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The shape of cloud computing to come.

Pulling together, under ‘cloudy’ conditions
Pulling together, under ‘cloudy’ conditions

David Mitchell Smith

While the term ‘cloud computing’ has been used in many contradictory ways, it is heralding an evolution of business — no less influential than the era of e-business — in positive and negative ways.

Overall, there are definite trends toward cloud platforms and massively scalable processing. Virtualisation, service orientation and the Internet have converged to sponsor a phenomenon that enables individuals and businesses to choose how they’ll acquire or deliver IT services, with reduced emphasis on the constraints of traditional software and hardware licensing models.

So just how will cloud computing be defined, and how will it evolve? During the past 15 years, a continuing trend toward IT industrialisation has grown in popularity. IT services delivered via hardware, software and people are becoming repeatable and usable by a wide range of customers and service providers. This is due, in part, to the commoditisation and standardisation of technologies, virtualisation and the rise of service-oriented software architectures and, most importantly, the dramatic growth in popularity of the Internet.

Taken together, they constitute the basis of a discontinuity that amounts to a new opportunity to shape the relationship between those who use IT services and those who sell them. The discontinuity implies that the ability to deliver specialised services in IT can be paired with the ability to deliver those services in an industrialised and pervasive way. The reality of this implication is that users of IT-related services can focus on what the services provide them, rather than how the services are implemented or hosted.

Just as utility companies sell power to subscribers, and telephone companies sell voice and data services, IT services such as network security management, data centre hosting or even departmental billing can now be easily delivered as a contractual service. The buying decision then shifts from buying products that enable the delivery of some function (such as billing) to contracting, with someone else delivering those functions. This isn’t new, but it does represent a different model from the licence-based, on-premises models that have dominated the IT industry for so long. Names for this type of operation have come into vogue at different times. Utility computing, SaaS and application service providers to name a few, but none has garnered widespread acceptance as the central theme for how any and all IT-related services can be delivered globally.

So how will cloud computing affect the strategy and direction of IT and business? The types of IT services that can be provided through a cloud are far-reaching. Compute facilities provide computational services so that users can use CPU cycles without buying computers. Storage services provide a way to store data and documents without having to continually grow farms of storage networks and servers. SaaS companies offer CRM services through their multi-tenant shared facilities so clients can manage their customers without buying software. More recently, they have offered platform services as well, but this represents just a start for delivering all kinds of complex capabilities to businesses and individuals.

The focus has moved up from infrastructure implementations to the services that allow for access to the capabilities provided. Although many companies will argue about how cloud services are implemented, the ultimate arbiter of success will be how the services are consumed and whether that leads to new business opportunities. The implementation can affect that outcome, but it represents only part of the overall value proposition.

Status quo

With any issue that has such high visibility as cloud computing, there is significant potential to change the status quo in the IT market. As for IT vendors, the impact could be huge, with established vendors having a great presence in traditional software markets. However, as new Web 2.0 and cloud business models evolve and become the province of not just consumer markets, a lot could change with the vendors at widely different levels of maturity. The consumer-focused vendors are the most mature in delivering what we call a “cloud/Web platform” from technology and community perspectives: most investment in recent years has occurred in consumer services. The business-focused vendors have rich business services and, at times, are very mature at selling them. But these vendors have a narrow cloud/Web platform or do not necessarily provide a cloud/Web platform today. These are all potential vendors. Many vendors from different perspectives (traditional IT vendors, Web-centric vendors or vendors from other business) were not technology providers but will play an important role in the overall cloud/Web platform market.

Companies invest billions of dollars in building up their core competencies — much of which goes into IT. Imagine if companies could lease their core competencies to other companies, then they could capitalise on both brands.

Basically, a core competency would drive revenue in the consumer facing market and the business service market. Will your company be a creator or a consumer of cloud computing services — or both?

The author is Research VP & Gartner Fellow

Related Stories:
IBM unveils products, services for cloud computing
Tata Sons arm, Yahoo! tie up for cloud computing research

(This article was published in the Business Line print edition dated December 1, 2008)
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