The Business Impact of Cloud Computing

I attended the 8th international Cloud Computing Expo in NYC (June 6th – June 9th 2011). There were over 7,000 attendees with curiosity and enthusiasm about the technology. Many informative workshops were being offered. They all shared these facts:

  • Cloud is booming even though it is in an early stage.
  • The use of Cloud alone is not enough. Make sure that Cloud is designed with security, reliability, no lock-in and scalability.
  • Cloud is highly scalable with SaaS (Software as a Service); PaaS (Platform as a Service); IaaS (Infrastructure as a Service), and BaaS (Business model as a Service) for pricing and provisioning solutions.
  • Cloud is driven by benefits like resource pooling, use on demand, cutting costs, improving agility, increasing scale, reliability and leveraging best practices.
  • The challenges are multi-cloud management, configuration, operation, lock-in, security and standardization.

Here I will focus on the business impact of the Cloud. Cloud computing not only changes the business model for companies; it can also provide new business opportunities for startups.

On June 6th, Steve Jobs announced iCloud. “We are going to demote the PC and the MAC to be just a device. We are going to move the digital hub, the center of your digital life, into the cloud.”  said Jobs, according to a live blog of his remarks at the Worldwide Developers Conference keynote.

What’s the impact of iCloud? If a PC becomes an access device, it may not need an operating system, a hard drive or any software. This change will impact all of the PC makers and software and hardware suppliers. Businesses will need to have a new business model to deliver their products or create new products to meet the needs of the iCloud ecosystem. Refer to Figure 1 the value chain for an internet start-up company that sells compact discs online. What would happen to that value chain?

Figure 1: Value Chain for an internet start-up (source Harvard Business School: Creating Competitive Advantage by Pankaj Ghemawat & Jan W. Rivkin)

On June 28th, Steve Ballmer announced the roll out of Office 365 (in the Cloud).  “We believe effective collaboration is a lot more than good group dynamics. It’s instant access to relevant information.” said Ballmer according to a live blog. Office 365 links Microsoft Office, SharePoint, Exchange and Lync Online into a platform that costs between $2 and $27 per user per month.

What will happen to IT professionals who install software and updates? What will happen to the people who package software? What will happen to the shelf space for software? The domino effect of the downstream businesses is huge when a delivery model is disrupted. Cloud is more of an economic shift rather than a technology shift.

At the same time, high demand has led to numerous innovations, new players and partnerships in the Cloud space. They provide hardware, storage, services, aggregation, integration, optimization, security, privacy and policy management. They move fast and might lock in a particular way of implementation. Gartner projected the Cloud services revenue will reach $148.6 Billion in 2014 vs. $58.6 Billion in 2009.

Welcome to the ever-changing Cloud!

Your Turn: What effect do you think The Cloud has on businesses? Leave a comment below and join in on the discussion!

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