Industry cloud aims to convert buyers into suppliers

Hoping to commercialize their own IP and industry expertise, organizations in healthcare, financial services and other vertical markets are creating a new breed of cloud service.

BOSTON -- Overwhelmed by options and unsure of their exact needs, many enterprise IT shops struggle to choose a...

cloud provider. But as cloud adoption grows, some organizations -- especially those in vertical markets -- are debating whether to become one.

The emergence of "industry clouds" -- cloud platforms that are built for, and often by, organizations within a specific vertical market -- has accelerated, according to analysts here this week at Directions 2016, an event hosted by analyst firm IDC. Cloud consumers in markets ranging from healthcare to manufacturing have turned the tables to provide their own set of vertically focused cloud services.

"Industry cloud, at its core, is really about the emergence of buyers becoming suppliers," explained Eric Newmark, program director of life sciences and industry cloud at IDC. "It's about companies within specific industries, in some form or another, helping to create value for other companies in their industry."

To be fair, collaboration between companies within a specific vertical market is nothing new; industry consortiums in markets such as life sciences, for example, have been around for years. But the cloud offers a platform for companies to distribute and commercialize their industry expertise as a set of services, deepening and accelerating this kind of cross-company teamwork, Newmark said.

Adoption numbers for industry cloud aren't staggering yet -- IDC estimated there are roughly 150 of them around the globe today -- but they are expected to grow, reaching 500 by the end of 2018 and more than 1,000 by the end of 2020.

Vertically focused clouds are expected to crop up in eight markets, in particular: healthcare, financial services, oil and gas, manufacturing, government, life sciences, retail and utilities. One of the most prominent examples of an industry cloud is General Electric's Predix, a platform as a service offering for Internet of Things data.

Meanwhile, banks and other financial services firms explore ways to use industry clouds to streamline regulatory compliance processes.

"You see [use cases] cropping up pretty much everywhere you look," Newmark said.

I think [industry cloud] is convenient, but it does not get IT off the hook.
Jonathan FeldmanCIO for the city of Asheville, N.C.

While industry clouds could be beneficial, there is the potential danger for users to assume they can brush their hands of most, if not all, responsibility when it comes to compliance, said Jonathan Feldman, CIO for the city of Asheville, N.C. A company using a cloud service specifically designed for the banking or healthcare industry, for example, might assume compliance and security is already baked in, and thus relax their own compliance practices.

IT, however, needs to remember that the compliance "burden" is never fully lifted from its shoulders, Feldman said.

"I think [industry cloud] is convenient," he said, "but it does not get IT off the hook."

Two models for building an industry cloud

Although it's still early days for industry cloud, there seems to be two leading models to build them.

The first, according to Newmark, is when an organization within a specific vertical market -- a hospital, for example -- has some sort of IP or expertise from which they believe the industry as a whole could benefit. They then offer that expertise or capability as a service via the cloud -- and monetize it. To avoid putting themselves at a competitive disadvantage, most organizations share operational capabilities to boost efficiency, mitigate risk or reduce costs industrywide.

The second industry cloud model involves multiple companies within an industry jointly creating a cloud platform or service. These tend to be "information-driven" clouds, Newmark said. For example, organizations could pool some of their data together in the cloud, and then have it mined and analyzed, either collectively or by a third party, to gain broader and more accurate insight into industrywide trends.

In either model, it's advisable for companies building an industry cloud to partner with a cloud provider, and even host their cloud on infrastructure from leaders such as Amazon Web Services, Microsoft Azure or Google, Newmark said.

"It's very difficult for end-user companies on their own to create powerful, scalable and elastic cloud-based platform services without leaders on the IT side," he said.

Feldman, for his part, said he'd be much more willing to use an industry cloud if it had the weight of an established cloud provider behind it.

"I think that would be more credible," he said.

In addition to partnering with a cloud vendor, organizations building an industry cloud also must ensure both their IT team and line-of-business departments are involved. While it's not always easy to break down the barriers between those two groups, it's well worth the effort, Newmark said. In fact, creating an industry cloud can even help to blur the line between the business and IT.

"One of the main things [CIOs] struggle with is, 'How do I change this perception in my organization that IT is a cost center, to something that is going to help drive top-line revenue and growth?'" he said. "The industry cloud opportunity, which commercializes a lot of what IT does, aligns pretty perfectly with that."

Kristin Knapp is site editor for SearchCloudComputing. Contact her at kknapp@techtarget.com or follow @kknapp86 on Twitter.

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