Thursday, April 21, 2011

Cloud as a neutralizer of scale benefits!!

The notion that the cloud is taking over the world has got to be tempered. I was recently at a conference where most of the CXOs admitted that they don’t know how it will impact them. They’re not thinking about 5 years later - they’re thinking now.

Most people who understand the cloud and have done stuff in it are very clear that when it comes to IT infrastructure and software as a service, it’s quite obvious how the cloud can benefit. However, it’s when it comes to everything else including data, services, processing etc on the cloud, the majority view is that it won’t happen in a hurry across the board.

Standardization is a big question – how are we going to get on the cloud standardization across companies when many are not standard even within!! The best that could possibly happen is a private customized cloud. I am referring to large global corporations.

However, when it comes to mid-sized companies, or start ups the argument changes. It’s likely that the cloud will allow these mid sized enterprises to “leapfrog “ , get ahead of the larger ones as they have fewer constraints and legacy. Emerging market companies can now be structured very differently and designed better for their business from day one as compared to a more evolved large global corporation. They can be set up to leverage the cloud and standards from day one …. And that could mean a huge competitive advantage!!

Industry after industry will see the rise of brand new companies who have a killer product or service and because they will structure themselves differently from the beginning, they will have a massive edge over the others in terms of go-to-market speed and flexibility as well as in terms of a cost structure that would rival if not be better than a large corporation with huge scale.

Does that mean that the cloud allows mid sized companies to compete with large corporations? Does scale become less relevant because of the cloud?

For instance, we all know emerging market companies in the wireless market that are structured differently and fast becoming global competitors in the wireless space with global standards. They often have the unique combination of the lowest prices in the entire world, at the highest profit for themselves with better service for their customers!!

Think about companies that structure themselves from day 1 to only focus on design, product and customer interface and ownership - everything else is done through an ecosystem they’ve built which allows for flexibility and speed and scale leverage from day 1 and variability from day 1 .

So to me the Cloud could mean if not demise at least reduction of scale advantage in some industries and a further boost to emerging market cos with global ambitions!!


  1. Absolutely, this will give companies agility, which will help them, improve their ability to rapidly and inexpensively re-provision technological infrastructure resources. Also because resources will be shared hence the cost will be spread across a large pool of users.

  2. A very interesting perspective and I know one can always count on you to have one Tiger :)

    I work on a leading Cloud computing platform but I cannot make myself to be an Cloud Computing evangelist since I believe its too early to call it the be-all solution in its current state.

  3. It promises to be game changer, no doubt! We rightly embarked on this journey with couple of partnerships, was reading the recent Recon venture

    As you rightly pointed the smaller ones have luxury and ease to adopt while due to size the bigger ones will closely watch to see how do they benefit or whether to venture or not. Thanks

  4. Cloud happens to be an interesting phenomenon since the emergence of web, garnering an equal amount of both support and misgivings. Though the benefits to a small sized startup is clear outright, management gurus are yet to see through its implications to large corporations. Is cloud going to act as some sort of disruptive technology to IT and non IT companies alike? How would it level (or dislevel for that matter) the playing field? These are few questions that are yet to be answered with some degree of conviction.
    Even though it may appear that a major barrier to entry (Capital investment on IT assets)would be lifted as a result of availability on cloud causing too many players entering marketplace, one should not lose cognisance of the fact that the real competition would come from how efficiently a company uses its assets (including, workforce, suppliers, customers, product/services). So the winner would be the organization that can nibly adapt to the implications of cloud and make its business processes agile either by participating in cloud or by innovating its business model. Its time big Cs realize that the global arena is no longer their prerogative. Everyone is invited and welcome now.

  5. Cloud will certainly take some time as it is still in infancy stage.. for BPO industry where you have “N” number of client with there specific compliance requirement it will not be easy to move on cloud.

  6. An interesting article. re: Cloud benefits not clear with data, services, processing: agree with this view. All changes are accepted at different rates in different industries. For ex. SaaS applications were adopted much more in HR function than say Finance. Similarly, I feel that the propensity to adopt cloud is more with Software than with Data. "Everything shared" model with application, application platform, data platform, OS platform and Infrastructure is certainly not here now. But as industries adopt cloud in software and understand better with baby steps, adoption in other areas will be better. By then, product (cloud features) will also get better. Already infrastructure as a service is kicking steam. Certainly cloud will help neutralize disadvantage due to lack of scale and its important to adopt right business model for cloud right from start - e.g.

  7. Most of these small companies will need to be part of a Public Cloud based on their size and needs of getting the same price competitiveness of IaaS as that of alrge company in a Private Cloud of their own which also provides all kinds of Compliance and regulatory protection for them as well and they can invite who they want to be part of their Cloud ecosystem be it partners or Suppliers . also think about it this way as these large companies are ready to renew their infra structure they would use that opportunity to migrate to a Private cloud vs spending Capital and there are enough big players who will do it for them. So I am not yet ready to write off the large companies with the right IT strategy .

  8. Cloud is definately a Green IT initiative. It would take time but I see a great futuer of cloud it saves cost and there are always many challenges for any new revolution.

  9. No system is perfect. Cloud has its own set of constraints that companies will need to deal with. Your comment about new companies structuring themselves differently right from the start is also correct. The beautiful thing about the cloud, is that it minimizes (atleast at the start), the need for technology talent to be a key part of the team for success. This means that people with ideas and domain expertise can now launch companies with relatively easily, with lower investments. These companies will learn to deal with the constraints that comes with the cloud i.e. these constraints are BAU for them.

    Having managed global operations IT operations for a company during the dot com boom, I can now see how much more convenience a concept like the cloud would have provided me. I am now in the process of launching a new software in a SAAS model for the BPO industry, and I fully intend to leverage the cloud.

  10. Tyagaraj, what do you feel about Open Source technologies, though other industries (who are also security conscious) have openly accepted especially during the recession period to avoid getting tied with paying huge licensing fees, I have not seen BPO's accepting Open Source to that extent, what is the reason, request you to respond to PLEASE.....Thankyou

  11. It has been my experience that cloud solutions will gain traction incrementaly in large corporations. Department by department, group by group, the utilization of cloud-based applications,solutions,and resources will steadily gain traction until CIO's and IT departments will be forced to undertake radical changes to they way they go about supporting the business.

    BPO's have a unique perspective in bringing the cloud to market. They are in a position to determine best practices in advance of large corporations, and embrace the inevitable change for themeselves. Once fully understood, BPO's can affect dramatice change (and business opportunity) for their clients.

    Looking at this another way, cloud is nothing more than the outsourcing of certain resource management and application support that current BPO's already do. What it really resolves to is this: each party should concentrate on what they do best, then use the best-of-breed tools that allow them to succeed. Cloud Computing is just one of those tools, but a very important one