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Title The impact of cloud-based digital transformation on ICT
service providers’ strategies
Author(s) Clohessy, Trevor; Acton, Thomas; Morgan, Lorraine
Publication
Date 2017-06-18
Publication
Information
Clohessy, Trevor, Acton, Thomas, & Morgan, Lorraine.
(2017). The impact of cloud-based digital transformation on
ICT service providers’ strategies. Paper presented at the 30th
Bled eConference Digital Transformation – From Connecting
Things to Transforming Our Lives, Bled, Slovenia, 18-21 June.
Publisher AIS Electronic Library (AISeL)
Link to
publisher's
version http://aisel.aisnet.org/bled2017/42/
Item record http://hdl.handle.net/10379/7248
1
30th Bled eConference
Digital Transformation – From Connecting Things to Transforming Our Lives
June 18 - 21, 2017; Bled, Slovenia
The Impact of Cloud-Based Digital Transformation on
ICT Service Providers’ Strategies
Dr. Trevor Clohessy
J.E. Cairnes School of Business & Economics, National University of Ireland Galway,
trevor.clohessy@nuigalway.ie
Dr. Thomas Acton
J.E. Cairnes School of Business & Economics, National University of Ireland Galway,
thomas.acton@nuigalway.ie
Dr. Lorraine Morgan
J.E. Cairnes School of Business & Economics, National University of Ireland Galway
lorraine.morgan@nuim.ie
Abstract
The relationship between digital transformation and strategy formulation in the context of new digital
technologies is emerging as a research area which is ripe for investigation. Recently, information system
researchers have focused their attention on exploring this relationship in the context of cloud computing-based
digital transformation. However, while extant research has explored this relationship from an adopter
perspective, there is a dearth of research which has used an information and communications technology (ICT)
service provision viewpoint. Taking the perspective of fifteen ICT service providers, this comparative case study
elucidates how cloud-based digital transformation has impacted these organisations’strategy formulation
processes. This paper provides the following insights. First, cloud-based digital transformation can positively
impact the realisation of strategic objectives in terms of deliberate strategies such as agility and competitive
positioning. Second, we present a process model which delineates how ICT service providers’strategy
formulation was observed to be an emergent process, encompassing recursive cycles of business model
experimentation and iteration, organisational learning and organisational adaptation, primarily as a result of
the profound disruptive and innovative impact of cloud-based digital transformation.
Keywords: Digital Transformation, Cloud Computing, Strategy, Case study, ICT service
provider
“We are the blind people and strategy formation is our elephant. Since no one
has had the vision to see the entire beast, everyone has grabbed hold of some
part or other and railed on in utter ignorance about the rest.”
(Mintzberg et al. 2005)
Trevor Clohessy, Thomas Acton and Lorraine Morgan
2
1. Introduction
In recent years organisations have realigned their information and communications technology (ICT)
strategic objectives to provisioning and/or sourcing lower cost, flexible, resilient supply and delivery
options as a means of responding to the impacts of globalisation and the associated cost pressures
(Mohdzain and Ward 2007). Cloud computing represents an innovative technological advancement
which appears to offer a solution to these aforementioned objectives (Ward, 2012; Iyer and
Henderson, 2012). Subsequently, incumbent organisations are undergoing cloud-based digital
transformation journeys in order to reap the multitude of anecdotal business and strategic benefits.
In order for organisations to perform effectively in a digitized and networked economy, an
“understanding of the role and relevance of strategy is necessary for effective competitive behaviour”
(Mansfield and Fourie, 2004). The role of ICT in developing effective strategies has been well
documented (Porter and Millar, 1985; Henderson and Venkatraman, 1993; Atkins, 1994). Strategic ICT
can not only support and shape strategy but can also be pivotal in determining commercial viability
and represent a source of competitive advantage when used in innovative ways (Croteau and
Bergeron, 2001; Zott et al., 2011). However, the concept of ICT-enabled strategy formulation is
relatively ambiguous. For instance, Ward (2012) opines that the “knowledge we have developed [over
the past 30 years] about information systems strategies appears to have had little impact in some
organisations, even though they invest hundreds of millions of pounds in new information systems
and digital technology every year. This is evidenced by a global survey conducted by McKinsey (Khan
and Sikes, 2013) of 807 executives which revealed that while they acknowledged the strategic
importance of digital technologies to their business goes beyond cutting costs (e.g. business efficiency,
product and service innovation, entering new markets and so on), they were also dissatisfied with its
effectiveness pertaining to enabling overall strategic objectives (e.g. the realisation of forward looking
strategies which support growth and innovation). In the context of cloud computing, strategy can be
defined as “a set of decisions required to create and deploy a network-based, information service
delivery strategy that results in both cost savings and organisational agility (Iyer and Henderson, 2010).
However, the current state of art pertaining to cloud-based digital transformation strategies that
might be appropriate for ICT service providers is relatively ambiguous. As ICT service providers begin
to formulate their cloud strategies, “they need to understand the inherent capabilities that are
afforded by cloud computing…[which] can help them gain a competitive advantage by creating
opportunities for cost advantage and organisational agility”(Iyer and Henderson, 2010). Having a
comprehensive understanding of cloud-based digital transformation is “critical to forming a cloud
strategy that will unlock business value worth orders of magnitude more than the costs” (Linthicum,
2012). ICT are strategic insofar as they successfully implemented and are also used to realise strategic
intent (Arvidsson, Holmström, and Lyytinen, 2014). For instance, Khanagha et al. (2014) conducted a
longitudinal qualitative case study, from 2009 to 2013, of a telecommunication company (Telco) in
order to investigate how an established firm organised their digital transformation and strategic
arrangements when transitioning to provisioning cloud services. The authors identified that as a result
of the emergence of disruptive cloud-based digital transformation, the strategy formation process
encompasses a “collective experimental learning process revolving around a number of alternative
strategic intentions ranging from incremental evolution and transformation to complete replacement
of the existing business model” (Khanagha et al., 2014). Currently, there is a dearth of research relating
to how cloud–based digital transformation impacts ICT service providers’ strategies. Consequently,
research relating to how these concepts develop, interact and harmonise is also underdeveloped. This
is pertinent now as the cloud computing paradigm has reached a level of maturity which lays the
foundation for IS researchers to investigate how ICT service providers have moulded and sustained
their cloud-based digital transformation arrangments (Clohessy et al. 2016, Hess et al. 2016). In order
to ensure the long-term business viability and sustainability of the cloud computing paradigm, further
research is required to elucidate exemplars of successful and unsuccessful ICT service provider digital
transformation arrangements (Chang et al., 2013).
Cloud-Based Digital Transformation Strategic Impact
3
Thus, the objective of this research is to:
Explore how cloud-based digital transformation impacts ICT service providers’ strategies?
The remainder of the paper is structured as follows: The next section builds the theoretical foundation
for the study. Then we elucidate our research method. Next, the findings are presented and discussed.
Finally, we conclude with implications for theory and practice.
2. Theoretical Underpining
2.1 Cloud-Based Digital Transformation
Digital transformation is concerned with “the changes digital technologies can bring about in a
company’s business model, which result in changed products or organisational structures or
automation of processes” (Hess et al. 2016). The long journey towards digital transformation is often
fraught with complexity and ambiguity for incumbent ICT firms (Clohessy et al. 2017). This is
compounded by the fact that the transformation of mature business models to digital-based business
models encompasses potential nuanced legacy liabilities and issues. This is prominently evidenced by
ICT service provider stalwarts such as Dell, Intel, IBM and Hewlett Packard whose struggles pertaining
to how to best leverage the benefits of cloud-based digital transformation have been well
documented. Frequently, these organisations are operating in unchartered digital waters and as a
consequence lack the strategic clarity pertaining to what steps they need to consider prior to and
during their digital transformation journey. The cloud computing concept encompasses a
recombination of existing and new technologies and differentiates itself from antecedent ICT
paradigms via five essential characteristics: rapid elasticty, measured service, broad network access,
resource pooling, and on-demand-self-service (Mell and Grance 2011). Cloud computing enables ICT
service providers (person, organisation or entity responsible for making a service available to cloud
consumers) to virtualise their computational resources and concurrently provision them, via a service
orchestration process, typically in the form of Software-as-a-Service (SaaS), Platform-as-a-Service
(PaaS) or Infrastructure-as-a-Service (IaaS) (Liu et al., 2011). While there is anectotal evidence which
highlights the transformative business and strategic value afforded by cloud computing for ICT service
providers (Clohessy et al., 2016, Armbrust et al., 2009), our understanding of how these organisations
can develop digtal transformation strategies that effectively align with the value propositions inherent
to cloud computing technologies is still limited (Iyer and Henderson, 2012; Chang, Walters and Wills,
2013; Khanagha et al., 2014).
2.2 Bounding the Concept of Strategy
In order for IS researchers to have a comprehensive understanding of an organisation’s ICT strategy,
it is useful to understand the evolution of their intended and realised strategies (Chan, Huff and
Copeland, 1998). Mintzberg and Waters (1985) propose a widely cited comprehensive categorization
for strategy which identifies intended, realised, deliberate, unrealised and emergent strategy as
constituting key components of the strategy formulation process. This categorization of strategy is
suitable for investigating the “peculiarities” of modern emerging ICT (Peppard, Galliers, and
Thorogood, 2014) and thus provides a backdrop for this study to better explore the strategy
formulation process of ICT service providers (Figure 1). Intended strategy represents the
organisation’s official strategy (which may or not be written down) and realised strategy which reflects
the outcomes of decisions undertaken by the organisation stakeholders which may manifest from
deliberate, emergent, and unrealised strategies. Deliberate strategy is defined simply as “realised as
intended”, emergent strategy as “patterns or consistencies realised despite, or in the absence of,
intentions” and finally unrealised strategy as “intentions that are unsuccessful in its consequences”
(Mintzberg and Waters, 1985).
Trevor Clohessy, Thomas Acton and Lorraine Morgan
4
Figure 1: Strategy Research Lens (Mintzberg and Waters, 1985)
We selected the aforementioned seminal categorisation as a basis for conceptualising the concept of
strategy for the following reasons. First, no single strategy can be a panacea for an organisation and
that the most optimal strategic variables alter due to certain conditions and factors (Zott and Amit,
2008). Given the rapidly evolving nature of the cloud computing paradigm (Ojala and Tyrvainen, 2011),
and the subsequent dynamic nature of cloud-based digital transformation (Clohessy et al., 2016), the
categorization is well suited for delineating the strategy formulation process and chronicling how ICT
service providers have arrived at their current realised strategy. Second, in the context of cloud-based
digital transformation, the categorisation enables the identification of problematic issues and
emerging patterns of events and behaviours which may have resulted in ICT service providers
deviating from their intended strategy (Mintzberg and Waters, 1985; Chan et al., 1998). Third, the
categorisation enables business strategy to be “viewed in a non-descriptive manner, being conceived
in terms of how companies actually decide and act, not how they should decide and act” (Jansson,
2008). In the next section, we delineate the research method operationalised in order to elucidate our
research objective.
3. Methodology
This paper’s research objective is to explore how cloud-based digital transformation impacts ICT
service providers’ strategies? Due to the dearth of empirical research pertaining to examining the
relationships of the focal phenomena under scrutiny, our study is exploratory. Thus, a multi-method,
comparative case study research design was selected for the study (Stebbins, 2001, Yin, 2014). The
research sampling approach was directed by evolving theoretical concepts, whereby we identified
organisations and people from which we expected to elicit the majority of insights into the
phenomena of interest (Strauss and Corbin, 1998). For instance, this study encompasses an analysis
of both large and small and medium enterprise (SME) ICT service provider firms. The large business
model mature (BMM) ICT ventures represent organisations that have significantly longer tenure as
ICT service providers that are currently transitioning from ‘pre-cloud’ to ‘cloud-based’ business
models. The SME born-on-the-cloud (BOC) ICT ventures represent organisations who do not possess
the requisite existing maturity or tenure of pre-cloud business models. These firm’s business models
originated on the cloud. Data collection took place between January 2015 and August 2015 using semi-
structured interviewing based on a common protocol across 15 ICT service provider organisations.
Following the standard practice of using senior management as data sources, (Iyer and Henderson,
2012, Clohessy et al., 2016) we chose a senior manager from each targeted organisation. Interviews
lasted between 70 and 120 minutes. The interviews (including follow-up interviews) were conducted
until theme exhaustiveness was reached, which manifested when similar themes were being
identified and no new themes emerged. All interviews were transcribed, proof read and annotated
and then coded using NVivo 10. In order to improve the credibility of the data and provide cross and
complementary perspectives on emerging elements, secondary evidence in the form of archival
documents and published materials sourced from the ICT service providers’ websites (e.g. white
Cloud-Based Digital Transformation Strategic Impact
5
papers, specific ICT service providers case studies, brochures, reports) were collated and analysed.
While the study did not undertake a grounded theory approach, in analysing the data, the researcher
used an analytical hierarchical data analysis process adopted from Ritchie, Spencer and O’Connor
(2003) incorporating open and axial coding techniques based on the recommendations of Strauss and
Corbin (1998).
ICT provider*
Size**
Cloud Services/Business Model***
Interviewee
Inno Ltd.
Large
▪ Hybrid, public and private managed and self-service hosting cloud
offerings.
▪ Outsourcing and consultancy services. (BMM)
Cloud CTO
MobCon
Large
▪ Provision connectivity into cloud IT solutions via their existing
next generation Telco network and bespoke software solutions.
▪ Manage the design, build and implementation of their customers
cloud solution ensuring seamless network integration. (BMM(
Cloud CTO
Sigmathen
Systems
Large
▪ Hybrid, public and private managed and self-service hosting cloud
offerings.
▪ Outsourcing and consultancy services.
▪ Microsoft and SAP value added resellers. (BMM)
Cloud CTO
Gaviour Ltd.
Large
▪ Hybrid, public and private managed and self-service hosting cloud
offerings.
▪ Outsourcing and consultancy services. (BMM)
Cloud Manager
ZystemTech
Large
▪ Hybrid, public and private managed and self-service hosting cloud
offerings.
▪ Outsourcing and consultancy services. (BMM)
Cloud Manager
SandstemTech
SME
Bespoke software solutions enable travel companies to derive
maximum benefit for their customers. (BOC)
CTO
Levatte
SME
▪ Bespoke procurement software solution.
▪ Enables customers to source and evaluate new suppliers.
Cloud Manager
Yet3
SME
Bespoke CRM sales management and membership body software
solutions. (BOC)
CEO
FieldZuite
SME
▪ Supply IT infrastructure in the form of public, private and hybrid
cloud infrastructure hosting.
▪ Disaster recovery and virtual desktop services. (BOC)
CEO
VClazz
SME
▪ Supply IT infrastructure in the form of public, private and hybrid
cloud infrastructure hosting.
▪ Microsoft value added resellers. (BOC)
CTO
Zeta2k
SME
Bespoke software solution enables customers to visualize their raw
log data in order to unlock real time critical insights. (BOC)
CTO
Med3Care
SME
Bespoke software solutions aimed at the travel clinic service market
segment. (BOC)
CEO
Braavos PLC
SME
Bespoke software solution enables customers to integrate and
connect their existing core IT infrastructure into an ICT service
providers’ offering. (BOC)
CEO
LYS
SME
▪ Supply IT infrastructure in the form of private and hybrid cloud
infrastructure managed hosting.
▪ Outsourcing and consultancy services.
▪ Microsoft and Citrix value added resellers. (BOC)
CIO
WebReve
SME
Bespoke software solution enables customers to design and build
cloud-based website solutions. (BOC)
CEO
Table 1: Data sources for the study.
*Company pseudonyms have been applied to protect anonymity. ** Firm size categorised using limits as set by the
European Union along the dimensions “number of employees” (e.g. Small 10 -49, Medium 50-249, Large 250+) and “annual
turnover”. ***Large firms categorised as ‘business model mature’ (BMM) ventures (e.g. extant pre-cloud business models)
while SME firms categorised as “born-on-the cloud” (BOC) business model ventures (e.g. current business model originated
on cloud).
Trevor Clohessy, Thomas Acton and Lorraine Morgan
6
4. Findings
In this section, we report the empirical results obtained during the analysis of the semi-structured
interviews (denoted as sanitised quotes), archival documentation and published materials. It was
evident from the study that cloud-based digital transformation not only have a dynamic and turbulent
impact on ICT service providers’ strategies (emergent and unrealised) but also have a cogent collective
impact in terms of agility and competitive positioning (that is, their deliberate strategy) (see Table 2).
Realised Strategy
Digital Transformation Impact
Sources
Deliberate Strategy
Emergent and Unrealised
Strategy
1. Increased agility - organisational and
operational
2. Increased strategic acquisitions
3. Increased strategic partnerships
4. The dynamic nature of cloud-based
digital transformation, in conjunction
with the fluid of the cloud computing
market, facilitates increased
incidences of emergent and
unrealised strategy.
All ICT service providers - Examples
from INNO, Zeta2k, FieldZuite,
MobCon, LYS, Braavos,
SandstemTech
All large ICT service providers -
Examples from Sigmathen Systems,
INNO
All ICT service providers - Examples
from MobCon, Zeta2k , LYS, VClazz,
INNO, Med3Care
All ICT service providers- Examples
from VClazz, Yet3, FieldZuite,
MobCon, INNO
Table 2: The impact of cloud computing based digital transformation on realised strategy.
The strategies for ICT service providers (large and SME) encompassed short and long-term objectives
such as cogent market impact, increasing return on investment (ROI), enhanced agility, reinvestment
of capital, and reducing capex and opex. For example, study participants in Levatte and Sigmathen
Systems described how their strategy is focused on broadening their cloud geographic footprint and
growing their customer base in order to increase revenues while the CEO at FieldZuite explained that
their primary strategy is about increasing revenues through repeat customers.
All ICT service providers confirmed that their cloud-based business model(s) have significantly
impacted the realisation of their company’s strategic objectives (see Table 2) which has been largely
the cumulative result of a combination of deliberate, emergent and unrealised strategy. In terms of
deliberate strategy, all ICT service providers identified that their main objective for operationalising
cloud influenced business models was mainly for agility reasons. For instance, the CTO at INNO
described how their cloud strategy was focused on enhancing the agility of the organisation, stating
that “the new religion is cloud and we are all about agility and DevOps principals. Our objective is to
develop new or improved services faster than we did in the past. All new offerings must be agile and
be able to be provisioned at low cost”. This CTO further elucidated that “our new strategy is that we
are going to become a SaaS organisation and get out of the hardware business”. The CEO at Braavos
pointed out that their cloud-based business models “foster agile and cost effective operations which
are currently enabling our strategic objectives of becoming a market leader as a cloud integration
service provider”. While the CTO at Zeta2k described how their “cloud enabled business model has
allowed us to be very agile and nimble in order to provide a service to a large number of users very
quickly, thus facilitating strategic objectives”. Similarly, the CTO in FieldZuite explained that their
business model has had a significant collective impact on the company’s strategic objectives by not
only enabling them to compete with larger ICT service providers but also to deliver their cloud services
with greater efficiency to multiple global locations around the world. Moreover, the CTO in MobCon
elucidated on two examples of the cloud business model impact on their strategic objectives.
Cloud-Based Digital Transformation Strategic Impact
7
First, he described how cloud computing facilitates enhanced efficiency (e.g. operational, cost and
resource) and faster innovation in terms of supporting accelerated cycles of development. For
example, cloud computing enables the early deployment of demonstration environments that would
otherwise require substantial capital expenditure as a precursor to a full business case. Second,
MobCon’s strategic partnering with Amazon Web Services (AWS) facilitated stability in their business
model components, thus minimising strategy-business model misalignment issues which may have
manifested because of the disruptive nature of cloud computing technology. The CTO in
SandstemTech added, “the cloud has enabled us to be more responsive. We have sales pitch for a
large airline next week and cloud computing has enabled us to create an enterprise demo
environment for them in a matter of hours. The traditional method we would have utilised three years
ago would have taken weeks in order to create the same infrastructure for the demo environment”.
Strategic acquisitions were also identified as deliberate strategy by all large ICT service providers. For
example, the CTO in Sigmathen Systems explained, “it was a deliberate strategic decision to acquire
an established managed hosting in ACD (company synonym)“. Prior to this acquisition, the company
were losing customers to public cloud offerings. In order to streamline the on-boarding process for
cloud customers, the company also acquired an independent software vendor (ISV) start-up company
who specialised in subscription billing.
The CTO in INNO also pointed out that their decision to acquire an established cloud provider such as
CEES was pivotal to their cloud success, stating that “INNO’s acquisition of CEES in 2013 accelerated
its cloud computing strategy overnight. We can now use the CEES infrastructure and platform to
rapidly deploy existing software services as SaaS”. Partnerships were also identified as an example of
deliberate strategy by ICT service providers (e.g. Zeta2k, LYS, VClazz, INNO, Med3Care). Both the
interviewees in LYS and VClazz confirmed that it was a deliberate decision for their organisations to
operate as value added resellers (VARs) in order to avail of the economies of scale provided by their
large ICT service provider partner. All ICT service providers confirmed that their emergent strategy
manifested from cloud enabled accelerated rate of business growth and incidences of unrealised
strategy. For instance, the CTO in VClazz opined, “as a result of the exponential rate of growth we
have experienced provisioning cloud services, we have successfully transitioned from the end-user
market to the channel markets”. Similarly, the CEO in Yet3 pointed out that the company’s current
realised strategy has manifested as a result of emergent strategy based on their accelerated growth
in niche global target markets. In relation to unrealised strategy, IaaS was provided as an example by
ICT service providers (e.g. MobCon, FieldZuite, INNO). For example, the CTO in INNO explained how
prior to acquiring CEES, their efforts to build their own IaaS proved vexatious, further describing how
“it really was a painful process trying to develop our own bespoke IaaS. It didn’t have the scale of AWS,
Rackspace, and Azure. It failed simply as there wasn’t a big enough pool of resources for all the
customer requirements we had. We did not invest in it aggressively enough and were far too
conservative about investing in it”. The CTO in MobCon described how the company were initially
going to build their own cloud infrastructure. However, MobCon decided to partner with AWS, a
partnership that enabled the company to accelerate its move to provide cloud services to its existing
customers.
The study identified that the dynamic and recursive nature of ICT service providers’ strategy
formulation, business model experimentation, organisational learning and subsequent adaptation
when attempting to explore disruptive and/or innovative cloud business models. Figure 2 below
depicts the process model we have developed to reflect this recursive process. All ICT service providers
confirmed that their cloud strategy formulation and review decisions were largely management-led
(e.g. board of management, investors and so on) with changes being dictated by business model(s)
component performance (e.g. market analysis, revenue, cost). For example, the CTO at Zeta2k
surmised, “our organisation’s strategy is management-led and informed by business model
performance, strategic roadmaps, whitepapers, analyst research reports and customer communities’
feedback”, while the CTO at INNO explained how they have a committee of fourteen people
Trevor Clohessy, Thomas Acton and Lorraine Morgan
8
responsible for developing corporate strategy for the company’s four divisions (that is, hardware,
software, business consulting and technology consulting). However, on the contrary, the CEO at Yet3
described how their strategy is more leadership-led, which is facilitated by the flat structure of the
organisation. The CEO elucidated, “while the advisory board help the company to see the forest from
the trees, we have employees in Israel, Vietnam and Japan who can influence strategic decisions
without ever having met the CEO or the advisory board as they know more about the lay of the land
than we do”. The CEO asserted that the ability of their globally distributed employees to provide
strategic insight on their national landscapes has been a cornerstone of the company’s continued
success.
Figure 2: The relationships among strategy formulation, business model experimentation and
organisational adaptation when exploring an emerging disruptive and/or innovative business model
In an effort to maximise the realisation of their strategic intent, all ICT service providers are engaging
in business model experimentation and iteration. For example, the cloud manager at Levatte
described how they are experimenting and iterating their business model constructs at varying levels
within the organisation. The CTO in INNO also explained how their organisation was utilizing a bespoke
component business modelling (CBM) technique for formalising and reviewing their product business
models. The CBM technique breaks an enterprise down into its constituent segments and enables
INNO to take the aforementioned areas and break them down and identify elements which bring
business value to the company. The CTO at INNO further elaborated, “the CBM breaks our IT function
down into segments which we do that is strategic and operational and tactical. Elements and segments
which are important for our operations are maintained whilst other which are not strategically
important are outsourced”. The CEO at FieldZuite also explained how the business model impact of
the cloud computing paradigm was different to antecedent technologies, pointing out that “customer
needs are constantly changing. An inability to review and change individual business model
components can result in detrimental effects to the longevity of a ICT service providers’ business”.
While the CTO at Sigmathen Systems explained that transition for traditional hardware and software
providers to more cloud focused provision methods has had a combined revolutionary and chaotic
impact on their business model. The study found that the learning accumulated from this iterative
Cloud-Based Digital Transformation Strategic Impact
9
business model process serves as a foundation for organisational adaptation based on the potential,
requirements and impacts of the new cloud business model. Strategic organisational adaptation
encompassed re-structuring, re-organisation, change of personnel and new ways of managing.
The outcomes of this organisational adaptation served as an input for re-evaluating the strategic
intent of the organisations. 0ur analysis complements and extends existing research - in particular
Khanagha et al., (2014). On the one hand, it confirms the dynamic nature of ICT service providers’
strategic intent in response to disruptive cloud-based digital transformation and also identifies the
salient roles of adaptation, business model experimentation and the resulting accruement of new
knowledge. However, on the other hand, contrary to their findings that presented structural
adaptation as a precursor to business model experimentation, our findings indicate that business
model experimentation and iteration and the subsequent derived organisational learning serve as
salient inputs to ICT service providers evaluating whether the level of organisational adaptation
required to pursue their strategic intent is feasible. This would suggest that ICT service providers are
operationalizing a cautionary and evolutionary approach prior to committing substantial finances and
resources to restructuring their organisation in order to realise their strategic intent. In the next
section, we conclude with implications for research and practice.
5. Implications for Theory and Practice
The objective of this study was to conduct an exploratory investigation into how cloud-based digital
transformation impacts ICT service providers’ strategies? Both theoretical and practice contributions
stem from this research. From a theory perspective, extant empirical research in the area of cloud-
based digital transformation has largely focused on adopter perspectives. This study provides a
contribution towards a vivid contextual understanding the broader impact of cloud-based digital
transformation on both large multinational and SME ICT service providers’ strategies using Mintzberg
and Waters’ (1985) seminal research lens. Moreover, our study can further be considered revelatory
in that we have incorporated our findings into a new process model (see Figure 2) which demonstrates
that business model experimentation and organisational learning serve as salient moderating
antecedents to determining the level of organisational adaptation that may be required to realise
strategic intent of a cloud-based digital transformation. From a practice perspective, our findings
suggest that ICT service providers should continue to focus on using business model experimentation
as a means for harmonizing their organisation’s strategies with the disruptive and/or innovative
idiosyncrasies of cloud-based digital transformation. While the comparative case study proved to be
rich in detail, the findings are based on a small purposeful sample of fifteen firms. Thus, this study is
naturally limited in terms of it generalisability. However, we took care in relating our research findings
in order to relate the idiographic details of the cases to theoretical concepts.
Given the exploratory nature of this research and the high-level nature of the new process model,
others will need to build theory and subsequently test it. From an organisational learning perspective,
future research is warranted from a resource-based view of the firm and dynamic capabilities
perspectives in order to explore how successful ICT service providers are exploiting their core
resources and competencies in order to take advantage of the opportunities afforded by cloud
technology. Additionally, a systems thinking approach could elucidate the implications of altering
existing complex relationships, processes, and feedback mechanisms. For example, different change
processes may conflict with one another (e.g. there may be potential interference between re-
structuring and individual learning). Finally, while the primary objective of this study was to examine
the broader impact of cloud-based digital transformation on the strategy formulation process, we
believe that studying the strategy archetypes which emerge as a consequence of explicit cloud-based
service models (e.g. SaaS, PaaS, IaaS) seems an area ripe for research.
Trevor Clohessy, Thomas Acton and Lorraine Morgan
10
Acknowledgement
This work was supported, in part, by Science Foundation Ireland grant 10/CE/I1855 to Lero - the Irish
Software Research Centre (www.lero.ie).
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