Six Questions for Consumer Goods Executives to Ask About Cloud Computing For Consumer Goods and Services executives wanting to evaluate what cloud computing can for their businesses, asking the right questions is a good place to start Page Accenture defines cloud computing as the dynamic provisioning of IT capabilities— whether hardware, software or services— from third parties over a network 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 computing is shaping up to be a key enabler of high performance, which Accenture defines as a company’s ability to consistently out-perform peers across industry and economic cycles and generations of leadership Given the momentum behind cloud computing across so many industries, it is not surprising that consumer goods and services executives are beginning to evaluate 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: Many global organizations—including Starbucks, Citigroup, a major pharmaceuticals 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 devices 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 salesforce.com.4 • What benefits can it bring to my company? • What is cloud computing, and how does it work? • 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 recognize that while cloud computing promises to deliver a wide and powerful range of distinctive capabilities, the technology’s disruptive 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 Page Consumer Goods and Services: Poised to enter the cloud, poised to achieve high performance Hard-to-replicate capabilities are a hallmark 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 Highperformance consumer goods companies know where and how to compete They apply rigorous portfolio management practices to consistently win in highvalue/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 companies, performance anatomy is based on flexibility, seamless execution and simple operating models that embrace scalability, 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 computing power, enable companies to identify, penetrate and mobilize in lucrative markets more quickly than ever before Distinctive capabilities With the cloud’s ability to host and provision any number of applications and productivity 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 Page 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 innovative technology solutions To date, these innovations have included mobile applications, advanced analytics and digital receipts In our view, cloud computing represents the next step in this progression The adoption of cloud computing will be supported and accelerated by the pervasive 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 enterprisegrade 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 managed outsourced hosting providers face steep challenges when it comes to integrating 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 centralized 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 softwareas-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 relationship management and supply chain management are also initial preferred targets But this is just the start Examples of other processes being targeted for current and future SaaS implementations include collaboration, multi-channel order management and human resources And when retailers’ point-of-sale data and other consumer information are accessible via the cloud, dramatic improvements in merchandising 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 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 Barriers to cloud adoption 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), concerns about data security (27 percent) and the inability to have highly customized applications (22.3 percent) rounded out the top four reasons for slow cloud take-up Figure Reasons for adopting—or not adopting—cloud computing Reasons that Slow Adoption Why Organizations Adopt Service provider offers better, cheaper and more reliable applications Lack of industry-specific applications products 39.3% Reduced overall IT costs 60.2% 52.2% Decreased application downtime 8.2% 1.3% 5.6% Improves the ability to support multiple offices and remote employees 15.4% 2.5% 12.8% Responsibility of software upgrades falls on the vendor 30.0% 17.2% 21.4% Inability to have highly customized apps 16.7% 22.3% 17.5% Concerns with service reliability 21.0% 20.6% 17.8% 19.8% 17.8% 27.5% Lack of vendor flexibility, vendor lock-in 12.8% 12.9% 23.4% Complexity of integration with back-end systems 5.7% 11.6% 0.4% 15.8% 15.3% 21.7% Data and information security concerns Lower cost of implementation 7.1% 3.8% 6.8% Cost-prohibitive Based on open source 2.5% 0.0% 4.5% Lack of technical expertise/ skilled personnel in house to develop the Web applications 24.4% 27.0% 23.2% All respondents Consumer products Retail Source: Current outsourcing percentages from The State of Logistics Outsourcing: 14th Annual 2009 Third Party Logistics Study Projected 2012 outsourcing percentages based on IDC Manufacturing Insights research estimates All respondents 40.7% 31.1% 45.7% 21.5% 30.9% 12.2% Consumer products Retail Source: Verticals Insights Survey, IDC, April 2009 Page 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 stillnew phenomenon By focusing on these questions, executives can start to identify opportunities and risks that will impact their own companies 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) Page 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 organizations 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 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 infrastructures, but also shoulder the significant infrastructure setup and maintenance costs Private clouds can be used within single companies or possibly be shared with business 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 consumer 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 processing this information a critical requirement 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 Figure 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 networking available as a utility Infrastructure Cloud Computers (servers), data centers, networks Page “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 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 Forwardlooking 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, general benefits that all cloud services deliver Among consumer goods companies, these benefits fall into four categories: cost, flexibility, innovation and speed Page 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 Figure Initial opportunities for using clouds Accenture has identified many different possible uses for cloud computing Easy Software Development and Testing Business Continuity (Storage) Ease of Implementation • Extensive storage • Backup and recovery Hard Desktop Productivity • Web 2.0 applications • Workgroup applications • Office suites • Email and calendaring Sensitive Applications Legacy • Specific existing infrastructure • Complex legacy systems New Business • Software development and testing environment • Provide IT support for new ventures • Performance Testing • Non production projects Batch and Data Intensive Applications • R&D activities • One-off applications that don't rely on real-time responses • Reduced time to market • Data and high performance intensive applications (financial riks, modeling, simulation, data compression, Geographic Expansion graphics rendering ) • New back-office applications • Replicate standard processes in new locations and branches • Mission critical applications • Regulation-protected data (HIPAA, SOX, PCI ) Value to the Enterprise Innovation Leaders of consumer goods companies increasingly recognize that the traditional closed innovation model is no longer adequate to keep up with the rapid pace of today’s market By using cloud-based solutions, 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 businesses 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 organizations, 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 development 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 Peak Load Demands • New business activities • Applications with peak-loads • Seasonal websites • Applications with scalability needs High Value 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 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 service 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 business 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 integrated IT services, regardless of whether those ser- How can cloud computing 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 operations, they recognize the need for scalable Page 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 continually ensuring that these applications continue to add value Cloud computing is now jump-starting such an IT transition for many consumer goods companies and, in the process, creating an IT portfolio management capability that can enable high performance 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 multi-channel, multipolar 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 leverage 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 ideally 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 Cloud services can also address supply chain challenges, including the difficulty associated with accurately predicting demand for products and then ensuring that those products are available at the right time, and in the right place The cloud provides a robust channel through which consumer goods companies can tap new supply chain processes, technologies and emerging business models to improve supply/demand orchestration By linking factory information systems to those of suppliers, distributors and customers, the cloud also makes it possible for companies to minimize supply disruptions by creating a demand signal, which drives a truly integrated and automated supply chain Finally, cloud computing provides comprehensive and complimentary business applications, which can be used by entities across the value chain to drive efficiencies and cost savings in key areas such as load planning, consolidation, stock returns and shipping For consumer goods companies looking to enter new markets, cloud computing can make such expansion much easier One of the reasons is that the cloud enables simple operating models that integrate centralized global, back-office capabilities with a strong local presence for activities such as customer relationship management, production, sales and product delivery This global/local operating model is particularly important for companies looking to break into emerging markets Consider the unique challenges facing consumer goods companies looking to grow in the Asia Pacific region, which is home to some 20 million retail outlets Currently, the largest consumer goods players are only present in four million of these outlets To effectively penetrate this untapped market, companies need to identify, distinguish and target “modern” supermarket trade channels and smaller, “general”-trade channels that are common in Southeast Asia, India and China They also need to collect and make sense of highly detailed information about each outlet’s operations—from whether the outlet has electricity to whether it has space to store products The cloud can provide this level of information, enabling consumer goods companies to better serve their customer segments and extend their distribution networks beyond tier one cities While global expansion can significantly boost revenues, it can present a significant management challenge The cloud can help by enabling disparate, global teams to be more productive and work together much more effectively CocaCola Enterprises provides but one example With more than 72,000 employees around the world, the company wanted to boost employee collaboration, improve the flow of information through the enterprise, and free its resources to spend more time with customers To achieve these goals, Coca-Cola implemented a Microsoft-based hosted worldwide intranet With messaging, online meeting and collaboration tools now available on any device for employees across time zones and geographies, the company has reduced its travel expenses and improved its workforce’s productivity.6 Fully hosted productivity tools are now widely available in the cloud E-mail, videoconferencing, instant messaging and calendars are among the most common Others include any number of file sharing and management solutions, as well as sales lead tracking applications What they have in common is that they make it possible for workforces to generate actionable insights and collaborate more seamlessly than ever Nowhere is collaboration more important than in consumer goods companies’ globally dispersed research and development organizations Having teams in multiple countries allows R&D organizations to maintain local expertise to meet the product demands from consumers in specific geographies, while also taking optimal advantage of the cross-border mergers and acquisitions that have taken place in the industry in recent years With scattered R&D teams, however, consumer goods companies run the risk of creating knowledge “silos” with limited collaboration among personnel Cloud computing can mitigate this risk by providing a low-cost collaborative environment that enables distant team members to crossfeed and leverage each other’s insights in a way not possible with current infrastructure Additionally, the cloud makes it easier and more cost effective to improve the flow of information between R&D and other functional areas of the company such as sales and marketing The Canadian arm of GS1—a global nonprofit organization dedicated to improving supply chain efficiencies—is developing, in conjunction with HP Labs, a cloudbased recall service The GS1 Canada Product Recall service will run on the HP cloud computing platform for manufacturing and allow consumer goods companies to trace and remove potentially harmful food products from the supply chain It is expected that the new service will enable consumer goods companies to reduce errors, decrease the time it takes to respond to a recall, and reduce recallrelated costs — “HP Develops Cloud Service with GS1,” Consumer Goods Technology August 2009 Page 10 ”The biggest financial benefit of cloud computing, particularly in these capital-constrained times, is avoiding taking on debt and keeping cash in the company longer If a project uses a cloudbased service provider, then the CFO avoids writing a big check upfront Instead, checks are written monthly or quarterly, in alignment with the return.” — “Talking To Your CFO About Cloud Computing” Forrester Research October 2008 Can I depend on clouds to save my organization money? Over the last few years, the consumer goods industry has been significantly affected by lower consumer spending, a difficult and volatile economic climate, and raw material price increases At the same time, higher private label penetration means retailers now compete with branded goods makers, challenging market share with low-priced house brands and creating intense cost pressure on consumer goods supply chains These factors have made cost control a strategic imperative for high-performance consumer goods companies These factors have also made cloud computing an appealing option Clearly, executives in any industry should not take the promises and projections of cloud savings at face value The articles Page 11 about companies that have saved money rarely explain how these savings were calculated, and several apparently rigorous analyses of cloud savings have been attacked as unrealistic.7 In our experience, even where US-based firms move their internal applications to the cloud, they usually decide to retain a number of services in-house because the costs of hosting a server internally—whether in an optimized data center located in the United States or in a captive facility offshore—are lower than that of an external cloud service be helpful So is working with the finance department to develop a consistent and acceptable approach to measuring the costs and return from clouds Such efforts, we believe, would help them reliably estimate the savings We encourage consumer goods leaders, therefore, to look closely into the costs of cloud computing for their organizations They can so by seeking rigorous ROI case studies based on actual cloud usage, rather than estimates of anticipated savings Hardware, after all, is a relatively small component of data center costs Hidden management, transition and usage costs tend to reveal themselves only when organizations start to work with the technology Evaluating the pricing models of different kinds of cloud services might • Use standard, fit-for-purpose service levels as often as possible For consumer goods companies that believe the cloud offers real savings opportunities, our experience reveals things they can to maximize the possible cost benefits: • Adopt common standards that make sharing applications and information easier • Apply security and data privacy restrictions appropriately and standardize the number and types of different security levels as much as possible • Overcome any departmental ownership issues so as much work as possible can be moved to the shared cloud • Take care to maintain flexibility around procurement to avoid being locked into specific supplier arrangements Page 12 How will clouds affect the way my company operates in the future? The future of cloud computing is bright Only percent of respondents to a recent Accenture survey felt that cloud computing held no potential for their organizations (See Figure 4) It’s easy to understand the optimism Companies that have built massive clouds are already transforming the nature of competition Google’s advertising-supported search engine and tools and Amazon’s online retail operations are all made possible by the computing clouds created by those companies Cloud-based consumer applications such as Facebook and iPhone applets are driving innovation in unpredictable ways Page 13 Figure What you see as cloud computing’s greatest potential for your organization in the next five years? Potential % Enable speed, flexibility and responsiveness 59% Permanently and significantly lower operating costs 53% Enable new, innovative processes 46% Support product/service innovation 40% Improve decision making 34% Expand operations to new markets 32% Other 1% Cloud computing has no potential for our organization 1% Total Responses: 673 Source: Global Cloud Computing Survey, Accenture Institute for High Performance, 2010 For the consumer goods industry, opportunities are taking shape in a number of areas, including product safety, media management, global trade and logistics management, business intelligence and carbon footprint reduction We believe some of the more innovative potential uses for cloud computing will be found in: Sales and marketing For consumer goods companies, the name of the game is customer intimacy This opinion is supported by Accenture’s research, which confirms that customer insights and connectivity can spell the difference between mediocrity and high performance The cloud may ultimately be used to help consumer goods companies improve planning and merchandising processes to engage directly with the consumer, improve store-level sales performance and boost sales force productivity Underpinning these advances will be an infinite capacity for data mining and analytics Retail point-of-sale data, trade promotion management systems, and customer-identified loyalty transactions are becoming available via the cloud Digital merchandising, which combines merchandising data models and analytics engines, is also gaining ground It enables the tracking of what people want and how they want it, and can integrate social media to generate insights that lead to highly targeted marketing promotions, rewards and incentives Related to this is the emergence of smartphone-centered services that track consumers’ movements in a given venue and encourage them to visit others Shopkick takes the locationbased opportunity one step farther It is an application that rewards users with discount coupons when they check in to specific retail outlets and scan certain products Stickybits is another application that offers users the chance to win prizes when they scan product bar codes while shopping.8 Once they attach digital information such as reviews or a picture of the shelf display, it’s easy to imagine they can become “consumer agents” and important extensions of a consumer goods company’s marketing team Product lifecycle management Consumer goods companies typically take a siloed approach to product lifecycle management That is likely to change The cloud will ultimately provide a low-cost product lifecycle management delivery model that allows all lifecycle processes—from conception, through design and manufacture, to service and retirement—to be managed as a highly efficient, integrated and end-to-end process Such a delivery model will be particularly appealing to consumer goods companies with widely dispersed design and manufacturing teams Even with an integrated product lifecycle approach, high performance will be dictated largely by how quickly companies can introduce new products that will appeal to consumers Developing breakthrough ideas, recipe formulations and product prototypes typically requires many data-intensive iterations, complex computing capabilities and significant investments Cloud technologies can help speed the innovation cycle in several key ways For example, the cloud provides a low-cost platform for developing, testing and honing ideas It offers a channel through which external stakeholders— most notably, consumers—can become involved in idea development and testing through the relatively new phenomenon known as “crowd-sourcing.” It makes it possible for IT departments to keep pace with the rapidly growing demands from R&D departments for computing power And, when coupled with powerful product lifecycle management applications, it can significantly reduce the time needed to process data and develop the prototypes of what might become a company’s new billion-dollar brand Product traceability Product recalls in the consumer goods industry are currently managed with unwieldy and slow serial processes for tracing products A recall database residing in the cloud could help eliminate data latencies and provide quick and accurate information to channel partners With the right application in place, consumer goods companies could use the cloud to standardize the way they identify products, their points of creation, and all physical locations the products travel on their route to market This would not only facilitate the recall process, but also help distinguish real products from counterfeit “knockoffs” that are commonly found in emerging markets Specifications management To drive safety and security improvements across the supply chain, consumer goods companies need strong formula and specifications management capabilities As with R&D, cloud computing can offer a platform for the type of collaboration that is critical to maintaining operational effectiveness and production efficiencies Deployment models in the cloud can accommodate vast amounts of specification data, as well as approval work flows, proactive translations and process definitions Collaboration tools procured from the cloud enable remote work environments and form the basis for more efficient team communication Such cloud-based tools also allow individuals within and outside the organization to share documentation and high volumes of information more easily and effectively than would be possible through on-premise infrastructures As with benefits, it is difficult to fully gauge all of the ways in which the cloud will change how consumer goods companies will operate in the future We recommend decision makers perform a thorough assessment to understand how clouds can help them chart a course toward high performance In particular, strategists might investigate what new services to pursue using cloud computing, while CIOs may opt to track the evolution of the technology and the market for cloud services to ensure that strategic ambitions not outrun the capabilities of the technology We also suggest CIOs strengthen and upgrade their systems management and operations tools and processes to seamlessly manage the heterogeneous traditional (non-cloud) and cloud environments, which need to co-exist in the future Page 14 What about assurance of security and data privacy? Various surveys tell us that security and data privacy remain prime concerns for cloud implementers in the consumer goods sector The fear of their data being “in the cloud” is often the single greatest hurdle that leaders must overcome to build trust and gain the benefits from cloud computing CIOs are concerned that their data could be stolen or compromised by hackers, mixed with data from their cloud providers’ other customers, or released by mistake Any of the above could expose companies to compensation claims, public embarrassment, lawsuits and brand damage “Cloud computing may multiply the benefits of the Internet by a factor of 10… but we may also face 10 times the challenges.” — Participant Accenture and World Economic Forum Cloud Workshop, 2009 Page 15 Many companies today have very specific challenges in areas of security and data privacy Their existing IT estates consist of highly fragmented landscapes of security and data privacy approaches and policies taken across different departments This, in turn, carries a lot of risk and cost Using the move to cloud computing to drive more consistency and automation in security and data privacy may actually provide a catalyst for driving greater security and reduced costs We suggest consumer goods companies adopt a very practical approach to thinking about security and data privacy in the cloud Data comes with different levels of sensitivity, from low level (published widely and no restrictions) to ultra secure (highly confidential customer financial information) Companies can design their cloud to have similar and appropriate security built in So, for example, low-level data and access may well be suitable to go onto a public cloud infrastructure service with simple password access, whereas ultra secure data may require dedicated secure servers housed in ultra secure data centers with strong authentication required for access There will be several different levels of security in between Building and managing a secure and flexible infrastructure cloud using a combination of private and public services will set the stage for companies to gain the enormous benefits that cloud computing can provide As companies choose cloud service providers, we encourage them to include security and data privacy capabilities as a major part of the selection criteria We recommend that consumer goods companies take the following actions: • Work with providers to determine their attention to security, privacy, and compliance with data laws in all relevant jurisdictions • Make sure the provider can match (or exceed) the levels of security, privacy and compliance you have today • Remember that the security of the cloud should meet the security requirements of the most risky client that is serviced by the provider • Require cloud computing partners to provide their risk assessments, as well as explanations of how they would mitigate any issues found • Determine whether the cloud provider has a seasoned privacy officer and a client-facing chief security officer, chief information security officer or equivalent security role If it doesn’t, it is a sign that the provider doesn’t take security seriously enough • Schedule mandatory monthly discussions with the cloud provider’s top privacy and security people This discussion should flow both ways with no hidden items • Make sure the cloud provider has the ability to map its policy and procedures to any security mandate or security/ privacy/compliance-driven contractual obligation that is in effect • Pay attention to the cloud provider’s adherence to secure coding practices The key to understanding security in cloud computing is to realize that the technology is not a break with the past Instead, it represents the logical next step in the outsourcing of commodity services to many of the same trusted IT providers that have been leaders in the field for years Taking the first steps As we highlighted at the start of this paper, cloud computing is too important a technology to leave entirely to technologists Its potentially significant business benefits call for the involvement of business leaders We offer the following suggestions for executives contemplating a move to the cloud: Ask hard questions and demand databased analyses regarding cost savings Don’t assume automatic and substantive cost savings Do an ROI analysis Consider conversion and ongoing costs, as well as savings Don’t be intimidated by the jargon Experiment or pilot on low-hanging fruit such as workgroup applications, or on a non-mission critical, non-integrated application Then be ready to scale once you’ve proven the benefits are worth it Start small, then scale Begin by piloting low-risk cloud solutions and services such as e-mail or workforce productivity applications, or by experimenting on non-mission critical or non-integrated applications Then be ready to scale once the benefits are clear Establish a clear governance structure for cloud computing Many organizations have rules and structures in place that govern how IT decisions are shared between departmental leaders and IT executives Use them (and if they don’t exist, create them) to decide with whom to engage, both inside and outside the IT organization, regarding decisions on cloud computing, and what decision-making rights and responsibilities they have Set the standards for success Make sure goals and deliverables are well understood, and projects are well aligned with business needs Clarify how the value from cloud computing is to be determined: Which quantitative and qualitative benefits are sought? What constitutes success besides value achieved and projects completed? Don’t overlook the value of skills developed, partnerships established and risks addressed Provide the necessary support Besides financial resources and technical talent, support other activities that will underpin the success of cloud initiatives For example, organizations may benefit from a community of practice or a cloud program office to develop the skills and share the experiences of people engaged in cloud projects Buy cautiously, appraise frequently It’s too early to predict who the major cloud providers will be in a few years, what capabilities they will deliver, when they will deliver them, and how well So when selecting cloud providers, carefully consider whether they have the potential to be a desirable partner in the future Even after they are chosen, evaluate your partners on their financial stability, as well as their ability to improve functionality and service levels, to integrate data across different technology platforms and cloud services, and to deliver on their promises Keep cloud efforts on track Make sure cloud computing receives the focused thinking, planning and follow-up it requires Use the answers to these six questions to identify and address both immediate and longer-term business needs and opportunities that lend themselves to cloud computing, to develop a plan for using public and perhaps private clouds, and to gain the capabilities the plan requires Page 16 The consumer goods industry’s migration to cloud: not a question of “if”, but “when” Many executives are still grappling with cloud’s risks and the cost of writing off current IT investments However, for several companies, the transition to a cloud environment is already under way These companies recognize that the capabilities and potential savings from cloud computing are too great to ignore They are striving for first-mover advantage And they are looking to use the cloud as an enabler of high performance Page 17 At Accenture, we believe that the barriers to cloud computing are quickly falling away While it still may take time for companies to transition to the cloud, there are things they can start doing now—or start doing differently—to prepare The critical issue isn’t whether cloud computing will become a fundamental technology in the next decade It is how successfully companies will profit from the capabilities it offers Sources “What the Enterprise Needs to Know About Cloud Computing,” Accenture Technology Labs, October 2009; “Gartner Identifies the Top 10 Strategic Technologies for 2010,” Gartner, Inc press release, October 20, 2009; “2009 年云 计算中国论坛专题报道” (“Cloud Computing in 2009 Forum dossier”), Chinese Institute of Electronics Cloud Computing Experts Association, http://server.it168.com; “The Cloud Wars: $100+ billion at stake,” Merrill Lynch, May 7, 2008; Avanade 2009 Global Survey of Cloud Computing, http://www.avanade.com, March 3, 2009; Laurianne McLaughlin, “Cloud Computing Survey: IT Leaders See Big Promise, Have Big Security Questions,” CIO Magazine, October 21, 2008 Eric Auchard, “Salesforce.com Signs Citigroup Deal,” Reuters.com, November 15, 2007; “Salesforce.com Powers Starbucks Campaign to Mobilize Americans in National Service,” Salesforce.com press release, January 21, 2009, http://www.salesforce.com; Ron Condon, “The Opportunities and Risks of Cloud Computing Services,” SearchSecurity.co.uk, February 23, 2009 Ethan Smith, “Disney Touts a Way to Ditch the DVD,” Wall Street Journal, October 21, 2009 Ben Worthen and Justin Scheck, “Tech Giants Ramp Up Their Online Offerings,” Wall Street Journal, June 22, 2009; Zarina Abdul Jabbar, “Cloud Services/SaaS: What Telcos Are Doing,” IDC Technology Assessment, October 2009; Bernard Golden, “The State of Cloud Computing in Japan,” CIO.com, November 6, 2009; “SingTel to Help Establish Singapore as a Regional Cloud Computing Hub,” SingTel press release, July 14, 2009; Chris Preimesberger, “Fujitsu Launches Cloud Services in North America,” eWeek.com, December 8, 2009 Phillip Hallam-Baker, “Cloud Coockoo Land Computing,” October 19, 2009, dotfuturemanifesto.blogspot.com; Andy Greenberg, “Deflating the Cloud,” Forbes.com, April 15, 2009 Brad Stone and Barrett Sheridan, “The Retailer’s Clever Little Helper,” Bloomberg Businessweek, August 26, 2010 Luiz André Barroso and Urs Hölzle, “The Datacenter as a Computer: An Introduction to the Design of Warehouse-Scale Machines,” (Morgan & Claypool Publishers, 2009) Kevin Tigges, “Vantage Point: Get Your Head in the Clouds,” Consumer Goods Technology, May 5, 2010 Page 18 About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 204,000 people serving clients in more than 120 countries Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments The company generated net revenues of US$21.6 billion for the fiscal year ended August 31, 2010 Its home page is www.accenture.com Copyright © 2010 Accenture All rights reserved Accenture, its logo, and High Performance Delivered are trademarks of Accenture This document makes reference to trademarks that may be owned by others The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks For more information, please contact: Alan Healy Global alan.healey@accenture.com +44 20-7844-3023 Simone Morandi Europe simone.morandi@accenture.com +39 02777-57364 Jeff Hartigan North America jeffrey.s.hartigan@accenture.com +1 312-693-9908 James Layard Asia Pacific james.layard@accenture.com +65 9144-6902 ... industry to industry Accenture has identified six key questions we encourage consumer goods and services decision makers to ask about this stillnew phenomenon By focusing on these questions, executives. .. return.” — “Talking To Your CFO About Cloud Computing? ?? Forrester Research October 2008 Can I depend on clouds to save my organization money? Over the last few years, the consumer goods industry has... pressure on consumer goods supply chains These factors have made cost control a strategic imperative for high-performance consumer goods companies These factors have also made cloud computing an