Technology, Cloud

5 thoughts on Cloud Computing Fallout Beyond Lowering Costs

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Many organizations look at cloud computing as a way of lowering costs, but the fallout can actually be much broader:

  • Cloud security and mobile devices – At the same time organizations are looking at cloud computing and its impact, the consumerization of IT is forcing them to look at how information is delivered to the end users as well. The security implications of cloud computing and the delivery of critical business information to mobile devices come together to shift how applications are developed. BYOD is more about data access than it is about the devices themselves.
  • Application design shifts – The strengths of cloud (parallel processing in large volumes, remote automated/efficient compute pools, shared resources…) are somewhat incompatible with the way many applications have been written in the past. New techniques and training will be required. The existing application portfolio will need to be reviewed in-depth from a variety of perspectives (value/watt consumed…) to understand where effort needs to be concentrated.
  • Flexible contracting concessions – At least at the lowest level of cloud (IaaS), most of the cloud services will be sold on a “take it or leave it” configuration. Although the service provider will be unwilling to reconfigure their offering to meet the needs of any individual client, they may be willing to trade favorable pricing or other concessions for longer-term or higher volume customer commitments. These variables actually mean something to the service provider’s business plans.
  • Flexible Subcontracting – Although the standards are not quite there yet, the flexibility of a more incremental approach to consumption can allow for organizations to contract directly with the underlying cloud technology providers, or the relationship can be part of a larger outsourcing/service partner. This is part of IT’s shift in focus from operations to management of relationships and services to ensure effective.
  • Consumption knowledge based behavior changes – Now that organizations know more about how resources are consumed, there can be a tendency to tighten the very screws that are providing the visibility and transparency. A shift from just consumption to a real value vs. costs tradeoff needs to be well understood by everyone involved. Know your costs before shifting work into the cloud and be wary of chargebacks or approaches that may stifle adoption if true value is being generated. Be aware of what portion of spend is being consumed addressing old problems and what has been diverted to innovation generating new value.

In 2009, I wrote a blog post about measuring cloud adoption. These techniques can shift your thinking about cloud and cloud deployment as well.

Those are a few thoughts off the top of my head related to cloud fallout. What others can you think of?

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Pearl Zhu 90 Points | Mon, 12/17/2012 - 17:12

Nice year-end summary on Cloud, pick the application design shift, there're many brainstorming about application rationalization and modernization, Cloudification provides the new opportunities to review application Portfolio, not via isolated view, but via enterprise architectural view, to ensure application well fullfill business purposes, also bring effectivenss and optimization for business processes, and reduce the cost to maintain legacy applications. thanks. 

Paul Calento 255 Points | Thu, 11/29/2012 - 15:37

Cloud "fallout" underscores that fact that choosing a provider and launching a cloud-based solution is only part of the puzzle. A cloud management strategy is needed and requires a ready-fire-steer approach, as there are broadbased implications. Unfortunately, most of us are moving too fast to properly address them until its too late.

--Paul Calento

(note: I work on projects sponsored by and HP)

jamal khawaja 112 Points | Tue, 11/27/2012 - 21:38

Very cogent analysis of the second-order consequences of cloud conmputing.  Although I agree that cost will be the primary driver of public cloud by a huge margin, these factors must be considered as well.

Doug Goddard 123 Points | Tue, 11/27/2012 - 16:16

>>Those are a few thoughts off the top of my head related to cloud fallout. What others can you think of?

With respect to the public Cloud, it is hard to understand how it moves beyond a lower cost business model. The shift to a services life cycle perspective means value is a function of both utility and warranty. The utility in the public Coud is uniform and commoditized, for the most part, and there is little in the way of warranty, compared to an outsourcing agreement with real teeth in the service level commitments. These are not services that an organization is likely to gain any competitive positioning from, since everyone else is getting the same utility and warranty. Price is likely to be the determining factor in a commodity service. 

As you point out, the pricing models are very immature, there is some reluctance to the idea of cost transparency and there is likely nothing on the cost modeling side, coming from the public Cloud. Not sure how they do even a basic chargeback model. Consequently, it will be difficult to even determine the ROI of the commodity services.

The IT services perspective is technology agnostic. Consequently, the Cloud evangelists will have to move beyond simply shouting how great the technology is to close the deal on essential business processes.


John Dodge 1535 Points | Wed, 11/28/2012 - 14:51

I wonder if premium cloud services are analogous to premium PCs in the late 80s. We all know what happened there - high cost PCs that came with tons of support succumbed to the high volume, low cost PC business (as TVs had before PCs). And during that time, I would conjecture that PCs seemed every bit as complex and diverse as the cloud does today. While customized and tailored cloud services sound appealing, I wonder if low cost cloud services with all its warts will still win the you say, Doug, the cloud has to be matched to the "essential business processes.." - more or less.       

Doug Goddard 123 Points | Wed, 11/28/2012 - 15:25

I have no doubt there will be a low cost, low margin public cloud market for commodity services, just like there is for commodity hardware. There isn't really much unique about email, CRM, Payroll or HR, these days. There are about a billion To Do List solutions out there too. However, essential business processes are normally designed to provide an organization with a competitive advantage in the market spaces they operate in. They are unique, by definition. There is also an enormous inventory of essential business solutions that still run on mainframes. I don't think there are many banks planning to run their VISA systems on a public cloud any time soon. If they are, they will expect big checks to be written to them if those systems are down for even 5 minutes. My suspicion is the public Cloud vendors will eventually want to move up the value network, to gain bigger margins and some people are saying they represent the end of ITO and BPO. Just wondering out loud how that is done.

John Dodge 1535 Points | Wed, 11/28/2012 - 15:30

There's a lot of footdragging, hemming and hawing and hesitation about ever moving manufacturing systems, supply chain and ERP apps to the cloud. Maybe, it will happen inevitably, but those areas are highly resistant.


Charles Bess 93 Points | Tue, 11/27/2012 - 20:45

It will be interesting to see how this least common denominator model will turn out over time. Some of the folks jumping into the cloud business have only the most rudimentary knowledge of what it actually takes to keep a computing environment running. Right now they are relying on redundancy and automation -- Important and useful tools, but will they be enough for the long haul. As you point out, it needs to be about more than just technology.

Doug Goddard 123 Points | Tue, 11/27/2012 - 22:16

Just thinking out loud, there may be a higher value play in the public infrastructure as a service space, assuming one wraps an enterprise class warranty around the service and a robust governance framework, featuring service oriened financial and demand management. The pricing models need to be more sophisticated (i.e. multi-tier pricing, volume based charging, a wide array of service unit measurments) and the cloud vendors would likely need to do more cost modeling and allocation for each of their clients, so they become a strategic asset. They would also have to handle a constant steam of adjustments and multi-national taxation and currency conversion rules. 

There may be a play for a higher value software as a service too, where rapid customization is part of the service package. 

At the moment, the emphasis seems to be on commodization, so I don't know if any of that other stuff is in the pipeline. Besides, one is just more or less inventing outsourcing in the process.

Pearl Zhu 90 Points | Mon, 03/19/2012 - 17:50

Hi, Charlis, thanks for puting five thoughts together to understand cloud further and deeper, essentially IT now transform from building things from ground up into integration and orchestation, in order for faster delivery and easy provisioning, yes, SLA, vendor relationship, cost optimization., etc those are key issues beyond security and GRC. thanks.