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Business News/ Technology / Companies hesitate on specialized industry clouds
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Companies hesitate on specialized industry clouds


It’s early, but some CIOs don’t see a business case for clouds designed specifically for particular sectors.

Daniel Seay, chief information officer of Fifth Third Bank’s commercial bank division, says he hasn’t seen a catalyst for using a banking-specific cloud.Premium
Daniel Seay, chief information officer of Fifth Third Bank’s commercial bank division, says he hasn’t seen a catalyst for using a banking-specific cloud.

Cloud platforms specialized for given industries are off to a slow start, with some companies saying they simply don’t need them, thanks to existing software and their own customizations.

“There hasn’t been a catalyst to say, ‘I’m gonna go with an industry-specific cloud’," said Daniel Seay, chief information officer of Fifth Third Bank’s commercial bank division. “I can use my private cloud or I can use one of the hyperscalers along with another software firm and meet my needs in a more cost-effective, proven way at this point." (Hyperscalers refers to the largest cloud companies, among them, AWS, Microsoft Azure and Google Cloud.)

Unlike general-purpose cloud systems, which tend to come with bundles of generic enterprise apps and functions that need to be tailored to sector-specific tasks, industry clouds provide purpose-built digital tools for companies in a given industry. The sell is that they can be useful to, say, financial-services firms in areas like regulatory compliance, or to healthcare providers sharing secure lab results and diagnosis and treatment data across different departments.

As businesses try to keep cloud spending in check, vendors have looked to industry clouds, many of which hit the market in 2021, as a way to bolster revenue. SAP, Oracle and Microsoft are among those offering them.

But some companies say industry clouds just aren’t on their radar, in part because the offerings themselves are immature and in part because the business case isn’t there: Their industry-specific needs are already being met through their own bespoke tools and by cloud-software vendors.

The sector will grow a modest 10% next year, four points less than vendors expect, according to a recent forecast from Forrester Research. But that adoption rate could pick up soon as the technology matures, with Gartner estimating that by 2027 more than 70% of businesses will use industry cloud platforms.

There are advantages to a cloud platform molded to one’s industry, said Forrester Senior Analyst Akshara Naik Lopez, mentioning, for instance, built-in best practices on how to handle sensitive data in healthcare.

But industry cloud can also be more expensive and complex, she said, and requires specialized personnel to use. With purse strings tight in the tech sector, it’s more likely businesses will spend on cost-saving automation and refining core enterprise applications, she said, and less so on things like industry cloud.

“There hasn’t been a compelling business case around that," Fifth Third Bank’s Seay said. The bank uses a combination of public and private cloud and financial-services-focused SaaS vendors.

The industry cloud offerings on the market for banking are still nascent, he said, and the amount of build-out required for off-the-shelf tools for everything a large bank needs—including data models and regulations—is a big ask.

The value case for new investments is also under more scrutiny now than before, partly because technology has also made cost predictions more accurate—and therefore larger, Seay said. It doesn’t necessarily mean the bank won’t take on new technology, but more that “You’ve got to make sure the revenue or efficiency’s going to be there," he said.

Seay’s biggest focuses right now are on continuing to drive automation and turning data into insights, he said.

Other technology leaders agree that the still-green offerings on the market are currently a key barrier to adoption. At Aflac, CIO Shelia Anderson said she’s in “watch mode" on industry cloud, adding that she doesn’t see anything that tackles the depth and breadth of the insurance industry.

To be sure, providers have been working to flesh out their products. For example, SAP, which says it introduced its industry cloud portfolio in 2020, has clouds in industries like retail, automotive, life sciences and utilities. To further build these out, it said it also created an open innovation space where the company and its partners can build software that sits within these industry clouds. Currently it offers over 70 industry cloud tools built by SAP and more than 300 built by partners, the company said.

Microsoft said it has had a strong response from customers to its industry cloud offerings. Its healthcare cloud has customers like St. Luke’s University Health Network, MVP healthcare and Wellstar, which are using it to give patients and doctors a better experience.

Oracle said it couldn’t immediately provide information on its industry cloud customers. The company, whose industry clouds span sectors including healthcare and retail, reported in September that cloud revenue for quarter through August rose 30%, a slower rate than in the previous and year-earlier quarters.

Anderson said she would consider industry cloud when and if the fledgling offerings on the market developed further and the business could find real value behind it. For now, she is more focused on keeping budgets flat and choosing investments that align with business objectives, she said.

Other tech leaders aren’t sure industry clouds will ever offer the breadth or specificity they require. George Maddaloni, chief technology officer of operations at Mastercard, said financial-services clouds aren’t necessarily equipped to handle the 24/7 real-time processing that payments require. Instead, the company uses a combination of public and private cloud, layered with software it controls. “The unique position we play makes it difficult to imagine a one-size-fits-all industry-cloud solution for us," Maddaloni said.

Write to Isabelle Bousquette at

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