By Doug Neal
April 15, 2010
Although the IT industry is often accused of over-promising and under-delivering, looking back over time, the opposite is more the case. The extent of IT-enabled business change has been greater than most people could have imagined and the pace of IT-enabled innovation will only continue to accelerate, thanks to the rapid rise of cloud computing.
There was a time not so long ago when you could reach out and touch your friends, your team, your information and even your servers. Physical proximity was very comforting, but it is now the exception, not the rule. As we move to a world of virtual computers, virtual offices, virtual teams, virtual realities and even virtual companies, we will increasingly come to recognize that the virtual is becoming what’s ‘real.’. It is the buildings, travel and physical operation centers that are becoming increasingly unnatural and unnecessary. Businesses are being increasingly defined by information and how it flows. Cloud computing will only further this trend.
However, the real importance of any new information technology is measured by what effect it has on the overall management of the business. The role of IT is shifting from doing things to, or for employees, to one of creating platforms and enabling employees to do it themselves. IT is steadily becoming more integral to the business, and the cloud will facilitate and accelerate this integration.
Organizationally, the traditional separation of business and IT that was characteristic of the mainframe and even the early Internet eras is now giving way to an environment led by tightly integrated business/IT teams where discussions about who is in the business and who is in IT become increasingly meaningless. Additionally, when combined with social networking technologies, the cloud will help make what we today think of as informal, undocumented social networks much more visible, influential and manageable. Over time, personal, business and customer networks may challenge and even surpass the formal organizational hierarchy as the principal structures of the modern firm.
One of the big philosophical questions that topics such as cloud computing inevitably raise is: how much does this really matter? Isn’t this just another management challenge that business leaders need to address? After all, while technology has changed many aspects of doing business and requires many new skills, how much has it really changed the basic ways that organizations actually behave and make decisions?
Fundamental changes in the nature of the management model are indeed happening. As business theorists have noted for many years, much of the structure of the modern firm is based on traditional communications and transaction costs, but since technology is radically reshaping both areas, it is only natural that significant organizational changes will follow. Expect to see many more social and democratic systems and experiments - for example, techniques such as prediction markets, which place more value in the aggregated knowledge of employees than in a central forecasting group. Cloud computing will both enable and support such initiatives and will be inseparable from whatever new management paradigms emerge.
In looking at some of the key lessons we have drawn from the early cloud adopters, we are struck by the balance between direct cost savings, and improved speed and agility. These benefits provide a strong foundation for future cloud expansion. Moreover, it is impossible to separate these developments from the current global economic downturn and today’s heightened business uncertainties. We know from the past that recessions and their resulting cost pressures tend to make business and IT leaders more willing to pursue new computing alternatives, and that is clearly the case today. As IT budgets are slashed, perceptions of what is possible and acceptable naturally change, especially when order-of-magnitude gains are involved.
Despite the recession, the need for companies to innovate and compete globally is not going away, and firms will continue to pursue advanced business/IT capabilities to maintain or improve their current market position. The cloud may be the latest hot button term in the tech sector, but its proven advantages of being a rapid and powerful platform for innovation and experimentation that just about every company can afford are just being realized.
Doug Neal is a researcher with the Leading Edge Forum, the research arm of CSC, a $16 billion global IT services firm. The Leading Edge Forum focuses on key business and technology trends and identifies specific practices for exploiting these trends. He can be reached at [email protected].