Hurtling Down the Cloud Computing Path

Although nobody seems to fully agree on the definition of cloud computing, both IT organizations that consume these services and the IT services companies that provide them are convinced that cloud computing will cut their costs.

A new survey from CompTIA, a trade group representing IT services firms, finds that both IT organization and IT services companies say the primary benefit of cloud computing is lower costs.

But that’s still a matter of debate. In many case, it depends on the nature of the application. For instance, an application where there are large amounts of data transfers across the network can be expensive to run in the cloud because cloud computing providers tend to mark up their fees for network bandwidth access to make up from low-cost processing.

In addition, a lot of legacy applications can’t effectively run in the cloud because of latency issues and the underlying code might be too complex. These issues, combined with the security of the cloud and IT staff fears of losing control and ultimately their jobs, mean that the future of enterprise IT will probably be defined by hybrid approaches to cloud computing that consist in equal measures of public and private cloud infrastructure.

Of course, it’s not clear that IT services companies will be able to sustain themselves in the cloud, either. Many are initially attracted to the lower-cost model of cloud computing, which looks like a variant of a managed hosting offering. This approach lowers their costs because instead of having to dispatch people to a customer site or invest in all the gear needed to remotely manage those services, the IT services firm can manage the IT needs of hundreds of customers with one or two local data centers.

But there’s already a lot of cloud computing capacity in the world. That means that as IT services increasing become discrete sets of product offerings, the laws of diminishing returns will start to kick in. IT services firms soon will discover that cloud computing is going to be a harsh economic taskmaster that eventually will drive consolidation across the IT services industry.

Carolyn April, industry analysis director for CompTIA, concedes that most IT services firms have yet to figure out the right economic model for delivering cloud computing services. Many will opt not to invest the capital required by reselling cloud computing services developed by others. Others will find that unless they deliver the service themselves, they won’t be able to deliver high-margin custom services to their clients.

When you get right down to it, the entire industry is in a state of flux over cloud computing. IT organizations are unsure what cloud computing means to them and service providers are unsure of the potential impact on their business. So everybody in the industry is hurtling down a path that might reinvent the entire industry for the better or simply lead to its ultimate destruction. And anybody who says they know for sure how this will turn out is a liar.