Clouds, Stages, and IT Spending

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There is a lot of talk about what is or is not “cloud computing” and whether such a thing as a “private cloud” does or does not exist. In the end I believe there are many forms of cloud. The question examined in this post is “what impact will a move to cloud computing, in stages, have on IT spending?”

Recently Michael Neubarth wrote another fine article. Its title is “Are Private Clouds Hogwash?” For some reason for a number of people the very idea of a “private cloud” is disturbing and disorienting. Neubarth quotes a number of the literati on the subject. Most say cloud computing must be outside the enterprise or clouds require a scale of computing and mutually-balanced workloads that a single enterprise cannot offer. Maybe, though this argument seems to fly in the face of the origins of many cloud providers (Amazon, Salesforce.com, IBM).

The private cloud naysayers do cite a concern that I share. Some people are simply calling their traditional data centers “private clouds” and declaring victory. But, simply employing virtualization, web-based computing and other technologies doesn’t make a cloud. Neubarth quotes P Laudenslager on his blog, “Calling [the use of modern technologies alone] a private cloud is like drinking alone and calling it a private party." You can’t just put lipstick on a data center. There is a required aspect of cloud computing that is by-the-drink, load balanced, on demand, scalable with the financial, service management and administrative practices needed for businesses to rely on such capabilities.

Still, one might well be confused reading the complaints about the term “private cloud” at all versus seeing where major players are placing their bets. IBM, Acadia (the joint effort of EMC, Intel and Cisco), Google, Amazon, Microsoft and others might disagree. Acadia’s stated purpose is to offer private clouds as evolutionary pathways for IT. Many readers of Rock Icons and IT Thought Leadership feel as Judy Collins did when she wrote:

I've looked at clouds from both sides now
From up and down and still somehow
It's cloud's illusions I recall
I really don't know clouds at all

The research firm Saugatuck Technology has a take on Das Kloud that is fairly centered. In their research alert “Cloud IT: Stages of Simultaneous, Disruptive Growth and Change” they describe cloud computing as “The Cloud. IT as a Service. Platform-as-a-Service. Software-as-a-Service. Hosted services. Managed Business Services. These and many other capabilities and offering types comprise what we have labeled “Cloud IT.”

It’s a deliberately inclusive definition. They go on to say that “all aspects of user IT and business operations are rapidly melding into an inextricably interwoven, and inter-dependent, series of capabilities that are delivered and used as one or more services via one or more networks. [Saugatuck] no longer sees easily-definable boundaries between IT and business; just as [they] will soon see the disappearance of boundaries between traditional (on-premise) and Cloud-based business and IT.”

Saugatuck’s point is that user IT and business operations are rapidly becoming intertwined “into an inextricably interwoven, and inter-dependent, series of capabilities that are delivered and used as one or more services via one or more networks.” It’s a practicalist view, not a purist view. They see that the business/IT boundary is blurring as well as traditional, on-premise and off-premise IT. By extension clouds must reach from outside the business into the business.

Saugatuck also sees the use of Das Kloud evolving in four stages within enterprises. The first is the Point and Supplemental Stage where the majority of Cloud IT exists today for users and providers. In this stage cloud infrastructure offerings and use is “filling in gaps, augmenting existing system and process capabilities.”

The second stage is the Developmental Stage. Cloud computing makes a practically limitless scope of software development resources available to users and vendors alike, and very inexpensively. Software developers no longer have to rely on dedicated internal resources to code, test and refine. Resources are available whenever (and wherever) needed, and can be turned on and off as required.

The Internal Growth Stage is the third stage and involves significant development, deployment, and use of Cloud IT within user organizations as part of overall IT strategy and operations and includes private and/or internal clouds.

Saugatuck’s vision has a fourth stage, “Hybrid/Interwoven,” wherein customized combinations of traditional, Internal/Private Cloud, and third-party Cloud IT are delivered and used. Saugatuck ties it all together with this model:

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Working on Step 2

If we take Saugatuck’s estimates and stage descriptions as an example what are the implications for IT spending? Recall the basic concepts behind the IT funding model:

1. Systems built this year must be run and supported over time
2. Left unchecked, the compounding effect of increased operations and support costs inexorably crowd out further new systems spending
3. Because businesses cannot tolerate static systems, because system change and new challenges emerge, constant efficiencies are needed in operations and support costs to make budgetary room for new systems development

As described in Holding the Line on IT $pending, many companies are pursuing Saugatuck’s first stage of Supplemental Point cloud solutions in their campaign to hold down operations and support costs. These often include solutions as storage and processing. In the case of SaaS, many customers have deployed focused “point” solutions focused on key business. Saugatuck says these “solutions differ in concept very little from any early-stage, newly-introduced IT, with the possible exception that they are exceptionally low in cost to acquire.” And that is their point, budget reduction in operations to enable development spending.

The second stage deals with cloud computing and systems development. In an example of Platform as a Service (PaaS) multiple providers are coming to market with entire offerings for systems development in the Das Kloud. IBM and Microsoft are both investing heavily in Cloud-based development platforms environments and services for customers and their ISV and development partners. The Cloud also makes a practically limitless scope of software development resources available to users and vendors alike, and very inexpensively. This pattern will reduce the cost of developing systems and thus may ease the demand to reduce unit costs in operations and support, in the short term.

However, as cloud-based development becomes standard all competitors will have the same capabilities and the old pressures will resume. IF, as some claim, cloud-based development is a productivity enhancer for systems development it will bring systems to production faster. This will increase the pressure on support and operations to reduce costs as their workload will increase without resources to handle it. This will push those organizations farther into the cloud-for-cost-operational-reduction camp.

Saugatuck’s third stage, the Internal Growth Stage, is the significant development, deployment, and use of Cloud IT within user organizations, as part of their overall IT strategy and operations. It is a reaction of the success of the first two. If the Stage I, or Initiation Stage uses of Das Kloud reduces operations costs and eases development then everyone will want to be on those bandwagons. This typically results in a rapid increase or “Contagion” in use of computing and, in this case, a rapid increase in cloud-related spending.

Nolan's 4 Stages of EDP (IT) Growth

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I’m not particularly concerned with whether or not there IS such a thing as a “private cloud.” I think the description is apt enough. It describes how many very large organizations today, and smaller ones in the not-too distant future, will use cloud technologies. I’ll leave the nomenclature battle to others.

I do believe there is a driving requirement to reduce IT support, maintenance and operations unit costs day in and day out, week in and week out, year in and year out. The Cloud appears to offer assistance in making reductions without sacrificing delivery and quality. As and if that proves out expect your business to use much more of it in the near term regardless of the name you put on it.

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