Cloud Commerce: Tailor Your Commerce Strategy via Cloud Solutions

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Note: This post was originally published on the IBM Software Blog on Dec. 20.

Someone recently asked me how it was possible that cloud computing began to take off at just about the same time the economy got cold — circa 2008. This argument had a culinary simile: that major new technology shifts (such as cloud) are like ice cream. Delicious when things are hot, but forget about it when things are not. And cloud rolled along at a not-hot time. Ergo, cloud should have failed.

My counter-argument was that they had the wrong culinary simile in mind.

Cloud computing, or so it seems to me, is not like ice cream in winter. Instead, it’s more like a super-efficient oven in winter. Less about the eating, more about the baking. And if you’re a baker, baking is a big deal.

So, for instance, let’s take the case of commerce. How do you best implement that in a problematic economy?

Well, it stands to reason that any architecture responsible for the flow of business transactions needs to be as efficient, and scalable, as possible. That way, you can minimize costs when demand is lower, and maximize market responsiveness when demand is higher. And the more unpredictable demand is, the more appealing that idea becomes.
Cloud computing services are a perfect match for that description. So it’s easy to agree with a recent blog post I read hat predicted continued steady growth of cloud computing — even in a ‘challenged’ economy — over the next five years. With cloud, organizations don’t have to shell out for the sum total of the hardware and software of the cloud. They can simply lease someone else’s cloud as they see fit, to handle specific requirements they have at any given time. If they need more resources, they can pay for those resources as they go, dialing back at will. More, they can zero in on exactly the services they want, and skip the ones they don’t, making changes month by month as circumstances change.
Added up, this amounts to remarkably flexible, granular control over how much they pay to handle commerce over time. It also substantially reduces the business risk that would have come from a private, on-premise commerce infrastructure — a huge investment that might not pay off at a time when demand isn’t something that can clearly be foreseen.
So, to a risk-averse business leader, commerce on a cloud probably looks better in a cold economy — not worse.
Cloud-ifying your commerce architecture can really pay off — if you get it right
‘Probably’ is, admittedly, a little dodgy as qualifiers go. So I thought I should probably confirm this opinion with someone who knew better than I did.
A chat with Dave Carmichael, Manager of Cloud Business Solutions at IBM, was a major help. Carmichael’s take was similar to mine — though he also suggested the story was more complex than that.
‘Economically, things are volatile right now, and that’s having a real impact on the world of commerce,’ he said. ‘A volatile economy brings with it threats; companies need a strategy to handle the threats. But they also need to take advantage of the opportunities that volatile economies have historically presented.’
Opportunities? This was something I hadn’t really considered, but on reflection, it makes perfect sense.
If you think of a volatile economy as exerting pressure on organizations, you can see that the pressure probably forces them to take a new look at how they get things done. It acts, in other words, as a catalyst for change: steering organizations toward smarter, more efficient, more capable and more cost-effective strategies.
If the sum total of that change is effective enough, then a volatile economy has, in a practical sense, become an opportunity.
Carmichael sees commerce in the cloud in much this way. ‘Cloud can be more than just a part of commerce — it can be central to business strategies in this area,’ he said. ‘That’s because cloud can deliver IT without boundaries, help organizations build enduring customer relationships and, in doing so, transform the economics of innovation.’
How specifically does this work — this idea of ‘building enduring customer relationships’ via cloud?
Regular readers of this blog may recall that I wrote about the IBM Smarter Commerce initiative some weeks ago. The idea there was very similar: to put customers at the center of every phase of the commerce cycle, from Buy to Market to Sell to Service. By improving each phase in sequence, the overall customer relationship could be both strengthened and extended.  
The IBM cloud commerce strategy is, in essence, a super-efficient, super-flexible way to pursue that idea. Software capabilities brought to IBM via recent acquisitions — Sterling Commerce, Unica, Coremetrics and ILOG among others — are now providing the technical foundation of commerce solutions hosted in an IBM cloud.  
This means IBM clients can simply pick the commerce solutions they need to get the outcome they want, targeting some or all of those four commerce phases. And when they do, they’ll receive best-in-class performance and features without having to worry about any of the implementation and management required by a private cloud architecture.
Weigh the pros against the cons
Carmichael was careful to point out, though, that cloud-based commerce — like everything else in this world — has its cons as well as its pros.  
Cloud Commerce Pros
Higher business acceleration. Because you don’t have to implement or manage the cloud itself, you can concentrate on what really matters: your services. This significantly reduces the time needed to bring those services to market; collaborate with customers, suppliers and partners; and analyze incoming data in real time to understand, and serve, your customers better. You can also scale services up or down far more quickly than you could without a cloud.
Lower business risk. No capital investment is required in IT infrastructure (hardware or software). Your IT team can worry less about technical details, and more about business strategies. And your total cost for cloud services becomes both remarkably predictable and remarkably adjustable — helping you dial in just the right commerce formula while keeping a close eye on the price tag.
Cloud Commerce Cons
Long-term versus short-term costs. Not leveraging the cloud and looking to an on-premise, private commerce implementation is a huge capital expenditure, but since you own it, it costs less month by month than cloud services over time.
Lower customization potential. If you don’t own the cloud, you can’t customize the cloud and cloud services — at least, not to the same degree as if you owned it.
The IBM approach, though based on cloud services, really aims at a best-of-both worlds. It gives organizations the option to stay in-house for some capabilities, but outsource others to the IBM cloud whenever that makes good business sense.
True Value, for instance, decided to leverage IBM Software supply-chain management capabilities in this way. The retailer-owned hardware cooperative’s logistics challenges come as a natural result of their distributed presence worldwide: every year, they distribute more than 600 million pounds of freight to more than 5,000 stores in more than 50 countries.   
Via the IBM Sterling supply-chain visibility solution, True Value was able to establish more quickly, and more easily, where different shipments are at different times, and why delays are occurring — contributing to a 57 percent reduction in lead time, a 10 percent increase in fill rate and a stunning 85 percent reduction in backorders.
A different organization might find there’s no problem with supply-chain management, but that, instead, analytics of customer purchases are weak. Organizations in this situation could buy analytics services from IBM and call it a day, leaving supply-chain capabilities as is. The IBM idea, in every case, is simply to give customers the best available range of choices.
Carmichael’s expectation, though, is that going forward, more and more organizations will pursue an approach to commerce that involves cloud to at least some extent, because the pros will increasingly outweigh the cons.
‘Cloud is changing the game for companies, forcing them to rethink their IT so they can reinvent their business,’ he said. ‘Cloud really is one of those once-every-fifteen-years phenomena, like the world wide web, the PC, the mainframe and the typewriter. All of them really were paradigm shifts. And notice that all of them have IBM in common, too. For the last hundred years, we’ve been helping our clients get the best possible business value from all kinds of change in technology. Commerce in the cloud is no different.’

Additional Information

Accelerate your transformation with Smarter Commerce on Cloud

Rethink IT and reinvent business with IBM SmartCloud

Get customer insight through Smarter Commerce

See Smarter Commerce on Cloud in Action

Join in the conversation about Cloud Computing

Join in the conversation about Smarter Commerce

IBM Acquisition of Emptoris Bolsters Smarter Commerce Initiative

Webcast — Build and Manage a Low-Touch, Highly-Scalable Cloud Using IBM SmartCloud Provisioning

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