Thursday, 10 September, 2009

Will the hype for cloud computing continue forever?

There is more than enough hype in the media about cloud computing. It seems like cloud computing is being positioned as the ultimate delivery model for providing IT solutions to the business. While there is some truth in this hype, there are many fallacies too. Let me take a shot at this hype in this blog!

Simply put, cloud computing is the computing paradigm in which computing resources such as software, infrastructure (processing power, storage etc) and the deployment platform (e.g. Microsoft .NET platform) are provided as services over internet. That means the service consumer organizations do not own any of these resources. They consume these resources and pay as per their usage. These two attributes differentiate the cloud computing from the traditional computing. In traditional computing, the organizations own the computing resources and incur expenditure regardless of the usage.

Putting in economic terms, cloud computing helps organizations incur only operational expenditure instead of capital expenditure. That’s the great news for the consumer organizations as in current economic climate it would be difficult to get the capital expenditure sanctioned. Also since the payment is tied to the usage, the consumer organizations can both upscale or downscale their usage without worrying about sunk cost, as there is none.

Having said so, it’s not so great situation for service providers. Firstly, they cannot lock in their customers and can’t expect any annuity business in terms of annual maintenance payments. Secondly, they need to provision for scalable service delivery, which is an expensive proposition in spite of use of technologies such as virtualization. Lastly, the payback period for their capital expenditure is long as they are not paid in lump-sum but in small installments over a period of time.
Having said so, one would wonder why there are so many companies providing cloud computing services. The answer is simple! In today’s economic climate, not many organizations are willing to spend money as capital expenditure and perhaps the only way to survive is to get paid in proportion of the services delivered. In other words, this is buyers market so the sellers will need to bend backwards to make money.

Does it mean the cloud computing phenomenon will disappear once the economy accelerates? Not really! The hype will surely come down but there will be some companies that have betted heavily and will continue to embrace this paradigm. The opportunistic companies, who have now jumped on the bandwagon, will scale down (or close!) their cloud computing services and increase their emphasis on the traditional computing delivery model. In other words, the traditional computing will continue but will have the companion in the form of cloud computing! The consumer organization will use both the paradigms in future and there will be less number of companies calling themselves as cloud computing companies!

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