has a significant portion of its business dedicated to non-cloud applications — and those applications are vulnerable. He continues:

“Not all of Oracle’s software business is threatened by cloud computing, but it still makes sense to adapt. Even if Oracle sells software cheaper in some vulnerable areas, it is better to embrace the new business model than allow parts of its business to dwindle.”

Oracle will undoubtedly end up embracing cloud-computing. Earlier this year, an IBM study that involved “more than 3,000 global CIOs” reported “that 60 percent of organizations are ready to embrace cloud computing over the next five years as a means of growing their businesses and achieving competitive advantage.” [“New Global IBM Study Confirms Cloud Computing Poised to Take Off at Companies,” Small Business Trends, 21 May 2011] That is a money-flow into which Oracle, and most other service providers, want to jump. The IBM press release continues:

“As demand for ever-growing amounts of information continues to increase, companies are seeking simple and direct access to data and applications that cloud computing delivers in a cost-efficient, always-available manner. The use of cloud, which began in supporting deployments mainly inside companies, has now also grown common between organizations and their partners and customers.”

Of course, it’s not just access to information, or the sharing of it that is important, it’s deriving actionable intelligence from it. It is no surprise, therefore, that “the IBM study also found that more than four out of five CIOs (83 percent) see business intelligence and analytics as top priorities for their businesses as they seek ways to act upon the growing amounts of data that are now at their disposal.”

 

Another corporate giant, Microsoft, also sees its future in the clouds. The company “is pivoting to cloud computing from traditional computing [as] part of a sweeping revision of the software giant’s business model.” [“Ballmer Is ‘Re-Imagining’ Microsoft Around New Forms of Computing,” by Steven D. Jones, Wall Street Journal, 14 September 2011] Jones writes:

“Chief Executive Steve Ballmer said … that Microsoft is ‘re-imagining’ every part of its software empire to run on and through the cloud. … [He said] that Microsoft’s core computer operating system was being recast as a ‘powerful cloud’ operating system capable of delivering a rich inventory of Microsoft software in forms and sizes any device from a desktop computer to a phone can handle.”

Jones points out that one reason that Microsoft is transitioning to the cloud is because it is scrambling “to create software for a booming mobile device market. Sales of smartphones and tablets are starting to affect those of conventional computers, most of which run Microsoft’s operating system.” Jones continues:

“Cloud computing moves software and data storage onto remote servers operating behind corporate firewalls or on public networks owned by companies such as Microsoft, Google Inc. and Amazon.com Inc. Google and Amazon also are expanding into Microsoft’s turf by offering services such as document sharing and email. Delivering services through a cloud reduces reliance on a computer operating system such as Windows, which is Microsoft’s core business. Committing to the cloud also creates another way for Microsoft to fight back against competitors who say we are entering a post-PC world.”

Because corporate giants like IBM, Oracle, Google, and Amazon are garnering the lion’s share of attention when it comes to cloud-based service providers, business owners could easily conclude that only large businesses are able to benefit from those services. Carol Kline and Tina Valdez report, however, that large businesses are not the only companies that benefit from cloud-based services. [“SMBs and the Cloud: Size Does Not Matter,” CRM Buyer, 17 October 2011] Kline and Valdez claim, “As customers become more digital, social and mobile, small and mid-sized businesses have significant opportunity to improve customer satisfaction and loyalty through a differentiated customer experience, just like their enterprise competitors. However, those who are unwilling to invest in solutions that embrace the needs of today’s marketplace will most certainly be left behind.” No business likes to believe that it is the tail being wagged by technology’s head, but Kline and Valdez ask business leaders, especially slow adopters, to “consider these facts”:

  • More than 2 billion consumers are online, spending more time online than watching television, and only 28 percent of consumers prefer to resolve service issues on the phone.
  • 96 percent of Gen Y has joined at least one social network, and, in 2010, they outnumbered the Baby Boomer generation.
  • By 2015, mobile Internet will surpass fixed Internet, and 40 percent of 18-34 year olds use their mobile devices to make purchases today.

Kline and Valdez call these facts the “new realities” that need to “shape customer management strategies.” They are also facts that have “many small and medium businesses … scrambling to find solutions that meet customer needs without onerous investment and infrastructure requirements.” Kline and Valdez report that some small- and medium-sized business owners perceive cloud-computing as a money pit rather than a foundation upon which to grow their business. This perception, they write, is “based on the assumption that integrating a full-service cloud solution requires complex relationships with multiple service providers.” They continue:

“Thankfully, that’s just not the case. … Until the application of hosted — or cloud — technology, many advanced customer relationship management solutions were out of reach for small and mid-size operations. But done right, cloud technology and a smart cloud channel strategy stand to be huge enablers of competitive advantage through a differentiated customer experience. More businesses are recognizing this opportunity and taking advantage of the benefits of cloud-based contact center solutions, improving customer satisfaction and return on investment by as much as 27 percent in the process.”

That double-digit figure ought to get a few business owners to pay attention. That figure also begs the question, “How can the cloud help small and medium businesses compete and better identify, attract and serve customers?” Kline and Valdez not only ask that question they offer “six benefits you can’t afford to ignore”:

1. Reduced fixed and technology support costs, all with access to new technologies at lower risk. In large organizations, acquiring and maintaining traditional physical infrastructure — including data centers, as well as separate contact center technology at each service delivery center — requires significant capital expenditures. Organizations are then often committed to a system for the depreciable life of the assets, limiting the ability to try new solutions or make significant changes. Cloud solutions allow companies to pilot, implement, and globally scale without incurring unacceptable levels of risk.”

In other words, cloud-computing can help you reduce sunk costs in what will surely become legacy systems. The second benefit relates to customer service.

2. Improved customer satisfaction and revenue by delivering a consistently great experience and the right service at the right time via the right channel. A key driver in customer satisfaction is the ability to recognize and accommodate customers from one channel to the next. This nimble and proactive approach requires a partner that can deliver a centralized and virtualized infrastructure that allows for one view of the customer across all channels, including mobile and social channels.”

Not only can you get great solutions, those solutions are created by subject matter experts who most small- and medium-sized could never afford to hire. Getting back to money savings (which increases ROI), Kline and Valdez note another benefit is reduced onboarding costs.

3. Reduced onboarding costs, higher retention and better associate performance. A virtual, global system broadens the talent pools exponentially, and allows companies to select the most qualified associates. Once these associates are in place, they are armed with the best possible training and knowledge. This occurs via a crowdsourcing approach to learning and customer intelligence, along with the cross-channel visibility mentioned above, making for a powerful customer experience.”

Benefit four is also staff-related:

4. Reduced cost-to-serve via improved staff utilization, effective multichannel strategies, and access to new tools that improve operational efficiency. While a non-technical telephone contact can run as high as US$12, self service can be as little as $0.10 per contact, with click to chat, email and virtual agents costing anywhere from $1 to $5 per contact. Cloud solutions make it possible to balance these options and deliver sales and service via the right mix of channels to various customer profiles. As a result, average cost per contact can be reduced by 44 to 88 percent. Only cloud-based contact center solutions give non-enterprise organizations the chance to try multichannel solutions without the risk and investment. But when doing so, companies will be best served by selecting a provider that has the experience running the technology themselves, so they can serve as a professional advisor rather than merely the company that delivers the technology.”

My only caveat here is that companies need to make sure that technology improves customer service rather decreases it. Many customers view technology-based customer services as dehumanizing and infuriating. Kline and Valdez next discuss one of the most important benefits of cloud-based services — scalability.

5. Improved responsiveness and scalability, across channels, and around the globe. In the highly seasonal retail industry, for example, premises-based systems and traditional workforce management mean idle human resource and technology costs during non-peak times. Meanwhile, unanticipated or particularly high demand can result in missed opportunities and a poor customer experience. Cloud architecture enables ready and flexible access to the right associate talent pool.”

Their final benefit is closely related to reduced onboarding costs:

6. Reduced implementation timeline with fast time-to-market and time-to-benefit. Cloud-based solutions allow companies of all sizes to respond to dynamic market changes in real time. This allows companies to more easily make decisions based on market opportunities or competitive threats, ultimately delivering a more timely, and higher quality experience to customers.”

In conclusion, Kline and Valdez write, “Companies large and small stand to benefit from the flexibility, scalability and efficiency that cloud contact center solutions deliver. By leveraging the cloud to create a superior customer relationship management strategy, companies can drive down costs and improve revenue, loyalty and retention through a differentiated customer experience.” With all sizes of companies heading for the clouds, Gartner analysts Drue Reeves and Daryl Plummer ask several important questions: Is Cloud Computing too big to fail? [Financial Times, 17 October 2011] They write:

Liability – it’s a word you don’t hear in most cloud discussions, but you might want to start introducing the topic. In the cloud world, questions of who’s liable for business failures and how much compensation can be expected are often overlooked. So, how do you know if you’re covered or not? The issue is concentration risk and stacked liability. What if one cloud provider got so many big companies (or companies in an industry) and then failed? Could this affect us all? Could it affect the economy? Could a cloud provider become ‘too big to fail?'”

I think those are tantalizing questions on which to end. We’ll take up the topic in a future post.