Cloudonomics: The Business Value of Cloud Computing, + Website

The Cloud: More than IT

Earlier we suggested that cloud computing was both cloud and computing. We argued that IT mattered: It can be just plumbing, but it can also play a key strategic role. The cloud variation of IT can also be just technical or tactical—a way of provisioning a few servers—but it may be argued that it can be strategic as well. To understand how, we’ll use Treacy and Wiersema’s value disciplines framework.

When Treacy and Wiersema referred to customer intimacy, they meant precise market segmentation and offers that are personalized and contextualized to the customer. Cloud computing can clearly fit here: Consider Amazon’s book recommendations or Netflix’s movie recommendations. The cloud model is of the essence: Each individual having a personal movie history locked away in their desk drawer would accomplish nothing. Hundreds of millions—if not billions—of ratings all actively— “rate what you just watched”—or passively—based on patterns of purchases or viewing—collected via the cloud and processed using sophisticated “big data” algorithms are what do the trick. Using the cloud to enhance customer intimacy can be strategic: It increases value, by providing information products that customers are more likely to enjoy; increases revenue, by recommending products that customers end up buying; and reduces cost, due, for example, to customer churn. Moreover, it creates “customer intimacy” in the true sense of the phrase: Amazon, Netflix, and Pandora “know” you the way ...