Cloud computing has been the subject of much conversation (and hype) for about a year now. Our 4 City Tour focused on this, as did some recent research with one of our partners (white paper forthcoming) and our partner Salesforce.com has long led the charge in the cloud computing conversation.

This past week, cloud computing took center stage at Microsoft’s Worldwide Partner Conference (WPC) in Washington DC. From all indications, cloud computing will be the number one area of focus for Microsoft for the next 12 months (or more). So just what is cloud computing, why is it important to you and what is Microsoft doing that will impact it?  Let’s tackle each of those questions in sequence.

What is Cloud Computing?

 

In short, cloud computing means running your business applications on the Internet rather than on desktop computers or your corporate data center.

That may sound a lot like SaaS (Software as a Service), and it is! The difference is that, with cloud computing, businesses can outsource not just a select piece of software (such as ERP, CRM or SharePoint) to the cloud; but they can also move their hardware and infrastructure (including email, hard drive storage and even desktop applications such as Word) and development platforms (such as .NET and SQL Server) to the cloud.

While it may not be apparent on the surface, cloud computing will change everything about how organizations access and use technology.



SkyDrive is a simple example of a cloud application(www.skydrive.com). SkyDrive is a virtual hard drive from Microsoft. The drive uses the web to store, retrieve and share files. It is connected to my Microsoft Live account which lets me use web versions of Microsoft desktop applications (like Word). It saves me from buying a thumb drive, thinking about backups, copying my files to different computers, and buying Word on every computer that I want to use to edit my document. The image to the left is a quick Word file that I whipped up and saved with my SkyDrive (the image is the web version of Word).

Why is it Important to You?

So why isn’t cloud computing receiving even more attention? The reality is that it is only important to a relatively small group of individuals in any given business.

  • Day-to-day “users” of technology don’t care about the cloud – as long as they can turn their computer on and use their applications, they are happy.
  • In many cases IT departments view cloud computing as a threat and become an obstacle to adoption.. That’s too bad.  Make no mistake, the cloud represents a significant change for all IT departments, The cloud will change IT departments, but those that resist the change the longest will be those who lose the most during the change.
  • It is the CFO and other C-level executives that will realize the earliest benefits of the cloud. These are the individuals who are focused on the benefits that the cloud can deliver to their top and bottom line, outlined below.

 Cost Management: Moving applications to the cloud can mean not only lowering your costs, but the cloud also means better predicting what your costs will be. Rather than the CFO having to worry about the variable costs of replacing servers, upgrading applications and struggling with system downtime, the organization can have a single flat monthly cost associated with maintaining applications.

Focus on Core Business Value: Technology has become an enabler for almost every business. But relatively few businesses would consider technology to be the core of their business. Few businesses would say that maintaining hardware, running backups and installing software is the core value that they provide to their clients. In fact, for most businesses, these things are distractions that take them away from the core focus of their business.  Cloud computing removes those distractions and frees up the resources of the business to focus on their core business.

Constant Upgrades: Most businesses wait months or years after updates are introduced before rolling them out to their staff. This puts them at a strategic disadvantage relative to their more nimble competitors. Cloud applications are automatically upgraded for all users without having to wait for resources to become available to perform an installation. Most updates will allow administrators to decide when they are visible to users in order to avoid disrupting businesses.

Ease of Enhancements: Developing third party enhancements to software is notoriously difficult. Every organization has their own security infrastructure and software vendors often release updates that render third party add-ons useless. Cloud applications use a single, consistent infrastructure so third parties can develop add-ons knowing that they don’t have to plan for a large number of variations in technology architecture. Cloud hosts work hard to ensure that any updates to the applications will remain compatible with third party applications.  This results in more add-ons, at a lower cost and with more reliability than with current applications.

Work Wherever You Want: One benefit the end user may experience right away is the ability to work wherever they are. More businesses are using distributed workforces and flexible remote work policies to control costs and provide a better work/life balance. Cloud applications make this more practical than PC based applications.

Shorter Time to Go Live: Because cloud applications do not require complex installation procedures, businesses can be up and running with cloud applications faster than traditional server-based applications.

Business Agility: Perhaps the greatest long term benefit of cloud computing is improved business agility – the ability for a business to react faster to a changing marketplace than ever before. Cloud development frameworks (such as SharePoint 2010 and Dynamics CRM) and development platforms (such as .NET Azure and SQL Azure) give businesses the ability to rollout and improve customized applications faster than ever before. Businesses that leverage these capabilities are able to differentiate from their competitors more quickly – outmaneuvering them in an increasingly competitive marketplace.

What is Microsoft’s Strategy?

At the WPC, Microsoft spent a significant amount of time explaining their strategy. It’s exciting to see that Microsoft has been busy developing an innovative way to deliver the cloud that delivers the above benefits – plus the additional benefit of choice to their clients. At the core of Microsoft’s strategy is a 3-by-3 grid of services and options related to the cloud, illustrated in the matrix below. The 3 rows in orange represent the different types of services that Microsoft will host in the cloud; the three blue columns represent the options Microsoft is delivering to the marketplace for hosting.

 

 

Cloud Services (in Orange):

  • Infrastructure as a Service (IaaS): This includes core portions of a businesses infrastructure such as e-mail and SQL Server (database infrastructure).
  • Software as a Service (SaaS): This is where most of the attention is focused today and includes core software applications such as customer relationship management (CRM), enterprise resource planning (ERP), accounting, human resources information systems (HRIS) and other core applications. It also includes desktop applications such as word processing, presentations and spreadsheets.
  • Platform as a Service (PaaS): Personally, this is the area I am most excited about and that I believe will offer some of the greatest area of innovation to businesses. The “platform” will deliver a flexible framework of applications that can be used to rapidly create entirely new web-based applications that are unique to each individual business.  This will include application frameworks (such as Dynamics CRM and SharePoint), and also web-based development tools (such as .NET Azure and Silverlight).

 Hosting Options (in Blue): Most vendors of cloud applications do not provide a choice in hosting – you either buy the service from them or you don’t get access to the software. Microsoft recognizes that some businesses (for security or other reasons) may never migrate all of their applications to being hosted by Microsoft. So Microsoft is allowing businesses and Microsoft partners to host the entire Microsoft cloud architecture in their own data centers!  Microsoft will do this by selling their cloud architecture as “cloud appliances” (my understanding is that this means the Microsoft cloud will be pre-configured on hardware that is sold be manufacturers such as Dell and Fujitsu and will be kept remotely up-to-date with patches and new releases by Microsoft). So all the benefits of the cloud can be available through the public cloud (hosted by large vendors such as Microsoft, Dell and Amazon), the partner cloud (hosted by businesses such as C5 Insight and PowerBridge) or directly in your private cloud (hosted in your own organization’s data center).

The Cloud and Rich Clients: Another unique element that Microsoft is building into their strategy is the idea of the “rich client.” What this means is that the Internet can deliver a great deal of power and data – but it can be significantly enriched by smart devices (such as personal computers and mobile devices). While I expect there will still be room for the “dumb client” that most cloud computing providers are trying to move towards (if for no other reason than that dumb clients keep costs low), I also expect that “smart clients” will continue to play an often critical role in making decisions about cloud applications (being able to take your data offline, process large image and video files that available bandwidth can’t support, etc).

A Wild-Eyed Prediction

Within a relatively short period (perhaps as soon as 5 years from now), most businesses will not host any of their IT services or applications within their organization. With the exception of the “client” (i.e. the PC or other device used to access applications), 100% of a businesses technology will be hosted in the cloud. In a growing number of cases, businesses will require their employees to furnish their own client – leaving no technology at all in the hands of the business.

Think this is unimaginable? Imagine a time not too many years ago when electricity was a cutting-edge innovation. Large businesses invested in generating electricity for their organization and carried the cost of personnel to manage their electricity for them (that’s one reason why you see many factories along rivers where electricity could be generated more easily). It wasn’t core to their business, but they had no option but to make this investment to survive. Soon, however, business innovators developed utilities that generated and sold electricity to all businesses.  All a business had to do was pay a monthly bill to manage all the logistics of generating electricity (with far less cost and distraction to their business) and plug into a socket to receive all the benefits of electricity. Expect to see the same thing happen with computing power that happened with electrical power.