Posted by: Greg Ness | May 8, 2009

The Dizzying Economics of Cloud Computing


The billowing state of cloud computing -from expansive, hazy definitions to product proclamations establishing a new level of irony for the term “vaporware”- has clouded some potentially interesting debates about technology and business and the increasingly strategic importance of the network.

I was on a call recently with some networking executives from Cisco, F5 Networks, Infoblox and VMware preparing for the May 21 Fire panel on infrastructure 2.0 (or dynamic infrastructure) when one of the panelists coined the term “just in time IT services”.  There was a pregnant pause as soon as the term crossed the telephone wires.

The panelist was making a point about the relationship between investments in automation and supply chain in manufacturing with (similar investments in) network infrastructure.  The implication of his comment: will high paying IT jobs eventually migrate to companies, states, nations, regions, etc. which make the new computing network infrastructure investments and acquire competitive advantage as IT shifts from hardware-bound, location-bound models to various forms of cloud computing pulsing across highly intelligent network fabrics?

In the meantime, CIO Magazine published an interesting article on McKinsey’s recent cloud computing report.  The report clearly intends to debunk the economics of cloud with perhaps out-of-date reasoning.  Read the report for your own conclusions.

No One is Running to Cloud Just Yet

No one is saying that enterprises today need to immediately adopt cloud computing.  Hardly.  I think the FIRE panel consensus will be that enterprises should begin planning for the coming shift by automating their network infrastructure and reducing the manual labor and delays inherent in keeping a typical network available and secure.  As system automation and movement increases, static networks will be barriers to the business cases required for new investments.

As enterprise IT evolves the pressures will mount as SMB services get cheaper, more flexible and more dynamic.  Service providers will creep up with more capabilities, applications and services as they monetize new offerings and displace the outdated IT models that resemble pre-1990s manual business practices.  Cisco’s Urquhart called them “an army of clerks”, and I think he’s right.

Those enterprises (and regions) stuck with manual labor tech empires will lose.  Automation will produce higher paying jobs in IT in the same way that it has in brick and mortar industries.  Governments that over-invest in programs that simply maintain dying status quos or twiddle with various wealth transfer tax schemes will postpone an even more painful inevitability for their taxpayers as those who get it continue to reshape the delivery of IT services on robust, automated networks and prosper.

Out there in the land of service providers is a Henry Ford or Bill Gates who understands the coming transformation and is testing and innovating for comparative advantages while others hang on in desperation.  Where they build tomorrow’s factories will make all the difference, in the same way that the Marshall Plan and the railroad etc. shifted wealth on often unprecedented scales.

2016 Update: The enterprise cloud has finally caught on, especially for new workloads and momentum is building for moving existing workloads into the cloud. Key drivers include digitalization and rising maintanance costs tied to increasingly complex, cobbled enterprise networks as well as greater demands for agility and security.

Read more at: CIOs Must Cross a New Chasm of Destruction



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