The Cloud – More than outsourced infrastructure

Sometimes a company operates IT infrastructure with its own equipment and resources, often called “on-premises hosting.” However, this model is often inefficient: Expensive technologies are usually used with less than full capacity, and assets are mainly managed manually instead of automatically.

• Cloud offers numerous advantages, especially for small- to medium-sized enterprises.
• To fully exploit its potential, the cloud should not be viewed as merely outsourced infrastructure.
• Data exchange in the cloud creates a wide range of opportunities to generate added value – provided that data protection and compliance are guaranteed.

It is therefore particularly attractive for family businesses to use cloud services. The cloud makes infrastructure instantly available, in exactly the amount the business needs. Tying up valuable capital through high investments in hardware and software is thus avoided.

In addition, with the right providers, IT security is generally higher than in an on-premises model. Often this is because the large cloud service providers invest considerably more in IT security than a small- to medium-sized enterprise can afford.

Regular maintenance, care, and ongoing assurance of effective security architecture are necessary for smooth and secure on-premise operations. Cloud solutions also offer advantages in terms of operational costs. Transforming to a cloud operating model can free up resources in the company that can be reallocated to innovation, new products, and growth.

Operational infrastructure in the cloud can be used to control plants or machines in the manufacturing industry (cloud-based backends). Cloud can also be critical in the operation of smart stores.

However, the possible added value of cloud computing goes far beyond IT. Small- to medium-sized enterprise that only use the cloud as an outsourced IT infrastructure are not making full use of its potential. The cloud can transform and accelerate the way products are designed, manufactured, improved, and distributed.

First: Cloud transformation should be used to optimize applications and related processes. Instead of migrating existing applications, processes, and data to the cloud in their original form (“lift and shift migration”), they should be standardized and simplified as part of the migration.

Second: A great potential of the cloud lies in sharing or collaborating around data with business partners or customers in the cloud. It is essential that a cloud transformation is carefully planned and implemented so regulatory requirements are met which can help minimize the risk of reputational damage – to avoid things like the misuse of company and customer data by third parties.

Therefore, data protection and compliance should aim to be ensured at an early stage. In addition, robust data governance structures should be used to help ensure that sensitive data is not transferred to data sharing ecosystems. Only in a later step should the potential of data exchange be developed.

By sharing data, value chains and business models can be optimized and redesigned. Your own company and customers, along with supply chain partners, can potentially benefit from this.

For example, companies could use shared data pools tooptimize the maintenance and repair of their machines ("smart maintenance"). Or, a retailer's suppliers could gain insight into their real-time data and thus see when the retailer's stock of their products is running low and help ensure the timely delivery of new goods. The scenario would also apply to pre-product research and development, and many other cases.

Such information has commonly been shared along value chains in the past, but cloud solutions can simplify and automate this in a shared ecosystem.

Value creation can also be generated on a larger scale. One example of this is the Catena-X project – a decentralized, open, and scalable network in the automotive industry. It aims to ensure that vehicle manufacturers, suppliers, and outfitters exchange information and data across companies in a standardized and secure manner. A particular focus is on the active involvement of medium-sized companies.

Catena-X is intended to make collaboration in the industry more efficient, i.e., to enhance and accelerate logistics, supply chain and quality management processes. The participants hope that this will increase the competitiveness of the vehicle industry and increase sustainability along the value chain.

In order for data sharing in these ecosystems to be mutually beneficial, it is crucial that these networks are based on equal partnership and reciprocity. There should be no dominant actor in the ecosystem who can gain an advantage  from the data to a particular degree and/or to the detriment of other members.

The cloud provider itself should not be a dominant player either – for example, in addition to its function as a cloud service provider, it also acts as a competitor to those who make their data available and share in the cloud.

With the points described, small- to medium-sized enterprises, in particular, can make greater use of the diverse potential of the cloud. However, it is important that any attempt at cloud transformation fits in with the strategic goals of the enterprise, is embedded in the overall digital transformation strategy, and that a suitable cloud architecture with the right cloud provider is selected accordingly.