The Cloud Part I: What it is, what it isn't, and how it affects the IT sector

Previously, I outlined some of the impacts on the IT sector in general, including how the operating model for IT vendors differ, the financial attractions for customers, and how security won’t be as big an issue as some people make out. Now, I’d like to outline some of the impacts on organizations that buy IT software and services – the Customers.

The impact of The Cloud on customers
In the medium term, the main adopters for Cloud applications (as distinct from Cloud-based Infrastructure or Platforms) are likely to be SMEs, because

• The financials are attractive, but come at a price - you get what you’re given
• Furthermore, LEs can typically afford up-front CAPEX more easily than SMEs

Customers will use 2010 to trial how the Cloud could work for them, if they haven’t already started. And most people will already be forming views of the Cloud as consumers (by using Apple’s mobileme, for example). There will be a natural order to which apps are considered for pushing out to the Cloud.
From 2011 and beyond, the main question is: do the economics make sense? If we assume the security issues and data protection issues are addressed, then whether a business chooses to move a process into the Cloud or not, will be driven by the cost / benefit equation.

Focus on competitive edge
Non-core processes, where the business can change to adapt a template, may move out into the Cloud. This will free up CAPEX that the business could choose to divert to core processes that give competitive edge, with impacts on the role of the CIO

Another driver for outsourcing?
With customers looking again at their processes and asking which are non-core and can be pushed into the Cloud, this could provide another push into outsourcing business processes.

Islands of data
If business users are free to use their credit card to start using Cloud applications, then islands of business data will start to pop up all over the place – some visible centrally, and others not. This will cause a problem with corporate performance management if not addressed.

Changing role of the CIO
Where organisations choose to move applications into the Cloud, the role of the CIO will change considerably, with a need for less internal IT resources, more business engagement and a more agile mindset. The CIO will have to get even more adept at persuading / cajoling / coercing multiple parties to collaborate or fail.

Opportunities in the grey area
Something doesn’t have to be “in the Cloud” or not. It could be a bit of both. Customers will need to understand exactly what to put where

Corporate technology driven by consumer technology
It used to be the case that businesses had better computing technology than the person in the street. In the last 10 to 15 years that has changed. Consumers often have better resources at home than they do when they come to work. How many enterprise user interfaces are as slick as the games that are played on the Xbox? How many purchase ordering applications have the “one-click” function that Amazon does?

Understanding what everyone else is doing
In response to my earlier article, one of my customers pointed out that he will be looking at what the IT vendors are doing themselves – are they “eating their own dog food” / “drinking their own champagne”? Customers will want to know this and more – while IT vendors are struggling with the challenges I outlined earlier, there will be many mixed messages, and changing strategies out in the marketplace.