Hi, I'm Russell Ives. I'm the managing director for operations at Accenture in Australia. Our business, the operations business covers process outsourcing, cloud applications, and application outsourcing infrastructure and security. So they're quite germane to the conversation today. There's a couple of challenges for both vendors and for the client. If you look at it from the vendor perspective. Firstly, in sort of a software infrastructure perspective. Clearly the revenue streams that the vendors typically have, changed form quite dramatically. From a software perspective, the upfront license fee and maintenance changes into a more of a consumption and usage based contract. And for the vendors themselves, as they go into market, that means changes to their organization, changes in terms of how they go to market, changes in terms of how they encourage and incentivize their sales force. Who used to be renumerated on license revenue and now that mix changes. So the vendor organization needs to think about how they change to meet the changing economic dynamics in the cloud environment. And that flows all the way through the stack. From a services perspective, it's quite interesting in the sense that the old SI deals that used to be very front-end loaded, lots of capital expenditure. And then potentially an application outsourcing, or management services stream out the back also changes. Some of our clients are looking to avoid the capital expenditure. See that capital expenditure smoothed over time as part of the services wrapper around perhaps, a cloud based application. And that means that services providers, such as ourselves need to change the economics in terms of what we put on the table for our clients. And that means changes in our team. Changes in our behavior. Changes in how we think about the economics of constructing services arrangements with our clients. The client challenges are multiple, as well. You have challenges in the IT space. In terms of a cultural dynamic, which is very focused on on-premise infrastructure, on-premise software. And quite often an IT organization that's built up, managing stuff that they can see on the floor. And part of the shift to cloud is actually moving away from that being able to see it on the floor. And changing the skill set and the behaviors of the IT organization to cope with the service provider, delivering those services, the platforms, and the applications out of sight. And to some extent changing the trust equation in terms of where that service provision and that capability is actually coming from. Then you have sort of an economic dynamic where I've now moved away from having lots of fixed assets on the floor, to buying a stream of service capability, or platform capability. How does the IT organization then change to deal with the different financial constructs? Does it support chargebacks? Does it hinder chargebacks? Does that make it easier for IT organizations to manage their expenditure, and manage this service provision into the business side of the organization. And then lining up the IT organization with their business clients. So how does the business client out there in the organization then consume those IT services? Does it make it easier? Because the IT organization can actually deliver more flexibly, or is it actually harder? Because the IT organization isn't ready. So you've got sort of business set of challenges in terms of how to deal with usage of cloud based capability. You've got an IT set of challenges. In terms of what does it do to my mix and match of capabilities. And then you've got the vendors starting to shift their positioning to be able to deal with a very different construct in terms of servicing the market place. So arguably, three challenges. So jumping the chasm from before cloud to adopting cloud and then sort of moving on and really taking advantage of it, we've probably seen a couple of different strategies in terms of getting there. I think, to some extent, MIPS on demand or storage on demand in cloud, if you call it infrastructure as a service perhaps, is relatively simple. No major changes to how services are potentially delivered from the IT organization to the business. The change is sort of happening below the water line. In some senses it's a shift back to time sharing 20, 30, 40 years ago. I'm showing my age here. But it's relatively invisible to the organization. IT organizations can actually do that on a trial, sip it and see. Does it work on a small scale? And then we've seen sort of small scale adoptions to sort of non-critical areas. Whether that's in desktop applications. Whether it's in analytics, or data as a service. Where you can actually buy some non-business critical functionality, which can sit off to the side. Organizations can test it, can trial it. Does it actually work? Can I get the service levels? Can I get the responsiveness? Can I get the flexibility? And can I test out some of the commercial models, that sort of hang with that, or go along with that? Once you start moving into the core parts of the business, obviously, it gets a little bit more challenging to actually make substantive changes to the IT infrastructure. Substantive changes to how the business processes sit over the top of that. And, that's where the chasm perhaps gets wider and gets deeper. What we've seen though is it usually takes, to the next big step, it usually takes a visionary, and that visionary could be in the IT organization, who wants to do something particularly dramatic in changing the cost base, the service provisions models, the capabilities that they have, in a significant way. Or it could be a visionary on the business side who wants to make some, again, some very significant changes in the business operating model. Wants more flexibility, wants a new platform application, for example. But doesn't want to go through he capex spike. And basically is mandating a significant change in basically dragging the IT organization along. So with the background I think of the testing and trailing it on small scale, non business critical gets you close to the chasm. And then I think to take the big leap you actually need a visionary, either in the IT organization, or in the business side of the house really dragging the organization through. So I think as you've jumped the chasm, some of the standout items that we've seen from an adoption perspective, both good and bad, I think the biggest challenge from a vendor perspective and from a client perspective is the behavioral change on both parts. Because you've got vendor organizations who have five, ten, fifteen, twenty years of traditional behaviors in supporting clients, dealing with particular problems, taking trouble tickets, doing change requests, doing all sorts of classic change management type activities. And in actual fact in the cloud based, or consumption based environment things are a lot more dynamic, a lot more flexible and making sure the vendor organization is actually ready to deal with the flexibility. And, the dynamism of a cloud-based, more flexible environment is often challenging. Particularly if the organization has a long history of very classic IT sort of engagements. And that problem is also replicated on the client side. Because they're used to buying exactly the same way. They're used to engaging exactly the same way, dealing with change requests, dealing with scope changes. I want to buy an extra few MIPS, or I want to more storage, or I want to buy more services. And then as you move into this consumption flexible oriented environment. The buying patents, the management construct needs to be different. Needs to cater more for their rolling flexibility of a cloud base, or a consumption based environment. And that means that both parties to be successful. Both parties need to move through that behavioral change and readiness together to be able to make that successful. Because if one party is ahead of the other. It obviously introduces tensions. And as you move to that other side of the chasm. You want obviously both parties to be moving, to be moving flexibly. So again, I think one of the ways to break through that that we've seen, is if you have strong leadership on both sides. On the vendor side and the client side who are both committed to this cloud based conversational consumption based conversation in commercial arrangements. They can drive through those sorts of challenges. And I think it really is, to me that's the real, the nub of making it successful is ensuring that both organizations are ready to make the leap at the same time. If you look at sort of then on the flip side some of the benefits and the successes of moving to a cloud - I often link the cloud and the consumption base because a lot of the concepts sort of come together. Some of it is to do with certainty. I know what I'm paying per transaction or per MIP. And I can see the usage very, very clearly. And if I'm in the IT organization, and I do I want to structure chargeback regimes, that measurement of the costs that have been incurred are now much more explicit. And I can make the business users of those services much more accountable for them managing the costs and the benefits of the usage they've got. If we look at it from a sort of an SI perspective. Where I'm implementing a new application or a new service capability. Because it's on the cloud, the opportunity for configuration, or in particular, customization. And heading down the rabbit hole of over customizing applications is minimized because you are actually constrained. And what that means is you get the bulk of the capability much faster, much more efficiently, which means time to benefit is actually improved. So we've actually seen that come through as well. And then as you cater for the variability of the business, as it moves through ups and downs, that tends to swing a lot more flexibly. You don't have to go through the change request. I don't necessarily need to go through my IT chain cycle, which might take three months to schedule, six months to get into the mix, and then so on. Because it's now in that environment where the changes can be applied much more efficiently, much more effectively. You actually end up with a much more responsive capability. Whether that be at the application layer, or whether it actually be the processes that might sit on top of that and therefore, the time to benefit can be a lot faster. So there's a couple of different benefit points as you sort of flow through the chain. And as you take advantage of the flexibility and the responsiveness of that environment. So recommendations for legacy organizations - those that are yet to adopt - things that they could have a look at. I think the under investment in IT infrastructure is a great opportunity to look at how cloud can bring that IT infrastructure up to a much more flexible, much more capability level. It gives them the opportunity, the legacy organizations, the opportunity to explore with vendors. And those vendors could be infrastructure cloud vendors. It could be application cloud vendors, particularly in non-business critical areas. The opportunity to test out cloud technology, test out those commercial arrangements, test out how they manage a cloud provider. And take advantage of the inherent flexibility and capability in the cloud infrastructure.
