Tuesday, May 29, 2012

Utility Computing


Most people point to Douglas Parkhill's book The Challenge of the Computer Utility that was written in 1966 as the origin of the cloud computing concept. The book details many of the foundational elements of today's cloud computing - elastic provisioning, online delivery, and perception of infinite supply. It just took 34 years for infrastructure to support the original vision.

In the book, Behind the Cloud: The Untold Story of How Salesforce.com Went From Idea to a Billion-Dollar Company by found Marc Benioff, he describes how he had a number of conversations with Tom Siebel about creating an online CRM product. Typically licensing software was selling for extraordinary amounts of money. The low-end product could start around $1,500 per user per license. Worse, buying pricey software wasn't the only expense. There could be an additional $54,000 for support; $1,200,00 for customization and consulting; $385,000 for the basic hardware to run it; $100,000 for administrative personnel; and $30,000 in training. The total cost for 200 people to use a low-end product in the 1990s could exceed $1.8 million in the first year alone.

Most egregious was that the majority of this expensive (and even more expensively managed) software became "shelfware" as 65 percent of Siebel licenses were never used, according to the research grou Gartner.

We have all seen products come into our companies that had millions of dollars invested into the initiative only to find out that it didn't suit the business need, they were to complex, or couldn't be integrated into the existing systems. Unfortunately the investment made into the product made it very hard to walk away from the solution even if it was obvious that it wouldn't work.

Marc Benioff wanted to change that with a SaaS CRM solution. He envisioned having subscribers that would pay a monthly fee like you would a utility company and that it would require half the investment. Providing subscription applications over the internet wasn't unique, it had been done with Prodigy, CompuServe, AOL, and online gaming; however what was unique was taking a business application and hosting it on the internet to replace traditional corporate software.

In May of 2003 Nicholas Carr wrote an article IT Doesn't Matter in the Harvard Business Review. Most IT professionals and executives were very critical of his article. He argued that corporate computer systems weren't important to a company's success. They were necessary - you couldn't operate without them - but most systems had become so commonplace that they no longer provided one company with an edge over its competitors. He thought that information technology had become inert. It was just the cost of doing business.

SaaS based solutions changed the landscape. By offering a utility based computing model that was charged by monthly subscription you could reduce your initial investment and have the elasticity to expand when required. The SaaS cloud service provider operated the infrastructure and software, and companies didn't need to worry about the complexity of implementing a system like CRM. Additionally, you were able to have a robust system up and running in a matter of days instead of 12 to 18 months with traditional software development.

Corporate executives are embracing the utility based computing business model to outsource certain applications to cloud partners. Skip Tappen from NWN viewed this transition as TaaS (Technology as a Service) at the recent 2012 IT Summit and Expo. He said that IT services are a continuum from traditional IT through SaaS. There were two components to delivering the technology, the first was the physical layer (infrastructure, platform, and software) and the second was the service.

SaaS solutions present a compelling opportunity for small, medium, and large corporations. They can provide a competitive advantage by reducing complexity, enhancing speed to market, and lowering capital costs; however they should be implement for edge based software solutions. Core applications that define the organization's heart and soul, their distinct product characteristics should stay internal. While cloud service providers offer great solutions for software that isn't a core component, they don't provide innovative strategic value for your company and that is the reason core applications should stay in-house.

IT must define the criteria for assessing applications that provide strategic value moving to the cloud and which applications are better suited for staying on premise. They should start with "greenfield" applications, it should include a cloud questionnaire for an initial assessment of the application and their should be a cloud solutions team that does a business and risk assessment.

Devising a Cloud Application Onboarding Strategy by Alessandro Perilli from Gartner can provide you with some lessons learned from field research of 17 world-wide organizations. He dives into qualification questionnaires and business impact assessments. It is a fantastic document that can help frame an initial approach for a cloud strategy.

Alessandro points out that developing an application onboarding strategy is a fundamental aspect of any cloud adoption initiative. Organizations need an efficient approach to identifying, prioritizing, and facilitating the onboarding process while addressing organizational and cultural changes.
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