The Emerging Cloud Lifecycle

Mary E. Shacklett, President, Transworld Data | 2/16/2011 | 6 comments

Mary E. Shacklett
IT spending is coming back in 2011, but it's important to keep in mind that it's not likely to entirely come back. This translates to more spending on on-demand and pay-as-you-go services, and continued, restrained spending on fixed assets like internal hardware, software, and networks. This means cloud computing services.

It’s also worth noting that most CIOs, whether they hail from large enterprises or smaller companies, are increasingly familiar with cloud solutions and how these solutions might best be employed in their businesses. This familiarity, along with active cloud adoption that has occurred over the past three years, is beginning to produce business usage patterns that could well presage how cloud will be used in the future.

Current data suggests that...

Large enterprises are most comfortable when they create their own clouds that they control and operate, especially if they already have major investments in their internal infrastructures. They like this model of cloud deployment because they can control security, while also sidestepping corporate reliance on outside vendors for mission-critical applications.

Small and midsized businesses (SMBs) find themselves pressured to compete in a global economy against enterprises that are much better endowed with resources and internal IT expertise. These companies have to find ways to level the playing field, and going with cloud-based services enables them to do this. Consequently, they are likely to use cloud for both mission-critical and non-mission-critical applications.

Those SMBs developing comfort levels with the cloud are beginning to explore the possibility of moving away from public and more into private or even internally hosted cloud computing.

So what does this all suggest?

“What it suggests is that many companies, even small ones, that start out on a pay-as-you-go basis by utilizing our cloud services, eventually reach a point of critical mass where it makes sense for them to in-source the solution,” says one industry solutions provider. “This is why we provide both cloud-based and internal system versions of our solution.”

One of the primary drivers for the transition to cloud and then back to internally hosted systems is cost. This is because at some point, a company looks at its cost models (which were what originally drove it to the cloud), and discovers that it is no longer more economical to keep an application in the cloud, compared to hosting it internally. This happens as seats are added (many cloud models charge companies on the basis of a per-seat/per-month pricing model).

The second driver is what large enterprises already believe: that the company reduces its risk from vendor failure, sudden pricing increases, vendor financial instability, and vendor technology failures or security breaches when a system is maintained internally, where it is directly under IT supervision, governance, and control. It appears that SMBs are no different in their thinking.

The end result is that we may, indeed, have a lifecycle emerging in the use of cloud services for SMBs. This lifecycle begins with the enthusiastic adoption of cloud-based services to avoid capital and operating expenditures, and then gradually migrates into an internally hosted cloud once the cost savings are no longer realizable in the cloud pricing model.

Naturally, that’s not the end of the story. Cloud services and other IT solution providers see these trends, too. They will likely respond with offerings that are more aggressively priced, and that come with richer feature sets -- with the goal of making the cloud argument so compelling for customers that they will never, ever want to go back to internally hosted systems.

View Comments: Newest First | Oldest First | Threaded View
Zentropist   The Emerging Cloud Lifecycle   2/17/2011 8:45:40 PM
Re: A few thoughts...
What may be interesting is how businesses react to IBM's recent press announcement concerning the planned build out of significant Cloud computing facilities in China.

This was my response to a question on this very issue posted on LinkedIn earlier today:

"Speaking plainly, my first concern with this development, particularly as it relates to Cloud computing, is data security and integrity, along with the risk of exposing sensitive workflow processes on outside servers in a country whose political system is still evolving. The Chinese government still tends to exercise a level of control over its population and activities within its borders that typically exceeds that of Western liberal democracies, without as many checks and balances. 

As a potential IBM client, one might ask how Big Blue proposes to mitigate risks that its Cloud based services could be infiltrated, compromised or interfered with for any of a variety of reasons due to Chinese domestic politics, international concerns, and/or with the tacit or explicit permission of the government. 

This is not to say that other governments don't engage in surveillance, intelligence gathering and other activities under the rubric of national security (and sometimes, especially now, out of self-preservation), but I believe it to be a legitimate concern..."


fbpmt   The Emerging Cloud Lifecycle   2/17/2011 8:00:37 PM
Re: A few thoughts...
what about the impact and cost of compliance?
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Mary E. Shacklett   The Emerging Cloud Lifecycle   2/16/2011 9:38:03 PM
Re: Private vs Public
Hi David,

I don't know that it necessarily is a verdict.

What I think it  shows is that enterprise IT (even in smbs) prefers direct control over  its applications.


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Mary E. Shacklett   The Emerging Cloud Lifecycle   2/16/2011 3:27:07 PM
Re: A few thoughts...
Certainly this could be the case--and companies should weigh their options carefully.
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EyeTee   The Emerging Cloud Lifecycle   2/16/2011 1:33:30 PM
A few thoughts...
First of all, good article, Mary!

However, while I do agree that sometimes SMBs will "outgrow" their public cloud-based solutions and decide to bring those systems in-house to reduce costs and increase control for the various valid reasons you did mention, I don't think this is always in the case, and may in fact become a less common occurrence with time.

As you mention, there are various reasons and advantages to in-sourcing, but there are numerous disadvantages as well. Let's say a mid-sized company decides to stop paying their cloud provider for a certain system in order to save on per-seat subscription costs and to have more control over their level of service. Fine.

Now, what happens five years from now?

In all likelihood, the in-source solution will remain mostly the same with few upgrades. Meanwhile, their old cloud provider has added all sorts of new features, increased their reliability, and continually improved their product in order to remain more competitive.

Now the in-house solution seems a lot less attractive, and people begin suggesting going back to the old competitor (or maybe a new, better solution that has popped up in the meantime).

In some companies, this may become a very unhealthy lifecycle: you find a cloud solution for a problem because your in-house solution is outdated, you use that, outgrow it, bring it in-house... five years later, you find a cloud solution for a problem because your in-house solution is outdated... and so on.

David Wagner   The Emerging Cloud Lifecycle   2/16/2011 12:44:14 PM
Private vs Public
Mary, if the life cycle is for smaller companies to migrate to private clouds, does this imply that the private cloud is superior to the public cloud?

I thought, perhaps incorrectly, that the jury was still out on that, but if this is a trend, it seems like one that shows maybe the jury has come back with a verdict.

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