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Cloud computing set to transform Russian business this decade

Val Draggeim’s article in The Moscow Times Partner, Consulting/technology integration Deloitte CIS

 

Internet technology has helped create new business models since the late nineties that have reshaped how companies do business today. Now, the cloud computing adoption is producing a new range of business services that are much more comprehensive and capable, and will define the next decade of business. The qualities that define cloud computing – on-demand service, elastic capacity, and variable consumption – offer a powerful new way to deliver new business services and business models. Russia, along with other emerging economies, has the chance to move directly to the more effective models offered by cloud providers and develop an even more agile economy than those who adopted cloud systems early on.

Prospects of Cloud Computing in Russia

Worldwide spending on cloud computing is forecast to exceed $150 billion by 2013, with Russian spending likely to be in the hundreds of millions of dollars. As IT use in Russian companies is less developed than in the United States and Western Europe, proportionately fewer organizations in Russia have significant data center infrastructures and fully automated  core business processes. For many companies, the question is what path to take when building their IT structures for the future, and the choice of computing infrastructures and business applications potential offers unlimited opportunities to them.
An analogy that is often given to cloud adoption here is the development of the telephone network in Russia. A comprehensive country-wide landline infrastructure was never established during the Soviet Union, so modern Russia almost entirely bypassed the capital-intensive development of a landline network and jumped straight to mobile telephones. Similarly, Russia could go straight from a relatively undeveloped IT structure to a comprehensive cloud computing that is more economically efficient and advanced than other contemporary IT infrastructures.

New business models

Cloud computing is a compelling new approach for enterprises to take in order to use IT more effectively. It is helping organizations to radically lower their market entry costs, speeding up solution implementation, and putting in place new models which have elastic scale and pricing. Initially, companies consider cloud computing options mainly because they want to reduce capital expenditure on IT. Later on, however, the vision extends beyond the conventional cloud layers of infrastructure, platform, and software, to a potentially revolutionary use of cloud computing throughout the business. The latest cloud practices are creating new ways of providing and delivering business services – or even introducing services that have never been seen before in the market. Service providers are using cloud services to compete in new ways, offering a complete business service – Business-as-a-Service – without cloud subscribers having to operate other systems or software. Several solution providers in Russia offer cloud services that provide comprehensive accounting, tax compliance or customer relationship management services, and they are discussing completely new business models, such as cloud brokering, to make the most of dynamic supply and demand trends.

Management impact

Cloud computing can have a profound impact on both the IT and business models of a company, and it will be key for technology and business leaders to understand the broader implications of cloud capabilities. The challenge goes beyond determining the right cloud vendor and implementation strategy. Policies on data management, security, risk, compliance, and even tax can all be impacted by the adoption of a cloud computing system. The cloud revolution offers greater IT capability, agility, and flexibility, allowing for a dynamic scaling of resources that adapts to the speed of business change. Overall IT spending can decrease as IT capacity inefficiencies are reduced through using a “pay-as-you-go” model which requires fewer data center resources and lower maintenance costs. Perhaps most importantly, organizations are seeing rewards coming quicker with lower business start-up costs, projects taking less time, and improved results. Absence of specific tax regulation of cloud systems means tax structuring can be freer, as was experienced by U.S. and European companies when cloud systems were being introduced, and hence more opportunities for cloud services providers. Although still in its infancy, cloud computing has the potential to completely change the way we do business. At the moment, we are only aware of a fraction of the change it is capable of achieving.

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