Back in the 70s, telephone engineers were the first to use the term "cloud" to represent complex networks. While their primary business was cables, wires and leasing and selling phones, these visionaries were already beginning to think of telephone service as a utility. Fast forward to the mid 2000s and Eric Schmidt at Google started using the term "cloud computing". It caught on and, today, roughly five years later, the Cloud is here and changing just about everything we know about computing, connecting and collaboration.
The "Cloud" needs be seen as a technology dial tone that is changing the corporation. Most often it is defined as delivery of computing as a service, rather than a product, using shared resources, software, and information over the internet (public cloud) or via a private network (private cloud). It’s already revolutionizing the way in which we all work and is having an increasingly radical impact on how companies invest in IT. Smart businesses are not waiting for the phone to ring; they are speed-dialing the Cloud to capture these two game-changing opportunities.
According to the Gartner Group, "Cloud will be as influential as ebusiness." Indeed, cloud solutions will enable productivity gains and new opportunities with an overall effect similar to that of e-commerce. That’s a bold statement, but one that many investors are already banking on:
- $6.7 billion in private capital has been invested in cloud related companies since 2009
- $28.1 billion has been chalked up in M&A transactions for cloud related companies since 2009
- 80% of VCs say investment in cloud computing will increase in 2011
(sources: Sources: NVCA, Capital IQ, McKinsey, Boston Consulting Group)
Changing How We Work
The cloud promises a big leap in productivity through real time collaboration, on any device, anywhere, anytime and without major expense. Consider this simple example, repeated millions of times each day in the corporate world: assume that a team comprised of four functional areas (finance, marketing, operations and sales) all work on a product rollout. In the legacy model (illustration on the left, below), all functional leaders meet to kick-off a planning meeting. They then go off and work independently, checking-in on progress weekly to compare notes, swap ideas and update the others on plans for their area. Unfortunately, a lot can go wrong. Time is wasted on integrating multiple versions of documents and/or establishing which version is most current. There are also lapses in sequencing – as each functional leader adds their bit and passes the document to the next contributor, it’s challenging to establish or adhere to logical project phases and valuable time is often lost.
In contrast, in a cloud environment (see the illustration to the right, above), a master document can be shared, reviewed and edited by all four functions at the same time. In short, collaboration happens, time is collapsed and productivity leaps.
As simple as this example is, the result is revolutionary. In particular, the impact it will have on businesses that employ knowledge workers – now comprising 25-40% of all workers in the US economy – is huge. Here’s why: by definition, knowledge workers work creatively using, often in an improvisational manner. Their work:
- Requires problem solving without "connect the dots"
- Involves a high degree of collaboration with others
- Synthesizes disparate facts into a cohesive plan
Cloud computing, in addition to the inherent mobility of the solution, increases the sources of insight and ideas; improves the availability of problem solving tools; accelerates decision making processes and eliminates low value tasks. In the cloud, real-time information sharing enhances collaboration, eases frustration and makes information more "liquid" – available to all in the organization wherever, whenever and in places and devices where workers choose to access it. This is new and is already revolutionizing the way in which we work.
Changing How We Invest in IT
In addition to changing how we work, the Cloud is also impacting how we invest in IT. For decades, corporations have adhered to an IT legacy investment model that involves:
- Large up front investments. (Just as an example, the average SAP installation tops off at $16.8 million and the average Oracle installation costs $12.6 million)
- Betting on future productivity gains that may take months or years to realize
- Risking attainment. Many times, corporations select Path A only to discover after significant investments, wasted time and shattered goodwill that Path B would have been a more workable choice.
For IT, what matters most has always been how to increase capacity or add new capabilities quickly and without disruption while spending the least amount of dollars and time on licensing, employee training or new infrastructure. What the Cloud offers is the opportunity to amplify the pace, quantity, and potential for new gains due to lower capital costs and lower risk. On going support costs can also be greatly reduced and the time horizon for achieving benefits can be compacted. The speed, frequency, and transparency of improvements is amplified. That not only changes how we think about IT but how we run IT.
Summary
To only view the Cloud as an efficiency or cost play is to miss some of its great potential to really transform the way you do business and the way you run your business. Compare Cloud to the other changes we’ve experienced over the last 10 to 15 years – from email to mobile devices – and the perspective becomes clear. While these were life and work-changing, the Cloud has evolved into something much bigger than the telecom engineers who originally coined the phrase ever possibly imagined. It signals a great opportunity to fundamentally change the way work gets done and how the IT function enables that work to get done.