Six Questions for Consumer Goods Executives to Ask About Cloud Computing doc

Six Questions for Consumer Goods Executives to Ask About Cloud Computing For Consumer Goods and Services executives wanting to evaluate what cloud computing can do for their businesses,

Six Questions for Consumer Goods

Executives to Ask About Cloud Computing

For Consumer Goods and Services executives wanting to evaluate what cloud computing can do for their businesses, asking the right questions is a good place to start.

No leader in business today can afford to

ignore cloud computing1 As a platform

upon which innovation, flexibility and

speed-to-market can flourish, cloud

com-puting is shaping up to be a key enabler

of high performance, which Accenture

defines as a company’s ability to

consis-tently out-perform peers across industry

and economic cycles and generations of

leadership

Many global organizations—including

Starbucks, Citigroup, a major

pharmaceuti-cals group, and major retailers (both online

and off-line)—are already using “the cloud”

to analyze data, provide applications to

employees and run special projects2 Media

giants are reported to be working on a

cloud-like service that will enable content

to be delivered dynamically in multiple

formats and on a variety of devices3 And

more cloud services will soon be available,

as established IT and telecom providers

including Accenture, Microsoft, Fujitsu,

KDDI, China Mobile and SingTel join cloud

pioneers like Google, Amazon and

sales-force.com.4

Given the momentum behind cloud computing across so many industries, it is not surprising that consumer goods and services executives are beginning to evalu-ate its potential for their organizations

As they look to capitalize on the benefits associated with the cloud, we encourage them to ask six key questions:

• What is cloud computing, and how does

it work?

• What benefits can it bring to my company?

• How can it help me address the specific challenges my company faces?

• Can I depend on clouds to save my organization money?

• How will clouds affect the way my company operates in the future?

• What about assurance of security and data privacy?

Looking for the answers to such questions

is prudent However, executives should rec-ognize that while cloud computing promises

to deliver a wide and powerful range of distinctive capabilities, the technology’s dis-ruptive and pervasive impact makes it hard

to evaluate its longer-term costs and risks Likewise, its potential uses are exceptionally broad and difficult to foretell

What is clear is that cloud will affect how computing strategies are developed and managed, how information is controlled, and how new technology cost models are applied It is also clear that the cloud

is poised to drive significant operational change and lasting business value For that reason, we encourage business and

IT executives to collaborate in making the cloud-related decisions that will best move their organization forward

Accenture defines cloud computing as the

dynamic provisioning of IT capabilities—

whether hardware, software or services—

from third parties over a network.

Page 2

Consumer Goods and

Services: Poised to enter

the cloud, poised to

achieve high performance

Hard-to-replicate capabilities are a hall-mark of high performance The Accenture

High Performance Business research has

shown that two other characteristics are

equally important to long-term success

and competitive advantage One is a

clear market focus and position High-performance consumer goods companies

know where and how to compete They

apply rigorous portfolio management

practices to consistently win in

high-value/high-potential markets The other

is what Accenture calls “performance

anatomy,” or the culture of continuous

renewal that enables top companies to

outperform their competitors again and

again Among high-performance

compa-nies, performance anatomy is based on

flexibility, seamless execution and simple

operating models that embrace

scalabil-ity, collaboration and integration

Together, market focus and position,

distinctive capabilities and performance

anatomy make up the building blocks of

high performance Cloud computing is one

of those rare phenomena that can make

each of these building blocks stronger:

Market focus and position

With the cloud’s unlimited data capacity,

consumer goods companies can analyze

market and consumer behaviors to a

granular level The detailed insights that

accompany those analyses, plus the low

upfront costs for virtually unlimited

com-puting power, enable companies to

iden-tify, penetrate and mobilize in lucrative

markets more quickly than ever before

Distinctive capabilities

With the cloud’s ability to host and provi-sion any number of applications and

pro-ductivity tools, companies can significantly

improve their operational performance and

create a global platform for collaboration

Performance anatomy

With the cloud’s elasticity, computing

power is scaled up and down as needed

This contributes to the flexibility for

which high-performance consumer goods

companies are known

There is no reason consumer goods companies can’t take advantage of what the cloud has to offer The industry has proven it can successfully adopt innova-tive technology solutions To date, these innovations have included mobile applica-tions, advanced analytics and digital receipts In our view, cloud computing represents the next step in this progres-sion The adoption of cloud computing will

be supported and accelerated by the per-vasive global use of the Internet, higher broadband penetration and steadily rising bandwidth connectivity speeds Together, these trends are helping to ensure that the Internet can serve as an enterprise-grade platform

Consumer goods and services companies are already moving towards cloud-type solutions—especially in the areas of infrastructure and applications Some, for example, have established virtual private network structures In doing so, they’ve taken a necessary step toward adopting

an infrastructure cloud solution Based on our experience, companies that have not virtualized their infrastructures or man-aged outsourced hosting providers face steep challenges when it comes to inte-grating an infrastructure cloud service

Other consumer goods companies have entered the cloud cautiously and with minimal risk by procuring raw computing power for computation-intensive jobs like data cleansing, for moving commodity applications like e-mail and desktop productivity tools into the cloud, or for experimenting with “private” clouds

These companies typically have central-ized IT structures, as well as CIOs who recognize the value of procuring non-core infrastructure components and services via the cloud

Still other companies have opted to engage with well-established software-as-a-service (SaaS) providers In many cases, business units (rather than a centralized IT department) contract with cloud providers on a one-off basis to manage transaction processes such as procure-to-pay or payroll Customer rela-tionship management and supply chain management are also initial preferred tar-gets But this is just the start Examples of other processes being targeted for current and future SaaS implementations include

collaboration, multi-channel order man-agement and human resources And when retailers’ point-of-sale data and other consumer information are accessible via the cloud, dramatic improvements in mer-chandising and sales execution processes,

as well as analytics usage, will occur Regardless of their point of entry into the cloud, consumer goods companies will surely shift from a “buy-and-own” to

“pay-as-you-go” model of IT provisioning This has broad implications for a host

of business activities It also presents

a conundrum As business units rapidly procure lower-cost cloud services on their own, they may do so at the expense of a cohesive IT strategy and approach

“Forrester expects that firms that choose to compete on price leadership will continue

to seek success through standardization of everything

in the IT stack But for firms that pursue product and service innovation or customer intimacy, CIOs will develop skills in orchestrating services in cloud and

on-premise to support colleagues in pushing the boundary of process-based differentiation.”

“Distributed Enterprise 2.0”

Forrester Research, Inc

July 2009

Recent industry-specific IDC research on cloud computing revealed that “reducing overall IT costs” (60.2 percent) was the top reason to adopt cloud computing, by far Ironically, cost was also the top reason (cited by 31.1 percent of respondents) why other consumer goods companies are choosing not to make the move to the cloud As the figure below depicts, the lack of technical expertise (30.9 percent), con-cerns about data security (27 percent) and the inability to have highly customized applications (22.3 per-cent) rounded out the top four reasons for slow cloud take-up

Figure 1 Reasons for adopting—or not adopting—cloud computing

Why Organizations Adopt

4.5%

6.8%

0.4%

12.8%

5.6%

52.2%

17.8%

0.0%

3.8%

11.6%

2.5%

1.3%

20.6%

2.5%

7.1%

5.7%

15.4%

8.2%

39.3%

21.0%

60.2%

Service provider offers better,

cheaper and more reliable

applications

All respondents

Source: Current outsourcing percentages from The State of Logistics Outsourcing:

14 th Annual 2009 Third Party Logistics Study Projected 2012 outsourcing

percentages based on IDC Manufacturing Insights research estimates.

Reduced overall IT costs

Decreased application

down-time

Improves the ability to support

multiple offices and remote

employees

Responsibility of software

upgrades falls on the vendor

Lower cost of implementation

Based on open source

Consumer products Retail

Reasons that Slow Adoption

12.2%

45.7% 23.2%

21.7%

23.4%

27.5%

17.5%

21.4%

30.9%

31.1% 27.0%

15.3%

12.9%

17.8%

22.3%

17.2%

21.5%

40.7% 24.4%

15.8%

12.8%

19.8%

16.7%

30.0%

Lack of industry-specific applications products Inability to have highly custom-ized apps

Concerns with service reliability

Lack of vendor flexibility, vendor lock-in

Complexity of integration with back-end systems

Data and information security concerns

Cost-prohibitive

Source: Verticals Insights Survey, IDC, April 2009

Lack of technical expertise/

skilled personnel in house to develop the Web applications All respondents Consumer products Retail

Page 4

What is cloud computing, and how does it work?

Accenture defines cloud computing as the dynamic provisioning of IT capabilities—

whether hardware, software or services—

from third parties over a network The primary characteristics of cloud services include:

• Little or no capital investment

• Variable pricing based on consumption

• Rapid acquisition and deployment

• Infinite scalability

• Lower ongoing operating costs

Computing clouds are, in essence, online, supersized data centers containing hundreds of thousands of servers hosting Web applications Cloud services—from raw infrastructure to complete business processes—can be purchased through Web interfaces and turned on and off as needed (See Figure 2)

For business people, cloud computing can seem too good to be true: massive amounts

of computing power with no expensive IT infrastructure Cloud computing lets orga-nizations bypass the expense and lead time

of buying, installing, operating, maintaining and upgrading the networks and computers found in data centers Instead of licensing software, users tap into a service when it’s needed for as long as it’s needed All that is required is a broadband Internet connection and a mobile device or personal computer with a browser to access and activate the cloud service As with most utilities, organizations pay by the kind and amount

of services used, plus any additional fees Once the cloud-based service has been initiated, the data processing is done

on the back end in remote data centers Clouds are designed so that processing power can be added simply by attaching more servers Everything is virtualized

so software can be run on any available server with excess capacity And because everything is hosted in the cloud, users can run processes, build applications and more without loading each and every tool onto their computers

Six key questions

As with most technologies, the significance of cloud computing differs widely from industry

to industry Accenture has identified six key questions we encourage consumer goods and services decision makers to ask about this still-new phenomenon By focusing on these questions, executives can start to identify opportunities and risks that will impact their own companies

Figure 2 The Cloud Stack

Process Cloud

End-to-end process enabled and provided through the Cloud

Applications Cloud

Applications designed to be run

on Clouds—elastic, distributed and modular

Platform Cloud

The ‘operating system’ of the Cloud makes processing, storage and net-working available as a utility

Infrastructure Cloud

Computers (servers), data centers, networks

The basic technologies are well established

and can be duplicated by any organization

This makes it possible for consumer goods

companies to potentially build “private

clouds”—restricted infrastructures that

use cloud computing technologies but are

only shared by approved organizations The

advantage of this approach is that private

cloud users have more control over their

data The disadvantage is that they need

to not only make various cloud services

available on their own internal

infrastruc-tures, but also shoulder the significant

infrastructure setup and maintenance costs

Private clouds can be used within single

companies or possibly be shared with

busi-ness partners Clouds the size of those run

by Microsoft, Amazon and Google require

warehouse-scale computers so they can

support many millions of users around the

world without becoming sluggish.5

The specific challenges that con-sumer goods companies face around using retailer, consumer and point-of-sale data

to drive product innovations, supply chain efficiencies and sales make establishing

a common, secure infrastructure for pro-cessing this information a critical require-ment In addition, unique cloud services and applications specific to consumer goods are beginning to emerge These are

”rented” on a capacity or per-usage basis and range from merchandise financial planning applications to customer analytic business process outsourcing services

This description barely touches the underlying complexities But for business leaders, it gets at the crucial point: with cloud computing, the provision of IT power typically becomes someone else’s problem

Cloud computing opens the door to new and distinctive capabilities that can enable high performance And it makes available new business processes and application solutions that are industry-specific and at

a price point that is remarkably lower than traditional solutions implemented only one

or two years ago

Page 6

What benefits can cloud

bring to my company?

As illustrated in Figure 3, cloud computing

presents a number of potential uses for

the consumer goods industry

Forward-looking companies are already thinking

about how cloud technologies and the

uses outlined below might change the face

of their operations (see question 5)

Of course, each use of cloud computing

will generate a unique set of benefits for

the organization There are, however,

gen-eral benefits that all cloud services deliver

Among consumer goods companies, these

benefits fall into four categories: cost,

flexibility, innovation and speed

Cost

Low prices on cloud services are a big part

of their allure Lower IT capital outlays and improved asset utilization combine

to create an irresistible value proposition

Add the savings from eliminating the cost

of servers, software licenses, maintenance fees, data center space, electricity and IT labor—along with the benefits of replacing

a large up-front capital expense with a low, pay-for-use operating expense—and the financial appeal of cloud computing

is obvious While cost is an important driver for all consumer goods companies,

it is perhaps most relevant for smaller companies that historically could not afford sophisticated IT solutions For them, the cost advantage of the cloud can level the playing field

Flexibility

Clouds enable consumer goods companies

to create highly elastic IT environments They can be summoned quickly when needed and, as demand grows, scale up easily Conversely, when demand eases, they can just as quickly scale down and,

if necessary, exit the market entirely with minimum loss of time and capital That flexibility makes clouds well suited for sporadic, seasonal or temporary work, for processing vast amounts of data, and for software development and testing projects Clouds can also supplement conventional systems when demand for computing exceeds supply, ensuring that companies are able to make the most of their on-premise ERP solutions

“Cloud computing enables a

higher level of innovation and

discoveries by dismantling

data silos and providing

greater capabilities in data

mining and data analytics.”

— Participant, Cloud Computing

Session, World Economic Forum

Annual Meeting 2010

Accenture has identified many different possible uses for cloud computing

Value to the Enterprise

Legacy

• Specific existing

infrastructure

• Complex legacy

systems

Sensitive Applications

• Mission critical applications

• Regulation-protected data (HIPAA, SOX, PCI )

Desktop Productivity

• Web 2.0 applications

• Workgroup applications

• Office suites

• Email and calendaring

Business Continuity

(Storage)

• Extensive storage

• Backup and recovery

New Business

• Provide IT support for new ventures

Peak Load Demands

• New business activities

• Applications with peak-loads

• Seasonal websites

• Applications with scalability needs

Geographic Expansion

• Replicate standard processes

in new locations and branches

Software Development and Testing

• Software development and testing environment

• Performance Testing

• Non production projects

• R&D activities

• Reduced time to market

Batch and Data Intensive Applications

• One-off applications that don't rely on real-time responses

• Data and high performance intensive applications (financial riks, modeling, simulation, data compression, graphics rendering )

• New back-office applications

Easy

Hard

High Value

Figure 3 Initial opportunities for using clouds

Innovation

Leaders of consumer goods companies

increasingly recognize that the

tradi-tional closed innovation model is no longer

adequate to keep up with the rapid pace of

today’s market By using cloud-based solu-tions, they are able to open up innovation

to more employees, customers, partners

and even consumers around the globe This

means they can harvest better ideas faster

And with those ideas, they can unleash the

potential to launch new products and

busi-nesses in new markets quickly

Speed

In general, cloud computing acts as an accelerator for businesses, enabling them

to innovate and compete more effectively and tap new revenue streams more quickly

With low-cost development tools and theoretically unlimited IT resources on tap, consumer goods companies can introduce new IT capabilities across their organiza-tions, improve their responsiveness to changing business demands and quickly enter new markets or launch new products

or services in existing markets Importantly, the cloud’s ability to accelerate IT develop-ment is not just a benefit for mature organizations in developed markets By providing more immediate and affordable access to next-generation applications, tools and infrastructure, companies in emerging economies may leapfrog to higher levels of technological development

The ongoing Accenture High Performance Business research program has revealed that cost containment, flexibility, new product innovation and speed to market are distinctive capabilities shared by nearly all leading consumer goods companies That cloud computing can strengthen each

of these capabilities is a testament to its importance as a tool to position consumer goods companies for long-term success and sustainable competitive advantage

Page 8

Achieving high performance with IT

service management

IT organizations are realizing that the emergence

of cloud services represents a significant departure

from existing IT practice, and carries far-reaching

implications for IT providers and users alike

Specifically, the cloud makes a centralized IT

ser-vice management function exceedingly important

While we believe the IT departments of consumer

goods companies will continue to supply the

majority of IT services—especially those enabling

core business functions—we also know more

busi-ness units will turn directly to SaaS and other

cloud-based solutions to meet their infrastructure

and application needs As a result, the IT group’s

role will likely transform from being the builder

and provider of IT to being the manager of

inte-grated IT services, regardless of whether those

ser-vices come from on-premise systems, third-party providers, or private or public clouds In other words, the responsibility for coordinating all these services and ensuring that they effectively align to business objectives falls to the IT group

Our research suggests that this move toward service management will ultimately make the IT organization an even more valuable resource to the enterprise High-performance businesses know exactly what they have in terms of IT, where it’s running in the business and how to adequately protect their businesses from the risks inherent with cloud computing What’s more, they are con-tinually ensuring that these applications continue

to add value Cloud computing is now jump-start-ing such an IT transition for many consumer goods companies and, in the process, creating an IT port-folio management capability that can enable high performance

3

How can cloud comput-ing help address the

specific challenges my

company faces?

The consumer goods industry has faced

tremendous change in recent years Some

of this change—which is reflected in

evolving buying values, brand preferences

and purchasing habits across multiple

sales channels—is due to the emergence of

a new breed of consumer They are better

informed, more demanding and highly

connected They want satisfying customer

experiences at every turn And they expect

to be treated as a “market of one.” Some

of the change is also due to globalization

and the emergence of a multi-polar world

with multiple centers of economic power

As companies look to expand their

opera-tions, they recognize the need for scalable

and flexible capabilities that will keep their cost of entry low And then there is the unrelenting push for continued cost reduction With increasing price pressures and commodity costs, margins have become razor thin The pay-as-you-go model of cloud computing provides an attractive option for the many companies wanting to delay, reduce or eliminate their capital spending

As companies adjust to the new business environment to survive and thrive in what has become a truly channel, multi-polar world, they are challenged to create the distinctive capabilities that will enable high performance The Accenture High Performance Business research program has revealed that these capabilities include:

• Brand and category leadership

• Customer and consumer intimacy

• Insight-driven marketing

• Channel management excellence

• Organizational flexibility

• New product innovation

• Point-of-sales availability

• Simple operating models that lever-age scalability, collaboration and integration

Cloud computing has the attributes to help companies in the consumer goods industry strengthen these capabilities in many ways

For example, the cloud can help consumer goods companies know more than they ever thought possible about their customers and consumers The basis for strengthening both retailer and consumer relationships lies in gathering, analyzing and using vast amounts

of consumer, point-of-sale, promotional and supply chain data—activities for which the cloud, with its infinite data capacity, is ide-ally suited The insights from such analyses can be used for a variety of purposes, from creating meaningful and targeted customer experiences to driving improvements across the product development and sales cycles Digital sources of data are also available, enabling companies to track things like navigation patterns and purchases on websites and via mobile devices