From the Enterprise perspective, now has never been a better time to invest in cloud services. Enterprises are broadly adopting all types of cloud services at multiple levels in the organization. Initial predictions were for the enterprise to favor private and community clouds over public services, but the hottest trends in Cloud adoption has been Software as a Service (SaaS) and cloud-based business applications which are projected to grow from $13.4 billion in 2011 to $32.2 billion in 2016, a 19.1% five-year CAGR! The rapid adoption of SaaS applications of all flavors by the enterprise has been a surprise to many, but the vastly reduced costs due to the pay as you go pricing models, and high degree of service delivery flexibility has overcome any perceptions of needing to trade price for reduced feature sets. Unsurprisingly, the most often added cloud-based application services are Customer Relationship Management (CRM), Supply Chain Management (SCM) and Enterprise Content Management (ECM), with Web Conferencing, teaming platforms and social software suites nipping at their heels.

Infrastructure as a Service (IaaS) continues to appeal to companies that want to replace in-house and traditional data center models for the cloud hardware abstraction approach. Gartner is predicting Infrastructure-as-a-Service (IaaS), cloud management & security devices, and Platform-as-a-Service (PaaS) are growing from $7.6B in 2011 to $35.5B in 2016, a CAGR of 36%. A word of warning for companies that think just because the Amazon cloud is easy to use, it is easy to build and manage. Building a private cloud still requires a degree of expertise that few enterprises have in-house. In the next year or so expect more companies to see the value of using the services of cloud consultants to avoid painful and expensive mistakes when building private clouds; or alternatively using emerging enterprise focused public cloud services such as Bluelock or Terremark.
Platform as a Service (PaaS) which still does not quite know what it wants to be when it grows up, is lagging with only about $1B in revenue in 2012, but as the market matures, expect to see rapid uptake as companies recognize the value of standardized tools that can ease the pain of Cloud application deployments. Some of the newer PaaS tools like the ServiceMesh Agility Platform combine the features of a SDLC workflow engine, production support and orchestration across different cloud platforms.

New Cloud Technology Directions

Ultimately, innovation is the marriage of technology and organization change. The dilemma is how to pull innovation into IT core functionality without disrupting the flow of new ideas, when the modern enterprise understanding of IT is focused on operational excellence and cost control. The CIO should be leading the cultural change to the new flat organization by leveraging cloud and mobile application in new and interesting ways. The trick is to create tools for people to quickly test and validate their ideas so they can implement new ideas that work within the enterprise framework. Cloud tools can be used to deliver on that promise, but is the enterprise up to that challenge?

This is not the first time wrenching technology innovation has changed how companies do business, and it certainly will not be the last. Companies able to use disruptive technologies, such as cloud computing, effectively will leave companies who do not have that ability in the dust. By recognizing the seeds of change and embracing them, the smart company can leverage cloud services by using the efficiencies of pooled IT resources at the same time allowing greater flexibility to meet the challenges of the global economy. This combination of combining commodity utilities with innovation allows companies to compete effectively using the efficiency and flexibility strategies simultaneously.

Challenges, Always Challenges…

Consumers intuitively get cloud and have been more than willing to embrace it warts and all as it has matured. They are highly price sensitive and will easily sacrifice features in exchange for low cost. On the other side of the market spectrum, the more conservative enterprise market is still struggling with the basic model. Some companies worry that the emerging cloud companies are too small to do business with, while others are concerned with how to incorporate new technologies into existing technology portfolio investments. To address their concerns, at the same time as Cloud technology continues to mature and standards develop , innovation around service delivery and breakthroughs in storage technologies are making it ever more enterprise ready. The pace of cloud vendor consolidation has already picked up as the traditional enterprise vendors such as HP and IBM has rushed to add enterprise ready cloud services to their portfolios. This should alleviate the fears of even the most technology adverse companies.

A final word for any remaining cloud technology skeptics, as with any innovative force, the cloud is just a tool to drive change, not an embodiment of change itself. Enterprise cloud consulting leaders, have firsthand experience with how companies willing to ride the Cloud revolution will not only survive in today’s hyper-competitive world, but thrive. I cannot wait to see where the next wave takes us!

About the Author
Beth Cohen, Beth Cohen is a senior cloud architect for Cloud Technology Partners, Inc., focused on delivering solutions to help enterprises leverage the efficiencies of cloud architectures and technologies. Previously, Ms. Cohen was the director of engineering IT for BBN Corporation, where she was involved with the initial development of the Internet, working on some of the hottest networking and web technology protocols in their infancy.

Unlike what happened in the aftermath of the dotcom bust in 2002-2005 where there was tremendous investment and development of new technology from the entrepreneurial community, this downturn has not been as technologically fruitful. For the last year or so, the IT market has been coasting on previous technology breakthroughs for systems and storage virtualization, WAN optimization, wireless networking and the increased availability of SaaS (Software as a Service) offerings of all stripes. Those technologies are all innovations that came out of the telecom and technology downturn in 2001 that followed the dotcom boom of the late 1990’s. In the early parts of this decade, underemployed startup engineers were taking the half baked ideas from the dotcom era and turning them into practical products. The translation of the ASP (Application Service Provider) concept to SaaS is the perfect example of this process. Sadly, with the major innovations in these areas behind us, most of the recent product offerings are focused on incremental improvements rather than technologies that turn the status quo on its head.

Is there any hope that the growth of innovation will pick up again soon? I hope so, but the reasons for the slowdown are not for lack of new ideas. The meltdown of the financial markets a year ago which has meant reduced access to capital for new enterprises has in the short-term translated into entrepreneurs focusing on more potentially lucrative markets such as the growing medical and consumer areas. This does not mean to say that there has been no innovation at all, but from what I have seen the smart engineers are not spending much time devoted to developing the next killer business application. Why should they when the enterprise isn’t particularly inclined to be buying these days?

So what are the newly underemployed engineers working on these days? There is no doubt that smarter mobile devices are the next big thing. The level of innovation in this area matches the heady days of the early Internet gold rush. It seems like every other day there is an announcement of a new device, new application or a new service available to capitalize on the seemly insatiable market for pocket sized mobile systems that do more. Mobile email, texting, twittering and other rapid communication delivery systems are becoming the norm outside of the business community and are poised to sweep through the enterprise as well. The continued development of smaller or pocket devices that do more on a smaller footprint is ultimately going to transform business, but while many companies have not gotten much past Blackberries for their executives and road warriors, the new generation is using them for everything from romance to job hunting.

About the Author

Beth Cohen, Luth Computer Specialists, Inc.

Unless you have been buried under a rock for the past few years, the answer to this question should be obvious.  Practically all of the revolutionary products and hot services that everyone is talking about are being developed directly for the consumer sector.  Yes, business has been happy to cautiously adopt innovations; only after they have proven themselves in the brutal crucible of the fickle mass market.  Think about all the great new products that have come out in the last eight years, wireless LAN, Instant Messaging, Web 2.0, social networking, MP3 players, PDA technology, flash drives, and cloud computing, (yes even cloud computing, which is mostly a means for Google and Amazon to recoup some of their investment in excess capacity) are all examples of technologies that originated as products designed for the consumer market that have since been adopted by the enterprise.  The truth is that there has been essentially NO IT innovation created directly for the business market for many years.  Unless you count virtualization and mass storage hardware, which I would argue are mostly reinventions of the very old ideas of the service bureau and the mainframe respectively, on faster hardware.

Looking deeper into the economics of emerging technology, it becomes obvious why innovation is coming mostly from the consumer sector.  Follow the money.  While the risks for venturing into the consumer market are extremely high, — ask Apple about the notorious Newton, a product clearly far before its time.  The rewards for catching the fancy of the consumer cannot be matched by anything in the enterprise market.  Apple’s iPhone, a far more sophisticated Newton successor, is a good example.

My crystal ball says the next big thing will be developed for and marketed to consumers first.  Small and mid-sized business customers, for better or worse, are now lumped with consumers.  Since the fragmented and notoriously cheap SMB market has always been a hard nut to crack, it is easy to see why it makes logical sense for vendors to build consumer grade products and assume small companies are willing take whatever they are given.  With the current tight economic environment, permanent transfer of corporate R&D to the startup model, and limited resources available for innovation, I expect to see this trend not only continuing but accelerating for the foreseeable future.

Beth Cohen, Luth Computer Specialists, Inc.  IT infrastructure consulting services.