John Wise introduces Cloudonomics (part 1 of 4)

Cloudonomics is the economic effect for the consumer and the supplier of selecting a cloud-based operating model (cloud hardware, cloud software and cloud service) as opposed to an enterprise software and services model. While the “cloud” is commonly used inside the home by most families (e.g., email, social media, Gmail, Facebook, Amazon, etc.), it has yet to be widely adopted in the workplace. As the “cloud” moves into the work environment as a better and more cost-effective alternative to the 1980s approach of enterprise software, this situation is changing rapidly, as discussed in this paper, and will have significant impact on suppliers and consumers.
In this white paper, the “cloud” will be viewed in three distinct levels: Level 1 incorporates only hardware; Level 2 includes hardware as well as software; and Level 3 encapsulates hardware, software and services. Varying degrees of Cloudonomics are applied to each of the three levels.
True cloud software will result in better user interfaces and productivity, the ability to cloudsource, and even significant savings in hardware costs.
The true benefits of cloud are significant, but be aware of cloud “fakes” as they will result in new costs with no benefits. Outsourcing hardware is not uncommon; however, this doesn’t equal cloud. There are software vendors that will provide a browser interface, but when achieved through slow desktop emulation, this also doesn’t equal cloud, and there are services that have been outsourced but rarely do they actually equal cloud.
There has to be consideration for enterprise solutions versus public clouds and private clouds before discussing the three levels of cloud. 

Enterprise Solutions
The challenges inherent in legacy enterprise software solutions include high cost of ownership and support, lack of scalability, recoverability and poor security. Most enterprise solutions are poorly or often not fully tested to a state of functioning recovery (i.e. hardware may fail over but software does not). Malicious insiders and access vulnerabilities do exist, making internal users and passwords left on sticky notes, a serious weakness. Additionally, most enterprise solutions have limited resources, procedures and controls for providing infrastructure, platform and services. Keeping the software up to date in the enterprise environment can be a significant job all together.
Public Cloud Solutions
A public cloud has clear financial and operational benefits; however, these benefits should be carefully considered against security issues. The public cloud vendors (infrastructure, product or services) will continue to have a wide range of issues that will remain in the forefront of the industry mind. As with any business there are data sensitivities that need to be addressed and thought through when looking to share consumer-level clouds.
Classic issues include shared hardware issues, unknown vendor sites, unknown staff, data leaks, insecure API (application programming interfaces), location (e.g., outside the United States) and malicious insiders.
Private Cloud Solutions
Private cloud vendors undertake due diligence on the service chain to ensure the highest standards are achieved. This results in customers being satisfied that a private cloud offering offers them the security and configuration fitting for their business. Important advantages that a private cloud offer are known providers and vendors; physical checks and monitoring of
data centers; known staff with established processes, procedures and controls; defined contractual terms; and fully tested and scalable disaster recovery.
Typically private cloud vendors will ensure that there are no shared technology issues (i.e., dedicated hardware that is not shared with other companies). This eliminates the possibility of third-party data contamination (i.e. data loss or leakage) and technology update vulnerability.
Private cloud vendors often have defined security practices that include options on security from Secure Socket Layers (SSL), Virtual Private Network (VPN), encrypted data storage, host intrusion detection systems and federated identity manage- ment systems to overcome alleged security issues.
Normative Cloudonomics (advocating “what ought to be”) and the current enterprise software and outsourcing model will result in challenges that enterprise suppliers need to overcome. The challenge of creating multi-tenanted and virtualized software is difficult; however, several leading cloud companies, such as, have demonstrated that these obstacles can be successfully addressed.
The combination of hardware cloud, software cloud and cloudsourcing will result in a paradigm change to the enterprise option looking less and less attractive as the market adopts cloud.
Cloudonomics provides significant benefits that include:
  • More cost-effective hardware options
  • Better recovery options
  • Reduced cost of software, integration, maintenance and training
  • Pay-as-you-go pricing models
  • Better user experience
  • Improved time to market
  • Improved access to information (mobile)
  • More extensive access to integrated information
  • Access to wider service offering

Cloudonomics will result in what is commonplace in home computing (ie. eBay, Amazon, Google, online banking, etc.) becoming commonplace in the corporate/enterprise and result in a new set of vendors in the marketplace.  

A 2011 report titles “State of Cloud Survey” found that 88% of businesses felt that the cloud would improve their IT agility.  The U.S. Commerce Department’s National Institute of Standards and Technology (NIST) has released papers to foster the federal agencies’ adoption of cloud computing.
Many enterprises are rapidly migrating to the cloud to achieve significant cost savings.  Forrester Research recently forecasted that the market for cloud services will grow to more than $241 billion dollars by 2020.

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