Cost reductions not the biggest driver for cloud adoption: IBM

Cost reductions not the biggest driver for cloud adoption: IBM

Summary: Despite many touting that moving to the cloud eliminates all the maintenance and support cost of owning your own servers, that's not why industry leaders are doing it, according to IBM.


The main benefit of the cloud is not the typical financial outcome such as cost reduction, according to IBM director of Cloud Business Justin Gatlin, but more a driver for business growth and innovation.

At a media and analyst briefing prior to the company's InterConnect 2013 event in Singapore on Wednesday, Gatlin said the company's talks with businesses that are looking to move to the cloud found that they aren't focused on the traditional reasons for making the move.

"It's not about cost reduction. That's not how the conversations go," he said.

"It's about empowerment. How we empower business users, align the business, how we empower the IT users, and how we empower the customers."

He additionally said it is more about increasing the speed at which businesses can deploy to market and reduce their development cycles.

One such example has been the TienPhong Bank in Vietnam, which adopted SmartCloud in 2011 for services such as core banking, e-banking, and mobile applications.

According to Gatlin, while using the cloud allowed them to reduce operational costs, the real benefits are seen elsewhere. These benefits included a 50 percent increase in the number of customers in less than one year, improving its self-service features, and enabling the bank to provide real-time customer information across the entire organisation.

"When their customers walk into a banking centre, the people at the banking centre know of that customer's presence and information about them is pulled up and is at their screen when that customer approaches."

Technology a bigger concern

More broadly, the use of technology within business has continued to be a top priority to the C-suite. While this includes the cloud, IBM Global Business Services strategy and transformation leader Steven Davidson said that technology really includes broad changes like those in media and entertainment.

From the company's C-Suite Study, Davidson said that technology has been highlighted by CEOs as the top factor outside of its industry that would influence its business' future.

In 2004, technology was only sixth on the list of the CEOs' top concerns.

"We've asked this same question every year," he said. "And for the CEO, what we've seen is a steady increase in the importance of technology."

Although CEOs see technology as significant, it is ranked second by the CIO and chief marketing officer.

Other findings from the study found that the CXOs are looking more towards customers in order to drive business decisions.

IBM Global Business Services partner and vice-president Peter Korsten, who dove deeper into the findings of the study, said that generally, it doesn't matter if this is a business-to-business relationship or business-to-consumer relationship.

Businesses are a bit slow in getting on board, however. Korsten said that only about a third of marketing managers are tapping into social media and customer reviews in order to listen to their customers.

Michael Lee attended IBM InterConnect 2013 as a guest of IBM.

Topics: Cloud, CXO, IBM

Michael Lee

About Michael Lee

A Sydney, Australia-based journalist, Michael Lee covers a gamut of news in the technology space including information security, state Government initiatives, and local startups.

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  • It's funny when a company opens a Facebook page,

    within seconds they get SLAMMED by complaints of irate customers, ALL VALID!!!

    So, exactly why did those companies have a customer research branch before? Obviously they failed to figure out the problems...
    Tony Burzio
  • Cost reduction is not driving Cloud

    Of course cost reduction is not driving the Cloud. Its a must have factor which is so much taken as granted that no one talks about it. Its like going to buy a car, no one says I need a car with wheels. That is because the inherent assumption is the car will have wheels. Therefore, for any IT initiative the inherent assumption is it will reduce IT spend. IBM is trying hard to fend off Amazon which plays on cost competitiveness and solution design, but not winning (especially the recent snub from the judge in the US which has upheld CIA's decision to give the contract to AWS over IBM).