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High-Tech Companies Face Challenges Keeping Pace With New Cloud-Based Business Models

High-tech companies are struggling to transform their traditional business models of shipping hardware products or packaged software to more complex business models of providing new services based on cloud computing, new Accenture (NYSE: ACN) research has found.

“Executing these recommendations requires a dramatic departure from how most high-tech companies run today”

The research, summarized in a new report released today, Where the Cloud Meets Reality: Scaling to Succeed in New Business Models, included interviews with more than 40 senior executives from 30 companies that operate, or are building, Software-as-a-Service, Platform-as-a-Service or Infrastructure-as-a-Service

cloud-based businesses. The goal was to develop deeper insights to help companies create approaches to successfully scale and operationalize these new cloud-based business models.

The research further revealed that many senior leaders lack a clear understanding of how the complexity of these new business models impacts operations in nearly every function of their companies. This disconnect will become increasingly important because most leading technology firms expect to generate revenue growth through five or more business models by 2015, several of which are likely to be based on cloud, the research concluded. These companies typically have two-to-three business models today.

“Growing cloud-based business models is highly strategic and an immense undertaking for high-tech companies,” said Mitch Cline, global managing director with Accenture’s Electronics & High-Tech group. “Companies face enormous operational challenges in determining how to support these new models and deliver the world-class experience demanded by enterprise customers, in particular. Companies aren’t prepared today strategically or operationally to cope with the magnitude of disruption they’re facing.”

Accenture recommends that companies take these steps to help overcome the challenges:

• Determine how many business models they have today and which new ones are needed to capitalize on market opportunities;
• Identify and build distinctive capabilities needed to deliver business in the cloud;
• Develop a segmented operating model to deliver distinctive service capabilities with the right customer experience and economics; and
• Implement a governance model for making key resource allocation and other critical decisions.

“Executing these recommendations requires a dramatic departure from how most high-tech companies run today,” Cline added. “Delivering to customers using a service business model is so fundamentally different than using a product business model that nearly all business operations need to be re-thought. As a result, high-tech companies need a coherent blueprint to make a successful shift to a services-centric business and to compete more nimbly with new cloud competitors. Chief operating officers in particular need to take more responsibility for forward-looking strategic planning and to develop sharply different capabilities and skills.”

Methodology

Accenture conducted in-person and phone interviews with 30 companies from May 2011 through November 2011. The interviews focused on business unit executives as well as operations and IT executives, primarily in the high-tech industry. The research also included interviews with executives in communications and other technology-enabled companies. The interviews explored the challenges facing companies as they confront a future of providing Anything-As-a-Service (XaaS).

For a copy of Accenture’s new report, Where the Cloud Meets Reality: Scaling to Succeed in New Business Models, go to www.accenture.com/new-business-models.