Corporate IT Forecast: 100% cloudy with a chance of meaty cost savings

As the adage goes, history is bound to repeat itself.  In his book, The Big Switch, Nicholas Carr presents an insightful summary of the evolution of the power-generation industry and draws discerning parallels with that of the information technology industry.  First, he summarizes how the industrial power-generation business transitioned from the brawn of men and animals, to the force of running water and then to the steam engine.  He recounts how mid-to-early nineteenth century manufacturing enterprises had to situate their factories near running water as to capture and transform the water’s force into the mechanical energy necessary to operate their manufacturing machines.  These early industrial age firms were not only in the business of manufacturing goods, but also manufacturing energy.  Sounds crazy, huh?  Read on. 

Towards the end of the nineteenth century, a mere 50 years since first automating the manufacturing platform, several engineering breakthroughs led to the possibility of generating and distributing power through an alternative delivery model:  large-scale electric utilities.  These utilities’ superior economics of scale would enable them to deliver power at a much lower price  point than manufacturers could attain with their own power-generation equipment.  Manufacturers could now simply focus on their primary business – manufacturing. Makes more sense, eh?

This is strikingly similar to where we are now in the information age.  Since the mid-twentieth century, modern businesses have invested trillions of dollars in not only enterprise software, hardware and systems integration services but also the data centers and technicians required to host, install and maintain their complex data processing operations.  Much like their industrial age counterparts, no matter what their main trade might be, each modern enterprise has had to also be in the business of information processing.   

That is until now.  A mere 50 years since the dawn of the commercial computing age, engineering breakthroughs (e.g., hardware virtualization, ubiquitous high-speed bandwidth) have led to the dawn of an alternative delivery model in data storage, processing and manipulation:  cloud computing.   Now, in lieu of operating their own private computing systems, modern firms can tap into centralized computing plants capable of data storage, data processing and data transmission.  And much like their historical brethren, these cloud service providers (CSPs) face the same challenge that electric utility providers faced a century ago – “convincing industrial businesses that they should stop producing their own power and instead buy it as a service from central plants.”  Some major enterprises like Home Depot have been convinced and are reaping the economic rewards of this new paradigm; others like Pulte Homes convinced but perhaps misled.  As the relevant technologies and cloud architectures mature, the superior economic benefits associated with centralized computing supply will eventually be too great to resist and every enterprise will leverage the cloud computing platform.

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