What Is a Cloud-Based Contact Center?

Customer service call centers got their start in the 1960s, and by simply picking up the phone when customers called, provided the most basic version of what we know today as contact centers. 

As communication technologies evolved and customer service became more important to all businesses, call centers eventually evolved into contact centers. While traditional call centers are only for phone calls, contact centers expand those channels of communication across a variety of mediums, including online chats, SMS, and more. 

The second major distinction between traditional call centers and modern contact centers is the data collection and analysis that takes place, leading to many contact centers now being cloud-based. This blog will explore what cloud-based contact centers are, cloud vs premise-based contact centers, along with the benefits and solutions they provide for customer service departments. 

What is a Cloud-Based Contact Center? 

A cloud-based contact center is a contact center solution hosted in the cloud rather than on-premises. This solution leverages cloud computing technology and is easy to scale, flexible, cost-effective, and secure. 

Cloud Versus Premise-Based Contact Centers 

On-premises and cloud-based contact centers have the same end goal — to serve customers more effectively. So why do organizations choose to make the switch from on-premises to cloud-based contact center solutions? And why now?

Scalability:

For organizations running complex contact center operations, scalability is the biggest felt difference between the on-prem and cloud-based contact centers.

Premise-based contact center use requires continuous server purchases over time, regardless of usage trends. Even servers with high storage will eventually hit capacity, and the cycle of buying new servers will continue. 

A cloud-based CCaaS (Contact Center as a Service) model can be automatically scaled for you by your vendor, so adding to your cloud capacity is a no-brainer during high-traffic times and sustained business growth, allowing for organizations to pay-as-they-go.

This works both ways, since a vendor will also scale back your cloud server capacity based on peak call times and seasonal upticks in business.

Staffing: 

On-prem hardwire requires physical storage space and dedicated staff for managing the hardware. As remote work and smaller office spaces increasingly become the norm, many companies cannot justify the space and staff required to store on-prem contact center hardware.

Lifespan:

Hardware lifespan is limited, and upgrading hardware is costly. No hardware replacement is required when using a cloud-based contact center. Instead, your vendor can automatically make upgrades and improvements to your storage solution, so your organization always stays up to date. 

Security: 

Contrary to what some may think, a cloud-based contact center is actually more secure than on-prem. If your organization uses a provider who is taking the most current and compliant security measures, your cloud-based contact center will excel in security, as well as fully mitigating disaster recovery risk. On the other hand, it requires more staff and complex logistics to keep physical hardware safe and secure in your building at all times.

Current Cloud-Based Contact Center Trends 

AI:
It should come as no surprise that AI is making big waves in the CCaaS world. Companies are either implementing IVR (Interactive Voice Response) services for agent support, intelligent flow support, in their contact center strategy, or they are updating beyond IVR to Intelligent Virtual Agents.

CRM Integrations: As competition between CRM and CCaaS providers increases, so does the potential for innovative integration. Partnerships between CCaaS companies and Salesforce, for example, show the potential for native CRM deployment within existing CCaaS solutions.

Personalization:
CCaaS solutions are so advanced that customers now expect personalized interactions from their contact center provider — many may not even realize they’re speaking to a virtual agent to begin with. Customers implicitly know that companies have access to their data and expect it to be used in call center interactions.

Top Industries for Cloud-Based Contact Centers 

Wondering if your industry needs to focus on contact center optimization? Learn from these leading cloud-based contact center industries: 

Telecommunications:

The telecoms industry uses CCaaS on a large scale, given their high volume of customers and high number of use cases for self-service. As these organizations become increasingly competitive, there is an incentive to reduce contact center costs, and cloud solutions are key to accomplishing this objective.  

Banking and healthcare:

The needs of banking and healthcare customers are varied and often urgent. These industries require extensive compliance and security measures, which can take time and tedious repetitive tasks for call center employees. A cloud solution is ideal for these industries as they provide increased capability and IVR options for multiple levels of demand.

Manufacturing and retail distribution: 

Supply-chain-focused organizations require robust contact centers for addressing customer needs, order issues, returns and exchanges, and more. 

Features of Cloud Contact Center Platforms

Cloud-based contact centers come with a variety of capabilities. These will vary based on the provider your organization chooses, but some essential features to be on the lookout for are:

Omnichannel capabilities: As mentioned above, simple call centers don’t cut it for most organizations anymore. Find a contact center platform that has omnichannel capabilities for the places your audience is interacting with the most – WhatsApp, Messenger, and social media DMs are just a few omnichannel options to consider, so your company can show up where your customers already are. 

Real-time analytics: Access to real-time analytics from your cloud-based contact center provider will be crucial for BI reporting and quick, relevant decision-making. 

Reporting access: Certain vendors have paywall access to contact center data and reporting, which is a major setback for any company. If you are struggling with access, remember that this is your organization’s data. Paying for a cloud-based contact center service means you should always have access to the reporting your organization needs. 

Benefits of Cloud-Based Contact Centers

Still on the fence about implementing or transitioning cloud-based contact centers? A few of the biggest cloud-based contact center benefits are: 

Scalability and flexibility:

A contact center solution that suits your company well now may not be a great fit five years down the road. Migrating on-premises contact center solutions is a huge headache compared to the ease of migration that comes through simple cloud-to-cloud transitions. 

Cost savings and reduced infrastructure costs:

While the on-prem versus cloud-based cost comparison will be different for every organization, an on-prem contact center solution is almost always more expensive than a cloud-based solution. Because of their longevity, simple implementation, and ease of access for those who need it, cloud solutions remove the upkeep costs required of hardware and software, as well as storage and staffing costs. 

Enhanced disaster recovery and business continuity:

In the event of a disaster, cloud-based contact centers can continue to operate almost uninterrupted as long as your employees have access to the internet, in contrast to an on-prem contact center, which is vulnerable to power outages and physical damage.

Selecting the Right Cloud Contact Center Software

Choosing the right cloud contact center software comes down to your organization’s unique needs. Almost every CCaaS provider will meet your contact center needs on a basic level, but we encourage you to truly evaluate every vendor available to determine who will truly be a good fit. 

Some cloud contact center software provider options include NICE, Five9, Genesys, and Google CCAI.

Kenway’s Approach 

Kenway is proud to provide a strategic call center solution approach for customer service oriented organizations. Our focus on strategy, implementation, reporting, and support includes thorough vendor assessments and full digital transformation consulting and support from start to finish.

FAQs

What is a cloud-based contact center?

Rather than hosting a contact center on-premises, a cloud-based contact center is hosted online in the cloud. 

What are the benefits of cloud-based contact center solutions?

Cloud-based contact centers provide solutions for organizations including cost savings, increased security, disaster recovery, advanced reporting and analytics, and flexibility. 

What are the main differences between cloud-based contact centers and on-premises contact centers?

Cloud-based contact centers offer greater flexibility, scalability, and remote accessibility, with lower upfront costs and easier maintenance through a third-party provider. While on-premises contact centers offer more control over data and infrastructure, they require significant initial investments, dedicated IT resources, and are less adaptable to rapid changes in demand. The choice often depends on your business's size, budget, and operational needs.

The Comprehensive Guide to Multi-Cloud Architecture

The presence of multi-cloud architecture is representative of the complexity of our digital age. The multi-cloud approach to data management is already the industry standard although it is relatively new, and while it can greatly increase productivity and help companies progress in their data storage capabilities, it also presents challenges in terms of security, cost, and streamlined management.

This article will provide an overview of multi-cloud architecture, from its advent and evolution to current use cases and projected future growth. 

If your organization wants to stay ahead of the curve in multi-cloud computing, keep reading. 

Evolution of Cloud Computing

Like most things in the world of technology, cloud computing has had strong roots in the world of IT for decades, but only in the last 10 years has multi-cloud computing taken the front and center stage as the best practice for organizational data management.

From single-cloud to hybrid to multi-cloud strategies 

When cloud computing came onto the scene, the focus was solely on using an individual cloud to store data. The single-cloud model gave companies and individuals the ability to store data online rather than burdening their physical servers.

As data centers and organizational needs increased, a hybrid-cloud model was developed. This method of cloud computing combined physical data storage with cloud computing for a more diversified, secure, and flexible cloud storage option.

We are now in the age of multi-cloud computing, which has only been commonly used for a handful of years but is now the standard for any enterprise with data storage needs.

Flexibility and innovation in cloud infrastructure

Cloud computing has cycled through three versions of itself in just a couple of decades. While this fast-tracked growth can be overwhelming for business owners and IT departments working to keep up, it is the best and perhaps only way for cloud infrastructure to progress. The modern world of technology moves at lightning speed, and if cloud computing is going to do what it promises — provide security, flexibility, and agility for data storage — it needs to move as quickly as the rest of the IT world. 

What is Multi-Cloud Architecture?

Multi-cloud architecture is the use of two or more cloud services to store, manage, and deliver data for a variety of purposes. Muli-cloud architecture is closely related to hybrid cloud, which is the use of a private, on-premises cloud in tandem with a public cloud. 

Multi-cloud architecture for diverse organizational needs

Every cloud iteration has proven better than the last, and hybrid multi-cloud architecture continues to demonstrate this by supporting diverse organizational needs. When an organization is working across multiple departments, serving various types of clients, and dealing with large amounts of data, a “just okay” solution to data storage isn’t going to cut it. 

Instead, enterprises need what a multi-cloud system provides: flexibility, security, high performance, and low downtime. An additional perk of multi-cloud computing is the variety of cloud providers on the market. Rather than choosing just one provider, organizations can make a la carte cloud choices based on budget, particular storage needs, and available integrations. 

Multi-cloud architecture truly allows organizations to custom-tailor their storage solutions, which helps them see success everywhere else in their business.

The Strategic Importance of Multi-Cloud Architecture

The customization mentioned above means that even competitors in the same field can set themselves apart from one another in the way they deliver services and handle customer data. Multi-cloud architecture creates a world of possibilities for business owners to craft their governance and management strategies in unique ways, rather than being beholden to predetermined cloud computing requirements. This also means that as your business grows and changes, your cloud strategy can grow with you. 

Benefits of Multi-Cloud Architecture

Enhanced reliability through redundancy:

Redundancy implemented with multi-cloud network architecture provides security and peace of mind for your organization. Redundancy means you can store a data set in one location, on one platform, and have it duplicated and backed up on a completely different provider’s service. If an outage or cyberattack impacts your primary cloud, your backups will be secure. 

Optimized performance:

Different cloud providers have different specialties. Some are valued for their cost-effectiveness or security, while others are useful for automation, customer service, or performance monitoring. Capitalize on the potential of these providers by crafting a multi-cloud plan that will play to the strengths of each provider you choose, so you can get the highest benefit every time. 

Improved disaster recovery capabilities and geographic reach:

Similar to reliability through redundancy, multi-cloud architecture removes the risk of losing valuable data in the event of a natural disaster or outage. Storing data in clouds across geographic locations means that if one location becomes inaccessible, your data will still be secure.

Multi-Cloud Challenges and Considerations:

While multi-cloud architecture is a top recommendation from IT professionals and adds many benefits to enterprise data storage, some challenges accompany multi-cloud network architecture as well:

Complexity in management and integration:

The biggest benefit of multi-cloud computing can also be its biggest downfall. Piecemealing together a multi-cloud strategy based on specific offerings from different providers is a great way to tailor your storage needs to your cloud solution, but it can be a headache for governance and management. Data contracts and thoughtful governance plans should be implemented early in the process of adopting a multi-cloud solution to avoid confusion across your enterprise.

Security concerns with data spread across multiple platforms: 

The security that comes from redundancy across platforms is also a double-edged sword. Coordination and alignment across your organization are necessary to ensure security measures are implemented correctly between every department and cloud provider. 

Vendor lock-in risks:

Make sure you fully understand the requirements and contractual obligations of each cloud provider you use before implementing their cloud for your data. The last thing you want is to try to implement a multi-cloud strategy, only to end up locked in with one provider and forced to abandon the rest of your multi-cloud plan.

Planning and Implementing a Multi-Cloud Strategy

There is no one-size-fits-all approach to planning your multi-cloud strategy. The needs of your organization, your existing data systems, and your IT budget are just a few factors to consider when planning a multi-cloud approach.  

Designing a Multi-Cloud Environment

The elements of a multi-cloud environment will vary, but there are multiple design patterns to choose from and services to use for successful design implementation. 

Assessing business needs and technical requirements:

Don’t make multi-cloud strategy decisions in a vacuum. This stage of the process is a great time to pull in stakeholders from across your enterprise to ensure a well-rounded view of your data storage needs is obtained. Interview these stakeholders, find common pain points and growth goals, and begin making decisions about your multi-cloud environment from there. Some business needs to be on the lookout for are scalability, security, user interface, and customer support. 

Selecting the right mix of cloud providers and services:

Choosing your cloud providers takes a great deal of intention and research – ensure the compatibility of your existing cloud services by weighing your choice cloud providers up against your analytics services, such as Microsoft Fabric or Tableau. 

Integration Techniques

Once your cloud providers are chosen and your multi-cloud strategy is laid out, integration is the next step. Strategy is a great start, but implementing multiple cloud providers at once with your pre-existing systems is a significant task. Cloud integration is when the strength of your multi-cloud system will truly begin to shine. 

Seamless connectivity solutions
There are many options and platforms to choose from when integrating your existing cloud services with your new multi-cloud strategy. If you have on-premises cloud storage, focus on creating a hybrid-cloud bridge between your existing private cloud and new public clouds. The most important aspect of integrating your cloud platforms is a seamless integration experience — focus on a system that will be efficient and secure, with limited down time. 

Another method for seamless cloud integration and development is containerization through tools like Kubernetes. These containerization tools allow your organization to develop cloud-native apps, adjust workloads, and grow in flexibility across cloud providers.
Pro tip: While considering your integration tools and methods, it’s also a good time to evaluate whether your data is being housed in the most efficient way. A data lakehouse is the most flexible, cost-efficient, and secure form of housing and organizing structured and unstructured data. 

Security and Compliance

One consideration of hybrid multi-cloud architecture is ensuring security and compliance measures are stringently followed across every cloud platform. 

Internal, company-wide measures can be taken to educate your team on data security, set up guardrails for data access, and establish expectations for best practices – because although security platforms and data restriction can go far for your company’s privacy and security, individual users are interacting with this data every day, and they ultimately have responsibility for the handling of important data.

One highly effective way to establish governance and compliance across your company is to implement particular contracts, policies, and governance norms that can be agreed upon by every team member.

Operationalizing Multi-Cloud Architecture

Now that your multi-cloud strategy has been established, your integration tools have been chosen, and governance policies have been laid out for your organization, it's time to use your cloud strategy in real time. 

A multi-cloud management tool can significantly reduce your workload in managing multi-cloud architecture, and there are multiple options to choose from.

To discern which multi-cloud management tool is best suited for your organization, weigh your priorities and greatest needs. Are you most concerned with cost savings, Kubernetes management, governance and security, or hybrid to multi-cloud integration? 

Make a priority list and discover which tool may be right for your organization. Multi-cloud management tools to explore include:

Cost Management and Optimization

Multi-cloud architecture integration and management tools are important for the growth and success of your business, but the cost of these premium providers can add up. A few ways to mitigate excessive spending on cloud tools is to ensure there is no idle spending on certain platforms through constant monitoring and reallocation of resources based on current needs. 

Remember that the benefit of multi-cloud architecture is the inherent customization, so take advantage of that and adjust your cloud provider allocations based on your business growth and current needs. 

Some cost-monitoring and management tools include Azure Cost Management, Amazon CloudWatch, and CloudHealth. 

Case Studies and Real-World Applications

Kenway successfully aids enterprises in their hybrid to multi-cloud deployment, from organizations at the national level to small businesses. These companies are seeking assistance in everything from growing in their understanding of their buyer's needs through Salesforce to establishing cloud redundancy and increasing organizational security. 

The possibilities of success that can come from your organization’s investment in multi-cloud architecture cannot be overstated. See for yourself how one of our own clients scaled their operations through technology modernization and a multi-cloud solution.

Future Trends in Multi-Cloud Architecture

Multi-cloud architecture has made large strides toward further data integration and sophisticated data storage and use, but if we know anything about the world of IT, it's that things move more quickly than most anyone can predict or expect. 


AI and machine learning

AI is a game changer for the entire digital world, and the cloud is by no means excluded from its impact. AI and machine learning can fill in the gaps for organizations without team members being proficient in every cloud or management platform, as well as aiding in optimization and analysis. 

Edge computing 

Edge computing is a form of physical storage that places data storage as close to the data source as possible, cutting out the centralized cloud approach for a decentralized approach that can be more efficient and secure in certain scenarios. 

With so many types of data and organizational needs, edge computing and cloud computing should be able to coexist with no issue — in short, there is plenty of demand for both. 

Summarizing Multi-Cloud Benefits

Now that we have walked through the history, benefits, challenges, integration, security, cost roadblocks, and management tools that go along with multi-cloud orchestration, you should have a comprehensive understanding of what platforms and providers will best set your organization up for success as you transition to a multi-cloud system. 

While the initial setup and implementation is a large lift, remember that multi-cloud is the way of the future for digital enterprises. The sooner you begin implementing your multi-cloud architecture, the more of a competitive edge you will have in the fast-paced digital environment. 

For organizations just starting with multi-cloud implementation, Kenway recommends laying out your cloud strategy priorities and gathering insight from stakeholders across the company. Have a plan in place for every provider that will be needed to make your company’s cloud integration a success, from providers to internal governance. 


Lastly, remember that multi-cloud architecture is far from one-size-fits-all. The unique needs of your particular business should dictate the choices made for implementing this new structure – be attentive to what those inside of your organization are saying, and stay cognizant of advice received from multi-cloud experts. 

If expert advice is an area where your enterprise needs support, Kenway would love to supplement those needs with our team of consultants. Kenway is proud to offer tailored multi-cloud strategies based on your enterprise's current needs, growth plans, and security requirements. 

Multi-Cloud Architecture FAQs

What are the benefits and risks of multi-cloud architecture?

Multi-cloud architecture benefits include increased disaster recovery capabilities, security through redundancy, and data flexibility. On the other hand, risks of multi-cloud architecture can arise when governance is not taken seriously by an organization and its team members, and when cost-savings are not taken into account from the start of implementing a multi-cloud strategy. 

How does multi-cloud architecture enhance security and compliance?

Multi-cloud architecture requires a high level of intentional security and compliance because of the various cloud providers being used at once. The elevated security risk can actually be a benefit because of the level of intention and coordination required to ensure a consistent security plan across the board.  

What strategies should organizations adopt for effective multi-cloud integration?

Use a containerization or organizational tool like Kubernetes for effective multi-cloud integration, as well as planning well beforehand and focusing on preparation for reduced downtown during integration efforts.

Cloud Data Warehouses and Data Warehouse Modernization

I can still remember my first time working with a data warehouse. The year was 2013, and I was working on my first post-school data engagement with an IT software organization. We were going to build a sales-centric enterprise data warehouse that would extract, cleanse and integrate a variety of data into a single, large repository, transforming the way the business managed their sales lifecycle. This enabled their team to leverage data in all facets of the sales lifecycle and optimize their ability to close deals.

I was fascinated by this concept, and its value proposition was clear and powerful. I was hooked at that point and have subsequently spent the majority of my career working on data engineering, data warehousing, and business intelligence solutions.

Shortly after this initial engagement, I began learning about cloud data warehouses. Today, organizations use tools like Azure Synapse and Snowflake to manage massive volumes of data every day. But it took a while to get to this point. Here’s a look at how data warehousing solutions have evolved, and what to consider as you modernize your approach to data storage.

Why Data Warehouse Modernization Is So Important

For many years, regardless of the industry, company size, or the BI platform, data warehouse structure was essentially the same. At the core, there would be a separate relational database to house the data, typically leveraging dimensional design schemas. A nightly data integration process would be developed to extract data from the line of business applications to load the data. These two components would make up the backend of the data warehouse and take the most time and effort to implement.

On the front end, there would be any number of business intelligence tools to give users direct access to slice and dice the data. This solution supported the operational and management reporting with respect to “what happened” types of business questions.

This was the typical data warehouse for many years, and it has served us well. However, new trends are causing it to break in several different ways, including but not limited to data growth, fast query expectations from users, non-relational/unstructured data and cloud-sourced data. Organizations are unable to meet the growing need to integrate and analyze a wide variety of data being generated from social, mobile and sensor data. Seventy-seven percent say that data intelligence is a major challenge. More importantly, these data warehouses struggle to answer the forward looking predictive questions necessary to run the business at the required levels of granularity or in a timely manner.

However, modern solutions, like cloud data warehouses can be designed to handle these new trends.

The Modern Data Warehouse Structure: What to Consider

Data warehouse modernization can have a different meaning depending on the organization’s level of Business Intelligence (BI) maturity. Modernization is relative to the organization’s current capabilities and needs. Some organizations today are still struggling with basic reporting and often export data into Excel to organize, filter and analyze their data. Because Excel offers benefits in reporting, some organizations often fail to see the value of investing in BI. Others have very mature data warehouse capabilities with multiple data platforms, advanced reporting tools and sophisticated power users.

From Kenway’s experience, many organizations are expected to upgrade their data warehouses and some of their analytical tools over the next several years. This may require a multi-platform environment to handle both the traditional data warehouse reporting needs and to handle big data analytics. It also may require a transition to a cloud data warehouse solution.

When thinking about modernizing your existing data warehouse, start by evaluating your existing reporting capabilities and revisit the original business drivers and assumptions. Start by asking the following questions to determine if you have a need to modernize your data warehouse:

Cloud Data Warehouses and Other Modern Storage Solutions

Cloud data warehouses are now widely touted as the future of data warehousing. They enable organizations to keep up with ever-expanding amounts of data. Data professionals say that data volumes grow by 63% every month at their companies. Many organizations are already short on IT talent, and managing on-premise solutions becomes unwieldy when data volumes are growing that rapidly. With a cloud data warehouse, you can rely on a third-party to maintain the hardware and system updates for your database needs and allocate IT resources to other, business-critical tasks.

Along with a cloud data warehouse, there are other new tools, techniques and data platforms available today that can be used to achieve data warehouse modernization:

Modernize Your Database

In conclusion, traditional data warehouses were never designed to handle the volume, variety and velocity of today’s data centric applications. Therefore, many organizations will need a more modern data warehouse platform to address many emerging business and technology requirements.

Are you interested in learning more about how Kenway can help you modernize your organization’s data warehouse? Kenway’s experts can help. Connect with us today at [email protected] for a consultation.

Cloud Data Warehouse FAQs

What is a cloud data warehouse?

A cloud data warehouse is a cloud platform acting as a centralized data store and serving data for analytical use-cases. Cloud data warehouses sit adjacent to a broad toolbox of public cloud data services and enables integration and use of these services to deliver applied data use-cases.

What is the difference between a cloud warehouse and a data warehouse?

Whereas traditional data warehouses require organizations to deploy and maintain on-premise hardware and software, cloud warehouses don’t require any physical hardware.

How does cloud data warehousing work?

With cloud data warehouses, third-party vendors manage all hardware and software updates. Data is stored in the cloud, and can be accessed from anywhere. When an organization needs to increase its storage capacity, it can simply upgrade its account with the vendor — there’s no need to add more on-premise hardware.

Is AWS a data warehouse?

AWS provides a wide variety of managed services, including data warehousing solutions.

 

From Problem Prevention to Solution Innovation: The Cloud

If you’ve explored the work of Daniel Kahneman, you may have found yourself wondering about the nature of certainty in an unhealthy amount. In his Nobel Prize winning body of work, we are confronted with evidence corroborating what we already know but sometimes are too scared to admit –that humans make the same mistakes over and over again. Kahneman’s work as a psychologist is focused on understanding errors in human judgement that are caused by consistent hiccups in the machinery of cognition, rather than the type of errors induced by changes to our emotional state. Knowledge of the first type may be especially impactful to those who are making strategic decisions about large organizations. In the world of high-impact decision making, mistakes have big consequences. This is the world of strategy.

If we define ‘strategy’ as the process of putting your team in a winning position, then it is a topic that has been of interest to humans for millennia. I’d like to present a case as to why I believe that it is in every company’s strategic interest to develop and expand their cloud capabilities. Specifically, I’ll address how the developing world of cloud services and solutions can offer decision makers reprieve from the real costs of uncertainty.

It’s a mistake to think of integrating cloud services, or migrating current infrastructure to Amazon Web Services (AWS) or Azure, as merely a choice of technology; migration and integration hardly encapsulate the strategic opportunities of rethinking, rebuilding, and enhancing work-flows across the enterprise. Amazon’s branding of its annual cloud conference ‘re:Invent’ forebodes an epoch of strategic change for businesses all across the globe. Delivery of IT services via a cloud delivery program is not just a matter of taste –there are many consequences that will impact your business’s ability to put itself in a competitive position, especially against those who have already begun to embrace Cloud Services as part of the fabric of their solutions.

The numbers suggest adoption of Cloud Services is accelerating. An article on CIO.com estimates the size of the public cloud market has grown nearly 70% over the last two years. With a little more research, we find that Amazon Web Services, the business unit responsible for generating 71% of Amazon’s operating income, was able to cut prices of different services seven times in Q4 of 2016. Over the last few years, we have seen many companies begin to build their cloud services capability by instantiating development and test environments on hosted environments. We think that trend will continue, and in 2017, we will see companies migrate more and more production services to some form of a cloud delivery model.

The Availability Heuristic

I’d like to briefly expound on one insight from Kahneman to help better explain my argument; what Kahneman calls the availability heuristic. This is a mental shortcut we take when making decisions by associating personal experiences or more commonly-observed scenarios to inform our ultimate decision, because these are more easily available to us. This applies to what Kahneman calls the judgment of frequency, or making estimates for the probability or frequency of an event. For example, Kahneman’s work shows that if you were to ask someone whether they have read more fiction or non-fiction books in the last 10 years, their answer would be heavily influenced by the genre of their most recent reads.

Now that you have an idea of how the availability heuristic influences our results, let’s think through a case where a company’s strategic leadership might be particularly susceptible.

Use Case: Solution Innovation

One strategic responsibility for any company is to ensure they are able to acquire the inputs and materials necessary to solve business problems. In today’s business environment, this means procuring computing power, digital storage, and network capabilities among other things. The exercise of identifying the capabilities necessary to create solutions to the universe of problems that a business might confront, invites the availability heuristic right through the front door. This set of problems is abstract in nature, but the closer we can get to the set of problems that will actually occur, the more of a strategic advantage you will have gained.

Let’s say that you have an incredible forecast rate of 80% (which means you correctly predict 8/10 problems that will occur). But now the success of your company could rest on the outcome of those two misses. Are you The Home Depot missing out on the sale of two washing machines, because your forecasted numbers were slightly off in Jacksonville? Or are you Blockbuster Video missing the expansion into digital streaming?

Despite our best efforts, we are going to be wrong some of the time, and unfortunately this can happen a lot of the time. In the face of these limitations, we might pursue a different line of questioning –what is the best strategy to mitigate the cost of being wrong? What can we do now to minimize the impact of our future failures? In this thought experiment, we must divest some of our focus from problem prevention and invest in solution innovation.

Cloud computing enables on-demand access to a pool of public (or private) and configurable computing resources. These resources can be quickly provisioned, and because cloud delivery models only require you to pay for the resources you use, the full cost of a solution will depend on the scale of deployment. Developers working closely with the business gain the ability to create small batch, scalable solutions for extremely low cost. Furthermore, you can adopt an approach where value isn’t the result of an event, rather value is created by the process of iterating and examining the features of a solution using a closed feedback loop and deploying what works and throwing out what doesn’t. Companies immediately benefit from shortening the time-to-value horizons. The story of Netflix embracing cloud services is a great example of the benefits realized from embarking on this journey (listen to Netflix’s Cloud Architect Adrian Cockcroft discuss their journey here).

Another strategic advantage is realized by outsourcing maintenance to vendors who are more efficient providing those services, which is especially helpful if you are realizing growth and your forecasted capacity requirements will prove to be low. Here we see how the public cloud facilitated the extreme global growth of some of our favorite services like Uber, Netflix, and Salesforce.com.

To combat the impact of unknown disruptions, the events we leave out of our mental models, we can explore opportunities to re-engineer the process of solution innovation itself. An IT organization that can deliver services via a cloud model will allow their companies to attack these innovation opportunities from many different angles.

This might mean examining the value proposition of enabling Cloud Access to an organization’s development workflows to encourage cloud computing skills to take root organically within the IT space. It could mean pursuing opportunities to virtualize the processing and storage of large datasets; saving researchers time, and allowing their insights to add value on a shorter horizon. Or it might mean you’re a small company, and you don’t want to deal with the headaches of owning your own email server anymore.

Kenway is here to help. If you’d like to learn more about how we are helping companies embrace Cloud technologies, or if you’d just like to find out more about who we are and how we think, please reach out at [email protected].

For More Learning: Podcasts, books, and articles that helped inform this viewpoint

a16z: All About Microservices

An interview from September 2016 discussing the cloud journey Netflix felt it had to embrace to become a global leader in streaming services

Thinking Fast and Slow

Daniel Kahneman’s attempt to consolidate his 40-years of work on human’s mental shortcuts when faced with uncertainty

The Undoing Project

Michael Lewis’ narrative on Daniel Kahneman and Amos Tversky’s friendship and how their ideas on judgement and decision making is becoming a major influence in the world of high-stakes decision making including business and sports.

6 Trends that will shape cloud computing in 2017

Article summarizing the likely trends in cloud computing for the upcoming year

Amazon Web Services posts $3.5B in sales, up 47% from last year, reaches $14B annual run rate

Report on current state (2016) of Amazon’s cloud products (AWS)