Cloud computing is a shift that’s taking place in the way computing is done inside organisations. A move away from purchasing computer assets and installing them inside the boundaries of a company or a government agency, to a model where we rent those assets over networks from somewhere else. So that at the broadest level is what cloud computing is. So it’s important now because a lot of things have changed over the last ten years.
One, as I said, is we’ve learnt a lot about application delivery over the web, actually delivering software that way. But also the networks themselves have become fatter and more capable, so broadband is more pervasive, and therefore it makes more sense and the service levels are much more acceptable.
The other thing is we’ve learnt a lot about using shared computer facilities and the technologies to do that have emerged and matured over the last few years. Because this is this notion that several companies can share the same data centre, and that data centre might be in Sydney or it might be in California, and they can have all their software hosted there. So we’re getting much more efficient about doing that sharing of resources and partitioning it in a nice way that keeps some integrity in their own information and software.
The other thing that’s happened is that we’ve seen a maturing of the business models. So how we pay for these things, it’s been an experiment for many companies over the last decade. But we’re starting to see the ability to do utility based pricing, the ability to pay per month, per user, for access to all sorts of software instead of buying it as an asset. And the provisioning side of this, all the people providing services out there are maturing their offerings almost on a month by month basis
Typically most of the hardware is wasted most of the time. It’s used maybe 10% or 15% of its capacity on a daily basis and then we use 100% of that computers capacity or close to it during peak periods. So what’s happening in the cloud, is by sharing and pooling our resources and having many customers using the same pool, we’re balancing out all those spikes and troughs in demand and we’re using these computers at closer to 80% of their capacity most of the time. So it’s far more efficient, far more energy efficient, and certainly far more cost efficient for people doing it.
So cost efficiency is a major motivator for doing this, because you’re taking complexity and management and operational costs outside your company and making it somebody else’s problem, somebody who is expert at doing it, and you’re basically simplifying the issues around operating IT.
Companies start this journey as a way to save money, then they quickly find that doing computing in the cloud allows them to be more agile as organisations; to start new products and services with less risk, less capital investment; to shut down different types of business that didn’t work; and not walk away with a whole lot of hardware they’re not using they just simply stop renting the service.
It allows them to move and reallocate people and open offices much more rapidly then they could before. And it’s allowing them to even consider mergers and acquisitions or divestitures that they couldn’t have considered before because of the complexity that lay behind the scenes.
The respondents in this study are also telling us that cloud computing is allowing them to innovate around their services, their offerings to their own customers. Basically they’re hosting their own software on behalf of customers, they’re able to even differentiate their service levels by renting additional computing capacity, they’re able to offer faster turnaround to their customers during peak periods that their competitors do not.
So there’s actually a flow through of benefits for people adopting cloud behind the scenes to what they’re delivering to their own customers as well. And that’s very powerful.