What do Cloud computing and a sub-prime mortgage have in common?

Rob Livingstone

Rob is a respected and experienced CIO, with more than three decades of industry and ICT experience. Over the last 16 years he has held the CIO role at several multinationals, most recently Ricoh. He is the owner of Rob Livingstone Advisory and a Fellow of University of Technology, Sydney. Rob delivers the Pathways Advanced and Business ICT leadership programs in conjunction with the CIO Executive Council.

Welcome to my CIO blog. In thinking of an appropriate moniker, the word ‘accidental’ sprang to mind. What’s accidental about my career as a CIO? In the mid 90’s I was given the job of re-implementing a failed ERP implementation in a multi-division, nationwide business. I remember the day well. “…we’d like you to stop what you’re doing and, as of next week, take over the management of the IT Division, and re-implement the system that’s just been implemented, in your spare time!”. To that point, I’d only ever been on the receiving end of various enterprise IT Divisions’ services and dictates. The boot was certainly now on my other foot.

Having just clocked 10 years as CIO at Ricoh, I have decided to move on to look for something different. Through this column, I hope to be able to precipitate some productive and interesting discussions on industry topics that are not only relevant, but also possibly even controversial.

By now, everyone has been subject to the ‘cloud-infestation’ of almost every aspect of IT. If you don’t have ‘cloud- something’ you’ll be left behind.

This made me think about the recent GFC and the sub-prime mortage crisis.

Given that ‘Cloud’ is at the peak of the Gartner 2010 Hype Cycle, I think this is a good time to stop, draw breath and reflect on the view from the top of the ‘hype mountain’.

Some of the comparisons that spring to my mind are:

Cheap now – expensive later: Just like a sub-prime mortgage, you can get into the cloud by using your credit card. Full life TCO considerations are not always top of mind.

Product ‘democratisation’: Just like a sub-prime mortgage, anyone can have a Cloud application. Far flung parts of a business can ‘do their own thing’, without having to involve IT. Like building your own home without needing Council approval! Just hope that the foundations are well designed and built.

Compelling initial offer: Just like the blush of young love … you are largely presented with the best side of what’s on offer and you’ll only see what you really want to see! Remember a third of marriages do not stand the test of time. The seduction of the Cloud is most evident at the Board level of organizations and in the user community.

Opacity over what you’re purchasing: Not everything is always willingly disclosed up front by the Cloud provider. Understand precisely what you are purchasing. A lot of questions need to be asked to comprehensively understand the product or service. Like switching on a Xmas tree light one at a time in a darkened room. Only after a while does its true shape become evident.

Risk is downplayed up front: ‘Trust me’ requires a number of small or a larger, bold large step of faith. Somewhere ‘out there’, someone will be looking after your applications for you.

Promise of continual rising value/reducing cost: This hypothesis is largely untested, as the jury is still out on the 3-5 year true TCO of enterprise public Cloud.

Flexibility is offered, but not very easily achieved: Textbook SaaS means you pay for what you use. Ask your favourite Cloud vendor to invoice you on a monthly basis for your monthly concurrent usage profile of 7150 users for January; 20 users for February ; 4300 for March; 350 for April ; 1750 for May and 1900 for June. Make sure you only pay for what you use.

Get that ‘locked in’ feeling: Easy to get in, maybe not so easy to get out. (You can get your data but try having to re-write 100 per cent of your business logic.)

Crowdsurfing is fun: Everyone’s rushing around talking about it, so there’s pressure on you not to be left behind. Don’t spend time assessing things, just ‘get with the program!’. It's like an evangelical gathering.

Emotion plays a part in the decision: You really want that house (software system), and you just love the kitchen (easy to use) – worry about the plumbing later!

In my recent discussions with peers and a number of large organizations, the ‘Cloud’ phenomenon is very confusing, with as many opinions as solutions. All I can say is that amongst the confusion and mixed messages, there are very well designed, build and operated, cost effective offerings.

My message is simple: Be alert, fully informed and stick to the basics – then you should realise the upside value of the Cloud

In keeping the momentum going, and to provoke further discussions on the topic of ‘Cloud’ I will be presenting a paper entitled “Is your organisation instrument-rated to fly in the cloud?” at the World Computer Congress. I just hope that there are no mid-air collisions in the near future!

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Tags: SaaS, cloud computing, sub-prime, mortgage

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