“When Unicorns Ride Elephants”
By Peter Coffee
In the two years since the “unicorn” emerged as the creature of startups’ fantasies, it’s become the mascot of disruptive change. Some worry that these massive valuations of more than $1 billion, removed from the scrutiny of public stock offerings, are the symptoms of an economic bubble ready to burst. Others see them as breakthroughs in job creation — not only in the high-tech San Francisco Bay Area, but also in any number of fast-growing cities where technology is king.
In either case, the glamor of these elegant beasts is overshadowing the elephant in venture capitalists’ board rooms: That is, the degree to which “the cloud” has absolutely and inherently enabled this phenomenon.
It’s remarkable that the cloud has become, so quickly, the accepted mainstream of IT-enabled business activity. Less than a decade ago, cloud computing was met with hostility by many IT organizations and practitioners — an on-the-cheap threat to governance, a plague on hardware providers, a job-killing threat to high-skill and high-wage jobs. As recently as 2011, cloud computing drove the kind of distrust among IT departments that was captured in headlines like “The Cloud vs. IT: Is Your Job in Jeopardy?”
Today, the balance of opinion has clearly tipped in the direction of cloud as net creator of opportunities. Like the movable-type printer (what about the village scribes?), the combustion engine (what happens to the grooms and stablemen?) and even the computer (millions of out-of-work clerks!), the cloud is now measurably growing, rather than shrinking the economy. In fact, new study from analyst firm IDC, which has been covering the tech industry for 50 years, finds that the cloud has an enormously positive economic impact today — and for years to come.
How the Cloud Creates Economic Growth
How does the cloud do this? Let’s start with the microeconomics. According to IDC, cloud computing frees IT departments from systems maintenance and routine upgrades, which plague 71% of companies surveyed recently by the firm. These are tasks that aren’t differentiating when done perfectly, but can be devastating to a business when done any less well. Relegating these tasks to the cloud lets an in-house IT department focus resources on high-value innovation: creating new consumer-facing apps, new cloud-based services or even entirely new business lines built on analytic power fed by an Internet of Things.
Respondents to IDC’s survey reported a healthy mix of new business projects, driven by a new surplus of “innovation capacity” emerging out of the cloud. These projects ranged from customer-facing work (such as CRM or sales management), to operational improvements (such as demand- or supply-chain management), to productivity enhancements (such as HR management or enterprise performance management). The value of this innovation — often delivered directly by IT back to the business — is not only remarkable, but also elevates IT from the server room back to the board room. For practitioners who remember when “computerization” was an act of innovation, rather than administration, it’s good to be back.
The effect of cloud computing on the macroeconomy is even more staggering. Radiating out from the skyline-altering presence of Salesforce, IDC predicts that the customers and the ecosystem of thousands of partners surrounding Salesforce will create more than 1 million jobs worldwide by the end of 2018; another 1.5 million indirect jobs as employees spend money in the broader economy. In that same timeframe, IDC estimates that cloud computing benefits accruing to Salesforce customers will add $272 billion in GDP to local markets. That’s a lot of unicorns — and Salesforce is just one of a growing array of clouds for doing business.
IDC predicts the United States will see the lion’s share of this GDP impact — more than 50% — due to its large share of cloud computing implementations. Taking a wider view, though, this is a global macroeconomic success story, as about 60% of job creation will happen in markets outside of the United States where labor costs are often lower. It’s even more important to recognize that while public cloud spending surpassed $50 billion worldwide last year, it still represented less than 3% of total spending on IT. There’s significant economic opportunity still to appear.
Unicorns draw the eye, but smart business leaders are harnessing the elephant to pull them into the future. We’re just at the beginning of the cloud’s potential to spur economic growth. The innovation this will invite, across companies of all sizes, is only limited by our capacity to envision new customer experiences to offer.
Mr. Coffee is the vice president of strategic research at Salesforce and a widely-published technology writer.
