Cloud Computing = Business First Computing

Dad

I have always been obsessed with business and more specifically the management of business. This lifelong interest was instilled by my father. He is an accountant by trade and a businessman for life, holding various positions across the finance department and general management. Growing up I wanted to be like him, to think like him and to impress him. He would't care what profession I followed, just as long as I was happy (and didn't ask him for money) but all I ever wanted to be was a businessman too. I thought Ozzie Smith, Willie McGee, and Vince Coleman were pretty awesome and I played some mean shortstop and outfield back in the day; for a 10 year old anyway. But my goal was never to be a baseball player, I just thought if I played for the team then I'd have a much better chance at getting to manage a part of team business. I knew baseball was fun but I also knew managing a business was infinitely more important. Peter Drucker said it best:

The center of modern society, economy, and community is not technology. It is not information. It is not productivity. It is the managed institutions as the organ of society to produce results.

In short, the center of modern society is business. Personally I define business very broadly. Business is acting with purpose to create specific conditions and results. Commerce, education, charity, government, healthcare - basically what ever we try to accomplish as a group - as a modern society.

What does this have to do with Cloud Computing? One of the first concepts that popped in my head when I was studying the Cloud was "business first computing". Some estimates put the global cost of IT project failures at more than $6,000,000,000,000 (I'll save you the time ... that's TRILLIONS) every year. I've personally played a role in my fair share. Every technology professional knows that IT projects fail constantly for dozens of reasons. It's the only department that wastes resources so spectacularly and where such waste is tolerated. "Information technology is complex!" So is architecture but we don't have buildings falling down all around us. Unfair, I know, architecture has been around for thousands of years. Aviation is pretty complex ... many aspects of the modern economy are very complex. The IT industry is relatively young and complexity is a very real and very difficult challenge but $6 Trillion dollars complicated? No way. So what's the deal with information technology?

One big issue is business, business models to be specific. I wrote about this in late 2009:

On-premises 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-premises 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. 

I had attended dozens of on-premises vendor meetings - real success had absolutely nothing to do with actual value delivered. Success was simply measured by the ability to effectively withdraw large capital payments from customers. Yes, everyone WANTS the customer to be successful and works hard to help the customer be successful but at the end of the day, the job was to sell a product. Leveraging that product to create value, well that's more complicated. The Cloud Computing vendor must continuously deliver measurable value to customers in order to be successful - they're providing a service. It was this fundamental change in business models that helped me realize Cloud Computing wasn't just some other option for the delivery of technology services to business - it was THE option. Technology plays a subordinate role to economics - like it or not, the Cloud is coming into every nook and cranny of every business across all applications.

Obviously, it's not a "flick of the switch" type change, different types of applications will move towards the Cloud model at their own pace as the technology matures. That being said, Cloud adoption is currently throttled much more by a lack of education than technical limitations. Take just 4 leading vendors as examples - is there anything you can't do with a combination of Google Apps, Salesforce.com, Workday, and Amazon Web Services? Sure, but your list is relatively short and it's shorter than you think it is, which brings me to my inspiration for this post, Salesforce.com.

It had been a few months since I had worked hands on with Salesforce.com or Force.com. In those months Salesforce.com had several major releases as well as awesome product enhancements, most notably Chatter. The user interface for users and administrators has had some great improvements. Integration with Google Apps, Batchbook, Linkedin, whatever - I can add an app from AppExchange in a matter of minutes. There's no need to upgrade to the next version, to buy new hardware to support Chatter, oh and everything works on an iPad and the iPad after that as well as the half dozen Android tablets coming in 2011. 

Sometimes I forget how incredibly awesome Cloud Computing is for business - you begin to take the fact that your applications continuously improve for granted. Salesforce.com is greatly improved in just a few months. SharePoint 2007 has had 4 years - how much has it improved? What's improved with SharePoint 2010 in that same period? Nothing. The online version of SharePoint 2010 isn't even available yet.

All the business ever wanted was the technology services. Buying and running products was the best way to provide these services. Operating a business at a loss for which there is only one customer? It's always been disgustingly expensive. Now it's just silly. Technology is just a means to an end, IT exists for the sole purpose of serving the business.