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Cloud computing - the next industrial revolution

The term ‘Cloud computing’ continues to receive a lot of attention from the media, and within the IT industry there is perpetual debate on definitions and from vendors a relentless succession of press releases on their latest Cloud offerings.

Cloud conferences are on the increase and every industry event has a track on Cloud computing and within organisations we hear of Cloud strategies being announced and VPs being anointed to lead them.

The hype on Cloud is still more prevalent than the adoption, however research continues to point to the increasing and rapid adoption of Cloud computing and its inevitable shift to mainstream.

But what is causing this shift and what is the real change that is occurring?

How much of this disruption that we call Cloud computing is actually caused by technology and products or are there other driving forces of change at play?

What if the real change is below the surface, a tectonic shift occurring in the attitudes and behaviors of customers and how they want to buy their IT?

Check out CIO Australia's Cloud computing section

There is no real definition for Cloud computing

The same question continues to be asked about Cloud computing: what is Cloud computing?

The IT industry seems more confused than ever before as it struggles to define and pigeon hole this disruptive change and there seems little agreement or consensus on what Cloud computing actually is.

In the US, the National Institute of Standards and Technology (NIST) attempted to alliviate the situation by putting out a definition - but this is now in version 15, has more than 760 words, includes five characteristics, three service models and four deployment models. It also comes with a disclaimer that, in essence, says their definition is likely to change. So they don’t really know how to define what Cloud computing is because it is a changing paradigm.

Presenters at Cloud conferences cannot resist putting up their own new definitions, when Web search engines are queried on 'what is Cloud computing' they return an increasing number of new results each day and the tweets continue to scroll down with many different viewpoints as the pro and ante Cloud camps continue to posit their own new theories and definitions.

On top of all this, many vendors are simply taking their existing services and products such as hosting, outsourcing and co-location and rebranding them as a 'Cloud' product which means that their definition of Cloud is translated into ‘our product’.

But while the IT industry grapples with the definition and argues amongst itself about whether this is something new or just a fad or hype, many in the industry are also just sitting back to see what happens. Sadly they may be missing the real point that this Cloud computing disruption is not about a technology, it is not about a product, it is not about a service offering, it is not something that we have always done, it is not even about a deployment model, rather it is a transformation, a paradigm shift and a change in attitude and behavior that is occurring under their very noses.

Customer’s attitudes and behaviors towards how they want to buy IT are changing forever and this is the real transformation that is occurring. Sadly, many vendors may not be prepared for it.

Despite the criticism here of the various attempts to define Cloud computing, some much-needed thought leadership comes from Simon Wardley of CSC’s Leading Edge Forum in the UK, who bravely adds his definition of Cloud computing to the confused mix:

“Cloud Computing is a generic term used to describe the disruptive transformation in I.T. towards a service based economy driven by a set of economic, cultural and technological conditions”.

Cloud computing is a fundamental shift of the IT industry from a product based industry to a services based industry driven by factors other than just technology and products. This lifts the current thinking of Cloud computing out of the technology product space and into the realms of economics and culture, attitude and behaviour.

Looking deeper into Simon’s definition and his thinking on this, we find that he also presents the best comparative analogy of Cloud computing ...the industrial revolution.

The industrial revolution

The Industrial revolution can be loosely described as a broad socio-economic and technological transformation that occurred in the period from the 18th to the 19th century. Like Cloud computing it was not a technology, not a product nor a deployment model but a mix of disruptive factors including complex socio-economic factors, technologies, attitudes and behaviors.

It was a shift from cottage based product manufacturing to centralized and mechanized factory manufacturing which had broad socio-economic impacts across many countries.

Similar to Cloud computing there seems to be no single definition that everyone agrees on and even 200 years later you will find many different viewpoints on how to define what was the industrial revolution.

But one thing we do know, it came, it happened, everyone adopted the new approaches and no-one could stop it, not even the Luddites who tried. We also know that it was a series of changes over a long period of time and no-one stopped to think about the definition of what they were doing, there were strong business and economic drivers and it just made sense to change the way things were done and the behaviors and attitudes shifted to suit the new approaches.

But what were the triggers for the industrial revolution and are those same triggers evident today with Cloud computing?

Taking a very simplistic approach the industrial revolution started with some long understood concepts, then there was the suitability of the manufacturing practices for this change, then the technology emerged to support the changes in practices and most importantly there was a shift in attitudes and companies became willing and wanting to adopt these new approaches.

Cloud computing is not about the technology waiting for the change to arrive but it is about a change that has been waiting for the technology, and with the current shift in attitudes we now have all the pieces falling into place to herald the next big industrial revolution.

Wardley suggests that there are four components that made the industrial revolution happen and it is clear to us that these same four components exist today that are making the Cloud revolution inevitable for all of us.

The changing attitudes

There are strong indications of rapidly changing attitudes within organisations and a shift in the desired approach for buying IT evidenced earlier this year when two Australian financial services organisations announced plans for an aggressive adoption of Cloud computing.

The CBA bank (ASX:CBA.AX), with more than 7 million customers and arguably the flagship of technological innovation for financial services in this region, made some startling announcements about its shift to Cloud computing, but more importantly revealed it was driven by a new attitude and behavioural shift towards the way they buy IT.

When Group Executive and CIO, Michael Harte, announced the move to Cloud computing he said:

“We're saying that we will never buy another data centre. We will never buy another rack or server or storage device or network device again”

and...

“We only want to pay for what we use, we want to get out of infrastructure computing and into fine-grain components and highly granular data, so that our customers enjoy new services. This is not about some technical breakthrough; it is about supplying customers the services they want — and doing that at value.”

In June, the prestigious Wilson HTM Investment Group (ASX:WIG), a 115-year old stockbroker and wholesale/retail fund manager, announced a $16 million deal to move its entire IT to the ‘trusted’ Cloud computing platform provided by Australian Cloud provider, IntraPower (ASX:IPX).

Similar to the CBA, a big driver for Wilson HTM was the shift to only paying for the IT that they use and it sees a radical shift away from big hit capex, annual licencing fees and lump sum software development costs to a streamlined model where they pay for all their IT on a per user per month basis and this allows for greater granularity and also mean that they pay much less for some users and all based on their actual usage.

At the time I was quoted in the ASX release:

“There is a major transformation going on in the IT industry and this is driven by the business requiring greater scale, flexibility and agility. The problem with the traditional IT model is having a large proportion of IT resources and budgets tied up with just keeping the lights on and managing a large scale infrastructure inventory all of which rarely confers any real strategic advantage to the business.

Unlike the high cost and high risk outsourcing, hosting and traditional in-house “one-to-one‟ infrastructure models, the new trusted Cloud computing model is a “one to many‟ model where you can pay to access state-of-the-art shared infrastructure, as and when you need it, allowing you to scale up or down quickly when required, all at a much lower cost than trying to do all this yourself”.

In hindsight I could have summed all this up by simply saying “utility computing”.

On the issues of security and privacy both organisations stated that these issues were the easiest to overcome and were actually greatly improved under the new model, which is at odds with the current chorus of concerns about Cloud computing.

Perhaps this is in part linked to fear and resistance to change displayed by some quarters of the industry (Luddites 2.0), but more importantly the willingness of these financial services organisations to make these changes and therefore work on solving and overcoming the usual hurdles.

Clearly there has been a change of attitude of tectonic proportions for the country’s largest bank and then one of the country’s oldest and most respected stockbrokers to announce to the market such a transformational shift to Cloud computing.

Without a doubt there are deep business drivers at play here, competitive and economic benefits of “industrial revolution” proportions and according to the research analysts at IDG there are many more organisations lining up so they don’t fall behind in the competitive stakes.

So, while there isn’t really a good definition for Cloud computing and Cloud computing isn’t actually something new, let us accept that instead, the term describes the transformation of the IT industry from product based to a services based economy, not driven by a technology or a product, but by changing attitudes and behaviours of the customer. The next big Industrial Revolution is at hand and this is an industry whose time has come.

You don’t really get a choice about Cloud computing so you had better prepare to adapt.

Scott Stewart is the consulting CIO at Wilson HTM, where he architected and delivered a 'Trusted' Cloud computing strategy to deliver flexibility and agility to the organisation. He regularly blogs on cloud computing and is undertaking a professional doctorate in Information Technology and the Queensland University of Technology around business and IT convergence.


Recommended readings:
Going Google

State of the Australian CIO Research 2010

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