Business and commerce runs on a definable by a set of known and quantifiable variables, vectors and influencing factors. Combined with seasonality, trends, cyclicality and an always-present element of the unknown, governments in all developed (and most developing) nations bring these measures together into what their national treasury, exchequer or federal banking system likes to call its economic model.
When we know how many businesses populate which industry verticals, what the flow of goods represents in any given quarter or year, to what extent demand and supply is swinging and in what direction, then we can then combine those measures with an evaluation of the money supply to establish a picture of economic growth, prosperity and agility.
Although there is no formally defined ‘cloud economic model’ as such, the data-centric growth, prosperity and agility of nations and their industries can be formulated in much the same way if we have the facts.
A deep & wide-ranging analysis
We need to provide a new degree of instrumentation to assess where differences exist in the usage and adoption of cloud computing services across different industries and sectors.
By examining different countries, industry sectors, departmental functions and company sizes, we need to ask IT decision-makers (ITDMs) in different Line of Business (LoB) functions across this matrix to get more granular and insightful view of business and IT agility than perhaps ever before.
In the wake of the Covid-19 (Coronavirus) pandemic with so much unplanned disruption, it is important to know which areas of industry have had enough systematic and strategic foresight to operate effectively. Equally, for the greater good of us all, it is important to know where industry feels it has been held back so that we can collectively and collaboratively build stronger societal structures for the future.
Insights for inner sight
To get some real insight here, we perhaps need to remember that cloud isn’t inherently ‘new’ as such. Although Microsoft Azure, AWS and Google Cloud are all nicely packaged up and branded as next-generation technology solutions, the core idea hasn’t moved on that far i.e. this is simply the commoditization and onward marketing of services. If we accept this truth, then, to be honest, we need to remind ourselves that commoditization is something that has been happening for thousands of years.
This is the view put forward by Richard Slater, head of managed services at UK-headquartered cloud services and implementation consultancy specialist Amido.
“By way of an example, in the 1930s, archaeologists uncovered what appeared to be a battery made by the Parthian Empire in the first century AD. There is some debate about precisely what the Parthians used batteries for, but it shows that electricity isn’t exactly new. Wind the clock forward to the 19th century and every mid to large corporation in the UK had a chief electricity officer (or chief power officer). Chief electricity officers were in place until 1901 when the Neptune Bank Power Station came online. Then, within a few years, commoditization had made the chief electricity officer role redundant,” explained Slater.
Commoditization breeds, more commoditization
The compelling (and potentially exciting) argument here is that commoditization, generally, enables further commoditization as follows:
- Commodity electricity leads to commodity computing (PCs).
- Commodity computing leads to commodity business computing (datacenters).
- Commodity datacenters leads to commodity cloud delivery (public cloud).
- Commodity public cloud leads to cloud diversity (public, private, hybrid, multi and poly cloud).
- Commodity cloud diversity leads to commoditized data… and so on.
“Understanding this approach to commoditized services is relatively trivial, albeit uncommon at the C-level; there are techniques such as Wardley Mapping to understand your value chain and identify what you should rent vs build – it’s a systematic and proven approach to business strategy,” said Amido’s Slater, suggesting then that this commoditization penetration point could help businesses to find out when, when and to what extent they should enter the economic model of cloud adoption.
For Slater’s money, the future cloud economics model is one typified by data-driven change and rapid adoption of commodity services, not standards adherence. He thinks that the most successful companies now and in the future use data and cloud to adapt, change and pivot at lightspeed; this all happens in a place where their economic model is driven by the need to reinvent themselves based on their markets’ signals.
Slater isn’t alone in his view of ever-expanding benefits in this space. Matt Smith, global chief architect at IFS points to a wider (but essentially related) growth cycle.
“The greater availability of data and the applications that help us sort, understand and act on it, across functions gives rise to another virtuous circle. Value-add insights lead to value-creating applications, which in turn help identify further efficiencies for organizations and focus vendor-partners around more specific challenges. This whole process is accelerated by the advent of cloud services, which allow rapid deployment of new innovation and an agile approach to solving the challenges of the day,” said Smith.
Monoliths continue, a buyer’s market emerges
He suggests that equally as transformative (and again enabled by the relative commoditization of cloud services) has been the growth of RESTful APIs to form connective bonds between applications on the web and across cloud. IFS’s Smith reminds us that we’ve reached new heights since the early days of component-based architectures, so that today, all manner of companies are now using composable architectures to benefit from a best of breed approach to enterprise software.
“We now have a market where buyers are better able to identify and integrate the solutions that suit them and vendors are better able to target problems to solve, building on their strengths rather than developing ‘do-all’ solutions. In this environment, it pays to be a good citizen in an organization’s technology ecosystem as the case for monolithic, all-in-one offerings continues to crumble. For vendors, the increasing propensity to deploy a multiplicity of cloud services to target specific pain points creates an enhanced ability to strengthen the relationship with the customer and sell more and higher value solutions into their business. For organizations, it’s a buyers’ market – with the evolving economics of the cloud lowering the barriers to entry and enabling new players to make up part of the technology stack, providing differentiated services to those with demands to meet,” deduced IFS’ Smith, with an eye on what could (or should) be a more positive future.
There may (as yet) be no formalized or universally accepted economic model to describe the state of cloud maturity – and there is no global cloud treasury – but we can (and arguably should) apply as many of the laws of economics as possible to this now wide-ranging and far-reaching approach to computing services that the world has embraced at increasing scale.