Cloud is not just about information technology but also business model. In order to provide executives a simple and efficient tool to help them define a cloud roadmap, I propose an approach centered around the Business Model Canvas (Alexander Osterwalder. The BMC is a synthetic tool to represent, share, analyze a business model and transform processes associated with its different elements: infrastructure, value propositions, customers, finance.

1. Transforming the business model with cloud
Practical guide for CxO’s
Michel REYROLLE - IT Architect, IBM (May 2015)
Introduction
IT externalization is not a new phenomenon, but today cloud industrialization allows expanding the boundaries of possibilities.
Already plenty of literature has been written on the subject of enterprise transformation induced by the cloud era. This paper is
not a new essay but rather a practical cookbook structured around a strategic tool, the Business Model Canvas (BMC). In this
paper, I propose a concrete approach to build a cloud strategy by plugging cloud business enablers (defined below) directly
into the BMC. The result is a practical guide will help consultants and executive management working on business model
transformation through a cloud roadmap.
The Business Model Canvas (BMC)
The BMC was proposed by Alexander Osterwalder(1)
in 2008 following his previous work on business model ontology. Its
form is a single chart to depict all elements that structure a company business: value proposition, operational infrastructure,
customer relationships, financial structure. CxO’s (CLO/Legal, CMO/Sales&Marketing, CHRO/HR, CFO/Finance,
CIO/Information Systems, CTO/R&D) share responsibilities in several BMC elements CEO overseeing the whole.
Infrastructure
Value
Propositions
Customers
Strategic Partners
(CLO,CMO,CIO)
Key Activities
(CMO,CIO,CTO)
Products
& Services
(CMO)
Relationships
(CMO,CIO)
Segments
(CMO)
Key Resources
(CHRO,CFO,CIO,CTO)
Channels
(CMO,CLO)
Finance
Costs Structure
(CFO,CHRO)
Revenue Streams
(CFO,CMO)
Table 1 – The Business model canvas (see Appendix for details)
The Business Model Canvas is a hands-on synthetic design tool to help groups of people share, understand, analyze, discuss
and enhance the business model.
Cloud impacts on companies are twofold:
 It impacts company business in many ways: interactions with partners and customers, positioning in the value chain, ,
product and services innovation, internal resources and processes, channels, revenue and costs structures
 Where most companies had internal IT systems, cloud introduces massive opportunities for externalization and
standardization of services with very different costs structures.
(1) Le Business Model Canevas: https://strategyzer.com/canvas, Alexander Osterwalder. This work is licensed under the Creative Commons Attribution-
Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative
Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA
(2) The power of cloud – Driving business model innovation, IBM Institute for business value, 2012
Upstream
value chain
Downstream
value chain

2. Strategy for Business Innovation
Multiple conditions govern a company success and
sustainability, among them strategy, finance, technology,
organization, innovation, ecosystem, competition, regulations,
economic and natural environments. The IBM Institute for
Business Value proposes a cloud enablement framework(2)
using “three organizational archetypes - optimizers,
innovators and disruptors - that characterize the impact of an
organization’s cloud-enabled business strategy”.
Figure 2 – The cloud adoption framework
Cloud business enablers
Cloud services influence many several above conditions that
govern company success, IBM identified six cloud business
enablers(2)
which impact business strategies.
Figure 3– Cloud business enablers
Business model assessment
In order to move forward the cloud strategy, it is necessary to conduct an organization assessment along the three main
dimensions (3D) below:
1. Cloud Enabler Levers for business model innovation
2. BMC element Infrastructure, customers, value propositions, finance
3. Organization Roles / processes / tools for business and IT
This task requires a broad understanding of the entire organization in order to identify how both business model and
organization could/should evolve based on cloud business enablers. Organization and business processes represent static and
dynamic views on enterprise. For each 3D cell, one looks for business model inhibitors and accelerators using KPI’s such as
value, costs (capex, opex, amortization), revenue, resources, competition, reactivity, quality, priority. KPI’s are used for
strategic decision making for business model transformation. CxO’s all contribute to the transformation in many ways:
 CEO Focus company on core business activities and value creation
 CMO Innovative value propositions, customer relationships, social networks interactions, channels, pricings
 CIO Security, business continuity, externalize IT infrastructure & applications, continuous watch of market places
 CTO Accelerate product innovation by leveraging 3rd
party cloud services, enable ecosystem with cloud API’s
 CFO Optimize costs/revenue structures, favor standardization vs customization of services
 CHRO Evolve workforce for value creation instead of IT infrastructure, adapt incentive plans to cloud pricing
 CLO Validate and align cloud partners SLA’s with company SLA’s, compliance
The cloud initiative has to be supported at the highest level, so it is recommended to set a cross functional team (eventually
supported by external consultants). The team will conduct the 3D scan and select solutions bringing optimal costs/benefits.
Team alignment minimizes risk of uncontrolled initiatives (shadow IT). The above process is applied incrementally to cope
with business constraints. Each iteration updates cloud roadmap, organization, processes and tools for the new business model.

3. Designing the cloud roadmap
Based on KPI’s and strategic priorities, the cloud project team will propose business model innovations: value propositions,
externalization, standardization, organization, processes, tools, etc. Cloud marketplaces offer a wide spectrum of XaaS services
for most activities performed by an enterprise. Some common XaaS services are listed below:
A continuous watch of new solutions on market places is mandatory in order to detect relevant opportunities to improve
business model while minimizing risks. Examples of services transformations:
 IT Infrastructure  IaaS, DaaS, MDMaaS, DRaaS
 Internally developed Services  IaaS, PaaS, SaaS
 ISV Services  SaaS
 Integrated Services  Industry cloud, SaaS, BPaas
 Web Services  IaaS, PaaS, SaaS, TaaS, BPaaS
 Public/Private networks  Integrated IaaS offerings
Once validated and accepted, new processes are put into production under IT team control with eventually additional
ecosystem actors such as: integrator to assemble/migrate the solution, Managed Services Provider (MSP) to deploy and
manage production in IaaS environment, ISV offering an extension to a selected service.
A sample cloud services map is given in Appendix B. Note that each cloud business enabler is seen here through multiple
perspectives of BMC elements where it appears. For instance, in the Customer element of the BMC, one will consider business
processes in the Channels, Segments, Relationships and search cloud enablers that accelerate the business model. The cloud
roadmap belongs to a continuum of hybrid cloud as depicted below. While hybridization level and roadmap dynamics might be
constrained by company business and legacy systems, business environment requires rapid business innovations.
 Mix of infrastructures: on premise vs externalized
 Mix of XaaS cloud values: IT vs business value
 Mix of cloud services: private vs public according to criticality
Figure 4 – Generic architecture of hybrid cloud

4. The value of a cloud service is determined by contribution (costs / benefits ratio) to fulfilling needs of stakeholders here
represented by CxO’s. To simplify, all BMC stakeholders will find value in SaaS services while some BMC Infrastructure
stakeholders will also be interested by PaaS & IaaS services for financial or operational reasons. For instance, some workloads
are eligible to migrate onto IaaS such as critical legacy, on premise legacy ISV applications, customized & home grown
applications, test, development). Parts of others workloads such as Manufacturing Execution System (MES), Industrial Control
System (ICS), Supervisory Control and Data Acquisition (SCADA) stay on premise for obvious operational reasons.
Selecting services and providers
One great advantage of cloud is the possibility to easily experiment and acquire services. Selection is done according to criteria
which some are interdependent:
 Cloud layer: IaaS/PaaS/SaaS require different levels of managed services and associated costs
 Service criticality: business dependency on service will influence public/private choice
 Service value: coverage of main needs, benefits for business, productivity, quality gains
 Service connectivity: ability to extend or integrate with other systems / clouds
 Service compliance: business, technical and quality standards, regulations
 Service Level Agreement: performance, availability, security, support procedures, backup, disaster recovery
 Service reversibility: ability to recover data at end of service
 Service costs: migration and/or integration, recurring, reversibility costs
 Return on Investment benefits / costs ratio
 Provider Sustainability: to be considered with care for critical services
 Provider Ecosystem: partners: integrator, technology, channel, MSP, ISV
A controlled selection process is important for optimal benefits of cloud services both at the operational and financial levels.
Once selected, services are added to an internal service catalog from which users will be able to apply for access to the service
according to the approval process.
Conclusion
Cloud services offer a great opportunity to revisit the business
model in order to reposition enterprise in the value chain.
Associating the Business Model Canvas and cloud business
enablers provides a holistic tool to adapt the business model
and design organizational changes. A cross company cloud
team guarantees a shared understanding on the evolving
business model by integrating all CxO’s perspectives.
Company positioning (Optimizer, Innovator, Disruptor) in the
Value Chain - Customer Value space, leads to different speed
and breadth of the cloud roadmap. Despite the higher value of
SaaS and/or services assembled from PaaS/SaaS, the cloud
roadmap may result in a hybrid architecture because of legacy
IT and operational constraints. The cloud adoption process is
incremental to manage financial and technical risks. It can be
summarized by the following activities:
 continuous watch of cloud market places
 business model assessment, identify transformations
 experimentation and selection of services
 deployment, addition of services to internal catalog Figure 5– The cloud adoption process

5. APPENDIX A - Details of the Business Model Canvas(3)
(3) Le Business Model Canevas: https://strategyzer.com/canvas, Alexander Osterwalder. This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:
http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA
STRATEGIC PARTNERS KEY ACTIVITIES VALUE PROPOSITIONS CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we
acquiring from partners?
Which Key Activities do partners
perform?
motivations for partnerships
Optimization and economy
Reduction of risk and uncertainty
Acquisition of particular resources and
activities
What Key Activities do our Value
Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
Sales & Marketing, Manufacturing
Customer support, Logistics, R&D
Finance, HR, IT
CATEGORIES
Production
Problem Solving
Platform/Network
What value do we deliver to the customer?
Which one of our customer’s problems are
we helping to solve?
What bundles of products and services are
we offering to each Customer Segment?
Which customer needs are we satisfying?
characteristics
Newness
Performance
Customization
“Getting the Job Done”
Design
Brand/Status
Price
Cost Reduction
Risk Reduction
Accessibility
Convenience/Usability
What type of relationship does each of our Customer
Segments expect us to establish and maintain with
them?
Which ones have we established?
How are they integrated with the rest of our business
model?
How costly are they?
examples
Personal assistance
Dedicated Personal Assistance
Self-Service
Automated Services
Communities
Co-creation
For whom are we creating value?
Who are our most important
customers?
Mass Market
Niche Market
Segmented
Diversified
Multi-sided Platform
KEY RESOURCES CHANNELS
What Key Resources do our Value
Propositions require?
Our Distribution Channels? Customer
Relationships?
Revenue Streams?
types of resources
Physical
Intellectual (brand patents, copyrights, data)
Human
Financial
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
channel phases
1. Awareness
How do we raise awareness about our company’s products and
services?
2. Evaluation
How do we help customers evaluate our organization’s Value
Proposition?
3. Purchase
How do we allow customers to purchase specific products and
services?
4. Delivery
How do we deliver a Value Proposition to customers?
5. After sales
How do we provide post-purchase customer support?
COST STRUCTURE REVENUE STREAMS
What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
is your business more
Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)
Value Driven (focused on value creation, premium value proposition)
sample characteristics
Fixed Costs (salaries, rents, utilities)
Variable costs
Economies of scale
Economies of scope
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?
types
Asset sale
Usage fee
Subscription Fees
Lending/Renting/Leasing
Licensing
Brokerage fees
Advertising
fixed pricing
List Price
Product feature dependent
Customer segment dependent
Volume dependent
dynamic pricing
Negotiation (bargaining)
Yield Management
Real-time-Market
Auction

6. APPENDIX B – Sample cloud services map
Below, for each canvas element and cloud enabler, are given examples of solutions that may improve the business model.
Again, since the business model canvas itself is a hands-on tool, the sample table below is a possible starting point for
organizations willing to question and evolve their business model in the cloud context.
Infrastructure Propositions de valeur Clients
Cost flexibility
Pay per use model
Continuous testing
Dev & Test environments
Business scalability
Test as a Service (functional, performance)
Seasonal elasticity
Market adaptability
Variability of test beds
Compliance (PCI/DSS, SOC, ISO, etc)
Masked complexity
Hybrid cloud
Desktop as a Service
Mobile Device Mgmt as a Service
Storage as a Service
Backup as a Service
Disaster Recovery as a Service
Integrated value chain w/ network providers
Increased Datacenter security
CRM/ERP as a Service
Context driven variability
Social Media Analytics
Real-time marketing
Ecosystem connectivity
BPaaS
Virtual PLM platform
Internet of Things
Collaborative design, digital mockup
Integrated value chain w/ network providers
Online training (MOOC)
Industry clouds
Cost flexibility
Freemium / Premium
Yield management
Business scalability
Cloud elasticity (OSS/BSS interface)
Content Delivery Network
Application Delivery Network
Product ranges
Market adaptability
Content Delivery Network
Application Delivery Network
Product ranges
Time to market
Masked complexity
Self service
Secured Payments
Context driven variability
Location based services
Virtual immersion, Augmented reality
Mobile applications
Internet of Things, Big data
Value creation from analytics
Ecosystem connectivity
Customers communities, user groups
Online training (MOOC)
Shipment traceability
Cost flexibility
Pay per use
Time-based pricing
Business scalability
Buyers groups
Market adaptability
Co-creation
Gamification
Reachable niche markets WW
WW 24/7 support
Services internationalization
Masked complexity
Self service
Automatic updates
Customer reach through Market Places
Integrated value chain w/ network providers
Context driven variability
Customer preferences
Virtual immersion, augmented reality
Location based services
Mobile applications
Real-time marketing
Desktop/Mobile continuity
Internet of things: monitor, alert
Ecosystem connectivity
Interfaces with social networks
Inbound Marketing
Loyalty programs
Collaborative workspaces
Online training (MOOC), customers, channel
Customers communities, user group, intimacy
Channel integration
Finance
Cost flexibility
Commodity cloud services: Desktop, Storage, Desktop tools, Collaboration, Communication
Pay per use from suppliers
Lower costs through seamless geographically distributed value chain (ex: PLM)
Public vs Private cloud for different purposes
Lower costs of pre-integrated value chains
Yield management
ERP externalization
Business scalability
Rapid geographic development
Market adaptability
Currency rates
Compliance
Financial analytics
Masked complexity
Self-service through cloud market places
Standardization vs costly customization
Context driven variability
Logistics optimization
Ecosystem connectivity
Purchase through Market place
Table 6 – Sample cloud services initiatives