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Our view on the tipping point for cloud computing

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Many indicators point to the fact that Cloud Computing is reaching a critical threshold (or “Tipping Point”, as headlined in the article below) after which it will no longer be the “next big thing”, but will be the standard model for providing all manner of IT services.  This is already becoming referred to as XaaS, or “Anything as a Service”.

A number of factors have converged to bring us to this point, such as:

–       steadily decreasing infrastructure costs

–       public cloud providers becoming entrusted to hold diverse company data

–       increasing numbers of cloud providers entering the market; e.g. initially restricted to just Amazon and EMC, now most of the large hosting companies such as RackSpace and GoDaddy and the traditional hardware/IT service companies such as HP, IBM, Dell, Oracle, Microsoft and RedHat offer cloud platforms too

–       the formation of smaller specialist cloud providers offering finer levels of suitability for specific products / business sectors

–       the stabilisation of communication protocols, allowing greater integration between both internal and external systems and applications

–       the development of the surrounding ecosystem, providing broad ranging support, management and analysis tools

–       and last, but not least, the maturation of the virtualisation industry

Virtualisation is a key underpinning of cloud computing as it is this technology that has allowed hosting costs to be considerably reduced (via high levels of hardware consolidation and a reduction in specialist skills required in-house), and it also brings the major benefit of allowing applications to be easily scaled up and down according to need.

The impact of all this is discussed in the following article by Steve Rosenbush (http://blogs.wsj.com/cio/2012/05/10/google-cio-ben-fried-says-cloud-tipping-point-is-at-hand/?mod=wsj_share_linkedin)

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Google CIO Ben Fried Says Cloud Tipping Point Is At Hand

The economics of cloud computing are driving down the cost structure of business so far and so fast that it’s scary, Google CIO Ben Fried says.

“It deeply disturbed me … in 2006, 2007 consumer companies were forcing efficiencies on a scale never seen before,” Fried said Thursday during remarks at the Bloomberg Link Enterprise Technology Summit in New York.

Our view on the tipping point for cloud computing

At the time, Fried was working in the technology group at investment bank Morgan Stanley, where he was a managing director of application infrastructure, in charge of software development, electronic commerce and knowledge worker productivity. In 2008, he left the bank and headed to Google, which was at the heart of the disruption that was emanating from the consumer market and beginning to spread through the business world.

Workers, accustomed to using free and simple tools such as Google Apps, Skype, Flickr and iTunes for their personal affairs, now wanted to use those cloud-based software tools at work. And CIOs and other technology executives were beginning to let them, and to experiment themselves with those services.

At the same time, enterprise-focused cloud services such as Amazon Web Services were making it possible for startups and other companies to run their businesses at much lower cost.

Now, just four years later, cloud-based computing is fast approaching a tipping point that will make it the standard for IT, says Fried. “Here’s where I think it is going. The macroeconomic tides — you can’t fight them forever — will force companies to adapt. We’re probably close to that point now,” he says.

The economics of the cloud do more than lower costs. They change the structure of businesses and markets, especially at Google itself, according to Fried. He said Google can afford to offer free, ad-supported services to millions of people because it has taken costs out of its own business. That requires owning many of the elements of its supply chain, because few other companies have the scale to run them as cheaply as it can. Hence, Google builds its own data centers, locating them to take advantage of the lowest-cost source of power — including one right near a fully depreciated hydroelectric dam, Fried said.

The economics of the cloud have led, he said, “to a level of vertical integration never seen before.”

The cloud is also forcing companies, and CIOs in particular, to reassess what their core business truly is, and where they want to invest their capital. The big difference between an enterprise product and a consumer product is that consumer products aren’t customized. “We don’t offer a special version of gmail for financial services firms,” Fried said. “You have to give up that control with consumer technologies. As a CIO, you have to figure out what is really important to you. Do you really want to worry about customizing email and word processing? You give up a little, but you can get back a lot.”

The ripple effects of cloud computing are far from over. Until now, cloud computing has been mostly about the distribution of applications. “The next wave” of cloud computing will enable the sharing of the environment to run those applications, Fried said. “You will be able to take advantage of what we had to build in order to create those applications,” Fried said.

<End of article>

In summary, it is evident that the mass migration to cloud computing is well under way, but it is also worth keeping in mind two essential factors as this scenario plays out:

–       the benefits to the business providing the service

–       the benefits to the end user

From the end-user perspective, the benefits are clear and almost universally positive: e.g. self-updating access-anywhere/anytime applications, explosion of low-cost and free services available, reduced need to maintain local backups etc.

The picture is more complicated from a business perspective.  The positives are widely known and understood, but the following risk factors need also to be considered:

–       cost: is CapEx really reduced, especially for smaller business and when migration paths are considered?

–       vendor lock-in: can you readily move from one provider to another?

–       application compatibility: can you achieve the beneficial integration and ecosystem participation required to stay competitive?

–       data ownership, retention and destruction: can your data be guaranteed to be available for a specified duration, and securely destroyed as and when required?

–       service interruption and disaster recovery: how do you deal with all of your business critical applications and data being unavailable simultaneously?

So, as with all development planning, it is up to each and every business to assess their own requirements and expectations before committing themselves to moving into the cloud, and in many cases a phased or hybrid approach (mixture of cloud and non cloud, or private cloud and public cloud) will be necessary in order to form a practical migration plan.

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Author: retailaccounting

CounterBooks is an online retail accounting management suite which is used by retailers across the world.

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