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Why Cloud Computing Has Legs

Photo by Catherinette Rings Steampunk

Photo by Catherinette Rings Steampunk

For those who have been around IT for a while, the cloud computing wave has many of the same characteristics of any other fad: huge vendor investment, scads of new start-ups, a lot of media coverage and a few high-profile cases that you hear about over and over.  After talking this through with Diamond’s CEO Adam Gutstein and our colleague John Sviokla, I think there is one thing that makes the cloud phenomenon different. 

It directly addresses IT budget line items.

MIT’s Center for Information Systems Research periodically collect IT spend data from over 1,000 companies.  They report spending across four categories: Infrastructure, Transactional, Information and Strategic.  While it varies by industry, the infrastructure spend in their last report was around 40% of total.  They boil the world of IT spending down to four simple categories and infrastructure is one of them and it accounts for 40% of all enterprise IT spend.  One of the two compelling cloud computing stories is directly targeted at cheaper, greener and more elastic infrastructure.  Bingo!  [The other story is around business agility provided through cloud applications.]

I believe that the easier it is to see where a new technology can impact a business, the broader interest and acceptance it can have in the marketplace.  As another example of this, take a look at service oriented architecture.  SOA had a similar vendor and media buzz early but has since stalled.  Try to find “SOA” on a top-line IT budget – you can’t.  In fact, making a case for an architectural investment like SOA by itself is almost impossible.

To support the notion of an apparent fall in SOA interest, consider the responses we got from almost 600 business and IT execs on their current and planned SOA investments in our latest Diamond Digital IQ survey.  Almost 70% surveyed haven’t and aren’t planning to invest in SOA.  I believe that this has more to do with the complexity associated with the communication of its value than its overall utility.

I think that cloud computing, especially infrastructure clouds, will be more like application maintenance outsourcing in that they both have easily addressable budgets, are easy to understand and therefore, will be easy to sell organizationally.

What do you think?

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  • http://www.peterkretzman.com Peter Kretzman

    Not to damn with faint praise, but your comments here are so dead-on accurate that they ought to be obvious. But yet they aren’t, to many people. Cloud computing and the excitement that surrounds it is not about new and spiffy technology: IT veterans seem to delight in pointing out that it’s essentially old wine in new bottles. So yes, it’s about directly addressing (and reducing) IT budget line items, AND about reducing the risk involved in a new project, new venture, etc.

    Especially, companies find “spigots” compelling: that is, they like the idea of resources that they can turn on and off at a moment’s notice. No long-term commitments, in other words. Cloud computing promises this, at least to an extent. It’ll be a lot easier, in an environment that makes use of cloud computing versus internally-owned resources, to successfully argue for experimenting with a new product, a new offering, an expansion of testing, etc. Lower investment, lower risk, and an easy out: it’s all good.

    Most people STILL miss this basic point, so I really appreciated your post.

  • http://www.peterkretzman.com Peter Kretzman

    Not to damn with faint praise, but your comments here are so dead-on accurate that they ought to be obvious. But yet they aren’t, to many people. Cloud computing and the excitement that surrounds it is not about new and spiffy technology: IT veterans seem to delight in pointing out that it’s essentially old wine in new bottles. So yes, it’s about directly addressing (and reducing) IT budget line items, AND about reducing the risk involved in a new project, new venture, etc.

    Especially, companies find “spigots” compelling: that is, they like the idea of resources that they can turn on and off at a moment’s notice. No long-term commitments, in other words. Cloud computing promises this, at least to an extent. It’ll be a lot easier, in an environment that makes use of cloud computing versus internally-owned resources, to successfully argue for experimenting with a new product, a new offering, an expansion of testing, etc. Lower investment, lower risk, and an easy out: it’s all good.

    Most people STILL miss this basic point, so I really appreciated your post.

  • http://www.asuret.com Bill Crowell

    I must say that Chris and Peter are again right on. Old wine in new bottles is essential time sharing in a new Internet world. It’s a great way to get something new going with minimum risk and investment.

    I do wonder how central data centers, as we built when I was in Oregon, will react. The idea was that we had 17+ agencies with their own data centers and they all were technically obsolete. If each agency continued to pursue their own agenda’s the investment cost would have been off the wall. So, the State invested $20+ millions to build a “state of the art” facility and a consolidated network. However, the savings were hard to pin down.

    If Oregon had it to do again, a cloud computing strategy might have had a better business case. It would be an interesting research project to see if the same or higher benefits could have been generated for substantial less cost/investment?

    That’s the point, CIO’s need to investigate cloud computing as an option to building internal computing capability.

  • http://www.asuret.com Bill Crowell

    I must say that Chris and Peter are again right on. Old wine in new bottles is essential time sharing in a new Internet world. It’s a great way to get something new going with minimum risk and investment.

    I do wonder how central data centers, as we built when I was in Oregon, will react. The idea was that we had 17+ agencies with their own data centers and they all were technically obsolete. If each agency continued to pursue their own agenda’s the investment cost would have been off the wall. So, the State invested $20+ millions to build a “state of the art” facility and a consolidated network. However, the savings were hard to pin down.

    If Oregon had it to do again, a cloud computing strategy might have had a better business case. It would be an interesting research project to see if the same or higher benefits could have been generated for substantial less cost/investment?

    That’s the point, CIO’s need to investigate cloud computing as an option to building internal computing capability.

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