Cloud Computing: Is it breaking ground for a new era of infrastructure and application development or just another buzz word created by a slick PR firms and copied by thousand of marketing departments? Everybody is talking about it but so far the strategic C-Level (CIO, CTO, COO and CFO’s) are still scratching their heads on how to apply this with their future strategic direction. About 3 weeks ago (9.21.09) Larry Ellison / CEO Oracle Corporation gave an appearance at the Churchill Club and was asking about Cloud Computing and his personal take:  Here is Larry’s response:

“The interesting thing about cloud computing is that we’ve redefined cloud computing to include everything that we already do. I can’t think of anything that isn’t cloud computing with all of these announcements. The computer industry is the only industry that is more fashion-driven than women’s fashion. Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish.

• It’s insane.
• When is this idiocy going to stop?
• We’ll make cloud computing announcements.
• I’m not going to fight this thing. But I don’t understand what we would do differently in the light of cloud computing other than change the wording of some of our ads.

That’s my view.” – Larry Ellison

So at this point you might think why even spend more time on this blog, I got what I needed – let’s move on to something else, somebody like Larry can’t be wrong. Well before you stop reading, let me encourage you to keep on reading as I try to challenge a bit Larry’s response.

By definition on wiki – cloud computing is an example of computing in which dynamically scalable and often- virtualized resources are provided as a service over the Internet. Users need not have knowledge of, expertise in, or control over the technology infrastructure in the “cloud” that supports them. A technical definition is that “cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (this could be e.g., networks, servers, storage, applications, and services) which can be rapidly provisioned and released with minimal management effort or service provider interaction.”

This definition states that clouds have five essential characteristics:

• on-demand self-service
• broad network access
• resource pooling,
• rapid elasticity,
• and measured service.

So if you try to match any of the leading ERP vendors against the 5 essential characteristics, which define Cloud Computing, and we may take their marketing aside, we might all agree that currently none of them can truly deliver such a concept. Maybe companies who grew up in a more traditional on – premise delivery model have problems with adopting or might have just underestimated the hype around these concepts.

So let’s look at a company who started out as a Managed Service provider? For such companies the 5 essential characteristics of cloud computing are nothing new and each of them are corner stones of their fundamental deliver concept. Lets take Salesforce ($1.2 Billion revenue and 63,200 paying customer) the No.1 CRM provider as an example. Not impacted by the current down turn of the global economy. Salesforce offers a core service, which helps companies to:

• Acquire new customer and grow your business
• Manage customer relationships
• Streamline your service and support organization

To provide the best in class service for CRM, Salesforce provide all of the application that might be needed to deliver the functionality to businesses looking for a CRM solution. In case a prospect can’t find a specific service in Salesforce core service offering, Salesforce decided to partner in strategic area rather than implement everything in house – time to market is always a huge factor.  So Salesforce decided to spend time in implementing an AppExchange store, which has currently 817 Apps counting to meet any business needs even beyond CRM. This allows Salesforce and their community of application providers to focus on their core expertise to continue gain market share around and beyond CRM. To provide such a services software providers need to have a flexible software layer and a rock solid infrastructure foundation. So in my eyes we really have to separate Cloud Computing into two different layers, the software layer and the hardware or infrastructure layer:

• Software layer  = Service Cloud Computing (e.g. Salesforce)
• Hardware or Infrastructure layer = Infrastructure Cloud Computing (e.g. Amazon)

Service Cloud Computing: Define new software components which utilize common standards such as Java, J2EE, BPEL, XML, .. and apply to the concept of rich defined Web 2.0 applications. These software components provide building blocks / interfaces that allow other software provider or services to plug in and utilize them as a service. So traditional on- premise software companies might have to review their current product strategy and their technology stack to identify if their roadmap applies to those new development standards. This is the starting point to even think about taking the next step in building out software components which can be used as plug & play components in such SaaS / Cloud Computing Scenario. The future success of companies who are in their markets only seen as “contenders” or “strong performers” and want to stay competitive to their leaders don’t only face the challenge to change the way on how they currently develop products they also have to strategically partner with others to provide a more competitive and complete service. This is a massive challenge and we might see totally new players / alliances which might challenge or erode current market leaders. This challenge will take years but the adoption or the new way of thinking on how to building out service cloud computing applications is happening right now.

Infrastructure Cloud Computing: The infrastructure layer relies on SOA, application servers, networks, servers, storage. Provide a underlined hardware concept which allows to have not only redundant systems also components which can be added if needs in case of unexpected peak times, seasonal business e.g. only 3 month out of 12 you might need twice as much hardware power to respond to customer demands.  The rock solid foundation of the infrastructure cloud computing will allow service cloud computing providers to offer a reliable service to their current and future customer base.

Companies search for options to consolidate existing integration technologies to a single platform or application provider who is able to provide a complete service. Such businesses that are interested in on – demand service models looking for flexibility, pay – as – needed, multi- tenant options. The technical layer or underlined IT infrastructure concept is not that important to them. More important is rapid time to market, lower entry cost, total cost of ownership and the amount of flexibility helped companies to consider and review new outsourcing concepts. When companies make the step to move away from a traditional on- premise, in-house client – server scenario to an outsourced/ on –demand model they haven’t thought about the different concepts of cloud computing, clients feel protected through their initial negotiated SLA’s,

So who should be really interested in service and infrastructure cloud computing?

The software, hardware and service providers, as now is the time to make those changes to be well prepared for upcoming market needs and customer requests.

-Remember not every business area might be a good fit for such outsourcing concepts – keep this in mind.