All Posts in Cloud

|In: Cloud|Last Updated:

A prediction: The business case for the Cloud will mirror the case for outsourcing.

That outsourcing is the right answer has been a constant. What it’s the answer to? That continues to evolve.

We’re already starting to see this with the Cloud. Makes sense, I guess, as the Cloud is the next generation of data-center outsourcing.

Now the Cloud does offer a couple of very major advantages over the previous versions. First, there’s the absence of opaque financial games. Cloud services come at standard prices. The popular practice of using lease/buy-back arrangements and other, even more financial-derivative-like complexities to front-end-load the benefits of a data-center outsource while back-end-loading the costs aren’t part of the Cloudiverse. Nor are expensive early termination penalties.

So Cloud computing does deliver the flexibility companies were supposed to get from data center outsources, but rarely did because these were, typically, ten-year contracts that were (and are) expensive to restructure once signed.

Nonetheless, Cloud Business Case v1.0 — that the Cloud will save money and lots of it — is nearing the end of its useful life. It won’t, and, as was the case with previous forms of outsourcing, the bigger the company the worse the financial case gets.

But that’s okay, because Cloud Business Case v2.0 is already shipping. Two different CIOs explained it to me. Even if they don’t save a dime … even if they have to pay more, in fact … putting their email into the Cloud (both used this example) is worth it because that means they don’t have to worry about it anymore.

Fair’s fair. Two isn’t exactly a statistically significant sample, and just because a couple of guys said something doesn’t make it a trend.

What makes it a trend is that these are the exact same words I’ve heard for decades when the subject was outsourcing: Put the responsibility in another company’s hands, sign a contract, and you don’t have to worry about it anymore.

With traditional outsourcing, this expectation was simply absurd. You have fewer tools at your disposal when managing an account manager backed by a ten-year contract that spells out every in-scope responsibility than when you’re managing a data center manager who’s an employee reporting to you on the organizational chart.

With a Cloud service, you don’t even have an account manager, at least, not in the same up-close-and-personal sense you did with an outsource.

Instead you have a service level agreement with a penalty clause. Maybe you have tools to let you monitor service level conformance, too. Blunt instruments, even when compared to working with an account manager; much blunter than an employee who is on-site and taking responsibility.

Cloud Business Case 2.0, then, is that what the Cloud really gives you is professional management so you don’t have to worry about it. It’s a convincing-sounding case.

Until you scratch beneath the surface, because if something goes wrong and you staff the function internally, you have an employee responsible for troubleshooting your multi-vendor environment. If you take it to the Cloud, the opportunities for mutual finger-pointing and blame-avoidance are abundant. As in, “Our servers were up. The problem must be with either your ISP, your firewall, or your internal networks.”

CIOs don’t get paid big bucks for charming naiveté. Whether you go to the Cloud, sign an outsourcing contract, or hire an employee, you’re still accountable. It’s still your worry.

Maybe when Cloud Business Case 2.0 starts to lose popularity we’ll finally hear the business case that should have been v0.9: What you can do with the Cloud that’s new, interesting, and seriously cool.

Compare:

When PCs first started leaking into the enterprise, an enormous wave of innovation leaked in with them, in the form of new, cheap software that did things nobody thought of doing before, and in the form of new, cheap tools that let employees figure out things they could do for themselves that nobody had been able to do before.

The World Wide Web brought the same thing — an enormous wave of innovation, this time in the form of tools, means and styles of communicating with customers, and whole new ways of doing business that had never existed before.

We’ve added smartphones and tablets. Browse the App Stores. Look at everything you can buy for ten bucks or less. Sure, there’s a lot that’s well worth ignoring. But there are also plenty of cheap, innovative apps that let people do nifty stuff.

The Cloud? It’s all about doing pretty much the same things, in pretty much the same way, only this way you pay by the drink.

It’s like the Dos Equis guy, but in reverse — the least interesting sales pitch in the world.

Comments

|In: Career Management|Last Updated:

Crowdsourced prediction is the Next Big Thing.

It’s a shoe-in, because it combines last year’s Next Big Thing — the Cloud — with ridiculing experts, a perennial crowd-pleaser.

Crowdsourced prediction is based on a simple premise — that crowds are wiser than experts. Take InTrade, which lets people bet on such matters as which Republican presidential candidate will become the nominee (yes, it’s really just an on-line bookie). Those who place their faith in markets insist that on-line betting on these outcomes delivers more accurate results than the experts. As in many domains, experts predict more poorly than random chance, this is likely. For example:

2009 counted as a good year for actively managed mutual funds. According to “‘Active’ Did Better in ’09,” (Annelena Lobb, 1/6/2010, The Wall Street Journal), their performance improved markedly that year — almost half outperformed simple index funds.

Pure random chance would have resulted in exactly half underperforming — the experts do worse relying on their expertise than they’d do by relying on a Ouija Board.

These aren’t stupid people, and they do know their subject. How could they do such a bad job?

My best guess: Business success entails luck as well as skill. Because investment experts can’t predict luck, they ignore it, substituting patterns they perceive that aren’t actually there.

These substituted patterns are convenient narratives, not empirically tested theories, which means they’re more likely to be wrong than right.

The issue goes well beyond stock-pickers. Many other sorts of experts also rely on unsubstantiated narratives to support their predictions — among them political commentators and, here in the field of information technology, market analysts.

In my expert opinion, of course.

Which is why Crowdsourcing is the new savior of the predictions business. And yet, if the Crowd makes a prediction that’s awesomely accurate today, how can it change tomorrow? InTrade’s predictions, for example, seem to change on a daily basis.

Might the purported accuracy of crowdsourcing be nothing more than circular logic –accurate because we define “accurate” as “what the crowd is saying”?

The study I’ve never found, which would answer this question quite well is of horse racing.

If crowdsourcing works as advertised, were we to tabulate the results of all horseraces we’d find that exactly one-third of all horses that ran with 2:1 odds won. Otherwise, the so-called wisdom of crowds is just another in a long line of appealing narratives that have nothing at all to support them beyond their natural appeal.

As crowdsourcing depends on Cloudsourcing, let’s move on, to a prediction: “Why aren’t we in the Cloud?” will supersede “Why aren’t our factories in China?” as the most-often asked rhetorical question in business.

It’s time, because those who have been involved in making Cloud-based computing work have started to figure out that its economics are just as situation-dependent as those of offshoring.

<Digression> Whether they offshored manufacturing or programming, business decision-makers focused on raw price more than the whole picture of total cost, plus risk, plus the increased complexity of managing operations halfway around the world, with all the attendant differences in language, culture, public policy, and simple clock time. It was all about cheap labor.

That’s the case even though, when it comes to manufacturing, it appears that direct labor contributes astonishingly little to the cost of manufactured items (in the case of automobiles, roughly 10%). As for software development, cost is rarely as important as such factors as reliable on-time delivery, code quality, and fit to function.

Which is why offshoring ended up disappointing its clients far more often than you likely read in the cheerleading articles that dominate the business press.</Digression>

Tally up the Cloud’s direct costs and the decision to go there is far from no-brainer territory, especially for companies big enough to need such niceties as identity management (Active Directory or an alternative) and server-managed print queues.

The Cloud shines brightest (there’s a visual!) when processing loads are unpredictable and highly variable. That’s when its ability to add and shed capacity more or less on demand is hugely advantageous.

For small and mid-sized companies, add the economies of scale that come from making technology management Someone Else’s Problem. For new, growth-oriented companies, also add cost avoidance, from not having to build a data center.

So here’s some advice you can use (finally!): Be prepared. When asked “Why aren’t we in the Cloud?” answer, “We are, wherever it makes financial and strategic sense.”

Or, if it doesn’t, answer, “We’re on the lookout for opportunities. So far, much to our surprise, we’d have to spend more to go there.”

Comments