Cloud-based and Cloud-Native sound similar when you are developing cloud applications. Wrong! Chris Skinner (The Finanser) put out a great piece on what is happening across many industries – not just banking.
I am having a debate on a regular basis about being cloud-native and digital at the core versus cloud-based and adding digital. The two are very different. Most big banks are moving to be cloud-based and adding digital, but that is outside the core and cloud-native. The latter has a business model born for the Internet; the former is evolving an old business model for the Internet age.
Chris Skinner
Chris also focuses on a report from PwC stating, “Of the $1.3 trillion that was spent on digital transformation in 2018, it was estimated that more than $900 billion went to waste.” And that is only in banks and only in 2018 – an eye-watering amount of money if you also factor in other industries and assume similar spending each year.
So, instead of wondering if you are Cloud-Based or Cloud-Native, the first question you need to ask is:
Why are you developing cloud applications?
The term transformation describes a change. Many Digital Transformations do not clearly articulate the value they hope to achieve and how the business model will change to realise that. Instead, they think digital transformation consists only of creating a better website, doing Agile or getting good at IT.
Your organisation needs to be digital and not waste time and money trying to disguise a giant dinosaur by wearing a snazzy digital hat. As Chris says:
The fact that so many banks are committing to cloud and working from home during this pandemic convinces them that they’re doing digital. But they’re not. It reminds me of the surveys I’ve seen where C-level bankers claim they’ve done digital because they’ve got a mobile app and that it does not require any change of their core business model.
Chris Skinner
Start with Why?
As Simon Sinek says “Start with Why?”. https://www.youtube.com/watch?v=nRaqe9M2DYc
If you don’t know why you are developing cloud applications, then don’t waste your money. If you want to save money, you are probably better off adopting Lean.
Successful tech companies, such as Netflix, AirBnB and Uber, understand their value, productise that value via an API and “effectively” create a marketplace.
What’s an API?
If you need to ask, you must hire a CTO (or a new CTO). There’s another post in that question but if you don’t know, check this out. Can you derive value from an API? Put it this way, you are not driving value solely from a website or an App. The Netflix API is much more valuable than the Netflix app.
What is Digital?
The term digital is not very helpful. We are at an inflexion point.
For example, your local newspaper and Facebook are digital – newspapers publish stories on their website too. What you need to focus on is the business model. Your newspaper and Facebook might publish very similar content, but that is where the comparison ends.
You must frame your perspective on Cloud in the same way. Amazon and local supermarket’s online shopping are both in the cloud. But you instinctively know that they exist in different paradigms.
The first industrial revolution marked the move away from manually produced to machine manufactured. No company today boasts of their product being “machine manufactured”. However, some organisations use the word ‘Cloud’ as a marketing feature to lend their brand the notion that they are innovative and cutting edge.
In actual fact, it is the customer who will make the decision as to whether you are innovative or not based on their experience of interacting with your organization. I am thinking of booking supermarket delivery slots versus hitting the ‘buy now’ button on Amazon.
Cloud Native
The problem with the phrase Cloud-Native is that it’s a functional term that will soon become outdated, like digital. New terms are coined all the time. But unless your business model outlives the technology they are based on then you may not have a future.