Tuesday, March 23, 2010

Cloud Computing and Innovation in Sourcing Strategies?

Executive Summay: A speculative look at innovation in sourcing strategies driven by Cloud Computing, based on pricing complexity and on third party players and standards helping develop seamless integration across vendors.

Would the adoption of cloud computing across industries lead to innovation in sourcing strategies? Would it lead to innovation in how the sourcing strategies are implemented?

Tried and tested single, dual or multiple vendor approaches exist, along with bidding mechanisms. If we are to speculate on potential for innovation, below are some possibilities. These are driven by the increasing complexity seen in the pricing of sourcing contracts- the elements of which sometimes resemble derivatives transactions.

1. Does the future hold structured arrangments where cloud computing locations (think: risk management/ disaster recovery/ pricing & capacity management) are transparently bundled into dynamic pricing of services? E.g. Dynamic energy trades/ demand management in the enery sector?

2. Does the future hold structured arrangements where multiple vendors could transparently bundle their services in a dynamic pricing model? E.g. Advertisers bidding on Google search response positions.

As you can see, this speculation rests not only on pricing going "derivative", but also on the emergence of a "glue" that holds all this complexity together and packages it for translation into everyday use.

Getting an answer to this can be broken down into the following steps:
1. Current state of the art in, and future trends in the industry:
- Are the players specializing? How?
- Which tiers of the computing infrastructure are being moved to the cloud and how?
- How are different sectors engaging with cloud computing and its vendors? E.g. Data privacy concerns in healthcare and financial services. We have covered some thoughts that impact this here:

The current state analysis process may be similar to the one we previewed for the consumer electronics industry here:

2. Alliances:
- Is there a potential for alliances between players in the sector? Or would any partnership within the sector be a step toward mergers and acquistions?
- Is there a potential for vertical alliances? E.g. Cloud computing providers and Google Analytics?

3. Development of Third Party Standards for Cloud Computing:
- These would range from metrics to methodologies across quality of services, monitoring and executive reporting.

What do you think?


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