Core vs context: Cloud computing's role in creating strategic value

Gartner estimates that IT maintenance accounts for approximately 80% of total IT expenditure and effort, with only 20% going to running applications and strategic projects. The question for many CIOs is can cloud computing be the key to changing this ratio and allow CIOs to devote resources to more strategic and innovative initiatives that drive the organisation forward?

We’ve all read and heard much about cloud. We are generally aware of the cost and operational efficiencies cloud services bring to a business. But do we really understand the true strategic impact of cloud services?

In our recent survey on cloud adoption amongst IT professionals, we asked respondents to outline how they think cloud adoption will affect the CIO. Whilst most of their answers tend to focus on changes in responsibilities, a select few of the respondents' comments highlight the potential strategic benefits of cloud adoption:

  • “I believe that adoption of cloud is enabling CIOs to further gain cost savings in the technology area by reducing previous spend on fixed assets. The role of the CIO… is still there to provide alignment of technology strategy to the business strategy.”
  • “The role of the CIO is to support the enterprise's goals with fit for purpose information technology and computing systems.”
  • “Frees up time from IT infrastructure towards pursuing other strategic initiatives.”

Overall, almost 50% of respondents agree that outsourcing to a cloud service would free up more time of the IT department to spend on strategic tasks. They pointed out several strategic initiatives from collaboration, to new product development, service improvement projects, forward planning and innovation. Respondents pointed out that CIOs will undergo a shift from the IT-management mindset to a business mindset, in order to be more involved in defining the strategic direction of the business.

These anecdotal comments and survey results align well with Geoffrey Moore’s concept of core vs. context. As he explains, “Core is what companies invest their time and resources in that their competitors do not. Core is what allows a business to make more money and/or more margin, and make people more attracted to a business than to its’ competitors.” Essentially, core activities are those that make a business “in business”. And context is everything else. Context activities are important and make up a significant a contributor to revenue, but it is not the main component of the business.

Eric Goodwin, CEO of Proofpoint suggests that it is best for core applications to be maintained in house, where the business can maintain a high degree of control and continually improve, while context applications are good candidates for cloud deployments.

The survey results above, together with this concept, suggest that with cloud services, you now have the opportunity to outsource "context applications" to the experts in that field, relieving you of that burden and allowing you to re-direct your budget, time and effort into core activities and services that can have a stronger impact on your business growth. Ultimately, cloud services will be a key instrument in changing the allocation of IT expenditure in businesses to one that is more focused on strategic tasks.

The Logicalis Virtual Private Data Centre was built with the strategic value of cloud in mind. It has been designed to deliver maximum benefits to you, with a focus on reducing capital investment and operational overhead in maintaining and supporting data centre infrastructure and user environment. To understand more about the Logicalis Virtual Private Data Centre and how you can relieve yourself of the burden of "context activities" to focus on "core activities," please visit our Cloud web site.


Tags CIO, Digital Transformation, Cloud, core versus context


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