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Cloud computing in a bubble economy

By James Kobielus , Network World , 12/09/2008
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Cloud computing is the IT world's latest hot topic, and it's no secret why. In tough times, when capital expenditure budgets are under severe pressure, any pay-per-use solution looks like a winner.

If you give enterprises a credible outsourced alternative to their internal platforms and applications -- one that requires no capital outlays, long-term contracts, data-center infrastructure or internal IT staff -- users can scale that service up or down as their needs and fortunes expand or contract.

Clearly, cloud computing -- as a purely on-demand service-delivery model -- is tailor-made for a bubble economy, such as the world in which we live. In a bubble economy, volatility rules, prices fluctuate wildly, and acute uncertainty and risk permeate everything. Even more distressing, this dynamic new order can destroy established industries, vendors, business models and investment portfolios with sudden, sickening speed.

As we've seen in the financial and automotive industries, valuations can collapse overnight, thereby dislocating lives, careers and communities without much warning. As the economic outlook deteriorates, survival strategies and last-ditch tactics -- such as shotgun mergers -- quickly preempt sound business planning.

Does anybody truly believe that established IT market segments are immune from the brutality of the bubble economy? Hey, let's admit that the IT industry was in fact the proving ground and remains one of the chief enablers of this new economic order. If we learned anything from the dotcom bubble, it was that the frictionless business formation of an on-demand economy can prove disruptive in both the good and bad senses of that word.

Yes, on-demand services contribute to innovation, efficiency and agility throughout the IT world. But fast-bubbling start-ups can also, in the same bold burst, mortally wound established IT vendors before they know what hit them. And this same process can just as rapidly doom the disruptors themselves -- whenever the next cloud of fresh bubbles emerges to suck away their oxygen.

Excessive business risk is the thunderclap inside the world of cloud computing, and it can zap IT suppliers and users with equal devastation. If you've invested in a traditional IT solution that now confronts a significantly more cost-effective cloud-based rival, you'll be hard-pressed to survive if one of your competitors has leveraged that alternative to pare its cost structure to the bone.

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Not all clouds are created equalBy esayegh@mosso.com on December 10, 2008, 11:06 amI could not agree more with James. Cloud Computing and Cloud Hosting are tailor made for this economic climate. However, I'd caution the readers that not all clouds...

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Cloud Computing: Enterprise or SMB play?By lbohanan on December 9, 2008, 9:42 pmWho will be the early adopters of cloud computing? SMBs that have little to no computing infrastructure or large enterprises with lots of iron in the closet? Next...

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Cloud Computing and the NetworkBy Anonymous on December 9, 2008, 4:28 pmNo one seems to be talking about how dynamic systems will be enabled on static networks. You automate systems and then the network team has to reconfigure manually?...

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