This is an IT geek’s failed attempt to choose a catchy title. I want to talk about value propositions of cloud computing. But trust me—I didn’t want to enter into a debate about whether a cloud computing system is male or female. I also did not intend to talk about Sarah Jessica Parker (I Don’t Know How She Does It is the title of a 2011 film she stars in). Still, I hope you get my idea.
Cloud can solve complex IT problems immaculately and handle turbulent business challenges with dexterity. In this blog series, I will present some of the benefits that achieve these goals.
I used the picture of a lady holding a trophy with cloud in the background as a metaphor for businesses that have succeeded in today’s competitive and borderless world by leveraging cloud computing. We will see shortly why cloud is important today.
In an article entitled “What Every CEO Needs to Know About the Cloud,” published by Harvard Business Review in November 2011, Andrew McAfee provided good insight on business and IT challenges for today’s organizations. Citing an IBM CEO survey from 2010, which included 1,500 CEOs around the world, he stated that:
“Close to 80% of them believed their environment would grow much more complex in the coming years, but fewer than half thought their companies were well equipped to deal with this shift. The survey team called it ‘the largest leadership challenge identified in eight years of research.”
The world is changing and there is no doubt that IT has to change as well. We have already started to observe a fundamental shift in IT today. In Darwin’s theory of IT evolution, cloud is the fittest candidate to meet our demands these days.
Cloud computing has moved past the peak of inflated expectations in the Gartner 2012 Hype Cycle for Cloud, and it is now finding a place in mainstream IT. According to a Gartner recent market forecast, worldwide public cloud spending will increase from $111 billion in 2012 to $131 billion in 2013. International Data Corporation’s (IDC) Market Predictions for 2013 reveals that 70 percent of CIOs will consider and embrace a “cloud first” strategy in 2016.
“So you are saying that cloud is no longer a buzzword. How does it help today’s IT and business?” I have encountered this question many times from different sources, and I will attempt to answer it in this blog series.
How organizations position themselves into the cloud ecosystem depends on the results they would like to achieve. An IBM white paper entitled “The Power of Cloud” looks at the following three business archetypes:
- Optimizers. These organizations leverage cloud to incrementally enhance their customer value propositions while improving organizational efficiency.
- Innovators. In this archetype, organizations significantly improve customer value propositions by leveraging cloud, which generates new revenue streams for them. Even businesses change their roles within an existing industry ecosystem.
- Disruptors. In this archetype, organizations leverage cloud to create radically different value propositions. They also generate new customer needs and segments and even new industry value chains.
Regardless of the business archetypes, cloud computing provides some irrefutable benefits. In this first part of the series I will discuss the first benefit: how reduced capital expenditure due to cloud helps businesses. In the second and third parts, I will present several other benefits of cloud that help organizations tackle the challenges discussed above.
Reduced capital expenditure
Many startups and small and medium businesses struggle to procure the required IT infrastructure to expand their business because of the upfront capital expenditure (CAPEX). Cloud computing eliminates this. Businesses can rent computing resources on a pay-per-use model and pay for only what they have used. Big companies can establish their own private cloud, which can be shared between multiple internal lines of business (LOB). Companies can also keep their existing IT infrastructure and extend capacity by renting additional computing resources from another cloud vendor. CAPEX thus become operational expenditures (OPEX) for public cloud and hybrid cloud scenarios.
Companies also have a flat IT budget these days. It is a known fact that 70 percent of this is used just for maintaining current infrastructure and applications and keeping the lights on in the data center. Companies need to look at how efficiently they can use their IT budget to expand their business by leveraging cloud computing. Karin Broecker recently published a blog, “Flat IT Budgets Are the New Normal,” that nicely presents cost effectiveness of cloud computing.
There are many other value propositions of cloud computing. In parts 2 and 3, I will talk about:
- Low ongoing cost
- Scalability and economies scale
- Efficiency and environmental impact
- Leveraging the expertise of skilled vendors
So please stay tuned.
Shamim Hossain is a Managing Consultant from Global Business Services, IBM Australia.While undertaking a range of technical and leadership roles over the last couple of years, he achieved IBM Certified WebSphere MQ, SOA Associate, Sun Certified Java Programmer and Sun Certified Web Component Developer certifications. You can reach him on Twitter @shamimshossain.
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