At a recent cloud conference, Joe Weinman gave a talk about the business, financial and user experience benefits of the cloud. He presented some complex simulation tools to show how these counter-intuitive characterizations challenge many of today’s fundamental assumptions about business and the cloud, including those regarding on-demand, pay-per-use and other business aspects. Although not radical in concept, like many of Weinman’s talks, they do challenge conventional thinking and are well worth taking a second look at.
Assumption #1: The Cloud offers a brand new technology and business model to business.
Counter Point: Although the technology may feel new to many, and the business model a radical departure from conventional technology strategies, in fact the business model and attributes behind the technology have been used for years by such industries as car rental services, hotels and many more.
Assumption #2: The services encompassed by the Cloud are always accessed via browser over the web.
Counter Point: As important as the Web/IP/Browser is to the technology, the cloud is in reality a general architectural model and although the web plays a big part it is far from being the whole story. To unlock the true value of the Cloud other types of networking technologies such as Optical Transport MPLS and VPLS need to be leveraged. Other uses such as audio conferences, webinars and M2M are services in the cloud that are used today without the benefit of browsers.
Assumption #3: With large clouds comes great economy of scale.
Counter Point: Because large cloud providers today are using the same architecture that is available to any enterprise this is not completely true these days. This same availability means that no major benefit is derived from their scale when we are looking at it in terms of economy. There are some other benefits that do come from size, the most notable being such characteristics as statistic of scale, scalability and geographic dispersion.
Assumption #4: All IT will eventually move into the Cloud because IT is like electricity.
Counter Point: One of the major differences between electricity and IT is that electricity has the benefits of scale that IT does not have, from an economic perspective. Any decision on how much of IT to keep in the enterprise versus running that function in the cloud is going to be governed by a large number of factors including the nature of each particular application, its cost and the amount of flexibility needed overall from IT. Whenever some type of decisions about IT are made, they are by their very nature quite complex, as opposed to how decisions about electricity are generally made, which are purely economic in nature.
Assumption #5: The replacement of capital expenditures (CAPEX) with operational expenditures (OPEX) is a big benefit that all businesses need to take advantage of.
Counter Point: While this may be true for many businesses, it is not so for all of them. Whether it is important to replace OPEX with CAPEX depends fully on the financial decisions that each individual company makes in regards to its financial and funding activities. For some it will be an advantage based on their business structure, while for others the gains may not be significant.
Assumption #6: Because of the lower cost of running applications in the cloud, business will see their spending on IT reduced.
Counter Point: Actually, it has been proposed that any technological process that increases efficiency for a resource will increase that resources rate of consumption as a result of the increase in efficiency. This has been called the
Jevons Paradox Effect and is already being seen to some degree in the evolution of the cloud today.
For a closer look at Weinman’s work theories on cloud and its impact on business, read his latest work on the economic rationale for the hybrid in
The Mathematical Proof of the Inevitability of Cloud Computing at his website
cloudonomics.
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