Adopting the cloud: how it affects firm

strategy
Sabine Khalil

Sabine Khalil is based at Introduction

the ICD, Paris, France.
Cloud computing is the next digital revolution that will affect everyone’s personal, social and
professional lives just as the introduction of the PC did. Cloud applications enable many
different activities, allowing employees located in different time zones to communicate
easily, worried parents to determine the exact position of their children and shoppers to
track the delivery routes of their parcels. Cloud computing now enables businesses to
switch from rigid traditional infrastructures to scalable and flexible environments, which has
a number of benefits.
Cloud adoption has expanded with the emergence of new technologies and the strong
presence of the digital transformation. Cloud technologies are mostly known for providing
software, platform and infrastructure services. They have become increasingly popular and
are used by almost every firm today. The total amount spent on cloud technologies has
increased from $67bn in 2015 to $99bn in 2017 and is projected to increase to $162bn in
2020, reaching a compound annual growth rate of 19 per cent. More specifically, the
amount firms spend on cloud software services is forecast to increase to $75.7m in 2020,
whereas platform service spending is expected to grow to $14.7m in 2020 and
infrastructure service spending to $71.5m in 2020.
This growth can be explained by the many benefits of cloud services. With their economic,
scalable, innovative and ubiquitous advantages, cloud computing has rapidly gained
popularity. However, it is important to note that to become successful, firms achieved their
goals through adapting their strategies to the cloud, i.e. cloud-related decisions were
addressed during various executive meetings.
I define the strategy of a firm as the way its business operations work together to achieve
agreed business objectives. The strategy constitutes the core of the firm, propelling a
focused, productive and profitable environment. It represents the firm’s resources,
strengths, vulnerabilities and opportunities. The aim of formulating a strategy is all about
meeting set business objectives. For instance, defining a strategy allows the firm to
prioritize and align its activities, provide action plans, enhance communication and define
appropriate accountabilities. Redefining a strategy enables the firm to enter new regions
and countries, expand and become nimbler.
However, as a new technology with a transformative nature, cloud computing pushes firms
to rethink their strategies and adapt them to address cloud-related decisions. Many firms
have failed when adopting cloud services without adjusting their strategies. A survey of 400
IT specialists illustrated a 57 per cent cloud adoption failure rate due to the lack of realistic
cloud migration strategies (Musiienko, 2017). Blackberry is one example of a strategy that
failed with the evolution of technology. Although this firm first introduced the “perfect”

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smartphone for business executives, it failed to adapt its strategy to the emergence of new
technologies in the following years. It hence lost its market share to a new leader, Apple.
Practitioners and academics have not sufficiently explored the role that cloud adoption
plays in the strategies of large firms. I therefore decided to conduct qualitative research into
the impact of cloud services on company strategies, offering practitioners managerial
recommendations for effective cloud implementation. Based on 35 interviews with business
and IT stakeholders, I concluded that the firms which successfully adopt cloud services
adapt their strategies to focus on maintaining their place in highly competitive markets,
implementing innovative solutions or reducing costs.

Cloud computing background

Cloud computing is defined by the US National Institute of Standards and Technology as “a
model for enabling ubiquitous, convenient, on-demand network access to a shared pool of
computing resources (e.g., networks, servers, storage, applications, services, etc.) that can
be rapidly provisioned with minimal management effort” (Mell and Grance, 2009, p. 1). The
notion of cloud computing as a public utility was first introduced in 1961 by John McCarthy.
Since the 1960s, various concepts have led to the emergence of cloud technologies. For
instance, the development of the internet pushed the idea of using networks to provide
computing as a service (Cafaro and Aloisio, 2011). Numerous computing technologies,
including utility computing, grid computing and virtualization, led large firms such as
Microsoft, Amazon and Google to develop large-scale data centers that offer commodity
hardware (Armbrust et al., 2010).
Several service models of cloud computing are offered by cloud providers for firms and
individuals. The most popular of these are the cloud infrastructure, platform and software
services. Similarly, firms can choose between four cloud deployment models: public,
private, hybrid or communal clouds.
Practitioners and academics have largely addressed the benefits associated with
implementing and adopting cloud services. They have split these advantages into six
categories: economic, scalability, performance, innovation, agility and ubiquity. Managers
are satisfied with cloud services owing to their pay-per-use characteristics that allow them
to be consumed as needed, enabling managers to switch from capital expenditures (assets
costs) to operational expenditures (operations costs), and reducing IT training and
maintenance costs (Armbrust et al., 2010). Many managers also consider cloud computing
to be a green technology, as it requires less hardware on their premises, consumes less
electricity and produces less carbon emission than on premise applications (Dutta et al.,
2013). The scalability of cloud services is also highly attractive for firms, as this enables
companies to allocate computing resources on-demand, scaling them up and down as
needed (Onwubiko, 2010; Benlian and Hess, 2011). If managers require a certain quantity
of resources (storage data, bandwidth, etc.) one day and then need twice that amount the
next day, cloud services can provide this easily. Managers can watch their firm’s
performance improving through the use of robust virtual machines, high-quality cloud
services and simplified operations (Dutta et al., 2013).
The innovative side of cloud computing is also emphasized by academics and
practitioners, as it can facilitate the digitization of business processes (Marston et al.,
2011) through real-time fulfillment, around-the-clock availability and minimized errors.
Furthermore, processes are more agile and firms have a shorter time-to-market with the
agility provided by cloud services (Dutta et al., 2013). This agility means departments
can work together and communicate more effectively. Finally, cloud computing is
ubiquitous, so users can access their data whenever and wherever they need to using
any device they possess (Onwubiko, 2010).

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 Meanwhile, numerous press articles, white papers and blogs have expressed concern
regarding the risks associated with cloud adoption. Security issues are often mentioned
where managers feel threatened by possible inside and outside cyberattacks (Srinivasan,
2013). Managers then redirect their strategies to focus on storing delicate and sensitive
data on their premises or within a private cloud environment (Oredo and Njihia, 2014;
Voorsluys et al., 2011). Data are at risk of being lost in a public cloud, which represents a
major concern for upper management (Armbrust et al., 2010). When data are located in a
public cloud environment that does not abide by national laws and regulations (such as the
Cloud Service Level Agreement Standardisation Guidelines, the Health Insurance Portability
and Accountability Act and the Sarbanes–Oxley Act), then compliance challenges can
result, which is becoming a serious issue for modern managers (Dutta et al., 2013;
Srinivasan, 2013). Although cloud service standardization issues limit the ability of firms to
differentiate themselves from one another (Oredo and Njihia, 2014), the lack of customized
services affects company competitiveness. Additionally, it is claimed that cloud services
are aimed to being unreliable, unpredictable, congested and often unavailable (Armbrust
et al., 2010; Sultan, 2011). Practitioners are worried by the reversibility of cloud services, for
example when they wish to move their data from one cloud provider to another (Armbrust
et al., 2010). Figure 1 represents a summary of the various aspects of cloud technologies.
Given the many advantages and disadvantages of cloud adoption, the strategies of many
firms have been affected. The emergence of cloud services and the expansion of their use
within firms have led managers to rethink their strategies to adopt these disruptive
technologies effectively while minimizing the resulting threats (Armbrust et al., 2010; Khalil
et al., 2016).

Methodology
The previous background research shows there is limited existing research on the
relationship between cloud services and the business strategies firms use. An exploratory
research design thus seems suitable when exploring a critical subject that demands more
investigation. To which strategy do firms turn to when adopting cloud services?
The aim of this paper is to explore the strategies large firms use when adopting cloud
services. I therefore decided to conduct 35 semi-structured interviews with the business
and IT stakeholders of large private and public firms located in France. Given the

Figure 1 Cloud technologies overview

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complexity and novelty of the field of cloud computing, a qualitative research design was
selected, as this allows us to gain insights into the way this topic affects the business
strategies of various companies. The interviews took place between November 2015 and
April 2016. Each hour-long interview addressed the perceptions of these stakeholders on
the strategies their firms use and their approach to cloud adoption. Venters and Whitley
(2012) argue that cloud adoption is more challenging for large firms, which justifies the
chosen size of firms. I meticulously selected the participants based on their graduate
schools and their advanced knowledge of business and IT subjects. Table I summarizes the
details of the 35 participants, including their job titles, their industries and the adopted cloud
services. The recorded interviews were fully transcribed, allowing us to categorize various
themes, which I then analyzed. The analysis was conducted using the software NVivo v.11.

Results and discussion

The results of the analyses reveal that firms do not simply adopt cloud services to address a
marketing trend. Although cloud computing may be a buzzword used in numerous blogs,
websites and articles, managers stress that it has a deeper importance, and firms have
several motives for adopting its use. The findings shed light on three main corporate strategies
used by the 35 interviewed firms. Although some adapt their strategies to the highly
competitive marketplace, others are motivated by a need for innovation. Finally, the majority of
firms adapt their strategies because of the massive reduction in costs associated with cloud
services.

Highly competitive market

When asked about their reasons for cloud adoption, some firms affirmed they adapted their
strategies when implementing advanced cloud services to maintain their place in the highly
competitive market. Companies heading into a market flooded with competitors require a
competitive strategy to stay up to speed with modern fast-growing markets. This is
especially owing to the fact that the way a firm deals with its information systems
differentiates it from its competitors. A firm thus aims to obtain “a competitive advantage over
its competitors” (IT.8) in the industry while “generating a higher return on investment” (IT.22).
It is important to note that a firm’s information systems include the various cloud services
used. This propels managers to focus their attention on dealing with the implemented cloud
services to “beat [their] competition” (IT.16) and “increase revenues” (IT.22).

Table I Participant description

Industry Roles of participants

Research center CEO (B.1)

Insurance CIO (IT.1, IT.9, IT.10); Senior IT project manager (IT.5); Cloud computing project manager (IT.8)
Transport CIO (IT.2); Senior IT project manager (IT.3)
Retail CIO (IT.4), CEO (B.9)
Bank/financial services CIO (IT.6, IT.21); Senior IT project manager (IT.22)
Media and entertainment CIO (IT.7); CEO (B.8)
Utilities CIO (IT.11, IT.12, IT.16, IT.17); Senior IT project manager (IT.14); Cloud computing project manager (B.6)
Manufacturing CIO (IT.13, IT.18); CEO (B.2, B.5, B.7, B.10, B.11)
Social declarations CEO (B.3); CIO (IT.20)
Healthcare Senior project manager (B.4)
Postal services CIO (IT.15)
First Minister services Interministerial assistant director of state IT (IT.19)
Higher education CIO (IT.23)
High tech Senior IT project manager (IT.24)

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 Moreover, the level of competition depends largely on the industry. For instance, in cases
such as the telecommunication industry, competition is emphasized. Participant IT.16 was
the chief information officer of a French telecommunications firm. To maintain their clientele,
IT.16 affirms that they are pushed by competition to adopt sophisticated and advanced
cloud services. The high-tech industry is similarly competitive. Even though high-tech firms
offer innovative and creative products, they can be replaced easily by more mature and
emerging firms. In such aggressive industries, firms “need to stay up-to-date not to vanish
with the extremely competitive market” (IT.7). While sharing their strategy, IT.7 explained
that “start-up firms that emerged in parallel with the cloud stole much of the firm’s market
shares.” To regain their place in the market and win back the lost market share, this firm
shifted their strategy and became more involved in advanced cloud services. It was crucial
that they adapt their vision and strategy to the new technology, i.e. cloud services.
In addition to the improved strategy, cloud adoption for this firm was more efficient and
successful. According to other firms, “cloud services pushed [them] to have many
opportunities that [their] competitors have” (IT.5). Attracting new customers and increasing
their clientele is an essential aim for businesses. Improved cloud adoption helped these
firms align themselves with their competitors – and in some cases pushed them to “reach a
higher competition level” (IT.5) – and so attract more clients. Some executives and
managers focus on keeping their firms alive in the competitive market. However, cloud
services are a disruptive technology. A few years after adopting cloud technologies, these
firms concluded there was a need to address many decisions related to cloud adoption and
adapt their strategies to remain competitive.

Urge for innovative solutions

As mentioned above, one of the advantages of adopting cloud services is that it can boost
innovation. While they spur the creation of new markets and start-ups, existing large firms
benefit from new applications (e.g. online banking and online electricity reports) in addition
to new opportunities to become more innovative. Firms are attracted to innovation strategies
when their objectives are to increase their profits and market shares via innovation and the
development of new products and services. To prevent the failure of innovation initiatives
(through the implementation of cloud services), large firms need to build a sound cloud
strategy and thus adapt their present strategy.
According to the findings, a large group of the participants affirmed that cloud adoption
propelled them toward an innovation strategy that embraced the innovative aspects of
cloud services. Their firms adopted various cloud services to “create faster [and] more
innovative IT services to satisfy [their] customers” (IT.12). One of the best practices of an
innovation strategy is indeed “leaning on customers.” A better understanding of customer
demands allows executives and managers to redefine their strategy to develop “new
services and products with the help of innovative services” (IT.2), “new lines of business”
(IT.14) as well as “enter new markets” (IT.18).
The business strategies firms use are also affected by the nature of the industry they are in.
For instance, the utility industry is evolving, giving place to innovative services and
products. Utility firms base their innovation on cloud services and are highly satisfied with
this technology (IT.11). Cloud services affect both the industry and the sector. The
innovative side of cloud services also triggers public firms to jump in the cloud computing
world. For instance, through adopting cloud services, a public firm is able to implement a
“strategy that is focused on their users while working with modern tools” (IT.19). Some other
public entities consider cloud computing to be “just a modern innovative tool that
organizations need because it is 2016” (IT.20). Firms today are realizing the crucial need for
structures, which will dictate the way they need to search for novel and original solutions.
Large firms in France commonly aim to use cloud services to fulfill these needs. This then
pushes executives to rethink their strategy, with a focus on innovation.

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Reduction of costs
In addition to building a strategy based on competition or innovation, some firms affirmed
that their strategy focuses on the cost reductions generated by cloud computing. Cost-
cutting strategies are not only the result of tough times in businesses; with the pay-per-use
characteristics of cloud computing and the low prices of services, firms are motivated to
adapt their strategies to concentrate on reducing costs. Adopting such a strategy is an
effective method for increasing operational efficiency.
The strategic process of implementing cloud services was highlighted by some
participants. Before adopting any cloud service, the first step involves firms analyzing their
costs. Through their cost analysis, firms stressed the benefits of cloud services, which allow
companies “to identify and better classify [their] costs” (IT.6). Following the cost analysis
and several discussions with business departments, the firm concluded that “adopting
cloud services will decrease their total costs” (IT.4). Many firms were then propelled toward
cloud computing. They aim to reduce their total costs through “minimizing the total costs
from adopted tools on-premises, in addition to maximizing [their] reduction of costs from
adopted cloud solutions” (B.5). Public firms were the most tempted by the cost reductions
associated with cloud services, as long as their data are secured; “Whenever a data center
in the French territories will be available, allowing [the organization] to evolve with total
security while reducing [their] costs, [the organization] will be the first to store [its] data
there” (IT.1). Figure 2 represents the distribution of the 35 participants according to the
strategy they follow. Although some firms are interested in keeping their clientele and the
integrity of their market share, others focus on embracing the innovative side of cloud
technologies. Finally, the majority of the participants were tempted by the cost reductions
generated by cloud adoption.

Conclusion
From the results of the analyses, one can conclude that the adoption of cloud services has
had an impact on the strategies of the 35 firms under review. According to the analysis, this
is mostly because of the benefits generated by cloud technologies. Although these offer a
large pool of inexpensive on-demand services, executives and managers find cloud
services appealing for their businesses. For instance, the motivations mentioned by the
interviewees shed light on the need for firms to align their business and IT objectives and
merge them into the firm’s overall business strategy. Building a cloud strategy and
incorporating this into the firm’s existent strategy is crucial for the firm’s success.
Independently of the strategy chosen, business and IT units therefore need to collaborate
more and communicate regularly to understand the needs of the market and implement
cloud services to meet these needs.

Figure 2 Participants’ distribution

14%

Compeon Strategy
Innovaon Strategy
54% Cost Reducon Strategy
32%

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 This study explored the impact cloud services have on the strategies companies use based
on 35 large international firms located in France. However, this research has a number of
limitations. For instance, the 35 analyzed firms were all the same size (large), located within
the same geographical location (France), and belong to the same culture (French). It would
be interesting to apply the results to other contexts (e.g. small and medium enterprises,
start-ups and Asian culture).
Nevertheless, although the academic and professional literature has not addressed the
impact of cloud adoption on the business strategies used by large firms, these findings
make a significant contribution to this field. Given the complex structures of large well-
established firms, they must adapt their strategies if they are to survive in today’s
competitive and innovative market. This study sheds light on the importance of the
relationship between cloud adoption and business strategy. Cloud adoption appears to be
challenging if not implemented efficiently, which highlights the need for an adapted
strategy.
Furthermore, this study enables practitioners to focus on redirecting or adapting their
Keywords: strategies when implementing cloud services. It also highlights the importance of building a
France,
cloud strategy and incorporating it into an existing strategy. Practitioners can locate their
Firm strategy,
Cloud computing, strategy within one of these three categories and redefine them accordingly. In addition, it
Qualitative research, provides practitioners with an example of the behavior of large firms in the French market. It
Cloud adoption, would be interesting to expand this study to different countries and conduct a comparative
Large rirms analysis to obtain more in-depth results.

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About the author

Sabine Khalil is an Assistant Professor in Management of Information Systems at the
International Business School of Paris (ICD Paris). Dr Khalil received her PhD from Télécom
Paristech in November 2017. She addresses the topic of information systems and
specifically cloud technologies in large firms from a business perspective. Dr Khalil has
attended many conferences, including the Academy of Management, the International
Conference on Information Systems, the Americas Conference on Information Systems and
the European Conference on Information Systems. Sabine Khalil can be contacted at:
skhalil@groupe-igs.fr

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