In the beginning: What spurred the rise in cloud computing
The shift toward moving hardware and management functions to external data centers began in earnest during the original dot-com bubble. At that time, physically outsourcing the technology elements associated with business applications offered some cost advantages but accomplished little else before the bubble burst. In hindsight, the idea of outsourcing the data center components of IT was just the first step toward solutions that offer sustainable value.
As the ASP model evolved into Software as a Service (SaaS), the right balance emerged between enhanced functionality, rapid deployment, and lower capital investment. That balance has converged with virtualization technology development and broadband penetration to drive the adoption of Web-based services.
How the credit crunch factors in
As more services became available online, the most commonly cited objections from businesses concerned data security and reliability. It was the credit crunch, though, that helped break down this wall.
In late 2008, many businesses saw their revolving lines of credit -- the money they used as operating capital -- drilled down to nothing. The cushion that sustained hardware and software spending over the last 10 years was gone. There were applications and services in need of an upgrade but fewer people to do the same amount of work, and the survival of many companies depended on successful navigation of the crisis.
And that's where cloud computing came in. The cloud offered up competitive technologies while eliminating much of the capital required to operate enterprise infrastructure. Today, there are more solutions available than companies can rationally absorb.
The proliferation of emerging technologies
The progress of technology since the real estate bubble replaced the dot-com bubble has been relatively quiet but steady. While communications services providers have grown their broadband footprints, independent software vendors have emerged with portfolios of multi-tenant management and collaboration suites and hardware and software vendors have focused on driving improved efficiencies into the future of computing platforms.
Supported by the maturation of virtualization technologies, hosting companies can offer unprecedented levels of redundancy and high availability for the dollar, thereby enabling the proliferation of enterprise-grade services that can be sourced from around the world. Companies like Amazon have leveraged that computing power to offer on-demand virtualized services around the globe.
So what's next?
Now that these services are recognized as critical to financial and operational success, what's next?
First off, companies will take a pragmatic approach to cloud services. On one side will be those who consume all IT and communications services via the Internet. The others will turn to private cloud and keep IT and communications resources behind the firewall. At the same time, companies of all sizes will avail themselves of built-for-purpose applications that are available on-demand. Departments within large companies will look to SaaS providers to satisfy data/project/customer management tools that are better served by point solutions on-demand than through internal IT organizations.
As for resellers, the proliferation of online services outstrips companies' ability to map business requirements with new technologies. Small businesses won't flock to online marketplaces just because they are there. Resellers can create practices around aligning relevant applications with the right businesses. Migration services, in particular, will be in high demand. Companies need help mapping existing applications and data to new platforms and will need training and support to drive adoption internally. Again, resellers who take a vertical approach will find efficiencies in a concentrated group of suppliers, as well as in their ability to spend marketing dollars wisely.
Questions about who will aggregate these Web-based services will emerge. Conceptually, anyone can be an aggregator. Companies that have a loyal audience with whom they interact online should hypothetically be in a good position to cross-sell relevant products and services. These companies could leverage an aggregation platform from which to provision, bill, and care for customers who are induced to buy online services from them. But is this a natural act?
The most logical place for the aggregator role is at the network, with the communication services provider (CSP) creating the on-demand offers. Since CSPs have unintentionally ceded the mobile application market to an over-the-top provider -- Apple -- they can't afford to do the same with the workplace.
Meanwhile, the proliferation of applications and services will continue. Suppliers will recognize and focus on vertical strategies to help drive adoption. It will be necessary for suppliers to easily demonstrate how they solve business issues, not how they can be configured to solve business issues. The Holy Grail will be getting the appropriate online services to interact, to maintain data integrity amongst customer and financial data, and to provide an integrated view across disparate cloud services.
Due to the proliferation of services-on-demand, suppliers, aggregators, and resellers will be forced to differentiate themselves by achieving a new level of customer intimacy. As "on-demand" becomes synonymous with "as I demand," smart companies will rush straight to the customers for the answer.
GRACE SCHROEDER'S BIO:
Grace Schroeder is CEO of LGM Cloud Strategies, a full-service cloud computing consultancy that focuses on putting products and solutions in the hands of cloud services vendors, aggregators, and resellers. Grace can be reached at email@example.com.
This was first published in August 2010