At the Thursday PDMA breakfast meeting on September 3rd, 2009 we discussed the notion of cloud computing. The fundamental concept is that businesses today own a level of capacity that ensures a cushion at peak demand. This is excess capacity. When it’s added together across many businesses it amounts to substantial waste, especially because peak usually tends to be an infrequent event for most businesses.
For example, the credit card industry maintains capability to handle volume for the day after Thanksgiving shopping deluge. If this capacity were pooled together with other industries then the total capacity needed at any one point in time would shrink. As a result, the cost should be lower in that pooled environment.
Fundamentally, Cloud Computing is similar to other utilities like the telephone, water, and electricity. It should be universally available, reliable and affordable.
Proponents of Cloud Computing also suggest that with the plethora of software solutions, there is a lot of duplication of effort. This too can be pooled to leverage established solutions across multiple users instead of customized solutions for each user.
The benefits are:
· Lower Cost – more efficient use of capacity drives lower costs.
· Greater Accessibility – Users have access to a greater library of solutions 7/24.
· Safety – 7/24 staff to handle any problems anytime.
· Automatic secure backup of data.
· Unlimited capacity from the perspective of any individual user.
· Ease of use.
The costs are:
· Network capacity is not really there yet.
· The cost of capacity may not actually go down, especially in the long run.
· The cloud likely will not be as reliable as desired, at least initially.
· Security is a concern where a third party is responsible. It is usually an internal person who breaches security.
The conclusion was that for many small and medium sized businesses, cloud computing makes sense. Where it is less likely to be beneficial is where IT is a core component of competitive advantage for the business.
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I attended a panel discussion on cloud computing a month or two ago and found it interesting, even amusing. The concept was discussed as if it were a true breakthrough. In fact, it's just a form of resource sharing, which has been around forever (literally - think "farm co-op").
Sharing resources in order to eliminate excess capacity and unnecessary investment is a great idea. On the innovation scale that we talk about, it belongs at the "incremental improvement (internally focused)" end rather than at the "breakthrough" end.
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