If you don’t know Cloud Computing (or even if you do) this post is a “must read.”

It’s an unprecedented time in history when it comes to IT infrastructure; yet, few companies are utilizing these advancements.  I’ve managed a large IT infrastructure and know the downside of upgrades, patches, security issues, desktop management, etc.  In fact, 80% of our time was spent maintaining a clunky physical infrastructure, rather than providing real business value.  Millions of dollars were spent keeping this behemoth running. 

As time moved on, more pressure came from the business units to deliver value, rather than maintaining (let’s face it, it’s only when the network goes down that anyone cares about technology).  Small businesses deal with this same issue – a modest in-house network, email, and databases all absorb vital cash.  In this economy, reducing expenditures is essential, but only if a company owner can deliver better technology and maintain a competitive advantage.

It has been my experience, that Cloud Computing can deliver superior results and lower IT costs by as much as 60% or more.  A few years ago I experienced first-hand the power of Cloud Computing when working with a financial services firm with about 20 employees.  I was able to reduce their IT budget by 70% and deliver a multi-million dollar CRM / Business Management system.  This system changed the way they did business.  It gave unparalleled visibility into their business. It introduced new insights and efficiencies.
   
The new system included a defined sales process, automated workflows, commission tracking, management dashboards, a 360-degree view of clients, and the result was a 400+% increase in assets under management. The transformation was quite miraculous.  
 
I’ve worked with small companies for years (both as an owner and consultant), and I have never seen technology have such an impact on process improvement.  In fact, at one startup we received multiple offers for $500K in funding as a direct result of the automated workflows and CRM system. A few years ago I experienced first-hand the power of Cloud Computing when working with a financial services firm with about 20 employees.    This system changed the way they did business.  It gave unparalleled visibility into their business. It introduced new insights and efficiencies.   The new system included a defined sales process, automated workflows, commission tracking, management dashboards, a 360-degree view of clients, and The transformation was quite miraculous.   I’ve worked with small companies for years (both as an owner and consultant), and I have never seen technology have such an impact on process improvement.  In fact, at one startup we received multiple offers for $500K in funding as a direct result of the automated workflows and CRM system. We were able to track:

• when clients came into the system
• how often they were contacted
• flag customers who were not contacted
• store all financial information in one central location
• provide a customer portal so clients could log into their account
• this was all done on a shoestring, startup budget of $500 per month 

Today, as I sit down with business people and map out their Business Processes, clarity gives way to efficiency (spreadsheets are replaced with a cutting edge technology platform).  It also provides employees with 24/7 access and a flexibility that allows them to work from home, at night, and on weekends. 

Often, the simple act of being able to check email before they go to bed provides for a peaceful nights sleep.  The benefits are almost unlimited and the infrastructure does not need to be maintained, upgraded, or cared for.  4 to 5 upgrades take place effortlessly every year, and substantial functionality is added consistently (Google does 18 to 24 upgrades per year!). 

For example, Salesforce.com recently developed a fully integrated platform on which to develop web sites.  Now, a company can manage their website content through the same application they’re managing customer relationships, tracking web visitors, and keeping track of Google Adwords campaigns. 

Integrations with Facebook, Amazon S3, Google, and other cloud applications are accelerating.  Thousands of applications are being developed and the Cloud Computing industry is growing at record speeds.

As Developing Nations have skipped over the copper telephonic infrastructure in place of wireless, the startup of today is by-passing a physical infrastructure in place of the cloud.  Many companies are building their entire infrastructure in the cloud and gaining significant competitive advantage.  Lower costs, more flexibility (applications can now be deployed in hours rather than months and years), and seamless integration is replacing older, stand-alone technology. 
In short, Cloud computing is a new paradigm and the company who does not take advantage of this technology will have difficulty competing with those who do.   
  
If you’re interested in learning more please call me immediately.  We provide a “quick start” program to review your business processes, goals, and objectives, which results in an unbiased recommendation of next steps. 

The total process takes about 10 hours (7 to 8 hours in-person and 2 to 3 hours documenting the recommendation). 

Total Investment:  $1,200.       

A paradigm shift is when a new form of technology emerges that replaces the old, while a next generation technology builds on previous computing architectures (not replacing it, but rather growing out from it).  The difference between these two concepts may seem subtle, but it is this very distinction that may put an end to Microsoft.   

These “paradigm shifts” in IT rarely occur – a true paradigm shift happens when one form of computing completely replaces another.  In fact, there really has been only one true paradigm shift in recent history, when Supercomputer centers where replaced by on-site servers and desktops.  The advent of the desktop computer was a paradigm shift, whereas, the advent of servers that tie desktops together was a “next generation” iteration. 

There is a significant difference between a paradigm shift and iterative/evolutionary growth – the first is a complete replacement (flat world vs. round world), while the latter simply builds on what already exists (the introduction of laptops, which did not replace desktops). 

Today, it appears that we’re in the midst of a true paradigm shift, in which one form of computing may completely replace another form.  Cloud Computing, or “Software-as-a-Service,” is the new paradigm, and it will replace the current Server/desktop model due to efficiency and simplicity.

Microsoft’s miscalculation is the belief that Cloud Computing is evolutionary, or a next generation of computing, while there is growing evidence that this is a true paradigm shift.  Only time will tell, but it would seem a strong case could be made that we’re living in a historic moment (from a technology perspective).

I would seem that Microsoft is still trying to put old wine into new bottles, and their failure to understand the difference between an actual paradigm shift and an evolutionary/iterative shift will likely be their downfall (if, in fact, this is a paradigm shift):

Don’t Be Fooled…

It’s important to understand what this paradigm shift is.  The real paradigm shift is NOT about putting applications that were once on servers into the “cloud” (or Internet), which is what Microsoft’s Azure seems to be doing.  The real paradigm shift is in a multi-tenant architecture.  This kind of architecture utilizes limited instances of an application that is shared between many companies.  While the data for each company is stored separately, the application itself is shared.

Why Is Multi-Tenancy the Key?

Multi-Tenancy resolves the fatal flaws inherent in the current server/desktop paradigm – software upgrades, software patches, broken integrations, lost data due to upgrades, conflicting applications, hardware upgrades, managing thousands of desktop computers, etc.  IT departments are spending millions of dollars trying to maintain these infrastructures that continue to become more and more complex. 

The success of the current server/desktop model depends on complexity.  Revenue is derived from upgrades, patches, on-site installations, etc.  The more complex and difficult to manage this infrastructure becomes the more Microsoft and it’s developers earn. 

It would appear Microsoft’s Azure is simply taking this complex IT nightmare and moving onto a new platform.  All the issues described above are not resolved, but rather moved to a new place.  Software + Service (Microsoft’s approach to “SaaS”) is simply the same Emperor in new clothes, nothing more.  

Multi-tenancy, on the other hand, represents an entirely new form of computing.  Instead of computing power residing locally it is accessed via the Internet.  Instead of millions of different versions of a single application on hundreds of different servers and desktops, millions of companies can now use a single version on one Application – a single set of source code for all users.  The difference between these two approaches is night and day – one will ultimately replace the other.  

During the early stages of the Industrial Age factories created their own electricity.  This provided them with a competitive advantage and an entire industry grew up around creating on-site generators.  Each company spent a portion of their revenue developing their own infrastructure specifically to create electricity. 

Then, a new technology emerged.  This new “grid” technology allowed electricity to be created centrally and delivered via wires (sound familiar?).  Delivering electricity became far less expensive than a company could do on their own.  The entire industry who provided on-site electricity infrastructure practically vanished. 

It was a paradigm shift that is very similar to what we’re seeing today.  We’re in the early stages of this shift so there will be some hiccups and growing pains, but this does not mean it’s not a paradigm shift. 

I suspect the advent of “Cloud Computing,” or more specifically multi-tenant Cloud Computing, will ultimately replace our existing approach to computing.  Just like electricity was ultimately “outsourced and commoditized,” it would appear on-site computing will also go the way of on-site electricity creation. 

This shift is already taking place.  It’s only a matter of time before enough pressure builds and the dam breaks.  Cloud Computing is reaching a critical mass.  When it does, Microsoft will disappear (if it does not wholeheartedly adopt SaaS and walk away from their most profitable products and services).   

Helpful Links:

http://news.cnet.com/8301-13846_3-10079576-62.html

http://blogs.zdnet.com/microsoft/?p=1671&tag=mncol;txt

http://cloudenterprise.info/2008/10/29/microsoft-azure-vs-amazon-google-and-vmware/

There are some very specific reasons the SaaS industry (also called “cloud computing“) is growing exponentially:

• Low up-front development costs
• No ongoing maintenance – no on-site applications and software
• No homegrown applications that need constant tweaking
• No servers to maintain, patch, and secure
• No in-house network to protect and maintain
• Seamless upgrades – often 2 to 3 times per year
• No broken integrations from upgrades
• Fast implementation – companies can have full-blown applications in weeks rather than months and years
• Flexible application that can change and grow as the business changes and grows

IT departments have been severely burdened by upgrades, server patches, and security issues, as well as developing and maintaining homegrown applications.  Often, 60% to 70% of IT resources are directed at maintaining this infrastructure, while the business units within their organization are demanding more tools to make them more productive.  This tension between the need to maintain an in-house infrastructure and the need to quickly provide innovative IT solutions while keeping costs in check is straining IT organizations, regardless of company size.

The future is now and the evidence of the emergence of a significant shift in IT is mounting. 

The SaaS deployment method will ultimately eliminate the need for an in-house network and will continue to free resources to provide innovative tools to business units.  While the longer-term vision of companies maintaining their entire IT infrastructure in the “cloud,” or Internet, is not there now, the time is not far off.  There are some companies who have already saved millions of dollars by eliminating their in-house network and have found the new “cloud” environment incredibly fluid, flexible, and reliable. 

This trend is unstoppable, and Microsoft thinks it can stem the tide.  It cannot.  There are far too many benefits that come from cloud computing.  Microsoft is a massive company with huge influence, but it’s not large enough to stop the new paradigm of SaaS. 

Microsoft is trying to redefine SaaS as “Software + Service (pdf),” a mixture of in-house networks and cloud computing.  The only problem is while this model may help Microsoft, it will not help a company struggling with upgrading servers and old applications, patching software, and having to fix integrations at each upgrade.  These problems are a significant burden and CIO’s are looking for solutions, which is why they’re turning to SaaS in droves. 

The SaaS tide is rising and Microsoft’s attempt to slow down this trend will ultimately end in their demise, if they do not fully adopt SaaS.  Unfortunately for Micorsoft, fully adopting SaaS presents significant risk because it will cannibalize their main revenue source, which includes server-based applications like Exchange, security patches to applications, hardware, and upgrading and maintaining physical infrastructures.  Ultimately, it’s a lose-lose proposition for Microsoft because they do well with greater complexity which runs counter to what a CIO desires. 

Smaller companies and startups are beginning with the SaaS model and skipping over the installation of complicated and costly IT infrastructures.  The more progressive small companies don’t even try to develop in-house networks – they use services like salesforce.com, Google Apps, and Amazon S3.  Why would they, when they can have a far superiour IT infrastructure in the cloud?   

This phenomena is similar to how developing nations have skipped over expensive “hard lines” and have gone directly to wireless networks.  Why would any developing nation, given a choice, install copper wires throughout their country when they could install wireless towers at a fraction of the cost?  The same could be asked of any new and developing company considering how to develop their own IT infrastructure. 

The Software + Service model proposed by Microsoft does not resolve the issues with which CIO’s are struggling.  In fact, it adds more complexity, which is why Microsoft will ultimately not survive this new paradigm shift to Cloud Computing.  A true paradigm shift seldom occurs, but when they do large and seemingly unstoppable companies often disappear if they do not radically change.  The only problem is it’s very difficult for a large company to innovate because their survival depends on an old paradigm, which will be swallowed up by the new.