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Cloud Computing in the consumergoods industry
1. IBM Global Business Services Cloud Computing
White Paper
Cloud computing in the consumer
products industry
2. 2 Cloud computing in the consumer products industry
Executive Overview Cloud computing helps reduce costs — not simply contain
Smart consumer products companies use the power of cloud them. This approach has already helped IBM consumer
computing to respond more quickly, improve service delivery, products clients achieve breakthrough productivity gains
reduce costs and drive business innovation. through virtualization, optimization, energy stewardship and
flexible sourcing. With IT spending at a very small percentage
As the consumer products industry faces unprecedented change of total revenue (most of which is spent on maintenance and
to meet the needs of consumers, retailers, new markets and management of existing systems), and with billions of dollars
challenges in commodity prices, two things will separate the lost annually to supply chain inefficiencies, consumer
winners from the losers: speed and agility. Technology will products companies trust IBM cloud computing solutions
have a key role to play in providing business leaders with the to help them become truly capable of glocalization and
information and predictive capabilities to make decisions differentiation, to integrate information and foster innovation
quickly. But with business still suspicious of the actual value and to demonstrate the consumer-centricity and corporate
added by information technology and the ongoing pressure responsibility that keep their organization strong.
on budgets, a new delivery model must be found that is fast,
secure, cost effective and has the ability to bind business and This whitepaper gives an overview of cloud computing and
IT. That model is cloud computing. illustrates how IT and business leaders at consumer products
companies can use IBM cloud computing to:
Consumer products companies are drawn to cloud computing
for its ability to speed service delivery and increase service and • Develop solutions in a short time
infrastructure availability while creating an elasticity that • Reduce IT labor cost by 50 percent in configuration,
allows services to be expanded — or contracted — as demand operations, management and monitoring
changes. Cloud computing gives you the ability to take action • Improve capital utilization by 75 percent, significantly
with much greater speed and reduces IT labor costs by up to reducing license costs
50 percent in configuration, operations, management and • Reduce provisioning cycle times from weeks to minutes
monitoring.1 • Improve quality, eliminating 30 percent of software defects
• Reduce IT support costs by up to 40 percent
Because companies can leverage economies of scale
through a cloud environment, they can reap this higher
ROI through greater staff efficiency and optimization of
IT resources. Cloud computing supports efforts to
establish and enhance information management and service
management architecture. With all these benefits in place,
cloud computing also help improve the perception of IT as
being both flexible and responsive.
3. 3 IBM Global Business Services
The consumer products industry: The consumer products industry is changing to meet the needs
Plenty of IT challenges of the consumer and retail customer and their IT organizations
Business leaders at consumer products companies have been cannot stand still. IT groups at consumer products companies
diligent about cost takeouts — and in support of this effort, must continue to control costs — yet they are also charged with
IT departments have moved to a distributed computing creating business value. But where will they get the budget?
environment. But despite much effort to streamline, the same According to a 2008 IBM study of CIOs, spending is very low
problems persist. The consumer products industry continues and staying flat.
to lose about US$40 billion (3.5 percent of sales)1 annually to
supply chain inefficiencies and customer trade promotions The most recent figures from a study of 134 CIOs indicate
still account for approximately 15-25 percent1 of revenue spend. that IT spending as a percentage of total revenue was 2.11
Adding to these pressures for IT is the perception of business percent — and much of that spend is on maintenance and
leaders that IT does not drive or deliver value. The business existing systems. Little money is allocated to growth and new
side also perceives projects as taking too long to complete, areas of opportunity.
and quality is not what it should be.
Further supporting this view, the 2008 GMA IT Study
reported that 2007 IT operating budgets as percentage of
total revenues was 2.11 percent. See Figure 1.
Despite the need to enhance these capabilities, IT spending remains flat
and substantial change within IT is seen as needed
As % of revenue, most IT budgets have Chief Information Officers and Chief
remained flat over the last 5 years Executive Officers see need for change
Amount of IT change required to respond
to changes in the marketplace
3%
10% 4%
14%
2.24% 28%
2.12% 2.17%
2.03% 2.04% 1.97% 2.10% 2.09% 2.11%
82%
2%
1.71% 1.70%
1.59% 1.62% 1.56%
1.42% 1.38% 1.39% 62%
1.33%
1% 0.82%
0.44% 0.42% 0.41% 0.42% 0.42% 0.43%
0.39% 0.39% 0.33% 0.35% 0.35%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008
Chief Chief
Total IT Budget Capital Budget Information Executive
Operating Budget IT Depreciation Officers Officers
and Amortization
No/limited Change Moderate Change Substantial Change
Figure 1: The average IT budget has remained flat as a percentage of revenues
4. 4 Cloud computing in the consumer products industry
IT executives can no longer allow the power of IT to lie Flat spending and the need for substantial change within
dormant. The industry is undergoing the most dramatic IT results in meaningful gaps that need to be embarked
change seen in years, with new availability of data driven by upon and beyond. New IT consumption and delivery models
enterprise resource planning (ERP) implementations and new demand new strategies from IT if leaders are to position the
sources of external data. Considering all this, a fresh approach enterprise for the speed and agility needed to fill these gaps.
must be taken by IT organizations at consumer products (See Figure 2). In this document we will discuss how cloud
companies if they are to work with business leaders to enable computing can help.
transformation to succeed in a dramatically different future2.
Despite the need to enhance these capabilities, IT spending remains flat
and substantial change within IT is seen as needed
Chief Information Officers and Chief
Executive Officers see need for change
Lowest importance/ 1 5 6 7 8 9 10 Highest importance/
poor performance good performance
Increased internal efficiency/productivity 6.5 8.1
Increasing supply chain visibility for traceability 6.1 7.4
Gap
Increasing efficiency of trading partner interactions 6.2 7.4
5.3 Importance
Increasing understanding of consumers needs 6.5
6.4
Growing market share
5.3
Complying with customer requirements 8.6
7.6
Performance
7.5 Key:
Supporting ongoing business operations 8.4 Importance
5.9 Performance
Increasing sales to consumers 6.7
building consumer brands 6.2
5.3
Reducing procurement costs 6.1 7.0
Figure 2. Flat spending, coupled with the need for substantial change within IT, results in meaningful gaps that must
be addressed by consumer products companies in 2010 and beyond.
5. 5 IBM Global Business Services
Cloud Computing can deliver Three different types of cloud computing implementations
Cloud computing is a way to deliver IT services within the have been defined: A cloud within the enterprise, commonly
enterprise, over a network or over the Internet. Service called a private cloud, a service provider-owned cloud accessed
consumers are only aware of the service; they have no need over the Internet, commonly called a public cloud, and a
to understand details of the underlying IT infrastructure, hybrid cloud, in which the IT services of the private cloud
its technology or its implementation. The service provider is are supplemented by those of a public cloud. (See Figure 3).
responsible for implementing the service and managing the
required infrastructure. Cloud computing is defined based on its characteristics of
scalability, virtualized resources, rapid provisioning and
The best cloud computing solutions are those that provide standardized offerings as an emerging style of IT delivery.
a safe and secure method by which to enable a business use Applications, data, and IT resources are rapidly provisioned
case. Security is an important consideration, because in and provided as standardized offerings to users over the
consumer products today, the organization acts only as network (Internet or Intranet) in a flexible usage model.
a transport mechanism for the transactions; it is not the
retailer, it is not the bank and it is not the carrier. Instead,
the consumer products company acts as the broker to drive
consumers to retailers.
Today there are three primary delivery models that
companies are implementing for cloud
Enterprise
Traditional Public Cloud
Enterprise Private Cloud
IT
Hybrid Cloud
Private Cloud Hybrid Cloud Public Cloud
IT activities/functions are provided Internal and external IT activities/functions are
“as a service,” over an intranet, service delivery provided “as a service,”
within the enterprise and behind methods are integrated, over an intranet,
the firewall with activities/functions
allocated to based on Key feature include:
Key feature include: security requirements, - Scalability
- Scalability critically, architecture - Automatic/rapid provisioning
- Automatic/rapid provisioning and other established - Standard offerings
- Chargeback ability policies - Consumption-based pricing
- Widespread virtualization - Multi-tenancy
Transform to a dynamic infrastructure
Figure 3. There are three primary delivery models for companies to consider when implementing for cloud computing.
6. 6 Cloud computing in the consumer products industry
Whether deployed within the enterprise or by a service Cloud computing is a cost-effective way for your company to
provider, resources are pooled and virtualized so that they transform to a more dynamic, agile infrastructure — but be
appear as a combined single resource which can be provisioned aware of the economics of the different approaches. Enterprise
to deliver services with elastic scaling. In addition to the clouds, for instance, deliver operational efficiencies that can
provisioning and virtualization of services, private cloud make a real difference for consumer products companies
computing de-provisions these services as well, making because they make virtualization and image management
possible the “freeing-up” of resources for other purposes. The possible. But cloud service providers with highly-standardized
concept of re-purposing and reuse is a key tenet of the cloud. workloads can drive even higher levels of cost savings for
mega-data centers. (See Figure 4.)
Cloud Scale Economics
Enterprise private clouds vs. cloud service providers
Enterprise private clouds offer significant operational efficiencies through virtualization and
image management
Cloud service providers with highly standardized workloads can drive even further cost optimization
for mega-data centers
Unit
Traditional
cost
SMB architecture
Enterprise
Cloud service Cloud service
provider provider prices
Enterprise private Cloud
cloud costs Cloud service architecture
provider costs
2000+ servers 10000+ servers Scale
Transform to a dynamic infrastructure
Figure 4. A comparison of enterprise private clouds vs. cloud service providers.
7. 7 IBM Global Business Services
Cloud computing: Four service categories managing the underlying software and hardware. PaaS can also
For companies that seek to obtain value with cloud services, be referred to as “cloudware.” With PaaS, web services, web 2.0
it is important to understand the different ways in which the capabilities and middleware can all be offered as a platform on
various categories of services can be delivered. There are four top of which applications can be built, assembled and run.
main categories of services provided by cloud computing.
Infrastructure as a Service (IaaS)
Business Process as a Service (BPaaS) IaaS provides hardware components such as servers, network
BPaaS makes it possible for companies to consume equipment, memory, CPUs and disk space. With IaaS,
business outcomes by accessing business services using consumer products organizations can run their entire
web-centric interfaces on multi-tenant and shared operations without installing and maintaining in-house data
infrastructures — without the need to own or manage centers. Access to IaaS provides consumer products companies
the underlying resources. BPaaS is an effective and efficient with a means to expand the reach of their existing internal
way for consumer products companies to create value enterprise applications to user groups in new markets without
quickly for processes such as trade promotions and Vendor the capital expense and time required to build out private
Managed Inventory services, and relieves your organization infrastructure. The approach to delivery of these services
from the need to support multiple dedicated resources to varies from provider to provider and market to market. This
manage back-office processing of financials, business service should be considered as consumer products companies
travel and property management transactions, procurement globalize their operations.
and employee benefits management.
The platform and infrastructure layers are optimized and
Software as a Service (SaaS) streamlined in the way they function. For instance, when
SaaS is a software distribution model in which software is a cloud-enabled application is deployed, it may not have
hosted by a provider in a central and remote location and traditional relational SQL access to data. This abstraction is
made available to consumers through the Internet or an what allows infrastructure providers to offer scale throughout
Intranet. SaaS is based on a pay-as-you-go pricing model. all three layers (software, platform and infrastructure).
Consumer relationship management and procurement supplier
management are two areas that IBM has seen deployed on
The business model for cloud infrastructure focuses
this service. This gives consumers of the service a way to
squarely on efficient utilization of the base infrastructure.
decrease or increase the number of software licenses based
The economies of scale of cloud are driven by the degree of
on need without having to install or maintain software or
virtualization of the physical infrastructure, including servers,
hardware or incur ongoing maintenance costs.
network and storage. The cloud platform manages the services
running on the infrastructure. The services being provided
Platform as a Service (PaaS)
by the cloud are what the ultimate consumers use.
PaaS is a form of cloud computing in which the computing
platform (hardware and software) is delivered as a service,
typically over the Internet. PaaS enables consumer products
companies to create, test, deploy and host applications quickly
without having to bear the cost and complexity of buying and
8. 8 Cloud computing in the consumer products industry
To succeed, consumer products companies
must possess specific capabilities
Gone are the days when consumers trusted a name brand;
instead, they trust Internet chatter, community blogs and
web reviews about products. Increasingly volatile commodity
prices must be managed intelligently. Shifts in business models
Consumer products companies must themselves must occur as the dynamics of the industry
acquire specific capabilities change and the value chain becomes even more complex.
There are plenty of channel challenges, too, as the retail
In a world that is increasingly intelligent, instrumented industry continues to consolidate; for the first time, consumer
and interconnected, IBM has identified six capabilities products companies find that retailers are both customers
that consumer products companies must execute in and competitors. And all this is set against a backdrop of
order to be successful. economic uncertainty and an ever-increasing growth in the
importance, power and influence of developing economies.
• Glocalization. Balance local with global systems
and processes. To win in an industry that is becoming more competitive by
• Differentiation. Pinpoint the processes, assets and the day, your organization must possess six capabilities — and
resources that create value, and then improve them. technology will be at the core for delivering them. But business
• Integrated information. Capture, integrate and leaders, due to past experiences with IT, are often apprehensive
analyze data to better deploy business performance. about IT’s ability to deliver. Cloud computing can change the
• Innovation. Create an open model that encompasses thinking of business leaders who distrust the ability of IT to
differentiated and value-oriented offerings that deliver, and can provide IT with a delivery model with which
exceed consumer expectations. to execute with speed and agility. Working in the cloud, IT
• Consumer-centricity. Connect with consumers organizations can bring forth solutions that strengthen brand
directly through popular channels and also through and consumer insights, that foster global collaboration and that
retailers. are implemented very quickly.
• Corporate responsibility. Conduct business
responsibly, efficiently and effectively and consumers
It is important to consider the workloads that apply to success-
will react positively to your brand.
fully achieving these six capabilities, since the kind of work
that an organization must accomplish possesses inherent
characteristics that make it run most efficiently on certain
types of hardware and software. Some activities demand fast
transactions, while others, like predictive analytics, require
intense calculations.
9. 9 IBM Global Business Services
To build cloud strategy, understand
workloads
Smart consumer products companies know that they must
develop the six capabilities mentioned above if they are to
thrive — and they are aware that technology is at the core of
success in all six areas. The most efficient and effective IT
approach will be one that is specifically suited to your organiza- Workload recommendations
tion’s workloads — and one that makes the most of the standards
and processes. You should think in terms of workloads when
IBM has identified workloads that will most likely
building your cloud strategy.
offer highest potential return and pose the lowest
risk for cloud projects.
Since workloads vary according to platform requirements,
complexity, business criticality and data sensitivity, some are
Public cloud entry points: infrastructure workloads
ideal for a public cloud, while others are more suitable for
are most appropriate
deployment in a private cloud. For this reason, a workload-
based approach to cloud computing is essential in determining • Audio/video/web conferencing
which delivery model — public, private or hybrid — is best for • Infrastructure for training and demonstration
that workload. It crucial to understand which workloads can • WAN capacity
realize the greatest benefits in a cloud service environment. • VoIP Infrastructure
• Desktop
In addition, some workloads, due to their characteristics • Test environnent infrastructure
(low risk and high potential for ROI) are better candidates • Storage
for a cloud pilot project. Business use cases are workload-based, • Data center network capacity
so know how you will deliver your workload and business use • Server
cases to understand not only which cloud strategy suits your
need, but which service is best suited for delivery of those Private or hybrid cloud entry points: database and
particular use cases. application workloads are most appropriate
• Data mining, text mining or other analytics
• Security
• Data warehouses or data marts
• Business continuity and disaster recovery
• Test environment infrastructure
• Long-term data archiving/preservation
• Transactional databases
• Supply chain applications
• Trade partner applications
• ERP applications
10. 10 Cloud computing in the consumer products industry
Use case scenario: Business analytics
in the cloud
One of the world’s largest food companies has engaged IBM
to develop a cloud-based platform to support analytics. A
technology-enabled pilot is providing insight and decision
making capabilities that link the company’s digital, consumer
An expansive vision of the future: and supply chain initiatives into a single program. These
linkages are fundamental to sophisticated forecasting and
Strengthening customer loyalty
deliver advanced brand performance monitoring and
execution.
Cloud computing can help consumer products
companies expand their capability in new arenas
Cloud computing has made it possible for this company to
around the world, delivering the ability to support
break free from an analytics environment that had impeded
initiatives in markets where supporting infrastruc-
swift execution. Because IBM has invested heavily for years to
ture does not exist.
help consumer products companies achieve business goals, the
cloud solutions implemented encompassed three dimensions:
Organizations find cloud solutions especially
consumer, brand and channel.
valuable for social analytics and collaborative new
product innovation, since business leaders gain
IBM cloud solutions brought these elements together to
the ability to scale up quickly as they expand
create a near real-time analytic and action environment to
throughout their brand portfolio.
enable more efficient and effective trade programs. Data from
consumer, brand and channel sources is normalized using
These companies see real value in an approach
statistical analysis and presented in a dashboard framework.
that enables permission-based marketing securely
Managers get performance visibility against retail level data
and easily. They enjoy better management of their
and can take action while a promotion is underway.
business reality—a pervasive digital environment in
which marketing and new product innovation
Demand signals are collected from heterogeneous sources
never stops.
(both internal and external) to increase visibility throughout
the value chain. Forward viewing improves internal execution
and drives actionable collaboration with business partners.
The IBM integration suite helps the company load, cleanse
and harmonize a vast amount of disparate data into a consistent
information platform. IBM business intelligence and
dashboard technology deliver trustworthy information
to the right stakeholders. And longstanding relationships
with leading industry partners made it possible for IBM to
create solutions that specifically address the needs of retail
store operations.
11. 11 IBM Global Business Services
Six Steps to Getting Started with Cloud Computing
1 2 3
IT Roadmap Architecture Workload
Assessment
4 5 6
Enterprise & ROI Implementation
Cloud Mix
Transform to a dynamic infrastructure
Figure 5. IBM offers six proven steps to help you get started with cloud computing.
Getting started with cloud computing Change is possible. The tools exist today.
IBM can help your company identify and prioritize your Discover the power of cloud computing. Investigate an
cloud computing initiatives. With decades of industry approach that delivers the kind of rapid transformation you
experience and demonstrated success implementing cloud need to succeed in an environment that grows more vibrant
solutions, IBM can help your organization determine how and complex by the day. Create a truly dynamic infrastructure
to examine workload and business use cases. that lets you use collaborative technologies to the fullest.
Experience a world in which business goals and IT capabilities
IBM offers a roadmap to help you understand not only which have fused. For consumer products companies, success resides
cloud strategy suits your need, but which service is best suited in the cloud.
for delivery of specific business use cases. Look to IBM to help
you assess and plan cloud adoption. Expect a “level of readiness” For more information
evaluation that gives you a clear idea of what to address first. To learn more about IBM cloud computing for consumer
products companies, contact your local IBM representative
or visit:
ibm.com/solutions
