Two Paths to the Cloud

By Thomas Young, Partner & Managing Director, CIO Services – Infrastructure, TPI

A recent study from Telecom Trends International estimated that Cloud Computing will generate more than $45.5 billion in revenue by 2015. But what should CIOs be doing about it today?

 

In his book The Big Switch, Nicholas Carr compares IT in the early 21st century to electricity in the early 20th  century, when large manufacturers had to generate and manage their own juice. Up until now, businesses have had to operate and maintain their own IT infrastructure.

 

In time, though, electricity became a utility that could support small and large operations alike. The key was standardizing on 110V-by-60Hz. Today, we see the emergence of a standard IT utility under the banner of Cloud Computing that may lay the framework for a revolution on the scale of electricity 100 years ago. 

 

So what is a CIO to do in 2010?

 

CIOs should assume Cloud Computing will evolve along two paths:

 

1.  Proactive Path: They move functions such as e-mail to the Cloud to lower cost and improve functionality

2.  Reactive Path: Their internal clients start to move functions such as CRM to the Cloud

 

In the Proactive Path, CIOs are driving the agenda to adopt solutions that leverage Cloud Computing technologies and service delivery platforms, and generally speaking, their business model does not change. In the Reactive Path, CIOs see major changes to their business model. For example, CRM is now being bought as a service from Salesforce.com.

 

Either way, the challenge will be to maintain their cost structure as more and more of the functions they support leave their data centers.  So in 2010, CIOs should plan to convert as much of their fixed costs into variable costs. They should also look to their supply chain to outlay capital and provide service at a cost that allows them to maintain their margins. 

 

As they try to separate the hype from reality, smart CIOs will be looking to create flexible third-party agreements with an eye on the Cloud.

 

To learn more, contact Thomas Young at [email protected].