In Corporate IT, The Cloud Changes Everything

A few weeks back, I was on a panel of media pundits asked to make predictions about what might happen in the innovation business in 2011. One prominent member of our group, seeking to stake out a bold, contrarian position, asserted that 2011 would be the year that “cloud computing” would be revealed to be a big nothing, an over-hyped concept that in the long run is more about marketing than actual innovation.

I completely see why someone might say that, even though. Every research infrastructure player is talking clouds lately – hardware companies, hosting services, software providers all spend so much time buzzing about clouds that you’d think they were working for the Weather Channel. It’s always tempting to write off this kind of buzz as overstated. Now of late I’ve become increasingly convinced that there’s substance to these clouds – and that more than a few companies are going to get caught in the coming storm they’re going to trigger.

For starters, the cloud is not quite as mystifying as you might think with the naked eye glance. All of the red-hot consumer Internet sites but dominating the conversation about the Web are built on a public cloud infrastructure. Facebook, Zynga, Twitter – they all rely on public clouds from Amazon.com and others to host their data. As Crosby notes, the public cloud is expanding at an astonishing rate: he says the cloud will quarduple in size over the then and there two years. The phenomenon is driven by a host of factors, not the least of which is the proliferation of of tablets and smart phones dependent on the cloud to store data. And as Crosby says, consumers have largely come to grips with the security and privacy trade-offs that come with the cool apps the cloud enables.

But Crosby as well notes that IT departments initial reaction to cloud computing has been to fear the cloud, which comes with a dramatic increase in IT automation. “More automation means more separation from the things they know and understand,” he says. The traditional IT skill set, Crosby notes, is about buying and at that time “mollycoddling” a variety of servers, storage devices and other boxes, using a variety of arcane and increasingly antiquated procedures. That approach to IT, he contends, is going away – and he says it happening faster than many had expected.

The end of the day

Crosby says that at the end of the day, the cloud is in effect about taking advantage of Moore’s Law – the whole concept of the cloud is about commoditizing computing capability.

Another way to look at the cloud is that it shifts the world from one in which businesses buy and at that time maintain their own computing capacity to one in which you simply pay for additional capacity as you need it. There’s a reason Amazon calls its hosting service EC2, or “the elastic compute cloud.” You pay for the computing capacity you need, no more, and no less. The systems adjusts on the fly. “Amazon EC2 changes the economics of computing by allowing you to pay only for capacity that you as a matter of fact use. Amazon EC2 provides developers the tools to build failure resilient applications and isolate themselves from common failure scenarios,” the company says on the EC2 web site.

“Cloud computing” isn’t just a buzz word. It’s a whole new approach to computing, which cuts out a lot of the waste and friction that exist in a traditional computing environment. It changes everything. Look out into 2011, and you can see the clouds gathering. And enterprise innovation companies ignore the trend at their peril.

Long career at Barron's

After a long career at Barron's, I joined Forbes as San Francisco bureau chief in December 2010. I've been writing about research and investing for more than 25 years. With Tech Musings, I'll pick up where I left off when I was writing the Tech Trader Daily blog at Barrons.com. When I'm not working, you can find me riding my road bike around the Bay Area hills, managing my fantasy baseball team, rooting for my beloved Phillies and Eagles and hanging out in the Valley with my family.