Cloud Computing isn't complicated - unless you're a traditional vendor

Businesses of all shapes, sizes and purpose are migrating by the millions to cloud computing solutions like Google Apps. Their reasons are not complicated - easy to use, full featured, reliable, flexible, empowering and inexpensive. 

One not need be technical to understand cloud computing. Google.com, Amazon, eBay, Google Maps, MapQuest, Craigslist, Facebook, Twitter, et cetera. Do you need to be technical to use Google.com to find the information you're looking for, Amazon to buy a 47 inch LG flatscreen, or Facebook to look at pictures of your sister's kids? Nope. Unlimited cloud computing resources are at your disposal 24x7.

Google Apps has more in common with Google.com than Exchange Server or SharePoint and this presents a problem for traditional software vendors. When selling software to businesses, complexity and pricing have a direct relationship. Basically the software vendor is incented to dream up and manufacture increasingly complex (or that which is perceived to be complex) "solutions" which customers then purchase - again and again. This has rendered software an extremely profitable industry - nearly a quarter of the world's 20 richest people are from Microsoft and Oracle. As with any large industry a self-perpetuating ecosystem has formed around the on-premise software giants - most commonly system integrators, independent software vendors, value added resellers, large account resellers, and training firms. Trillions of dollars spent and yet IT in the enterprise is years behind consumer technologies and millions of American small business owners are still handing out business cards with @aol.com email addresses - the current IT paradigm is working great for vendors but at the expense of customers.

On-premise vendors have been sitting pretty for some time. Imagine - you are able to sell a product over and over again yet it costs you next to nothing to duplicate, you're not responsible for getting the product to work yet make 90% profit margins on maintenance and support, you collect large upfront payments AND charge annual fees. This business model created our world's richest man. In this paradigm the vendor holds nearly all of the leverage. Cloud computing upsets this balance of power. 

Cloud computing is a service rather than a product. This is an important distinction. 

When a consumer purchases a product it is inferred they have done their due diligence - they may have buyers' remorse but at the end of the day the burden is theirs to bear. The vendor already has the cash in hand. Along with the software, the customer has also purchased hardware and other required products making them that much more invested - at this point, for better or worse, they either move forward or the decision makers look for other jobs. The burden of producing value is on the customer even though it was the vendor who received payment. Ultimately, a majority of IT projects fail, resulting in an enormous waste of precious capital. The system is prone to failure and on-premise vendors do not have an economic incentive to change the status quo. 

Providing IT as a Service changes the game completely. The economic interests of the vendor and customer are better aligned. The burden of producing value is on the vendor - where it should be as they're the firm being paid. This value must be proven on an on-going basis since the vendor must continuously prove themselves to the customer. The vendor becomes responsible for system performance, security, reliability, upgrades - ALL the work it takes to provide a transparent, high quality service. 

Detractors have a million different technical "concerns" about cloud computing but another million dollars on the bottom line will always speak louder. Cloud computing may not be for every vendor, but it is for every customer.