Why Cloud Computing Is Potentially Very Interesting Indeed

This post is just a loose collection of thoughts on the topic currently named ‘Cloud Computing.’ Lately I have found myself wondering about this with a feeling between annoyance and curiosity. Why are glorified datacenters being touted as revolutionary?

‘Cloud Computing’ is often presented as vague and amorphous, making it seem frustratingly obscure if you want a detailed mechanism, and pleasantly abstract if you are looking for a simple way of ‘storing data and running programs and stuff.’  My take on it is that it is a label for a strategy, where IT suppliers standardise their low-level services to construct a platform, upon which businesses or other organisations can be built with little need for expertise in that area. What seems to vary is the degree of ‘low-levelness’, where the particular ‘cloud’ on offer can range from virtual servers to complete virtual businesses, accounting packages and all.

You as a customer approach the service provider with a vague notion, “I want some servers to stick my web site and stuff on,” or “I want a kind of operating florist business to do my flower selling on” and the cloud service provider happily accomodates your fluffy, woolly skyward vision. A step towards utopia, or Idiocracy, depending on your point of view.

Regardng practical benefits for those who are looking at the details,  the economics can make a lot of sense. There are all kinds of opportunities for optimisation. Switching services to different machines to use cheaper electricity providers around the globe. Peak demands may occur at different times for different clients, so the capacity that usually sits idle can be shared to mutual advantage. Whenever things consolidate, as I’ve explored in previous posts, there are advantages, and disadvantages, and on the whole the structural changes might make much better use of energy, or resources, or what have you. But we all know that sound economics has, for many decades now, not been a driver of anything at all.

What is truly interesting about a consolidated, optimised, global platform of IT servies (aka the cloud), is the potential it offers for rapid (aka exponential) emergence of, and rapid (exponential) death of businesses that are mostly downstream of that space.

It takes the ‘two cultures’ of IT and business to a new extreme. You might decide to construct, for example, a service like Skype. You are a programmer, you develop a UI, you develop some components that process the data transfer, you do a little online marketing. You host your app in the cloud, and suddenly, with online payment provision catered for, with server resources limitless, it no longer matters if your new app is used by 10 people or 10 million people. All you need to do is make sure the revenue per transaction equals or exceeds the Cloud cost per transaction. If your business goes viral, then you can knock out an entire company like Vodafone.

This is why very large companies are looking at the Cloud now, as early adopters and the potential chosen few, because they know they need to be there as underlying providers in the future. The sales, marketing and bean counting side of it (the “business”) become ‘skins’ – there will be plenty of scope for innovation, plenty of scope for competition, but in a mixed economy where the basic safety net of the Cloud will always be subsidised by the activities of everyone. By the way – the Vodafone example works for the banking sector too.

So, it’s the potential for a new business model to grow rapidly (and die rapidly) in the context of a consolidated, global, standardised IT service model that is interesting. It’s not the basic economisations in the model, or the coolness of the technology on offer.

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