Executive Summary

In October 2013, Philips started to transform its IT infrastructure to a truly consumption-based model on the cloud. Alan Nance, Vice President of Technology Transformation at Royal Philips, has been leading this activity in strong collaboration with Philips Procurement. Per the model, service providers charge no start-up or termination fees, and Philips pays only for what it uses. These terms are set out in a charter which all of Philips’ major IT infrastructure providers have signed up to.

One year on, Sarah Burnett, Everest Group Research Vice President, caught up with Alan to learn more about the transformation and progress to date. In this, the first edition of Everest Group’s Practitioner Perspectives Alan Nance shares his insights and experience on this major transformational change including:

• The drivers for change including financial synchronicity, elimination of IT infrastructure Capex and speed to market
• The challenges, including changes to operational monitoring and skill sets
• Lessons learnt including how to select cloud services to match business requirements and the role of orchestration

Although the transformation to consumption-based computing is still in its early days, Philips has already cut €30m of fixed costs – it has another €380m to go.

The need for synchronicity goes beyond revenue and costs. It also applies to product development and speed to market – IT working in step with product requirements and with no Capex.

In summary, Philips has recognized the important role that IT infrastructure can play in business agility. It is today transforming its approach to infrastructure sourcing and deployment to tap into its potential to help grow its business.