Eight ways that cloud computing will change business

Eight ways that cloud computing will change business

Summary: When a major change arrives on the IT scene it's not always clear what the implications will be, if any, and so for large organizations a risk-managed wait-and-see attitude tends to prevail. Occasionally however some shifts offer cost savings, improvements to operations, or ways to tackle business problems that offer significant strategic advantage. The larger the benefit in one or more of these areas, then the more strategic the advance is and the greater potential it will impact the bottom line. Cloud computing is one of these.

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Interest in Cloud Computing GloballyWhen a major change arrives on the IT scene it's not always clear what the implications will be, if any, and so for large organizations a risk-managed wait-and-see attitude tends to prevail. Occasionally however some shifts offer cost savings, improvements to operations, or ways to tackle business problems that offer significant strategic advantage. The larger the benefit in one or more of these areas, then the more strategic the advance is and the greater potential it will impact the bottom line.

Cloud computing is quickly beginning to shape up as one of these major changes and the hundreds of thousands of business customers of cloud offerings from Amazon (Amazon Web Services), Salesforce (Force.com), and Google (many offerings, including Google App Engine), including a growing number of Fortune 500 companies, is showing both considerable interest and momentum in the space.

Cloud Computing: A delicate balance of risk and benefit

To be clear, there are currently unanswered questions and inherent challenges -- even some major risks -- in adopting cloud computing for more that so-called "edge" computing of minor applications and non-critical business systems. Notably, these include security of enterprise data that stored in the cloud, risk of lock-in to cloud platform vendors, loss of control over cloud resources run and managed by someone else, and reliability.

On the other side of the coin are some benefits that can potentially change the game for many firms that are willing to be very proactive in managing potential downside. These include access to completely different levels of scale and economics in terms of the ability to scale very rapidly and to operate IT systems more cheaply that previously possible. Easier change management of infrastructure including maintenance and upgrades (cloud vendors extensively virtualize and commoditize the underlying components to make them non-disruptive to replace and improve) as well as offering improved agility to deploy solutions and choice between vendors, particularly when cloud interoperability becomes more of a reality than it is today. Cloud computing also offers an onramp to new computing advances such as non-relational databases, new languages, and frameworks that are designed to encourage scalability and take advantage of new innovations such as modern Web identity, open supply chains, and other advances.

Pros and Cons of Cloud Computing

In fact, cloud computing holds the potential to dramatically change the businesses that adopt it, even if the technologies are only used internally. While these possibilities are only now starting to become clear, we can get a decent sense of these now:

8 ways that cloud computing will change business

  1. The creation of a new generation of products and services. The economics of cloud computing lets innovative companies create products that either weren't possible before or are significantly less expensive than the competition (or just more profitable.) This part of cloud computing is an arms race and there are short windows of opportunity since competitors can often put the economic advantages of cloud computing into their product formulations fairly quickly once they see that it works for you. Where it gets interesting is that many business ideas that required prohibitive amounts of computing power, scale, or radically new business models (the aforementioned open supply chains and Global SOA) but couldn't be implemented due to existing technical limitations or cost-effectiveness, can now be realized. Every improvement in storage, processing power, or technology enables innovations that weren't possible before (high speed Internet, for instance, made products like YouTube possible) and cloud computing makes these opportunities unusually accessible. Smart companies will take notice.
  2. A new lightweight form of real-time partnerships and outsourcing with IT suppliers. Companies that did traditional outsourcing of their IT services a few years ago already know what this feels like; a large part of what used to be in-house is now being done somewhere else and changing anything is hard. But unlike traditional outsourcing of IT, cloud computing will provide agility and control that traditional outsource cannot match for the most part. Don't like your cloud vendor? Unless you negotiated a long-term contract, you can often switch far easier than changing IT outsourcers. In fact, many cloud computing relationships consist of nothing more than a cancel-at-the-end-of-the-month commitment and corporate invoice. For many companies, this will actually be improvement over what they have now and give them choices they perhaps never had when everything required internal execution or to go through the outsourcing supplier relationship.
  3. A new awareness and leverage of the greater Internet and Web 2.0 in particular. Most companies are still notoriously critical of Web technologies as "not serious" computing. But the Web has grown up considerably in the Web 2.0 era and the challenges in scale, performance, and satisfying fickle audiences of millions has created technologies, solutions, and architectures that can address them in powerful yet economic ways that many enterprise systems are finding hard to match. When cloud computing is adopted by an organization, they will find themselves thrown into the pool with the rest of the online world in many ways, whether this is the employment of social tools, SaaS, non-relational databases or a host of other technologies in their new cloud. And in the end, this will serve them very well and allow many companies to acquire the skills and perspectives required to compete effectively in the 21st century.
  4. A reconciliation of traditional SOA with the cloud and other emerging IT models. A great post this week from our very own Joe McKendrick illustrates how SOA is evolving because of the cloud. The advent of cloud technologies will have to be dealt with and somehow encompassed by SOA initiatives that are already looking at their current toolset of heavyweight approaches and technologies with an eye towards seeking an onramp to change and improvement. Web-Oriented Architecture fits very well with cloud technologies which are heavily Web-based and it's a natural, lightweight way of building SOA at virtually every level of the organization. For many organizations, the cloud will likely be the straw that broke the back of traditional SOA and move it to a place where it will meet new business and technical requirements, faster rates of changes, and new business conditions.
  5. The rise of new industry leaders and IT vendors. While we're seeing many of the top players in computing use their existing strengths to create successful cloud computing offerings, there were also be a new generation of companies that businesses generally aren't used to dealing with as suppliers. Amazon and Google are two firms that generally aren't regarded as deeply experienced in the enterprise, and there are many others. While it doesn't seem that we'll see many entirely new players compete with the big firms, it's certainly not out of the question (and given the opportunity, likely from an investment standpoint) that we'll see some very well-funded new cloud startups that lack the baggage of existing leaders (thereby moving very quickly) and bring a new sensibility (radical openness and transparency, new technologies, and Web-focus) that's often needed with cloud computing. We may see perhaps even before the downturn ends. Either way, the industry landscape will be remade by cloud computing as it is one of the very few new IT developments that will be very broadly adopted in the next several years.
  6. More self-service IT from the business-side. Many cloud solutions, particularly as they relate to SaaS, will require increasingly less and less involvement from the IT department. Business users will be able to adopt many future cloud computing solutions entirely using self-service. This also heralds, as McKendrick indicates, that many of these scenarios will be much smaller and more numerous, tapping into the The Long Tail of IT demand.
  7. More tolerance for innovation and experimentation from businesses. With fewer technical and economic barriers to creating new ways to improve the business (LOB, marketing, sales, customer service, IT, horizontal services), cloud computing will enable prototyping and market validation of new approaches much faster and less expensively that before. While legal, branding, and compliance will often struggle to keep up the pace with the rest of the organization, there will be gradual thawing of the glacial pace of change as business possibilities become, well, more possible in the cloud computing world. This won't fix the often broken innovation mechanisms in businesses, but then again, cloud computing is so accessible that many new internal entrepreneurs (see previous point) will use the tools to create new solutions anyway.
  8. The slow-moving, dinosaur firms will have trouble keeping up more nimble adopters and fast-followers. Not adopting cloud computing doesn't spell the immediate demise of traditional companies that aren't good at making technology and cultural transitions (and make no mistake, cloud computing is a big cultural change), but it will pile onto other recent advancements and make it even harder to compete in the modern business environment. In the end, those too slow to adopt the benefits while managing the risk are likely going to face serious and growing economic and business disadvantage.

For many organizations in the short term the apparent potential of the individual changes above will often not be sufficient to them to make the transition to cloud computing, particularly as the cloud market is so new and major players such as IBM and HP have yet to arrive in full force. But gaining competency in cloud computing today by conducting pilots and building skills will server companies well and begin to position them for the future IT landscape. Longer term, cloud computing is increasingly appearing to be a transformative change in the business landscape.

What other ways will cloud computing change business? Bonus points for ones that aren't especially well known. Please put your comments in Talkback below.

Topics: Hardware, Amazon, Cloud, Virtualization

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29 comments
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  • The new criminal front!

    As more and more companies move their Web presence to third parties, these third parties will become more targeted by cybercriminals. It will be a one stop shop. Sites with many user's data will be more attractive than a single company's. Strongwebmail went down fast. Others will be easier. Giving your critical data to someone else will open it up to the highest bidder. Whether the hacks are internal or from the outside, they will be there.
    bjbrock
    • Security will be a very hot topic with cloud computing

      And because cloud providers will be such targets for hacking with all the riches behind their firewalls, you can bet security will best-of-breed since a major breach is likely to put them out of business.

      In fact, I would bet that most cloud providers will have much better security than the average enterprise. So will fewer well-defined centralized targets prove more risky than doing all your IT and security yourself? We will no doubt see.

      Best,

      Dion Hinchcliffe
      dionhinchcliffe
      • yeah . . .

        "you can bet security will best-of-breed since a major breach is likely to put them out of business."

        Best breed is, unfortunately, not equivalent to unbreakable. And yeah, when stuff breaks with a cloud provider, it breaks [b]hard[/b] because it affects so many people.
        CobraA1
      • Which in turn means NO MICROSOFT!

        They should be banned, excommunicated, categorically forbidden to ever enter the cloud business, because we all know what kind of "security" they are able to offer?!
        Mikael_z
        • This is one area in cloud computing that open source has a major advantage

          Privately developed commercial software is going to be less secure in general than software where the code can be examined by experts and the world at large.

          This implies that cloud computing offerings not only Microsoft but Google and Amazon are potentially less secure than say a cloud provider using Eucalyptus, though it's also true that open source is often used by the second two companies, more so than the first.

          Consequently, it will be interesting to see how cloud security plays out though Microsoft has an acceptable record of security for their online services (not their operating systems however.)

          Best,

          Dion Hinchcliffe
          dionhinchcliffe
        • Given some of Ballmer's own comments of recent,

          I wholly agree.

          Their irresponsibility of the last several years is deplorable. Especially when we all go to college and are told not to steal, to do good work, blah blah blah... just skip school and cheat and shift responsibility. And know where and when to buy and sell "stocks". That's how one gets to the top in America.

          I switched to the Mac for any number of reasons. And I sure as heck am not giving another penny to Microsoft. Their support of the last 2 years alone played a very big part as well; you don't tell a customer who just bought the latest and newest software version that a fix will be available in the next upgrade release (uh, Media 2 just came out)... amongst other things, it's p**s-poor on their part. Really p**s-poor.
          HypnoToad72
        • Babble on...

          Gee, I guess the majority of Fortune 500 companies are completely stupid -- having standardized on Microsoft servers.

          I'd suggest that if YOU are having problems with YOUR Microsoft servers -- then YOU should invest in some training and education...
          Marty R. Milette
      • May be not

        The news has many stories about government and bank data breaches. A for
        profit company will provide the lowest cost solution possible. I remember
        American made products and since outsourcing the quality has gone down.
        With anytype of outsourcing you get an initial price break but once the market
        has accepted the lower quality the price creeps back up.
        What is truely telling is the lack of hard data. How much will cloud services
        save? How agile do you need to be? What is the real level of services?

        So far I have heard a lot of advertising but few data points.
        mr1972
        • The jury is out on cloud computing cost, but seems promising

          There are an increasing number of data points on the cost of cloud computing, with the most cautious from McKinsey -- details: http://blogs.zdnet.com/BTL/?p=16384 -- but my back of the envelope calculations here are quite compelling http://blogs.zdnet.com/Hinchcliffe/?p=194. More importantly, we're largely seeing that borne out depending on how cloud computing is applied. As just a virtualization strategy, it's certainly not that big a deal, but when the full advantages of the cloud model are pursued, then the differences stand out much more.

          More importantly, I am personally witnessing the use of cloud computing technologies and providers very cost effectively with some of the companies I work with. The ROI stories are generally quite impressive and I'll be relating them here as I am able.

          Best,

          Dion Hinchcliffe
          dionhinchcliffe
          • More success stories for using cloud computing

            "I work with. The ROI stories are generally quite impressive and I'll be relating them here as I am able"

            I've posted few of the public success stories that the following scenarios: SaaS enablement, Enterprise, and System Integrator:

            http://natishalom.typepad.com/nati_shaloms_blog/2009/06/gigaspaces-launches-a-new-version-of-its-cloud-computing-framework.html

            natis
      • It is not security but risk

        Security is not the real issue but risk is what matters. We view security as a technical problem and generally most people in IT are good at solving technical problems. What we have to articulate to our business colleagues is the risk of moving to the cloud and how those risk are mitigated. This is a whole range of "what if" scenarios and the possible financial, brand, regulatory etc impacts the scenarios might cause.

        Our business colleagues are more interested in the impact of change overall than one technical area. Partly because I work in a fairly risk averse segment and the business understand risk well.

        We are already looking at what sort of information and processing we are happy to use in the cloud so that we can reduce the overall risk. However the benefits to us of using the cloud are to great to ignore.
        jumbuck
    • RE: Eight ways that cloud computing will change business

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  • RE: Eight ways that cloud computing will change business

    Cloud computing is becoming part of the enterprise more and more. Customers every day are considering the cloud as a way to drive new business opps and it's becoming a reality for many. You really do need to start the move to the cloud to stay a viable business in today's climate where the slightest edge means everything.

    Chet Kapoor, Sonoa Systems CEO
    www.edgeofthecloud.com
    ChetK
    • RE: Eight ways that cloud computing will change business

      @ChetK

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      weightlosspills
  • RE: Eight ways that cloud computing will change business

    Real-world costs make mincemeat out of pie-in-the-sky computing. It's all about saving money and cloud computing can't do that well enough to justify the clueless dreck this article purports (as in trying to be clever for clever's sake).

    Moving costs around doesn't fool anyone. Economies of scale doesn't compute in the modern IT world. You will pay more and that is why cloud computing is so much fluff.
    jjstone
    • Tuesday AM rant...

      ** The ultimate goal is to dispense with as many IT-related skills as possible from a companies payroll, and render IT a remote service much like electricity. That will be achieved when a business user decides on changing a business requirement and then does a few drag/drops on the screen - applications and data re-transform themselves automatically. Security of the company data on the cloud is guaranteed as there will be protection on the bits+bytes: either encryption or meta-data. **

      Nirvana or La-la land? Possibly both. An over-riding concern is always ownership and access. Expect the glossy PDF to have white text on white background for the gotchas; it's a service, it will be defined. Anything outside that definition, as in down to the nanometer, you will pay handsomely for. SOA/WOA is *not* a re-config free-for-all; 'can I just' will cost you - it may even eat you.

      Global SOA: fun time enough managing one outsourcer, let alone five.. ITIL covers the concepts, but not the amount of effort or responsibility in that scenario... headcount seriously up: keep some IT internal?

      Dinosaur vs. nimble: be careful who you choose - industry shakeouts at the nimble level may leave you severely at risk.

      And lastly, the simplex:complex:simplex view. Computing at the lowest-level is simple. Adding OS, hardware, drivers, database, apps, management ad nauseum on top is hideously complex. Then hiding it all with a simple interface. All the pain is underneath and taken away. Which bring us back to the nirvana state above: unless you retain an innate understanding of what your IT service is, and what it is doing, you will be happily ignorant of what is happening to data that is important to your business. And lets face it, these days if you lose your IT you've lost your business.

      [qu: what CIO tunes his/her own Lexus? None. Now you know why your service costs that much - you don't understand what goes on under there (never mind its a company lease and you don't give a rats fig)].

      Cloud suppliers might rue the analogy: the Necromongers catch-phrase "let me take your pain away"... (armour-plated uniforms, goth complexion and big dirty needles optional)


      muzza2005
      • Nicely said perspectives on cloud computing

        Complexity is the enemy of so much of what we do in IT: reliability, scalability, and as you point out, vendor relationships. When cloud computing can simplify -- and not complicate -- a given situation, it will be a useful option.

        However, most large businesses mastered multiple vendor and supplier relationships long ago. As much as we will lament the do-most-it-all-ourselves vision of IT as it is today, much of it can be commoditized more effectively by an external supplier that brings best-of-breed capabilities.

        I do think the vendors are still too immature and IT skills aren't strong enough for most companies to move anything critical over to the cloud yet. But "edge IT" is certainly ready today.

        Best,

        Dion
        dionhinchcliffe
      • Nicely said...it's interesting what the trenches say

        vs. the management rooms. Time will tell.
        US Is ! Europe-ThankGod!
  • Eight ways to enhance revenue

    I know this concept will make things eassier, more scalable and enhance the ability and opprortunuities for the technology industry to make better profits. But... they will be the only beneficiarys. As for the rest of us in the business world that actually use this stuff; we don't need cloud coumputing, we don't want cloud computing, we can't trust our business data to it, we can't depend on getting the reliablity,etc. IN short, it doesn't enhance OUR revenue.
    bboyce@...
  • RE: Eight ways that cloud computing will change business

    know this concept will make things eassier, more scalable and enhance the ability and opprortunuities for the technology industry to make better profits. But... they will be the only beneficiarys. As for the rest of us in the business world that actually use this stuff; we don't need cloud coumputing, we don't want cloud computing, we can't trust our business data to it, we can't depend on getting the reliablity,etc. IN short, it doesn't enhance OUR revenue.
    bboyce@...