Everybody is talking about the "cloud," so let's do it too!
Almost every year, our industry comes up with a new "next big thing." Some technologies indeed become a big deal; others don't. Cloud computing is the new buzzword for 2010, but in this instance I do believe that the "cloud" could change more than just a few things – it will become a global transformational power. I'm not focused on the many concerns being pointed out about the "cloud," like business models or security breaches, to name a few. These issues will be ultimately resolved (and the security fears are overrated).
What I do care about is the potential that cloud computing possesses to fundamentally change the way we do business on a global scale. Of course, like anything else, potential doesn't mean actual realization. It will all depend not on the what (the technology), but on the how (the actual implementation), but the cloud computing race has the potential to further close the gap between developed and emerging markets, at a much quicker rate. Cloud computing is the cheapest, most effective and fastest way for emerging markets to catch up. While Western European and American companies see cloud computing mostly as a way to reduce costs and increase flexibility, for companies in emerging markets (and in general, small businesses anywhere), the cloud opens up a way of accessing a bigger number of consumers, while enabling the ability to exploit their core competencies to its potential.
Mark Stahlman, a Wall Street technology strategist who has been writing about tech-driven growth cycles for more than 20 years, said recently that the "hallmark of the coming golden age will be its global inclusiveness" He added, "a billion new people will gain a productive foothold that would have been hard to imagine just a few years ago" ("The New Golden Age," Mark Stahlman,strategy+business, Feb. 17, 2010).
Just like Stahlman, I believe that a new global infrastructure is emerging, which is based on networked, shared computing resources. "As enterprises exit the recent slump, widespread investments will be made in private clouds, shifting business from high-fixed-cost data centers, and reshaping many public and consumer services… Meanwhile, innovative new service offerings will displace entrenched but inefficient medical and financial practices."
Just like Stahlman, I tend to believe that the benefits of the cloud will be broadly spread, but like with any major change, not everyone will be happy. "Adding a billion new people to the global middle class will add to the labor arbitrage that has already begun to affect many lawyers, journalists, software engineers and accountants. It will now affect professionals in health, finance and education. As cloud-based financial services spread, will we really need as many stockbrokers? As credible expertise becomes more easily available, will we still need so many intermediaries?"
The cloud is becoming a reality. The globalization of the cloud is becoming a reality and it may take as little as five years. Like any other life-changing scenario in life, now you know. So take the necessary steps to prepare yourself in advance. The change is coming.
Closing the Productivity Gap
How can cloud computing close the gap for emerging markets? I concur with Michael Vizard that "every time there is a major inflection point in terms of IT, there is usually a corresponding change in competitive edge" ("Cloud Computing: Changing the Balance of IT Power," Michael Vizard, Oct. 5, 2009). "With the arrival of cloud computing as a new type of IT platform, some folks are starting to wonder if we're about to see a significant narrowing of the IT competitive edge gap between companies that will especially benefit companies in developing countries. In much the same way people point to the rise of mobile phone technology in Asia as an example of how one part of the world took advantage of emerging technology to leapfrog other countries, the same potential now exists with the rise of cloud computing."
"...Companies in established markets where large IT investments have already been made appear to be thinking about cloud computing more tactically in terms of using a specific software-as-a-service application or outsourcing backup and recovery. Companies in developing markets appear to be thinking about more strategic approaches to cloud computing in order to narrow competitive enterprise IT edges with global rivals."
"To the extent that U.S. companies have relied on IT to maintain a competitive edge over global rivals, the potential ease with which rival organizations can close that gap by shifting to cloud computing creates a serious theoretical challenge in terms of leveraging cloud computing to achieve higher levels of business agility… Naturally, there is a lot more to enterprise IT than just the platform. But the fact remains that IT infrastructure until recently was a significant barrier to the cost of entry, and that might not be so relevant anymore."
If the differential in productivity between companies in developed markets and those in emerging markets, came from the IT and management advantage, then global connectivity, IT and management muscle coming from the benefits of the "cloud" can close that gap. Provided the fact that companies in developed markets have invested significantly on in-house infrastructure, while emerging markets have lower data center investments, would they benefit more from cloud services? Cloud computing is not just about affecting infrastructure.
Many companies headquartered in emerging markets are becoming global. As infrastructure also begins to be physically independent, then anything can potentially move to anywhere without a harmful influence on business. Potentially, any small business in any part of the world could access customers in any part of the world, which also increases the options in terms of products, services and prices.
Warning: Cloudy Weather Ahead
According to a new report by IDC, public IT cloud services revenue is expected to reach $55.5 billion in 2014. In the next five years, the annual growth rate will be 27.4 percent. The U.S. dominated public IT cloud services last year with more than 70 percent of the total, but IDC considers that growth from Western Europe and Asia-Pacific will decrease the U.S. down to 51.4 percent.
"Cloud computing in China now is just an idea. Its products and services will not be available in the next 3-5 years or even longer," said Huang Xiaoqing, Dean of The Research Institution of China Mobile, when asked about cloud computing at the 2010 China Cloud Computing Development Conference (Source: Computer Business Information Weekly).
Meanwhile, the growth in IT spending in India is one of the fastest in the world and is expected to be higher than China soon. According to a study by Zinnov Management Consulting, the total market of cloud computing in India will reach about $1.1 billion by 2015.
In Latin America, "usually technology [in North America] is introduced three years ahead of Latin America. But because of the ability of cloud computing to enable companies to be more competitive and get economies of scale, it is happening much faster than what was expected" ("Cloud Computing Heads South Of The Border," Ed Sperling, Forbes, Feb. 15, 2010).
Here's my point: While we discuss the many open issues related to cloud computing, let's not forget how this new technology can potentially change the rules of the game on a global basis. So while this happens and before the gap closes, businesses around the globe need to look at the integral transformation that in 5 years cloud computing will bring to the table and produce the necessary adaptations. The reasons for implementing cloud computing now may not be the same in 5 more years. The "anywhere" slogan may not just be for mobile services, but for many new services offered by small enterprises potentially located anywhere. Get ready for the new "cloudy future," because it's coming.
By Monica Zlotogorski, Editor of TM Forum's Inside Latin America and Vice Chair of TM Forum's Latin America Advisory Board