We LOVE the Cloud. When you think that 60% of the costs of maintaining the average server are purely electrical power (and worse with old hardware), simply jettisoning the asset-heavy infrastructure will reap a return.
However, when we delved more deeply into the seeds of Cloud Computing (read our earlier article), it's clear the future potential of Cloud goes well beyond cost-savings generated by eradicating clunky, inefficient IT infrastructure. Cloud can harness the true benefits of SaaS delivery and BPO can plug the gaps may companies need to have business services delivered in a readily-available "as you need it" model.
One of the core discussion points on this site over the years has been how the outsourcing industry can find new levels of efficiency - and business value - once companies have maxed-out the cost-savings from lower-cost labor. The IT outsourcing business still has plenty of mileage shifting software development and support work offshore, but eventually this will dry-up. Many of the high-end enterprises have already moved as much of the commodity work offshore, and they are having to look at more of the complex infrastructure areas for the next wave of productivity gains. Cloud delivery is going to pay a pivotal role in the heart of the future global sourcing delivery business, but the critical question is how quickly it will become adopted.
Stephanie Overby's latest article in Computerworld magazine has some excellent talking points:
- Gartner predicts that by 2012, 20 percent of businesses will own virtually no IT assets. "While adoption of cloud services is still low, outsourcers need to adapt to this change. The days of dedicated data centers are probably limited" (Susan Tan, Gartner)
- "Enterprise decision makers are rightfully fed up with old-school, black-box, ten-year handcuff deals" (Phil Fersht)
- While Doug Plotkin, of PA Consulting, seems to hold the opposite view that enterprises need to invest in research and take their time, before making radical decisions to their architectures; "Large established firms should research the market for the areas they can participate in without going overboard on the idea that they should completely re-architect their solutions and delivery mechanisms". Hmmm, maybe Doug spots a consulting opportunity...
The answer undoubtedly lies somewhere between a slow, methodological approach and a fast-paced impetuous decision.
One thing is clear: we are now living in a New Relentless Economy, where business are aggressively looking at new ways to drive out cost, improve productivity and find new thresholds of performance. I don't predict Cloud to sit around for years before companies finally adopt it. Moreover, we'll see a heavy vendor-push (already started by some) to move clients quickly onto Cloud-based platforms and train IT staff to develop Cloud-capable applications to support the transition. Look back two years to see how dramatically the climate has shifted and ask yourself "will enterprises hang aroundin this environment, or are we on a relentless spiral for productivity improvement?"
I predict we'll start seeing the first wave of genuine Cloud-based business utility offerings becoming widely adopted within a two-year time-frame.