Monday, September 6, 2010

Cloud Computing – Squeezing Every Drop of ROI

By now, everybody has heard about ‘the Cloud’. Despite the hyping that may have occurred, and of course with every new technology at the start of its curve - there is a hype cycle, Cloud has in most analysts minds now crystallized into a solid technology whose topology and value benefits are well understood by software vendors and consumers alike.

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And the numbers confirm this. Cloud computing as a market is huge - and growing. Revenues from worldwide cloud services is forecast to reach USD 68.3 billion in 2010, a 16.6 percent increase over the year before, according to Gartner. And this despite the ongoing ripples from the financial tsunami that continues to plague western economies.
Something about Cloud computing therefore must work - and must be right for the times we are now in. In my mind, three converging trends have occurred that have really pushed the Cloud computing phenomena forward over the last few years.
3 Trends Driving the Cloud:
1. No Change in Programming Languages
The first is the lack of creative or evolutionary force in traditional software development tools. Businesses today rely on software applications. From the very beginning, these applications have been created using sophisticated programming languages, many of which were developed in the late 1960's and early 1970's.
These languages require a very high degree of precision and completeness, with programmers writing detailed ‘code' to present real concepts and functions. It's a process that's labor intensive and open to errors, with knock-on consequences for a company's financial and competitive viability.
2. The Web Revolution
The Web revolution then came along and changed many things. Of course it paved the way for Cloud computing. But before that, developing business applications to run on the internet demanded a step up in development complexity. It meant writing code for more than just one machine. Developers now had to consider the interaction of multiple systems, platforms and devices, and programmers suddenly found themselves having to plan and write millions of lines of code. Programming languages that hadn’t changed fundamentally from the 1970’s were simply never built for this pace of change.
3. Slowdown of Developed Economies
And finally, there came the financial crisis – the third factor which essentially banged the nail in the coffin of the conventional IT status-quo, forcing many companies to shelve or massively cut-back existing projects and to shrink IT departments, in both the public and private sectors.
Like an emperor without clothes, it seems that modern IT application projects have now been exposed for what they are; massive budget items, too expensive and cumbersome for most, and not justifying the efforts that go into them. Something had to give.
Luckily, the Web revolution was able to. Cloud computing represents the lean consumption of computing resources; the antithesis of bulky, expensive hardware acquisition and lengthy code writing projects. It follows the ‘just in time' production model - where you use only what you need without carrying unnecessary IT baggage.
Multi-tenancy and elasticity are synonymous with the Cloud - enabling businesses to grow without incurring a direct IT cost penalty that previously made businesses think twice before attempting anything innovative. And more importantly, it’s already here and companies are snapping it up.
A Word of Caution
First, despite the wishful thinking and propaganda from some of the Cloud vendor-giants, not all companies will be shifting their mission-critical business application and databases off their own servers and into a vendor-hosted Cloud offering tomorrow.
It’s simply perceived to be too risky or too radical a move for most CEO’s. And again, the numbers seem to confirm this as Gartner predicts that only 20% of business applications will be off-premise by 2013. That means that by far, the larger proportion of enterprise applications will remain on-premise for a good few years to come.
If this is the case, then the main challenge for businesses now will be to learn how to effectively balance on- and off-premise deployments, and how to better integrate their newly acquired Cloud applications with their existing on-premise applications to get the most value from their overall data mix.
The second point is about the software vendors who build, deploy and own the software they are offering as-a-service (SaaS) to their client businesses. Tucked away amidst the fine print of the Cloud phenomena is a pretty substantial revenue challenge.
The Cloud model is already a major paradigm shift for software vendors used to earning license revenues. Suddenly, to survive, they must learn to adapt to a subscription model. And it won’t end there. As markets mature they tend to force down prices even further as more vendors enter the space and make things more competitive. For the Cloud and SaaS market this means that users will start demanding something cheaper than a flat subscription rate. They will be looking for a real pay-per-use model that will squeeze software vendors even further.
If this is the case, then software vendors, even before they set out on the Cloud path, will have to carefully weigh the development costs of building a Cloud application – and find ways to improve application development productivity and cost-efficiency. And even then, they should be prepared for a tough transition.
The Hybrid Application Platform Approach
A solution worth considering for both businesses and software vendors are a new range of Cloud-enabled application platforms.
What’s important is that these are not simply programming languages. Rather, they contain pre-built and pre-compiled business functionality that enables programmers to avoid the long and tedious code-writing process and concentrate instead on rapidly compiling application functionality and perfecting the application through testing. Such platforms can cut weeks, perhaps even months from the Cloud application development cycle – enabling software vendors and enterprise companies to get their Cloud or SaaS offering to market faster and cost-efficiently.
For software vendors, such an approach would be a good start to weathering the transition from license-based revenues to granular pay-per-use subscriptions that software vendors’ customers will be demanding in the not too-distant future.
Important for enterprise companies, is that such application platforms can offer a more viable ‘hybrid’ deployment capability than code-based programming. The hybrid option enables enterprises to move at their own pace towards the Cloud rather than all at once. It does this by first of all enabling them to cost-effectively build a business application – and then to deploy it either on-premise, in the Cloud, or a mix of both.
The main point is that ‘hybrid’ application platforms do not force the user to develop an application for only one specific deployment scenario. That can be chosen and changed at any time – without having to make substantial changes to the original development effort.
Ask Two Questions
As the Cloud market continues to rapidly expand, it becomes all too easy for companies to be swept up in the euphoria and to substitute cold hard analysis for “how bad can it be – everyone else is doing it” style thinking. It will be a hard task for many enterprises and software vendors to avoid the peer pressure and buy-now advertising of the giant vendors.
True, Cloud computing is the way forward. But to maximize the ROI and avoid the broken dreams of unrealized ROI, enterprises and software vendors alike should strive to keep two thoughts in mind; ‘how productive is this Cloud development tool really?’ ; and ‘how easily can I change deployment from Cloud to on-premise and back again when I need to?’. All else may be just hype.