Instrumented Interconnecteds Intelligent

The dust is settling in the cloud-o-sphere, yet this is by no means a mature industry. For one thing, the way corporations are using clouds is rapidly evolving. Based in part on the results of a survey of global business and IT leaders, some of my colleagues in IBM’s consulting ranks have come up with an analysis of the state of play that clarifies what’s going on.

They see three phases in the evolution of cloud computing for the enterprise: 1) Taking cost out of the data center via increased utilization of computing resources, 2) Using cloud services to improve business processes and operational effectiveness and 3) Innovating–using the cloud to enable new business models and to try them out quickly and inexpensively.

That third phase is just now taking hold, says David Hughes of IBM’s Global Business Services. “Business executives see that the next wave of cloud is about innovation. They see how the cloud can change the rate and pace and economics of innovation. They can try out a lot more things and push innovation forward in a variety of ways.”

The survey, conducted jointly by the Economist Intelligence Unit and IBM’s Institute for Business Value, tapped 572 business and IT leaders for their views on cloud use in their companies. Cloud uptake continues at a rapid pace. More than 70% of the respondents said their organizations are piloting, adopting or achieving substantial benefits from cloud computing. Asked what they expect three years hence, that number tops 90%. Even more interesting are the results pointing to innovation as a major goal. Only about 15% said they’re using clouds to create new business opportunities or transform the way they do business today. That number pushes towards 50% in the three-year time horizon.

Here are a few examples of how cloud computing allows companies and governments to radically change the way they do things:

–Netflix used to be primarily in the DVD shipping business, mailing out millions of movies on disks from regional distribution centers. But now video streaming is the core of the business. Netflix has been able to manage this transformation because the cloud model allows it to rapidly scale up streaming capacity to meet peak demand.

–Ford’s SYNC in-vehicle infotainment service can be constantly updated with new features thanks to the cloud.

IBM has been at the forefront of cloud computing for enterprises. Its early cloud services focused on helping companies manage their computing tasks more conveniently and cheaply in the cloud. But, increasingly, the new services include features that help clients create new markets and try out new business models.

Hughes points out that these are early days for cloud innovation by corporations and governments. Many new uses will be discovered as business leaders become more adventurous. In fact, keep a lookout on the A Smarter Planet blog for some upcoming posts that will explore cloud models that have the potential to have massive impacts on whole industries and on cities.

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