Cloud Computing is Not a Passing Shower

My Financial Times column 12/6/10

One way you can be sure a revolution is under way is when generations fundamentally disagree. Cloud computing is one of those technological phenomena that has sneaked up on the wider world of business and now has people on either side of a generational divide bickering over its value. The idea is that we can now use computer services as if they were a utility, like electricity, drawing on software and hardware when we need them, rather than each of us owning our own generators and distribution networks.

For digital natives, the cloud is as natural to computing as the keyboard. The cloud is Facebook, Zynga and Gmail. To an older generation, the cloud is WikiLeaks and data breaches. For managers trying to weigh up whether this is a fad or here to stay, where you stand may just be a function of your age.

I realised this at a recent conference where cloud computing was under discussion. The older people in the room railed about how moving a company’s operations to the cloud represented a fatal loss of control over your data. The younger audience members sat shaking their heads that anyone could doubt a technological shift with such gobsmackingly obvious advantages. There was nothing either side could say to persuade the other.

Cloud computing means dispensing with much of your own software and hardware and accessing it virtually as and when you need it. Rather than owning your own servers, you rent whatever server space you need for a monthly fee. Instead of installing a CD into your computer loaded with software, you access whatever software you need through your browser. Instead of storing your data on your computer or phone, you store it virtually and access it with a password. The likely benefits are extraordinary flexibility and access to far greater resources of people and information. In bean-counter terms, the cloud turns technology capex into more manageable opex.

So what’s the problem? It seems to be the loss of control. A manager who controls sensitive data on customers and pricing, for example, may be loath to remove that from his own hard drive and place it in the cloud. A chief executive discussing the possibility of moving to cloud services with his head of IT will almost certainly be told it’s a terrible idea. Far better to have one’s own servers and one’s own people maintaining them than relying on some abstraction like “cloud services”. Whom do you call in the cloud when your system fails?

The truth is, though, that objections to cloud computing are merely delaying the inevitable. Of course there are security issues to be overcome and technical fears to be allayed, but the basic ideas behind cloud computing seem irresistible: pooling resources to drive down cost and accelerate innovation and liberating people from the tether of physical software.

Pat Toole, chief information officer of IBM and an evangelist for cloud computing, likes to say of the cloud “it isn’t rocket science but it is computer science”. By this he means that the challenges of cloud computing for business have existed in every phase of computing, challenges around cost, utility and security. For now, Mr Toole says, some workloads are evidently better suited for the cloud than others. Work that requires collaboration, for example, can be made much easier through the use of virtual desktops and web-based services. More data sensitive areas, such as enterprise resource planning and transaction processing, may not yet be ready for prime-time on the cloud. But these are problems that companies will eventually make fortunes by solving. Until then, managers should pick and choose which aspects of their business will benefit from moving to the cloud, and which will not.

To reassure the hesitant, some large players are already all but living in the cloud. Li & Fung, one of the world’s biggest supply-chain operators, now communicates between its many clients, factories and suppliers through a web-services platform, where clients can place orders and pre-qualified suppliers can bid to fulfil them. Factories are audited in real time with hand-held computers. The company has created a platform of networked technological processes accessible to myriad participants who can now act far more quickly and at lower cost than they could via e-mail. That’s the essence of the cloud, and it is hard to see its impact not spreading.

For smaller companies, the risks of cloud computing are generally fewer. Their data is probably less valuable and less susceptible to theft, and they have much more to gain from access to technologies they could never have afforded before. They can purchase sales and customer support services on an as-needed basis, rather than investing in their own expensive infrastructure. And they can analyse customer data in a way only large corporations could afford to in the past.

These are remarkable changes and far more than silver linings.

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