Solution provider’s takeaway: Because VARs need to be agile when dealing with cloud computing, they should take a look at consumer technologies such as on-demand applications, which give them the opportunity to offer data and voice services.
4.5 Consumer Technologies and the Cloud
Originally developed to capitalize on the Web, consumer technologies brought along a revolution in information technology and, when successful, they morphed into business technologies. As such, consumer technologies replaced the federal government’s large military handouts as number one supporter of the IT industry. One example is provided by Facebook, another by Google’s New Services, which are
- Offering corporate products free of cost
- Prodding a switch from traditional software to on-demand
- Migrating applications, files, and service accounts on cloud servers.
As Figure 4.2 suggests, today business technologies and consumer technologies share a rapidly growing common ground, with the former benefiting from the latter. Therefore, information systems departments that reject consumer technologies as being beneath them increasingly find out that they made a big mistake.
This error or rejection took place first in the 1980s, when many corporate IT operations stuck to mainframes and dumb terminals, refusing personal computers as toys (and by consequence client-server solutions); continued programming in COBOL rather than by painting on video; and looked at knowledge engineering artifacts as academia's hobbies.
Companies that refused innovation in IT eventually found out the hard way that they lost a couple of decades in terms of competitiveness, along with the opportunity to cut their information technology costs with a sharp knife. What was intended to be another display of “professionals know best” turned into a major failure in judgment.
In a similar way today, companies that do not examine how they can benefit from consumer technologies are missing several potential benefits. One of them is resource flexibility, as the larger cloud computing providers can shift resource allocation among their servers, enabling customers to scale up capacity (subject to the constraints already discussed). Another is the cloud’s pay-as-you-go pricing, which:
- Helps in eliminating up-front expenditures and
- Permits the converting of fixed costs into variable costs.
Besides dollars and cents, another after effect of capitalizing on consumer technologies is empowering. The biggest benefit of the Internet has been to empower the user, and this has shifted contractual power from the sell side to the buy side. It has also been an eye-opener for IT service providers who sensed a new business in the making. Until recently, most computer and communication companies typically considered only heavy statistic-based business as a market-worthy. The Internet turned this argument on its head, by pricing emphasis to personalization—and cloud computing will, most probably, do even more in this direction. In the aftermath:
- Technology leveled the playing field, giving consumers the means to be in control, and
- The Internet enabled them to get together and tell companies what to do in their product offerings.
This is not exactly in the interest of companies who would rather tell the consumer what “he needs” to buy. But as Walter Wriston, a former CEO of Citibank, once observed: “The information revolution has changed our perception of wealth. We originally said that land was wealth. Then we thought it was industrial production. Now we realize it’s intellectual capital.” One of the best expressions of intellectual capital is flexibility and adaptability.
Hands-on adaptability can capitalize on a mass market with global dimensions, exploiting a previously unthinkable number of possibilities to make a profit through the right product at the right time. The Internet, and by extension cloud computing, lowers the barriers to entry, promoting innovation and competition directly in the consumer landscape.
Computer capacity, including databases and telecoms, can be rented as needed— and novel products may become hotcakes. Chapter 1 made reference to consumer technologies by excellence: Apple’s iTunes (for music and video), the iPhone (moving to business after having swept the consumer market), AppStore (for mobile applications), and MobileMe (a suite of online services).
Apple employed the Internet in the most intelligent manner to sell its hardware by means of value-added services. It also capitalized on the consumer market to reconquer the business market, after its hold of the 1980s waned. Therefore, one of the surprises in my research has been the finding that not everybody is fully appreciating the fact that the Internet is a revolutionary technology, one of the three or four main forces driving the global business transformation. The dynamics of global growth have changed as profoundly as they did with the advent of railroads, electricity, and auto transport. The evolution of an Internet-based supply chain meant that the two traditional factors of production and distribution—capital and skilled labor—are no longer sole determinants of an economy’s power, because economic potential is increasingly likened to the ability to use information in an effective way. That’s precisely where cloud computing is expected to make its mark among companies best prepared to catch the opportunity. (Only time will tell if they succeed by capitalizing on the fact that competitiveness is closely linked to the able use of information and knowledge.)
The Internet has promoted a better use of information by providing a framework for integrated distribution of products, services, and business support functions— with timely feedback. This permitted economies of scale traditionally associated with massive production, while supporting personalization made necessary by coexistence of multiple user communities.
The cloud has the potential to add to this transformation by supporting on-demand applications with diverse characteristics and quality of service requirements, as well as by providing multiple classes of service to user communities with a variety of underlying topology. The user communities in reference include end users, network services, applications, and their interfaces, which are providing:
- Data services
- Voice services
- Image services
- Video services
One may look at the Internet as a consumer technology that is primarily a transport layer but should not miss the fact that this provides common application interfaces for reliable end-to-end multimedia transfers. One of the advantages is that it is shielding applications, applications making interfaces and protocols seamless to the users—a feat that, ironically, major computer vendors took years to materialize.
Because of such advantages, this consumer technology made feasible a diverse set of traffic characteristics and also offered potential solutions to other standing problems, permitting fairly well-defined service offerings and operational procedures. Based on the strength of these developments, cloud providers can say that the wares they offer are sufficiently flexible to support interconnection of components across heterogeneous user organizations while ensuring end-to-end connectivity.
Another little appreciated after effect of the development of Internet-based consumer technology is migration capabilities through a path, making feasible phased implementation of the next generation of applications. The net accommodates disparities in terminal equipment and software, thereby ensuring an evolutionary deployment characterized by:
- An adaptable flexible framework as applications evolve
- Enhancement of quality of service at an affordable cost
- Expansion of network transport services and features as applications warrant
- A balance between near-term pragmatic implementation realities and longer-term development goals.
This has become possible because consumer technologies developed on the Internet can be leveraged by all businesses and consumers. Applications interact with other applications across the network, as well as with external networks and applications in a dynamic environment that supports a wide range of service facilities.
While the passage from consumer technologies to a professional IT implementation brings up the need for certain improvements like configuration management, these are well within the range of a service structure based on components that are shared, like access gateways, value-added processes, and so on. Nevertheless, a global management view is necessary to directly control system functionality. (This is relatively small fries compared to the avoidance of having to reinvent the wheel.)
What the reader should retain from these references is that consumer technologies, and therefore the consumer market, have opened huge perspectives in business applications—rather than the other way around. Cloud providers plan to further capitalize on this fact, which, however, does not mean that there are no limitations. In technology, as in daily life, somewhere hidden are the constraints.
The most important constraint for business that I perceive today comes from the ever-growing data center demand, which becomes increasingly difficult to satisfy. Global demand for data centers is projected to grow at an average of 12 to 15 percent per year over the next four years, surpassing supply growth by 300 percent.
Supply has lagged for several reasons. Data center construction is highly capital intensive and lead times are generally a year to year and a half. Data center building processes require design expertise and procurement of materials such as generators that are in short supply, and the 2007–2009 economic crisis has further reduced supply by:
- Limiting access to capital
- Promoting demand, as SMEs chose to outsource their data center needs
Another major factor limiting the supply of storage facilities comes from the fact that after having grown in an impressive way, the density of recording has stagnated. Counted in bits per gram, in antiquity the storage potential of cuneiform was 10–2; that of paper, 103; microfilm, 105; and mag tape, 106. This grew with optical disks to 108. The difference from cuneiform to optical disks is ten orders of magnitude, but that’s about where we are. Many research projects are promising but so far only on paper.
About the author
Dr. Dimitris N. Chorafas has advised financial institutions and industrial corporations in strategic planning, risk management, computers and communications systems and internal controls since 1961. A graduate of the University of California, Los Angeles, the University of Paris, and the Technical University of Athens, Dr. Chorafas has been a Fulbright scholar.
Printed with permission from CRC Press. Copyright 2010. Cloud Computing Strategies by Dimitris N. Chorafas. For more information about this title and other similar books, please visit http://www.crcpress.com/.
This was first published in May 2011