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Three things that may precipitate business in the cloud

by Mark P. McDonald  |  May 3, 2009  |  1 Comment

Cloud computing is the subject of significant debate and discussion even on the Gartner Blog Network.  Now I am not a cloud expert, I leave that to others such as Daryl Plumber or David Cearley – check out their blogs on this site.  However in talking with Silicon Valley CEOs, Corporate CIOs and others there are a few things that may help bring cloud computing to fruition. 

This entry focuses on three things that may not be obvious to the technical advocates of the cloud, but make some sense to me from a business/economic sense.  They are provided to spur debate on the factors leading to widespread business adoptions, not a discussion of the cloud’s merits.  

The two-year anniversary of a Global 1000 player operating their core applications in the public cloud.  This sounds obvious so I will not dwell on it too much other than to say that right now the cloud is doing a great job serving mid sized businesses or particular types of applications.  Becoming the option of choice will require a trailblazing company to not only move to the cloud but also stay there.  Think of it in terms of the move to outsourcing that started slowly (Kodak was among the pioneers) but accelerated when major players made and sustained a move.

Technology Tort reform that establishes product liability responsibilities on providers of the cloud.  Historically, users have waived their rights to sue providers for business damages based on the quality of their products or established liability clauses in individual contracts.  That’s one of the things you are agreeing to when you accept the terms.  If a computer or software malfunctions you cannot sue the computer maker in the same way you can sue other product manufacturers.  This may seem counter-intuitive as most reform supports business owners.  This point places the issue in reverse creating greater recourse for customers. Such recourse would accelerate business acceptance of the cloud as cloud relationships move closer to other product relationships.  There are good reasons why product liability and recourse for tech are the way they are, but those reasons foster the adoption and use of technologies in-house.  The cloud, according to its promise, is a different model where technology is a utility so it probably should operate more like a utility and other products in a legal sense as well.

A major cloud services failure, one that is significant enough to create demands for reform, regulation and public standards.  While the cloud is rapidly defining itself and is growing quickly, it’s a challenge for business people to understand and recognize its application as a business tool.  The cloud has hit the business mainstream with proof in a front-page article in the Wall Street Journal in February 2009.  In addition, as a mainstream business idea, the cloud is being sold as a panacea for all your IT woes, a place where you can get instant infrastructure or the environment where we will all work in the future.  Market competition will continue to define the cloud but nothing makes something real to business people like the reforms and business standards called for after a major failure or catastrophe.  The resulting publicity, regulation and standards often build the market over time rather than destroy it.

I am sure that there are other events that will be responsible for precipitating the cloud making it move from a technology to a business tool, but here are three to think about.  As I said at the beginning of this post, I am no expert in the technology of the cloud, but it seems to me that for the cloud to go mainstream it has to go through a business based baptism.  That baptism may not entail these events and there maybe others, but something will happen to have the cloud jump the business/technology frontier.

Interested in your thoughts and comments.  If your tempted to say that I do not know what I am talking about from a technical perspective, you will get little pushback from me.  But I ask what are the business triggers required to move from where we are now to where everyone seems to believe we should be.  Not the technical triggers, but the things outside of technology that will precipitate the cloud.

Category: economy  personal-observation  

Tags: business  cloud-computing  hypothesis  it-and-business  technology-torts  

Mark P. McDonald
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

Thoughts on Three things that may precipitate business in the cloud

  1. Business acceptance of cloud computing may be slower than what one would expect. Gmail has been around for 4 years now, Yahoo! mail for more than a decade, and they have attracted a (very) large number of users, both private and business actually, but I don’t see broad business adoption of public/free webmail services anytime soon. All of my clients — all large established businesses in services or manufacturing — have their own mail servers well protected behind firewalls and will continue so for the foreseeable future. Occasional Gmail failures and Google’s careful approach of keeping products in beta (thus avoiding to a certain degree the responsibility for their performance) mean that companies will not trust their business email to Google. Of course there are exceptions…

    The same will happen with cloud computing in general. Hosted services will work fine there where enforceable contracts with clear service levels and responsibilities exist (SaaS) but for a large established player to operate key business processes in the (public) cloud, several conditions are required:
    – Both data security (reliability) and data protection (privacy) should be perceived higher in the cloud than in-house
    – There should be sufficient trust in the few companies offering services in the cloud (dependency)
    – Those service providers running the cloud should be able to generate an ongoing revenue stream from their business users

    I believe none of these conditions is currently satisfied. And it may take a while…

    In the mean time, the cloud will certainly continue exponential growth in the non-business market!


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