I have read a few books and heard at-least a dozen talks comparing Cloud Computing with Electricity. The idea that businesses in IT industry would change drastically with Cloud computing has its merits. However comparing the evolution of electricity with cloud computing is stretching it too far. The fact that over the years manufacturing industry evolved from using small electricity units that would suffice to fulfill their requirements to centralized Grids seems appealing to a few. What we tend to forget is that in IT we already tried Grid computing and it failed. Moreover the analogy is fictitious because no one ever wrote a book with a title “Does Electricity Matter” and there was never been a debate on utility of electricity. Don’t get me wrong, I do believe that with Cloud computing IT companies need to redefine their business models so that they could gain competitive advantage. However by comparing Cloud computing with something as essential as electricity some pundits are arguing that cloud is the only way of survival in the IT industry going forward. I would certainly not buy that as other IT models will continue to flourish. If at all one wants to understand the Cloud computing and its impacts, one would be better of comparing Cloud computing with telecommunication industry.
Telecom industry evolved over time and its manifestation is that instead of making money on the handsets, companies are making profit on data plans today. The competition and advancement in Telco forced the stake holders to redefine the way they did business. Consumer expectation to pay less for a standardized service meant that there would be quick adaption but less profit provided customer expectation is met. It also meant that over a period of time there would be competition resulting in less profit margins. It also meant that client addition and retention would be challenging and would require streamlining of processes. Product offerings and packing that would be audience specific would govern the success of business. Business insight into processes and quickly changing market would be essential to change with the marketing trends. How did companies evolve with these changes to the industry? What happened to companies that didn’t change with the market? What was the impact on the early adoptors? What was the effect of competition on profit margins? I believe that answers to these questions would hold true for cloud computing.
In Pakistan, with a population of around 180 million, cell phones happen to be amongst the most sold commodity but service providers continue to complaint about the lack of profit. On the other hand small companies that sell problem specific solutions to these telecommunication giants tend to make good profits. Similarly the challenges of subscription models and KPIs for customer addition and retention in this model in Telco provide deep insight for the software industry. Think of a user who has a cell phone and uses services such as Hotmail, Google, Facebook, Car rentals, Hotel bookings and travel advisory. This user pays nothing and gets so much from the cloud. Now it’s just a matter of applying the same to industry so that businesses could run on the cloud. Businesses would eventually reach there so we are better off realigning to be part of the change. However bear in mind that profits are going to be marginal unless the processes are defined and services are replicated.
1 thought on “Understanding Cloud computing”
Excellent analysis of cloud computing in comparison to other IT models.
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