Blog post

Did recession arrive 18 months too early for Cloud?

By Mark Raskino | January 30, 2009 | 5 Comments

StrategyInnovationEnterprise 2.0Economy

In conversations I’ve had with vendors and more leading edge IT users over the last 6 months, most have agreed with this hypothesis.  The US recession may have started in the last quarter of 2007, but it took nearly a year to feed through to IT budgets.  The need to cut IT costs hit with a vengance in the 3rd and 4th quarters of 2008 (a little earlier for some). However we know many companies were already running fairly lean IT shops – not least becuase they were given only small budget increases, on average, roughly tracking inflation, in the previous 4 years.

So companies looking for a significant new round of IT cost cuts are having to tackle the challenge creatively. That makes many of them very interested in the cloud ideas. The theory suggests that the massive workload aggregation in cloud datacenters should yield lower per user, per month costs of software operation than running standard apps and tools yourself,  for example.

The problem is that the cloud isn’t ready for corprate prime time.  Google, Microsoft and others are improving web delivered software functionality, building more data center capacity, defining service levels and market enagement models, building billing systems and all the rest. They are doing it as fast as they can – but a lot of it just isn’t ready for the mainstream, moderately risk averse centre of the market. Which is a shame.

So you can view the arrival of the recession and the arrival of the cloud as annoyingly adrift of perfect strategic alignment. That said, the demand created for cloud ideals will certainly spur the vendors on to deliver faster and perhaps the whole market evolution will be accelerated as a result.

Every recession has a sliver lining.

P.S.  Maybe its 2 years too early, maybe 1 year. 18 months feels like about the right gap – but this isn’t precise analysis.

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  • Eric Knipp says:

    Eighteen months sounds pretty optimistic. As of yet there’s no good way to avoid vendor lock-in, although the Open Cloud Consortium is trying to develop open standards. I think that is a requirement for large enterprise Cloud adoption for PaaS and IaaS.


  • Mark Raskino says:

    A good point Eric – thanks. However the risk of vendor lock-in hasn’t always prevented large corporates going forward with other major technology waves in the past. If an IT management team sees jam on the table today – they can sometimes overlook what might happen as a consequence in later years.

  • Tris Clark says:

    Very interesting topic. In lieu of the recent Digital Britain report, what will also be interesting further down the line is how internet bandwidth will cope with the impact of cloud computing when it does gain enterprise level traction.

    Whilst some experts are bullish on the current, and likely future capacity within the Internet, some regions and countries are perhaps better geared for the higher volumes of data that cloud computing will require. Sure, companies like Google are frighteningly efficient in terms of their own infrastructure management but the same might not be true for local internet connections and exchanges which are outside of their control.

    Even in the UK, a relatively advanced country, there remains a digital divide and wildly varying downlink/uplink speeds online.

    Do you think most countries have the necessary infrastructure to simultaneously cater for rising llevels of consumer user generated content, high definition video on demand as well as enterprise level data traffic delivered via cloud? Or is it just too early to say Mark?

  • Mark Raskino says:

    Thanks Tris – you raise another important question. I’m certainly not qualified to answer in any detail – I would leave that to my telecommunications analyst colleagues. I will make two observations though. First – despite concerns and predictions of doom, the BBC iPlayer doesn’t seem to have overwhelmed UK internet services. Many valuable cloud apps are going to be bandwidth frugal by comparison. Second, I think low upload speeds could start to be the gating factor for evolution of some cloud services. We have tended to treat internet service provision improvement as a unidirectional problem for a long time.

  • Tris Clark says:

    Thanks for the feedback Mark. Yes, let’s hope cloud delivers on its considerable promise. It’s certainly going to be an interesting journey whatever happens!