Ever bought something new to find that it’s actually something old in a different wrapper? There are some great examples of deep domain experience, regulatory compliance and finely tuned capability – but there is also a lot of vapourware out there too.
If there is one thing that the enterprise technology sector is a master at, it’s the ability to conceive of new ways for large businesses to part with their cash. The relentless pace of development in software and services dishes up a new ‘must have’ opportunity on an increasingly regular cadence.
Businesses are fearful of being left behind in the ultra-competitive digital marketplace and many dive in headfirst before the proposition has matured for sufficient evaluation to be possible. Some commentators say it’s the biggest growth market the world has ever known – and that may be the case – but mixed in with all the stuff that is useful and has value is a load of other stuff which the vast majority of users never exploit but somehow end up paying for.
Take cloud infrastructure as a prime example. Cloud can mean many things to many different people but we have all come to accept that it is some sort of remote hosting services for applications and data – maybe we run SaaS apps in the cloud, maybe we use cloud compute for data and analytics, or we might just be grateful that we have ditched the server room and that’s the extent of our understanding?
The first iterations of cloud were called private cloud (amongst a few other things) and they were essentially a remote server that was a direct replacement for the one you had in your server room or data centre. The public cloud emerged with vendors like AWS, Microsoft and Google offering a different kind of cloud opportunity – one that you shared with other users, could scale up and down based on consumption and that delivered pre-configured security, patching and guaranteed uptime. For a variety of reasons, enterprises were concerned that ‘putting all their eggs in one basket’ could lead to problems so the concept of multi-cloud took hold where enterprises shared workloads across more than one vendor. At the same time, others started developing the hybrid cloud model that utilised a mix of public and private cloud environments. The latest iteration of cloud infrastructure is focussed on industry specificity – supposedly unlike vanilla public clouds, these industry solutions tailored to the unique requirements of a vertical market are the fifth or sixth iteration of a concept that is barely ten years old.
To understand just how much substance was behind these new industry solutions, I spoke to four senior execs from Google, Microsoft, IBM and SAP and posed a series of questions.
Being in the club
We all like to have an identity and belong to a club so the idea of being in the ‘retail cloud’ is an attractive prospect for ambitious shopkeepers. It’s an easy sell for cloud vendors because the promise of a solution that is finely tuned for an industry that comes with out-of-the-box functionality offers the ability to hide some of the complexity
But customers need to be aware of the limitations of some of these new flavours of cloud and interrogate how much deep functionality there really is inside vertical platforms. In some cases, a vendor’s vertical offering is very similar to their generic environment with a new front door and some light touch features. In others, the depth is far greater delivering highly focussed regulatory compliance finely tuned for that industry.
I asked Lori Mitchell-Keller, global leader of industry solutions at Google Cloud, why industry specific solutions were becoming so popular and what buyers should consider when looking for an industry platform partner. “Although companies understand that they need these solutions, many don’t have the time, money or even the skills in terms of artificial intelligence, machine learning and data analytics, to build those solutions for themselves,” she said.
“It’s important to understand that there’s a lot of real engineering work that needs to go into industry clouds and I do believe that some vendors out there are not really building new stuff. Some of the industry clouds out there are just infrastructure with a different label or architecture – they’re just putting a wrapper on it.
“Google is different and we are really doing a lot of research with our customers on what needs to be in the industry clouds. The people that I hire in my team are very different from your classic software people. The person that runs my financial services industry is the former chief digital officer at Wells Fargo. The person that runs my retail industry is the former chief digital officer at Neiman Marcus. The person that runs my consumer products industry is the former president of personal care at Kimberly-Clark. You can’t teach domain expertise. You either have it or you don’t.”
“It’s important to understand that there’s a lot of real engineering work that needs to go into industry clouds and I do believe that some vendors out there are not really building new stuff”, Lori Mitchell-Keller / Google
Why are industry clouds so hot?
I asked Peter Maier, president of SAP industries and customer advisory, why vertical clouds were so hot and whether they were fundamentally different to the kind of generic public cloud we have become accustomed to. He said: “Vertical cloud is just another word for cloud solutions that support the core business end-to-end processes of customers in their industries – in contrast to cloud solutions for administrative business processes. Customers always focus on their core business which is defined by the ‘vertical’ or ‘industry’ they operate in, simply because that’s where they win customers, generate revenue and fight for market share. And that’s what ultimately matters to business executives.”
“Vertical cloud is just another word for cloud solutions that support the core business end-to-end processes of customers in their industries – in contrast to cloud solutions for administrative business processes”, Peter Maier / SAP
Shelley Bransten, corporate vice president of global retail and consumer goods industries at Microsoft told me that the idea of an industry focussed cloud solution is not a new concept but has been driven up the corporate agenda by external factors like the pandemic. “Microsoft’s deep commitment to industry is not new but it’s taken on a new urgency with the pandemic where we know businesses increasingly need to apply tools and technology to ensure resiliency,” she said. “While every organisation needs resilience and agility, their specific challenges and solutions are unique to their industry. That’s why Microsoft has invested in industry-specific cloud solutions – vertical offerings tailored to address the unique needs of industries while removing friction and accelerating the speed to value.”
“Microsoft’s deep commitment to industry is not new but it’s taken on a new urgency with the pandemic where we know businesses increasingly need to apply tools and technology to ensure resiliency”, Shelley Bransten / Microsoft
Transitioning from vanilla to industry
One of the big challenges for enterprise leaders is the relentless pace of change – how can businesses justify moving workloads to another cloud when it’s likely that they have only just established a baseline following their primary cloud migration?
Mitchell-Keller went on to say that industry specific clouds were not a replacement of existing cloud solutions and that businesses should think of them in terms of an iterative improvement to their existing solution with ‘engineered’ enhancements that are tailor-made for their industry. “I don’t want people to think that an industry cloud is a totally separate ‘rip and replace’ what you already have,” she said. “The way industry clouds should work is bringing additive, real engineered products on top of the vanilla cloud – think of it as a layer of capabilities on top of your existing product. The cloud that has your infrastructure, your compute, your storage and your network, has to be in place foundationally for you to take advantage of all that data you have, but once you have all that data in a common backbone, then you have the opportunity to put on this industry cloud layer with specific capabilities geared for your industry.”
Prakash Pattni, managing director of financial services digital transformation EMEA at IBM, described a different approach and told me that the pathway for moving to an industry specific cloud was facilitated by a set of common reference architectures meaning deployment could be executed quicky. “IBM has streamlined the process for clients to move from a general public cloud environment to our IBM Cloud for Financial Services by building a set of common reference architectures that can be automatically deployed, and which workloads can be moved onto,” he said. “The platform has also been designed to be operable in a hybrid and multi-cloud environment, which most organisations are operating in today, with the requisite tooling and automation to provide visibility and control. If applications being moved to our financial services cloud are already refactored and cloud-native, this can significantly speed up the move to one of the deployment architectures.”
“IBM has streamlined the process for clients to move from a general public cloud environment to our IBM Cloud for Financial Services by building a set of common reference architectures that can be automatically deployed”, Prakash Pattni / IBM
Finely tuned for highly regulated markets
One area where the industry cloud play is the strongest is in industries like financial services and healthcare. IBM’s industry cloud strategy is focussed on four highly regulated industries: financial services, healthcare, government and telecoms. This industry focus is underpinned by a broader hybrid and multi-cloud strategy which has been articulated by Arvind Krishna, CEO, and Howard Boville, head of IBM’s hybrid platform, on a number of occasions – most recently by Boville at London tech week where he talked about the dangers of a dystopian future for customers that take the wrong architectural approach to building their cloud strategy and went on to extol the virtues of ‘an open hybrid cloud architecture’ that delivers agility, productivity and cost savings for its customers.
IBM launched its dedicated cloud for financial services in 2019 – the first commercially available industry cloud platform (cloud is an abstract word – Salesforce launched an FS cloud in 2015 and many others have since, but it depends on your definition of ‘cloud’). IBM partnered with Bank of America through a subsidiary company, Promontory, to design and build what it says is the future of modern banking and financial services with baked-in compliance and security that is finely tuned for the industry.
Pattni told me that IBM’s investment in these industry solutions is underpinned by a need for speed, agility and security. “An industry cloud like the IBM Cloud for Financial Services has the necessary regulatory compliance controls built into the platform’s code. These controls are updated in line with regulatory changes in the relevant jurisdictions and automated so that financial institutions can ensure compliance across their entire IT estate at all times.
“In addition, an industry cloud can now allow enterprises to keep their data as secure and private on a public cloud platform as it is on their own mainframes. For example, the IBM Cloud for Financial Services provides clients with IBM’s confidential computing capability, which means the client’s data remains private and accessible only to them, even in a shared cloud environment. This is supported by Keep Your Own Key encryption, which means the client has the only key to their data – IBM can’t even access it.
“Importantly, an industry-specific cloud can enable organisations to become more agile and innovate faster. Onboarding a technology provider or a fintech vendor typically takes over a year for a bank. But when the bank and its vendors are all using a platform like the IBM Cloud for Financial Services, which meets the relevant regulatory requirements, onboarding time is reduced to just days.”
Aside from highly regulated industries, other sectors are benefitting from massive investment into industry specific solutions, like retail. Bransten of Microsoft said: “Microsoft Cloud for Retail, which went generally available on February 1st, is a great example of the timeliness and customer benefit our industry clouds provide. As the retail industry continues its journey beyond the pandemic constraints, retailers will navigate an altered shopper landscape. Catering to new consumer and frontline employee needs won’t be easy, but it will push retailers to accelerate their pace of innovation, which will be vital for meaningful growth. Given this, our customers are asking for purpose-built retail solutions designed to allow their businesses to do things they’ve never been able to do before and with a level of speed and specificity beyond what they have experienced in the past. They’re realising the one-size-fits-all approach will no longer tide them over.”
Differentiation in a similar environment
That one-size-fits-all approach offered by generic public cloud is clearly not a solution that customers want – however, it does pose the question that if all banking clients are on the same cloud, using the same tools and the same solutions – how do they create differentiation? Maier from SAP told me: “In today’s hyper-competitive world, speed is key to business success. In this race, our customers’ skills in discovering new business opportunities, shaping customer relationships, creating the right products and services and organising their business for operational excellence are factors to create differentiation.”
While Bransten from Microsoft highlighted personalisation as a key tool for creating differentiation, she said: “Microsoft industry clouds help organisations by delivering a more personalised experience for their customers. These solutions scale and can be customised by a global ecosystem of partners to build unique capabilities on top of ours. The use of personalisation and customisation allows customers the opportunity to create differentiated experiences from their competitors.”
IBM’s Pattni was equally keen to note that joining an industry cloud solution – the same solution that competitors may also be leveraging – does not diminish the opportunities for creating differentiated services. “Being on the same industry-specific cloud platform as competitors does not stop an enterprise such as a bank from creating their own pathway of innovation,” he said. “While a platform such as IBM Cloud for Financial Services provides the same regulatory controls, enterprise grade security and interoperability benefits to all financial institutions using the platform, each company can still choose which technology providers and fintechs to transact with according to their business strategy and customer needs. The difference is that creating an ecosystem of financial institutions and technology providers on the same secure, regulatory compliant platform, speeds up consumption of innovation while de-risking the industry supply chain.”
How deep can you go?
One of the lagging concerns is the genuine depth of these industry solutions and it is clear that not all industry specific solutions are engineered to the same granular level as others and it is not uncommon for tech vendors to repackage, wash or repurpose existing technologies with a new badge to meet market demand. After all, it can take years to design, build, test and deploy fit-for-purpose solutions and vendors don’t have that kind of lead time to bring new products and services to market. Take cloud applications as a prime example – the SaaS market for applications started 20 years ago with Salesforce but it was far more recently that major ERP vendors started bringing core applications into the SaaS world. Oracle’s journey for Fusion was seven years and billions of dollars in the making – other vendors, keen to capitalise on the burgeoning market but without the resources of Big Red, simply reused their legacy applications, hosted them in a private environment, called it cloud and sold them to customers as the real deal. It wasn’t. Is the infrastructure market guilty of the same thing or is there genuine depth to these solutions? As Mitchell-Keller told me earlier, for industry solutions to deliver real value that is available to the customer out-of-the-box, there is a significant amount of ‘hard engineering’ required.
“It’s not about slapping an industry label on a horizontal product and calling it cloud. It’s about doing that hard engineering work to build out solutions that have never been introduced into the market before,” she said. “There’s a litmus test that we’ve been using internally to challenge other vendors in terms of – are you really building an industry cloud? The first thing is when you look under the hood: is it just a horizontal product, a CRM or an ERP where they’ve not really done the hard engineering work? If they haven’t then there’s a lot left on the customer’s plate in order to deploy that product themselves.
“Then you have to look to see if the product has been proven? Is there a real world example of a company using the product? Have the engineering investments really gone that last mile to ensure the solutions run out-of-the-box to help you to understand who’s already used them? Yes, there is always a first customer but for every Google product that’s been GA released, we have at least a half dozen customers that have already used it.
“The final thing is pricing. Are you pricing those solutions to save the customer money? Are they getting better value and better business outcomes that dwarf the amount of money that they’re paying for the product. And, most importantly, are those price models transparent? It’s a big red flag in terms of the products not being built to deploy out-of-the-box – if it costs way too much to implement you haven’t done the hard engineering work and the customer will have a lot of stuff to build themselves.”
What’s clear from talking to four different vendors is that each has their own approach to building industry capabilities. SAP has just one industry cloud composed of many different industry solutions whereas IBM’s approach is very different – zeroing in on just four key verticals and building specific capabilities for each into a dedicated, isolated environment. Google is iterating its generic public cloud platform with additive industry solutions to develop a layer of vertical functionality while also building horizontal products that cut across the blurred lines between adjacent industries.