Sean Park Portrait
Quote of The Day Title
There's no bad time to innovate.
- Jeff Bezos

Cloud computing = on-demand business innovation

While in the technology and venture capital world, a mention of cloud computing these days is more likely to elicit yawns than excitement, in 99% of the rest of the business world it is all too often looked upon as ‘just another new technology’, something for IT to think and or worry about. Whenever I’m in this other world I try to make the case that ‘the Cloud’ is as transformational a technology as electrification or the invention of the microchip. In fact, I’m becoming increasingly convinced that it will be the technology that lies at the core of the sixth techno-economic paradigm of the modern era:

Just as Intel’s 4004 microprocessor was the catalyst for a wave of creative destruction in the 70s and 80s, will AWS prove the same for the 00s and 10s? Probably. We’re seeing it already. And it’s going to disrupt the hell out of the mastodons of industry across most sectors of the economy. Why? Because their cultures and leaders are entirely ill-equipped to face such a fundamental paradigm shift. They know how to play by the old rules. The strategic competitive advantages they built up over decades risk suddenly – poof! – to become obsolete.

And yet all too often, I’m met not with disbelief but with apathy, indifference. You can see the thoughts forming in their heads: “I’m a CEO, a business man, a producer! Why is Sean boring me with this technology stuff? Why doesn’t he just talk to the CIO?” Worse, too often when I talk to senior technology managers in big corporations, they also are disdainful, thinking: “Yeah, yeah, that’s all fine for your start-ups and Web2.whatever companies, but this is a real business. Serious. Not some website for teenagers to swap gossip.” Ok I’m exaggerating but a lot less than you think. Sometimes I figure I must not be saying it right. So I’m always on the lookout for good articulations of the potential and importance of cloud computing and its incredible relevance to anyone who is pretending to run a business. Especially a big one.

Peter Fingar has written a great one, a summary of the new book Dot Cloud: The 21st Century Business Platform. He sums it up nicely:

In short, Enterprise IT must extend out to Consumer IT, otherwise those companies simply won’t be able to compete. As we’ll explore, Web 2.0 has changed the landscape with social networks, and companies can ill afford to ignore the shift…

…Cloud computing isn’t just about on-demand IT; it’s about on-demand business innovation…

…Cloud computing isn’t just for small- and medium-sized companies and garage startups. Cloud computing makes it possible to create new business platforms that will allow companies to change their business models and collaborate in powerful new ways that weren’t practical before. What’s important for companies to consider is that cloud computing isn’t about technology, it’s about technology-enabled business models.

So if you know a CEO, or any senior managers (in any business) pass them this article. It will only take 10 minutes to read. And maybe it just might make them reconsider. And maybe they’ll invite me to lunch! ;)

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Permalink||Comments|Filed under 'Business, FaaS, Peak Hierarchy, Sixth Paradigm, Tools, Web X.0'
Spotting the losers. Urban myths in clouds.
  • Sean, how are you going to find time for all those lunches?

    I think I understand why the big guys aren't paying much attention. They think they've heard this song before. If you were a huge company in the 70s then you probably had a mainframe (or a mini) doing some back office stuff, then along came the 4004 and its successors, the PC was born. The priesthood of the mainframe was displaced by middle managers with PCs on their desks getting right at what they needed rather than having to go through IT. Disruptive - yes, but only to the operational model, not to the core business - the company kept on going. The same is happening with SaaS today as the new 'shadow IT', where business people get to solve their problems with a browser and a credit card rather than having to engage in a multi month/year project with a less than even chance of success. CEO's will shed few tears about existing IT priesthoods being torn down, as they have not served their masters well.

    The real disruption comes from outside of the enterprise. The PC gave the little guy who couldn't afford a mainframe or a mini the chance to compete on an even footing. Likewise SaaS lets the little guy that couldn't dream of doing a $xm SAP implementation the chance to have stuff that looks like ERP. AWS (and similar IaaS/PaaS) is to the 4004 like SaaS is to the PC (and the commodity PC software packages like Lotus).

    Large companies think that they can build competitive advantage by having things like $xm ERP implementations, it's the IT centric update of the good old 'theory of the firm' (http://en.wikipedia.org/wiki/Theory_of_the_firm). Cloud computing (and specifically SaaS) moves the boundaries - it allows smaller organisations to become more efficient, and simultaneously exposes the internal inefficiencies of the old dinosaurs. That's where the real threat lies.

    For businesses that use IT I'm not sure that this moves the needle. Coca Cola might be able to tweak its margins against Pepsi by using a Business Process Utility rather than Business Process Outsourcing. It's different for the businesses that ARE IT (whether they like to think of it in that way or not) - financial services, telco, newspapers and media networks are all set to have their lunch eaten by somebody else; which is why their CEOs probably should make time for lunch with you. The existing brands can survive, particularly where they have strong cultures and are able to embrace a network centric approach to solving problems. The existing organisations will surely fail, as they're built around a model that's past its usefulness.
  • I agree with your analysis. If they listen at all there is definitely a (somewhat justified) bias to discount it as another IT Chicken Little story. But this time really is different. Which is obviously a tough sell.

    And clearly my focus is as you point out on businesses that are IT, which is a large and growing proportion of our economy. I'm not sure about Coke, but this is starting to permeate even manufacturing companies as supply chains are virtualized (see example in Fingar's article), making the Coase optimal market structure an atomized network of specialists rather than giant vertically integrated corporations.

    And the irony is - because of their brands, culture, 'installed base' - the incumbents could not only survive but prosper if they took these assets and combined them with a forward thinking, disruptive and innovative approach, co-opting (and thus neutralizing) many of the advantages of their potential new competitors. But this - and I know from my experience of the past 12 months - is a very very tough sell indeed. It is such a no-brainer but I've been amazed at how reluctant people are to even hedge their strategic risk. Like if even betting 1% on a different future is to admit that you are screwed so better to not 'encourage' or 'participate' in this future and maybe it will not happen. Like knowing there is a tidal wave coming but by refusing to look at it or acknowledge it that will somehow make it not real.

    So I'm sadly not too worried about my lunch calendar overflowing. Besides, how many CEO's do you think read my blog? I (think) I have a great community of readers, but suspect I am mostly preaching to the converted. Need to write a book I guess, get on CNBC (ack!) and win the GS business book prize. But who has the time! ;)
  • The fact that its getting shrugged off so much is bullish in my opinion. Disruptive technology is always eschewed at first. Thats what makes it so disruptive. Look how many Twitter haters there were out there (and still are) as Twitter quickly climbs the wall of worry and disbelief. Big companies are usually the last to embrace any big technology because the effect their inertia has on its adoption.
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