Every quarter one of the most closely watched set of figures in the technology industry is spending on cloud computing. While cloud computing is a good indicator of what is happening in tech buying generally in the enterprise, it has also has implications for other areas of enterprise development such as digital transformation.
Cloud infrastructure services spending hit another record in Q1 2020, growing 34% to $31.0 billion, according to recent research from Singapore-based Canalys. Growth in cloud services was driven by organizations around the world moving to remote work as the COVID-19 pandemic hit. As a result, enterprises sought rapid access to compute resources in the face of lockdowns and disruption.
In a statement, Alastair Edwards, chief analyst at Canalys pointed out that many organizations have turned to the public cloud for its burst capabilities to meet a sudden spike in use. Platforms such as Zoom would not have been able to operate without the flexible infrastructure provided by the major cloud providers.
Digital Investment Caution
But the research also showed something else. Despite the encouraging figures, enterprises are starting to show some caution in investments as they wait for the economic impact of the health crisis to kick in.
Cited in the Wall Street Journal,Mathew Ball, chief analyst at Canalys also pointed out that thatin order to cut immediate costs, many cloud users are taking out three-month contracts with cloud providers, rather than one- or three-year contracts, to keep employees working during state lockdowns. “Large enterprise consultative-led digital transformation projects were put on pause. Businesses shifted to enable remote working, which changed typical usage behaviors in terms of applications and network dynamics,” Ball said.
This implies a change in the way organizations are doing business. But is it changing their entire business model? While the way companies are doing business may change, a business model that is geared towards customers will largely remain the same, especially given that many have been investing in cloud-based technologies over past number of years.
Organizations Need to Transform
The pool of potential consumers is still there, Hung Nguyen, marketing manager at Switzerland-based Smallpdf told us. He points out that all that is happening is that customer behaviors are changing. People no longer purchase CDs, they stream music. Renting DVDs is a thing of the past — since we now have Netflix and Hulu. Even at this very moment, people are conducting business meetings via Zoom instead of having a face-to-face sit down due to COVID-19. “To stay competitive, business owners need to appease their existing user base through traditional means (newspapers, ads, physical letters) while starting to adopt methods of acquiring users online (SEO, ads, social media, e-newsletters). The latter is the definition of digital strategy,” he said.
Organization must continue analyzing their competitors' behaviors, explore different acquisition channels, and use what works best for their business. Business owners should always stay open-minded with developing technology, new business strategies, and new pricing models. “The online world is changing, and the needs of digital transformation vary, industry to industry. Organizations should be excited about the opportunity to reach a wider audience more than anything," said Nguyen.
Digital Transformation for All
David Moise president of Houston-based Decide Consulting believes it is. Digital transformation is not something reserved for the Fortune 500, the smallest of companies can digitally transform. “Whether you like it or not, every business is a software business. Let's take a mom and pop restaurant. A restaurant that manages Yelp, Groupon, DoorDash and social media better can create a clear advantage over competing restaurants,” he said.
“Most businesses have email, CRM, accounting and some operational system at a minimum. Zapier offers over 2,000 integrations designed for non-programmers to use. “Do you want an email from a specific domain to automatically create an event in you CRM? A lay-person can do this without a programmer or a $350/hr digital transformation consultant,” he said. He added that in a world where 5G, Machine Learning and quantum computing are just around the corner, not digitally transforming is the biggest risk.
Being Ready for Digital
What threatens your business model is not a lack of digital strategy — it is a lack of being ready for change. That would have been true before the pandemic and remains true today, Vaclav Vincalek, a partner in Vancouver-based Future Infinitive. “If you are not prepared to change, everything will threaten you,” he said. “Customers will leave. You’re not adapting while your competition is coming up with a better business model.” All that’s happening now is that current events sped up certain changes that were already happening (Whether companies will carry their digital strategies fruition after the pandemic ends, remains to be seen).
With any digital strategy, part of it is about managing risk — because to be fair, it is extremely difficult to change while the company must keep delivering products or services, without interruption, to its customers. “If you’re doing that, it’s not really a ‘betting the farm situation.’,” he said. “Digital strategy, like business strategy in general, often involves making bets on changes that you think will be beneficial. You check the data to see the results. You make sure you’ve got a repeatable process. And if the bet works out, you can start scaling up that change to where it really transforms your business.”
Digital Transformation Solutions
With the current crisis, it seems that many more enterprises see digital transformation as one of the solutions to their problems. Since the beginning of the crisis, the multinational professional services network firm PwC has been monitoring the impact of the coronavirus on enterprises through surveys of CFOs.
The PwC's COVID-19 CFO Pulse of the week to April 14 showed that 53% of the respondents with plans to defer or cancel investments are considering IT and another 25% are considering digital transformation. Only 2% of those financial executives are considering reductions or deferrals of cybersecurity or privacy investments, according to the survey. The report reads, “Significantly, relatively few global CFOs (18%) say they plan to defer or cancel investments related to digital transformation. At the industry level, this ranged from 24% of energy, utilities, and resources CFOs to just 11% of technology, media and telecommunications CFOs.”
It adds that this overall reluctance is not a surprise given that digital transformation stands to play a large and critical role in the latter stages of crisis especially as organizations accelerate automation or other new ways of working on-site, consider contact-tracing technologies to ensure workplace safety and look to create more integrated and tech-enabled supply chains.
Digital transformation, it seems, will be leading the charge to rebuild enterprises after the coronavirus has passed.