The c suite challenges IT new expectations for business value

• Most firms want to use IT to cut their costs 38% or improve business efficiency 42%, but there is also a clear demand for IT to add value in new ways, such as developing new products a

The C-suite

Challenges IT:

New Expectations for Business Value Written by

Executive summary

The advent of cloud computing, the ubiquity of smart mobile devices and the flood of data

available for analysis are creating new ways for businesses to serve their markets and enhance their operations To capitalise on these opportunities, companies are changing the way they use and organise technology, bringing unprecedented change to corporate IT functions, as Economist Intelligence Unit research, sponsored by Dell, demonstrates

Key findings, based on a worldwide survey of 536 C-suite executives in late 2011 and interviews with corporate leaders and industry experts, include the following

• Almost six in ten (57%) of the executives surveyed for this report expect their IT function to change significantly over the next three years; 12% predict a “complete overhaul” As part of this change, 43% say their company will increasingly use IT as a commodity service to be bought

as and when needed To put this in context, consider accounting, human resources or any other business function: could any of these reasonably imagine such radical change in the

next few years?

• Conventional trade-offs between using IT to grow one’s business or to cut its costs need no longer apply Respondents from companies that are focused on using their IT to grow revenue see their companies more effectively cutting costs than those from organisations that prioritise cost cutting New opportunities in IT can offer effectiveness and cost efficiency, not merely one or the other

• One in six CIOs are only “consulted” or have no role at all when IT strategy is formulated This means that they are implementing an IT strategy that they had scant influence developing The marginalisation of the CIO is a choice, exacerbated by disconnects between CIOs and their C-suite peers about the value and priorities of the IT function The situation is aggravated by a lack of confidence in CIOs: fewer than one-half of C-suite executives rate their own CIO positively in terms of understanding the business (46%) and the technical risks (44%) involved in new ways of using IT

• CIO involvement in setting business strategy appears to go hand in hand with superior financial performance Of the 37% of respondents who say their CIO is actively involved, nearly one-half (47%) describe their company’s financial performance as superior to that of their industry peers

Of the 20% who say their CIO has no role in business strategy, only 28% say they are performing better than their peers

• Most firms want to use IT to cut their costs (38%) or improve business efficiency (42%), but there

is also a clear demand for IT to add value in new ways, such as developing new products and services (22%) These endeavours may not be mutually exclusive: many companies are making improvements that not only improve efficiency but also offer new products and

reduce costs

• Cloud computing, a key development facilitating these shifts, is already widely adopted Nearly one-half of companies (47%) are using private cloud services, and even more (54%) are using cloud models to access business applications as a service A substantial minority of companies are even using the cloud for business-critical functions (34%)

• Security (51%) is executives’ primary concern with regard to cloud computing, and many firms are holding back to avoid the potential risks Fully 43% of respondents are concerned about their reliance on a third party for their IT, and 38% are explicitly apprehensive about the reliability of available solutions These downsides are real, but to take advantage of these opportunities, many companies are now managing to treat such hazards as just another of their many enterprise risks: something to be assessed, measured and mitigated

About the survey

In late 2011 the Economist Intelligence Unit conducted a survey of 536 C-suite executives More than one-third (36%) of respondents were CEOs and 20% were CIOs with the balance spread across other C-suite titles This survey was global in scope, with 29% of respondents based in western Europe, 29% in North America, 28% in the Asia-Pacific region and 14% in the rest of the world Nearly one-half (47%) of respondents came from organisations with more than US$500m in global annual revenue

Information technology (IT) never stands still The range of technical and strategic

options available to large organisations has evolved rapidly since the arrival of the first

corporate mainframe systems in the early 1960s But amid that change one factor has

remained relatively constant: big firms have had a central IT function that controls the

technology infrastructure and makes services available to business units and employees.

Although the trend to outsource IT services has eroded the dominance of this structure,

it still persists But for how much longer? A confluence of new technology trends –

notably cloud computing, the inclusion of mobile consumer devices into the business

environment and the ability to process vast data flows – may transform the way

companies use IT.

The impact of these technology trends will not be limited to the IT function They

create opportunities for companies to develop innovative products and services, to

connect with customers in new ways, and to rethink traditional business processes

Some firms have been quicker than others to spot the potential value in these shifts

But regardless of how they position IT in their business model, fewer than one-half of

respondents say their use of IT drives competitive advantage for them This suggests

there is plenty of scope for firms to employ IT in ways that really make a difference to

their business, whether by helping to develop products or services, improve business

processes, cut IT infrastructure costs or some combination thereof.

If companies are to benefit fully from these trends, chief information officers (CIOs) will

need to play a new role or IT will change around them The ability to change depends

on IT addressing the C-suite’s core needs and doing so through a language that clearly

expresses the business value of technology investments The divergence between

CIO and C-suite thinking on the future of IT must be resolved for companies to take

advantage of emerging opportunities.

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There is plenty of scope for firms to employ IT in ways that really make a difference to the business, whether

by helping to develop products

or services, improve business processes, cut IT infrastructure costs or some combination thereof.

• The divergence between CIO and C-suite thinking on the future of IT must be resolved for companies

to take advantage of emerging opportunities.

• More effective communication within the C-suite

is a key aspect of bridging this divide.

Great expectations of IT

A wave of new technologies has the potential to transform the way companies function and how

they generate business value But because every firm is different, each should have its own IT

strategy Some companies have made technological innovation an integral part of their business

model For others, the IT function is more of an enabler, providing the infrastructure resources

that other departments need to create business value Today, new technologies are creating an

opportunity for businesses to rethink these traditional models, to look again at what kind of IT

function they want and to understand the connection between technology and value generation

The ubiquity of mobile consumer devices such as smartphones and tablets is eroding the walls

surrounding the corporate IT environment and making it possible for companies to engage with

staff and customers in new ways Increasing computing power makes it possible for companies

to glean valuable business insights from a flood of data The volume and range of numerical

and textual data susceptible to analysis have grown exponentially The advent of social media

has created new ways in which firms can engage, listen to and learn from consumers And the

availability of “on demand” computing infrastructure via the cloud is making IT resources more

flexible and lowering the cost of computing-intensive business applications

Many of the executives surveyed for this report have spotted the potential for these technologies

to help their companies achieve their business goals One-half say they want to improve

customer service by investing in mobile innovation, for example Three-quarters feel they would

make better decisions if they invested in data analysis tools that distilled meaningful insights from

the mass of information that flows around their business To profit from these opportunities, the

C-suite has to assess such investments in a meaningful manner CIOs will need to communicate

their business value, if they are to take on a wider role

Rethinking IT value

How companies respond to new IT opportunities is influenced by whether their business is

driven by the need to grow revenue or to cut costs Most firms invest in IT because they want to

improve business efficiency; that is the priority for two-thirds of survey respondents The sluggish

global economy will dictate IT plans for many of them: one-third say they need to shore up their

finances, but nearly two-thirds (63%) have a more positive outlook They are targeting increased

revenue and see IT investment as an important way to achieve that goal

Global Blue, a business which helps international shoppers to reclaim sales tax on their purchases,

is using technology innovation to achieve its revenue growth aspirations The company is

developing mobile applications to give consumers location-based information about shopping

opportunities, possible savings and advice on how to reclaim taxes Some of this could be

location-specific: one idea is to use mobile mapping to guide customers straight to the airport

desk where they can submit a sales tax claim before leaving a country

To better seize the business potential of new information technologies, Waleed Hanafi, the CIO

of Global Blue, has restructured the company’s IT function For example, the budgeting process

now pushes IT costs further down into the business, so that the people who pay for an IT service

are – as much as possible – the people who benefit from it This helps to minimise costs, because

business managers are reluctant to pay for services they do not need, according to Mr Hanafi

But it also means that IT investment is more likely to provide new services that business managers

actually want “Anyone in the business can propose an IT investment project now if they can

show how it will benefit what they are doing,” he says

There is a “cultural expectation” within Global Blue that IT staff will play an active role in growing

the business Their role is not limited to facilitating the efforts of others One reason for fostering

this change of attitude is that today there are significantly more opportunities to use IT in ways

that enable business innovation than two years ago, according to Mr Hanafi

Tactics from a CIO:

• Push budgeting further down into the business

so the people who pay for an IT service are those who benefit from

it This can help minimise costs and better align

IT with the business.

• Encourage the “cultural expectation” that IT staff should play an active role

in growing the business

Do not confine this to facilitating the efforts

of other employees

• A combination of cloud computing, mobility and big data

is changing what IT offers business.

• The C-suite is making

a choice about these trends, even if it does not realise it.

Innovation or cost cutting?

The companies most excited by the potential of these technologies to aid business innovation are

those – like Global Blue – that are focused on using IT to drive new revenue opportunities They

are more likely than those focused primarily on minimising costs to want their IT function to help

develop new products and services, for example However, respondents who say their company

is focused on growing revenue not only expect more from IT, they actually say their IT functions

are delivering more effectively across a range of key business objectives

Understandably, companies focused on driving new revenue tend to be more effective than

their peers at using IT to create new products and to find new customers They also outperform

when it comes to improving the reliability of IT infrastructure and aligning IT with the rest of the

business Far more surprising is that respondents from these revenue-focused companies have

a more positive view of their organisations’ ability to reduce costs than those respondents that

primarily prioritise cost cutting

Chart 1: Percentage of respondents who say their organisation is “effective,” or “very effective” in

its use of IT across various business objectives

This suggests that traditional assumptions about the trade-off between cost and innovation in IT

investments have become outdated As the C-suite integrates these technology trends into its

strategies, there are opportunities to drive down costs while increasing innovation, growth and

reliability Chris Kimm, who has global responsibility for the customer-facing network operations

centres of Verizon, a telecommunications company, says it is important to strike the right balance

between cost, experimentation and innovation He wants to discover better ways of using IT that

will make his business more efficient, but he also wants to invest in IT innovations that could one

day revolutionise what his company does “We’re looking to do both things at once, and that’s

sometimes hard,” says Mr Kimm

An IT investment aimed at making the business more efficient can end up being innovative as

well, he says Verizon’s experience in developing its intranet is an example The initial motivation

was to cut internal communication costs, but over time the intranet has evolved into an entirely

new way for staff to collaborate, says Mr Kimm Other technologies can follow the same

trajectory, he believes

Chris Nielsen, the CFO of the online retailer Zappos, says he is willing to incur higher short-term

technology costs if that helps the firm to build knowledge or skills that will pay off later: “We want

to be able to try things out We don’t believe we’re at the point of just functioning on the cost side

of the equation.” Trying something new is a learning process: some companies are deciding that

the chance to develop their talent has a value that can keep paying dividends

Chris Kimm, responsible for Verizon’s networks outside the US, wants

to discover better ways of using IT that will make his business more efficient, but he also wants to invest

in IT innovations that could one day revolutionise what the telecommunications company does “We’re looking to do both things at once, and that’s sometimes hard.”

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60%

50%

40%

30%

20%

10%

0%

Focused on using

IT to cut costs Focused on using

IT to drive revenue

Using IT to reduce costs across the entire organisation

Improving the reliability

of IT infrastructure

Using IT to create new products/

services

Using IT to find/retain customers

Aligning IT with overall business objectives

Traditional assumptions about the trade-off between cost and innovation have become outdated IT investments aimed at making the business more efficient can end

up being innovative

as well

60%

50%

40%

30%

20%

10%

0%

Focused on using

IT to cut costs Focused on using

IT to drive revenue

Using IT to

reduce costs

across the

entire

organisation

Improving the reliability

of IT infrastructure

Using IT to create new products/

services

Using IT to find/retain customers

Aligning IT with overall business objectives

Costs still matter

For other companies, the focus on cost remains paramount Whenever Dan Morgan, the former

CIO at a leading British business which runs hospitals and clinics, spoke to his finance chief

about a new way of using technology, the conversation always began in the same way “His first

question is: ‘Will this cost me anything?’” jokes Mr Morgan “If I can start off by saying we’ll save

money, it’s a lot easier.”

Their business needs an effective, secure and reliable IT infrastructure, Mr Morgan explained

Finding innovative new ways of using technology in the wider business is not the company’s

objective But their focus on lowering costs does not result from a lack of cash Rather, it is a

reflection of the company’s core business strategy, which is to provide the highest levels of

clinical care while keeping their operating costs as low as possible This determines the way they

approach IT investments

Their IT team is working on projects across the mobile, cloud and data spectrum It is replacing

a 25-year-old patient record system, developing ways of making records available on mobile

devices, building a private cloud infrastructure and crunching data to improve the utilisation

rates of its operating theatres It is also opening up its IT systems to mobile access, so that the

thousands of freelance medical specialists who use it can access patient records, lab tests and

appointment schedules whenever they want to While the focus is not IT innovation, the push for

business value drives change

Case study: Balfour Beatty

Leaders in business units alert to the potential uses of new technology

The advent of cloud computing, big data analysis and mobile connectivity is changing the way

the construction and engineering company Balfour Beatty organises its business, says its chief

operating officer, Andrew McNaughton The company is investing in IT solutions that will turn the

related tasks of designing, building and operating large-scale facilities into a connected, iterative

process, Mr McNaughton says

When building a hospital, for example, Balfour Beatty considers it a complex system The

company gathers and analyses as many data as possible about how that system operates

This process has helped Balfour Beatty find more efficient ways of running contracts and gaining

knowledge that will enable it to design better buildings in the future

Cloud and mobile technologies play an important part in the process, aiding the capture and

dissemination of data and the insights the business derives from them “The volume of data we

can gather about the performance of an asset is growing rapidly,” says Mr McNaughton “We are

working out ways to turn that into knowledge, to manipulate it, to make it interesting.”

This complex systems approach applies to other projects, such as mass transit networks, Mr

McNaughton says The company is exploring ways of using data about mobile phone-call

volumes to predict changes in traffic flows A spike in calls, for example, might be an indicator

of a traffic snarl-up The company can use that knowledge to change traffic-light sequencing to

reduce congestion

Balfour Beatty has developed its own Building Information Management system to capture and

crunch performance data Notably, the application was created inside an operational business

unit, not in the central IT function “The people in the IT department are focused on delivering

infrastructure, not generating business solutions,” says Mr McNaughton “They are not there to

lead innovation.”

This is an important organisational change for Balfour Beatty, which has been pushing IT expertise

out into the business Operating units now employ people in leadership roles who are “smart

folks, thinkers and deliverers”, according to Mr McNaughton “What’s different now is that we

have leaders in the business units who are more alert to the potential uses of new technology

And these technologies are absolutely changing the way we operate It’s all about our ability to

capture and use knowledge The change that we’ve seen is the work we do at both ends of the

spectrum We can close the loop between operations and maintenance back into design.”

Will this cost me anything?

For IT investments, this question is not going away, but the answers may be changing as companies learn to deliver greater business value.

“These technologies are absolutely changing the way we operate It’s all about our ability to capture and use knowledge The change that we’ve seen is the work

we do at both ends

of the spectrum We can close the loop between operations and maintenance back into design.”

– Andrew McNaughton

Chief Operating Officer

Balfour Beatty

Overcoming C-suite disconnects

Transformations in IT also open up the possibility of a more strategic role for CIOs Adopting

this role, they will be able to concentrate more on what makes a real difference to the business,

and less on keeping basic services up and running One example is Chris Cook, the former CIO

of a company that provides diagnostic images for doctors He was examining how sourcing

commodity IT infrastructure could help him to focus more effort on innovations that would help

the business to grow For example, the high-resolution patient scans that the company generates

have traditionally been captured on photographic film This is expensive and limits how the scans

can be stored and shared

The company is moving to digital image capture, which raises new technology challenges Some

of these are specific to digital imaging, such as controlling the precise calibration of the screens

used to view images; others are generic IT issues such as how to store data securely Mr Cook

looked at ways of sourcing the latter on demand, so that he could focus on making sure the

business excels at the former “We want to be the best in the business at medical imaging, so we

need to be the best in medical imaging IT.” Any other IT capability is secondary, he explained

For some CIOs it may be difficult to refocus their efforts on the projects for which their input

really makes a difference, even if they agree it is necessary to do so The survey shows that both

CIOs and C-suite executives at many organisations believe their IT function needs to change

significantly But they do not always agree about what the new priorities should be For 40% of

the C-suite, streamlining the business process is the big issue; only 28% of CIOs agree One-third

of CIOs, meanwhile, want IT to make product and service development a priority, but only 20% of

the C-suite feel this is important

In a period of such significant transition, organisations must work harder at keeping their senior

technology staff connected to business leadership One way of achieving this is to build formal

management structures that bring IT leaders and senior business executives together Since 1999

the logistics services company FedEx has had a board-level IT Oversight Committee, comprising

heavy hitters from the technology world Its role is to appraise major IT projects and technology

architecture decisions and ensure that the company’s IT investments support FedEx’s business

objectives and strategies FedEx CIO Rob Carter reports to this group at every board meeting “We

use a lot of horsepower to provide a broad understanding of technology trends and innovation

opportunities in the marketplace because of the integral role that IT plays in our overall operations

and in value creation for our business,” he says

Few companies can boast such a formal connection between IT and board-level executives But

most respondents (81%) say their company has found a way to give the CIO a central role in the

formulation of IT strategy Just over one-half (51%) say the CIO leads the process

Yet some firms are marginalising their CIOs A significant minority (16%) say the CIO is only

“consulted” when IT strategy is formulated or that the CIO has no involvement in the process

That means one in six CIOs are implementing IT strategies that they did not determine Even

where CIOs are involved, their focus is often on “back-office” efficiency rather than revenue

generation Two-thirds (63%) of survey respondents say the CIO plays a key or leading role in

developing efficient business processes, with a similar percentage (67%) focused on providing

reliable business information But at present only about one-third (37%) have a key or leading role

in finding new ways of engaging with potential customers or in product and service development

This points to substantive disconnects between the CIO and the C-suite Ideally, business

executives should be able to rely on their CIO for a briefing on the technical and business risks

involved in new ways of using IT But fewer than one-half of C-suite respondents say their CIO

has a good understanding of these risks; up to one-quarter say it is poor There are also gaps

between the CIOs and their C-suite colleagues about how and where IT investment could best

add value Moreover, CIOs and C-suite executives have very different views about whether their

IT function is aligned with business needs Two-thirds of CIOs feel their function is well aligned;

fewer than one-half of the C-suite executives feel the same way This is a challenge to the CIO: if

you do not recognise an alignment problem frustrating the majority of the C-suite, how can you

begin to address it?

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Can the C-suite empower the CIO? There are risks and opportunities

• To merit this, the CIO needs to communicate and deliver business value

• One tactic is to bring

IT leaders and senior business executives together: at the board level.

“We want to be the best in the business

at medical imaging,

so we need to be the best in medical imaging IT.”

– Chris Cook

former CIO

Given the intense IT changes and economic challenges, it may not be surprising if some

executives are unsure about the way forward, and what kind of IT function they will need But

resolving these uncertainties has positive results: organisations that fully involve their CIO in the

process of determining strategy perform better than those that push the CIO to the sidelines

Nearly one-half (47%) of respondents who say their CIO plays a leading or key role in business

strategy formulation (37% of the total) also highlight that their business significantly outperforms

its competitors Among the one-fifth who say their CIO has no role in business strategy, only 28%

are performing better than their peers

Chart 2: Financial performance sorted by CIO role in business strategy formulation

From infrastructure provision to value creation

There is scope for the CIO to become a strategic player, but also uncertainty about what the

priorities should be Some CIOs have been sidelined and others empowered If IT staff must

better address business needs and more firms (43%) are going to buy IT as a commodity on

demand, CIOs should change their focus Mr Kimm of Verizon suggests this could be a liberating

experience for many IT leaders They will be able to concentrate more on what makes a real

difference to the business, and less on keeping basic services up and running

Another approach to better align IT and derive the benefits of these technologies is to bring IT

directly into lines of business Marketing communications agency DDB, part of the Omnicom

Group, illustrates this transition Its IT function used to focus simply on “keeping the lights on”,

says Nick Fox, its Chief Client Officer The head of IT reported to the chief financial officer

This reflected the unit’s main priority: to provide the IT services the business needed, at the

lowest cost

The proliferation of new ways in which its clients can pump out advertising and marketing

messages has changed the way DDB operates The process of making a print, radio or TV

advertisement used to revolve around two key people: the art director and the copywriter But

now that DDB creates work for such a wide range of digital outlets, such as Facebook pages,

Twitter updates and YouTube clips, technological know-how has become an essential element of

the creative process

“Digital work involves people who specialise in user experience, building sites – it’s just a much

bigger team,” says Mr Fox “You’ve got to have ‘the creatives’ working cheek by jowl with the

people who, operationally, deal with the technology The creativity comes from the collision

between what can be done, what has been done and the idea So unless you’ve got the IT

people and digital technologists around you, it won’t happen.” At the start of this year, to reflect

the changed significance of the IT staff, the senior technology executive began reporting not to

the CFO but to the chief operational officer “IT has become an integral part of what we do,”

says Mr Fox

“The creativity comes from the collision between what can be done, what has been done and the idea So unless you’ve got the

IT people around you,

it won’t happen.”

– Nick Fox

Chief Client Officer

DDB

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

The leading role or a

Financially ahead of their competitors Survey respondents

Devolve IT directly into the lines of the business? This strategic decision carries consequences:

• In a range of companies this is driving new business value, offering room for experimentation and controlling costs more effectively.

• There can be issues

of coherence that need to be considered before decentralising IT The C-suite should weigh the risks and benefits carefully

DDB’s move reflects a wider trend Over the next three years the pace of transformation

in corporate IT functions is set to accelerate Over one-half of respondents (57%) predict a

“significant overhaul” of their company’s IT function, with one in eight expecting a “complete

transformation” Moving IT staff closer to the business can help to better align technology with

business objectives; this is a goal for one-quarter of survey respondents

DHL, the parcels and logistics company which operates in 220 countries, has also organised its IT

staff to get tech-savvy people closer to operational business managers and benefit from scale by

consolidating all infrastructure internally Since the arrival of a new CEO three years ago, DHL has

been investing in IT to simplify its business processes The aim is to make it easier for customers

to work with the global logistics company, says Alex Pilar, IT leader in its supply chain business

DHL used to have an IT function for each of its operating divisions These have now been broken

up Infrastructure responsibilities, and the staff who specialised in that area, were moved to a

central IT services function Teams responsible for the development of business applications

remained with one of its four operating business units, but were told to work more closely with

management Their job is to find new ways of using IT that will help DHL’s customers

DHL runs its own delivery chains, but it also outsources its skills to large clients, offering full

supply-chain management services Facilitating these “customer-facing” business projects is an

important part of Mr Pilar’s work Using IT investment to streamline DHL’s own business processes

enables it to offer better services to clients, he says For example, DHL uses sensors and package

tags to capture vast amounts of information about the items moving around its logistics network

Analysis of these data can aid efficiency improvements But when applied to a client’s supply

chain, it could become a significant source of business improvement, says Mr Pilar

Companies selling electronics, for example, waste a lot of money on recovering faulty goods

from customers, according to Mr Pilar Some of these products will need to go back to the

supplier for replacement or repair, but often they could be fixed quickly at a repair centre nearer

the customer In other cases, there is nothing wrong with the product; the problem results from

user error and could be solved through better product documentation Capturing and analysing

data about product returns and integrating them with logistics data would enable a company to

ship returned products far more efficiently, says Mr Pilar

“This information is highly valuable for clients,” affirms Mr Pilar “But it’s been very expensive to

crunch it in the past, there is a risk of working with bad data, and the people with the skills needed

to make sense of the analysis are in short supply But I’ve got no doubt the opportunities are

now there.”

DHL used to have

an IT function for each of its operating divisions; they have now been broken

up Infrastructure responsibilities, and the staff who specialised

in that area, were moved to a central

IT services function Other staff remained with one of its four operating business units, but were told to work more closely with management Their job

is to find new ways of using IT that will help DHL’s customers.

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“The analysis Essence performs has been theoretically possible for years But for us to invest in the hardware and software just wouldn’t be feasible We’d never do it.”

– Matt Isaacs

Chief Executive Officer

Essence

Are these trends transformative?

The adoption of cloud computing, the ubiquity of mobile devices and the ability to capture and

extract insight from massive flows of data each offer companies significant benefits But it is often

where these technologies overlap that they can have the greatest impact

Matt Isaacs, the chief executive of Essence, a digital marketing agency, is excited about the ways

this is changing his business He has been sourcing basic applications as a service for over two

years; that has helped to keep IT costs down and made it easier for staff to access files away from

the office But over the last nine months Essence has started to source computer processing

power to crunch data

Essence is using cloud-based, pay-as-you-go computing power to analyse the performance

of its clients’ online marketing It gathers data from billions of website visits to work out how to

make advertising more effective “It’s the Nirvana of marketing,” says Mr Isaacs “Everyone knows

that half of their advertising is a waste of money, but they don’t know which half The analysis

Essence performs has been theoretically possible for years But for us to invest in the hardware

and software just wouldn’t be feasible We’d never do it.” The confluence of these trends opens

up new means of operating his business

Our survey suggests that, for now, many companies are focused on the process aspects of cloud

computing: they want it to lower costs (49%), improve efficiency (45%) and increase flexibility

(40%) But as the cloud model matures, its impact may be more profound, says Jos White, a

partner at Notion Capital, an Internet-focused venture-capital firm “Cloud is the next megatrend,”

according to Mr White “It touches all areas of technology and moves everything onto the

internet That’s a major shift in the way business works.”

Stanley Young, the chief executive of NYSE Euronext’s technology arm, NYSE Technologies,

says these technologies could transform the way the financial market company operates NYSE

Euronext is experimenting with a cloud built exclusively for financial firms The idea is to give

medium-sized institutions access to computing capacity and trading facilities that they could not

afford to build themselves, while offering top-up computing facilities to bigger companies “It can

take a firm six months to get a server in place, due to audit and compliance rules,” says Mr Young

“That makes it hard for them to be agile and innovative.”

If it becomes popular, this service could redefine the role of the stock exchange in the 21st

century, says Mr Young “We will still run markets, but we will be the owner and operator of a

market community Our role as facilitator and manager will evolve,” he explains “In some regards,

it’s like going back to the traditional role a stock exchange had a couple of hundred years ago –

creating a place or community where people came to trade.”

Like Mr Isaacs at Essence, some of the smaller financial firms within the NYSE community are

trying out business activities which would previously have been beyond their budgets For

example, NYSE Euronext holds seven years of complete financial market data; firms are now

accessing that data to test which of their experimental trading algorithms would have made

money in the past

Whereas Essence and the NYSE are finding opportunities to combine cloud with data, FedEx is

exploring its connection with a different trend: mobile In some of its FedEx Office print outlets

customers can produce documents directly from their mobile phones They can also have

in-store access to files stored on retail cloud services, which they can download into Kinko’s

specialist applications for formatting and customisation Using these services, customers can then

print the resulting document in a store elsewhere, if that is more convenient This is changing the

way FedEx engages with its customers and the kinds of services it can offer

• Why think of these trends in isolation? Their confluence can drive greater value.

• Question for the C-suite: How can IT create effectiveness, innovation and efficiency?