Cloud capitalism, IoT driving digital revolution
The digital economy has already surpassed the size of the oil economy, and the World Economic Forum pegs it at $100 trillion by 2025. While the industrial revolution was all about factories, the digital revolution is all about platforms, powered by the cloud and enabled by mobility.
When cloud computing first emerged, the decision to move to the cloud was purely an information technology (IT) one. But today, for organizations from oil and gas to manufacturing and retail, cloud has become a strategic platform to expand into new geographies, introduce new products and services faster, and drive growth. In addition to the technical advantages of leveraging cloud-based services, business owners have fully grasped the philosophical shift that the cloud stands for—empowered access to services for anyone, anytime, without the limitations of geographical borders.
A professor at New York University coined the term “cloud capitalism” to describe the way in which the cloud has changed the world of business for good. There are now very limited barriers to entry across sectors, levelling the playing field between start-ups and industry stalwarts. In tandem, nimble, new market entrants are turning standard business models on their heads, forcing established players to innovate to be able to keep up.
In the era of cloud capitalism, power also shifts to the hands of the user, as people determine how and where they want to consume products and services, rebalancing supply and demand. More and more enterprises are embracing mobile platforms to be able to serve their customers more flexibly. Royal Bank of Scotland (RBS) chief executive Ross McEwan has described the commuter train from Reading to Paddington, London, at 7.01am as the company’s “busiest branch”, as close to 170,000 customers log on to the RBS mobile banking app while on their way to work in the city.
In this new era, the need to optimize assets also becomes paramount: it’s not possible to nimbly corner the market if you are sitting on a large inventory or other heavy assets. Crucially, you need to be willing to share those assets with others in the ecosystem—even your competitors.
Momentum is building around cloud capitalism today because of four fundamental shifts taking place in the industry. One is, of course, the pervasiveness and business-critical nature of the cloud, made possible by reliable and secure networks. Second is the Internet of Things (IoT). IoT is empowering businesses to transform how they serve their customers, and the way people interact with the world around them. In Singapore, for example, there will soon be sensors in cars and on the roadways, and a toll will be charged based on the number of rotations of the tyre on the street that you’re driving through. The possibilities for applications like this are endless. Thirdly, artificial intelligence, like IoT, will change interactions between the consumers and producers of services across all industries. And finally, the application programming interfaces: they are accelerating the way in which software developers are able to bring more and more compelling services to data-hungry users’ fingertips.
The combination of these four shifts is very powerful, signalling the start of the platform economy, where businesses prosper by turning themselves into “platforms” upon which other companies or individuals can also thrive—for instance, Uber and Airbnb. In the platform economy, fundamental rules of capitalism are being re-written by the cloud. In parallel, digital transformation is making waves across all sectors. Arguably, in most businesses the focus has, to date, been on “looking” digital. So, “How can we improve the company website, make it more mobile friendly, and run some data analytics to glean more insights on our visitors?” But now, organizations across industries want to actually be digital. This brings about more existential questions such as “What business are we in? How are we going to make money? Where is the margin coming from in this value chain that we participate in?” Consequently, conversations among IT decision makers have taken on a very different tone. Chief information officers have become strategic partners for marketing, finance, sales and other lines of business, as well as senior management—and all of them want to know how they can leverage the latest innovative technology platforms and ecosystems, powered by the cloud.
As cloud capitalism continues to gather pace, the key question for customers and partners is how they can rethink their business models, strengthen their supply chains, innovate through new services, and expand to new markets in the platform economy through digital transformation.
Vinod Kumar is managing director and chief executive officer at Tata Communications Ltd.