Artificial IntelligenceCryptocurrencyMetaverseCybersecurityTech Forward

Why businesses are embracing industry clouds

October 10, 2022, 6:00 PM UTC
Smart businesses are cloud-sourcing just about anything that doesn’t help separate them from the competition.
Getty Images

For St. Luke’s University Health Network, using what’s known as an industry cloud turned out to be a big advantage during the pandemic.

Health care provider St. Luke’s, whose network includes 13 hospitals and 322 outpatient facilities in Pennsylvania and New Jersey, lets patients schedule appointments online. Demand surged after COVID-19 vaccines began rolling out, recalls vice president and chief information officer Chad Brisendine.

“Let’s say we [normally] had 1,000 people hitting our scheduling system,” Brisendine says. “That went to, like, 7,000 people all of a sudden.”

Fortunately, St. Luke’s, headquartered in Bethlehem, Pa., was prepared, having moved much of its workload to Microsoft Cloud for Healthcare before the pandemic. Previously, it would have taken a day, a week, or longer for the nonprofit to scale up to meet such demand, Brisendine notes. But the St. Luke’s cloud team quickly took it in stride.

“As that capacity started to be needed, they just applied it directly from the cloud,” Brisendine says. “When you have these quick workloads where you need to be able to scale up your infrastructure, the cloud makes it really great because it has all of the resources available.”

St. Luke’s is one of a growing number of organizations turning to industry clouds, which specialize in business processes for a particular sector. This change looks like a tech trend, but in fact, it’s all about strategy. By using these vertical offerings for tasks that have little or nothing to do with their secret sauce, companies can focus on what sets them apart.

Industry clouds gained momentum over the past three to five years, says Brian Campbell, a principal with Deloitte Consulting’s strategy practice. So-called hyperscalers such as Amazon Web Services, Google Cloud, and Microsoft Azure have played a large role.

“There was a real push in the market for the benefit of, first, the infrastructure—in a sense, the compute and storage—and then the emergence of all of these different services that each of them served up,” Campbell says. “And then really over the last two years, the next frontier of going from a lot of the IT and functional benefit to the actual heart of your business and the specificity of the industry processes.”

On that note, Campbell offers an analogy. “We talk about it as not needing to do open heart surgery to be able to accomplish the promise of industry clouds,” he says. “It’s almost the ability to put an exoskeleton onto the core and be able to make those improvements in different areas without having to open everything up.”

Businesses sound bullish about industry clouds. In a recent Deloitte survey of 500 senior cloud decision-makers from a variety of industries throughout the U.S., 74% of leaders polled completely agreed that industry clouds would be an enabler and catalyst for transformation and automation of industry-specific business processes.

Besides hyperscalers, enterprise resource planning (ERP) players, independent software vendors (ISVs), and customer relationship management (CRM) providers are investing heavily in the space, Campbell observes.

“Because the frontier that all of the Fortune 1000 is moving to is, ‘All right, we’ve focused a lot on our back office, we’ve got to focus on front of house,’” he says, noting that Deloitte has invested in industry clouds as a systems integrator, business adviser, and software provider. “Especially given the environment that everyone’s in today, given that that’s where the winners and losers are going to be separated from one another.”

Microsoft has done two things with its industry clouds, says Alysa Taylor, corporate vice president, industry, apps, and data marketing, at the company based in Redmond, Wash. “We have organized all of our assets to be very specific to use cases within the industry,” Taylor explains. “Then we have certain clouds that have a subscription model that allow you to have additive access to things like the data models and very unique industry connectors.” So far, Microsoft has released those subscriptions for financial services, health care, manufacturing, nonprofits, retail, and sustainability.

For St. Luke’s, the move began in 2018, the year after it created a digital strategy plan with Microsoft. Part of that plan was leveraging cloud services to be more secure, agile, and flexible, Brisendine remembers. “How do we get rid of things that we think we don’t need to be doing as a core strategy and a core discipline? At the end of the day, we don’t necessarily need or want to be managing infrastructure.”

So far, St. Luke’s has sent almost 80% of its workload to the cloud. After shifting many of the 1,000-plus applications it manages, it became one of the first health care organizations to migrate Epic, its major ERP platform, Brisendine says. “We did a lot of that work in 2020 and 2021, when we shifted a couple of thousand servers over.”

What’s left? Applications requiring more bandwidth than the cloud can currently handle, such as those providing images of X-rays. At the same time, St. Luke’s modest margins gave it a compelling reason to manage costs by using cloud services, Brisendine says.

St. Luke’s has brought disparate systems together into a common data model that provides a holistic view of patients and their medical history, Taylor says. “That saves them time and money. It takes the IT burden off of them, but it also helps preventative medicine and, in severe cases, saves lives.”

Using industry clouds lets businesses focus on what makes them unique. “The way that we’ve described it is: Make sure that your secret sauce is most prevalent,” Campbell says. “Those are the areas that you’re really going to hang your strategy, hang your customer experience, hang your differentiation to the market on.”

Industry clouds also offer “building blocks to then be able to customize even further, to achieve that differentiation faster, and be able to do it in a more innovative way over time, versus one and done,” Campbell adds.

Ingredion, a provider of plant-based ingredients to food and beverage, pharmaceutical, and other industries, is also going the industry cloud route. The company, based in Westchester, Ill., began creating a data repository in 2018 to analyze how environmentally and socially sustainable it is and to track the progress of All Life 2030, its wide-ranging sustainability plan.

Much of that work was done manually and scattered across almost 70 locations worldwide, with Azure as the data link. Then Microsoft approached Ingredion with its Microsoft Cloud for Sustainability, says Ingredion chief information officer Bob Border.

To start building a system that standardized and automated data collection, while also making that information faster and easier to analyze, Ingredion fed data on previous decisions its U.S. operations had made about Scope 1 and 2 emissions into a tool called Microsoft Sustainability Manager. (Scope 1 and 2 emissions are those that an organization makes directly and indirectly, while Scope 3 are those for which it bears indirect responsibility.) The goal: to see if using Sustainability Manager might have delivered different outcomes.

“We’re learning a little bit more about it as they’ve been developing and deploying this platform, and we do see benefits,” Border says. “Especially when we get to Scope 3, we definitely see some large benefits, although we’re already starting to see some benefits from Scope 1 and Scope 2.”

Although Ingredion doesn’t have a formal industry cloud strategy, it’s keeping an eye out for new opportunities after this first foray. “Because it should save us some work, which could end up being some savings,” Border says. “So we’ll always look at the value of doing things from an industry perspective versus building ourselves.”

Border’s advice for other organizations weighing a move to industry clouds: Understand how your data is being used so it doesn’t fall into the wrong hands.

“Some of the industry clouds we looked at, it’s kind of a black box,” he says. For example, a cloud provider might use artificial intelligence on your data to create a formulation for you. “Well, what happens with that data?” Border asks. “Now some of my products are in this formulation engine that my competitor might be using.”

Brisendine’s first tip is to decide whether you plan to manage your own infrastructure—and if so, what the plan is. He also recommends using financial transparency tools—in addition to those provided by Microsoft and other vendors—to monitor cloud resources. Doing an audit of your security tools is crucial, too.

And if you are managing your own infrastructure, give your team time to learn how to build it. To help everyone get comfortable with the cloud, St. Luke’s also moved lighter workloads first, Brisendine says. “I would definitely say start small and grow big into it.”

For St. Luke’s, probably the biggest lesson was around modernizing applications. And the business and IT must be strongly aligned on strategy, Campbell warns. “Without that, don’t go here.” Oh, and the time to embrace industry clouds is now: “If you’re looking at this space even 18 to 24 months from now, you’re going to be on the back foot of where your industry is.”

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.