Clouds Roll In

THE CLOUDS ROLL IN

An Afterword to
The Big Switch: Rewiring the World, from Edison to Google

By Nicholas Carr

In association with

April 2011

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A Meeting in Monarch Beach

In September 2010, I traveled to Monarch Beach, California, to attend the
InformationWeek 500 Conference, a large annual gathering of CIOs and other
information technology executives. My most recent book, The Shallows: What the
Internet Is Doing to Our Brains, had come out a couple of months earlier, and Fritz
Nelson, InformationWeek‘s editorial director, had invited me to the event to give a talk on
the book‘s themes. As I sat in on the other sessions, though, it became clear that the
conference‘s major thrust was cloud computing, a topic that had been the focus of my
previous book, The Big Switch. Figuring out ways to capitalize on the promise of ―the
cloud,‖ while tempering the risks of being an early adopter of the powerful new set of
technologies, had risen to the very top of the CIO‘s agenda.

During a break in the proceedings, I had the pleasure of sitting down for a coffee with
Anubhav Saxena, a top executive with HCL, a $5.7 billion IT services company and one
of the conference‘s lead sponsors. Anubhav had been an enthusiastic reader of The Big
Switch, and he was eager to share with me HCL‘s multifaceted plan to deliver the power
of cloud computing to its global clientele. He walked me through a PowerPoint
presentation on his laptop, and he gave me an early look at MyCloud, a service the
company is developing that will provide companies with a simple dashboard for building,
managing, and integrating cloud systems, applications, and services from a variety of
providers. In The Big Switch, I had argued that the creation of intuitive ―cloud interfaces‖
would be essential to the broad adoption of cloud computing, and MyCloud was one of
the most ambitious cloud interfaces I had yet seen.

One thing led to another, and Anubhav was soon asking me whether I had given any
thought to writing an afterword to The Big Switch, reviewing the enormous progress in
cloud computing technology and adoption that had taken place since the book was
published early in 2008. I told him that, having spent the last two years researching and
writing The Shallows, I was eager to revisit the subject of cloud computing. A series of

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phone calls and meetings ensued, which culminated in HCL‘s agreement to provide me
with financial, logistical, and intellectual support in writing an update to The Big Switch.
The afterword you are now reading is the result of that collaboration, and I am pleased to
dedicate it to Anubhav and his colleagues.

“Cloud First”

Two months after the InformationWeek conference, on December 9, 2010, the chief
information officer of the United States, Vivek Kundra, released a sweeping plan for
overhauling the way the federal government buys and manages information technology.
The centerpiece of the plan was the adoption, effective immediately, of what Kundra
termed a ―cloud first‖ policy. Noting that the government had long been plagued by
redundant and ineffective IT investments, which often ended up ―wasting taxpayer
dollars,‖ he argued that a shift to cloud computing would save a great deal of money
while also improving the government‘s ability to roll out new and enhanced systems
quickly.1

To speed the adoption of the plan, Kundra ordered the IT departments of every
government agency to move three major systems into ―the cloud‖ by the summer of
2012. At the same time, he announced that the government would use cloud technologies,
such as virtualization, to reduce the number of data centers it runs from 2,100 to 1,300,
that it would create a marketplace for sharing excess data-center capacity among
agencies, and that it would establish performance, security, and contracting standards for
the purchase of utility-computing services from outside providers.

Once fully in place, the ―cloud first‖ policy, Kundra predicted, would transform the
government‘s cumbersome and inefficient IT bureaucracy into a streamlined operation
able to deliver valuable new services to the American public. ―The Federal Government,‖
he wrote, ―will be able to provision services like nimble start-up companies, harness
available cloud solutions instead of building systems from scratch, and leverage smarter
technologies that require lower capital outlays. Citizens will be able to interact with

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government for services via simpler, more intuitive interfaces. IT will open government,
providing deep visibility into all operations.‖

Kundra‘s plan was remarkable for its scope and ambition. But even more remarkable was
the fact that the plan provoked little controversy. Indeed, its release was met with a
collective shrug from both the public and the IT community. That reaction, or, more
precisely, lack of reaction, testifies to the sea change in attitudes about cloud computing
that has occurred over the last few years.

When The Big Switch was published in January 2008, awareness of the possibility of
providing data processing and software applications as utility services over a public grid
was limited to a fairly small set of IT specialists, and the term ―cloud computing‖ was
little known and rarely used. Many IT managers and suppliers, moreover, dismissed the
entire idea of the cloud as a pie-in-the-sky dream. Cloud computing, they argued, would
not be fast enough, reliable enough, or secure enough to fulfill the needs of large
businesses and other organizations. Its adoption would be limited to only the most
unsophisticated and undemanding users of information technology.

Today, just three years later, the skepticism has largely evaporated. There is still debate
about how broadly the utility model will ultimately be adopted, but most IT vendors,
computer engineers, CIOs, and technology pundits now accept, almost as a matter of
faith, that the cloud will be a fundamental component of future IT systems. Even
Microsoft‘s chief executive, Steve Ballmer, once a vocal critic of utility computing, has
become a true believer. He said of the cloud in a 2010 speech, ―It‘s the next step, it‘s the
next phase, it‘s the next transition.‖ At Microsoft, he continued, ―for the cloud, we‘re all
in.‖2 A few months later, the software giant put an exclamation point on its CEO‘s words
when it announced it would spend hundreds of millions of dollars on a global ―cloud
power‖ advertising program, its largest ad campaign ever.

A recent survey of 250 big international companies found that more than half of them are
already using cloud services, while another 30 percent are in the process of testing or

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introducing such services. Only 1 percent of the companies said that they had rejected the
use of cloud computing outright.3 In addition to Microsoft, most other traditional IT
suppliers, including hardware and software makers as well as outsourcers, systems
integrators, and consultants, are rushing to roll out and promote cloud services, and
leading pure-play cloud providers such as Salesforce.com, Amazon Web Services,
Google, and Workday are rapidly expanding their offerings and ramping up their sales
efforts. Many billions of dollars are being invested every year in the construction of cloud
data centers and networks, a construction boom that echoes the one which accompanied
the rise of electric utilities a hundred years ago.

But, truth be told, all this frenetic activity and marketing hype is a bit misleading. The
business world, when it comes to the cloud, is far from ―all in.‖ Outside the federal
government, cloud-first policies remain rare. While most companies have embraced the
theory of cloud computing, few have placed the cloud at the center of their IT strategy,
and the actual adoption of cloud services remains in its infancy. Companies are, to be
sure, using some cloud services and experimenting with others, but corporate investments
in cloud computing, while growing at a healthy clip, still represent a small fraction of
overall IT spending.4 And the investments that are being made tend to be narrowly
focused on popular software-as-a-service applications. Only about 3 percent of big
businesses are tapping into cloud data centers to run virtual servers, and fully 85 percent
have no current plans to use such utility computing infrastructure, according to a 2009
survey.5 An equally high percentage say they have no existing plans to use the cloud for
data storage.6

Much of the wariness about moving too quickly into the cloud can be traced to the many
uncertainties that continue to surround cloud computing, including issues related to
security and privacy, capacity, reliability, liability, data portability, standards, pricing and
metering, and laws and regulations. Such uncertainties are neither unusual nor
unexpected; similar ones have accompanied the build-out of earlier utility networks as
well as transport and communications systems. Another force slowing the adoption of
cloud computing is inertia. Many companies have made huge investments in in-house

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data centers and complex software systems and have spent years fine-tuning them. They
are not going to tear everything out and start from scratch.

For large businesses in particular, we are still at the beginning of what promises to be a
long period of transition to cloud computing. The cloud is revolutionizing business
computing, but this will not be an overnight revolution. It is one that will, as I argued in
The Big Switch, play out over the course of at least a decade—and more likely two. That
does not mean, though, that corporate executives and IT professionals should be
complacent. The current transitional period will be marked by myriad advances and
setbacks as well as many upheavals—not just technological but also commercial and
social. Making the wrong choices about the cloud today could leave an organization at a
disadvantage for years to come.

From Dedicated to Shared

It is already quite clear that cloud computing is emerging as the dominant new
technological model for computer systems. The models it supplants, such as, notably, the
client-server model, entailed tight connections between hardware and software and
between systems and users. Computers and related gear were dedicated to particular
applications, and those applications were dedicated to particular individuals (in the case
of PCs) or groups (in the case of servers). These models were, as a result, highly
fragmented, characterized by redundant assets and investments and low levels of capacity
utilization. The cloud model, in contrast, is built on the assumption of sharing, in
particular the pooling of assets to support a diversity of uses and users. Hardware is
shared flexibly by applications, and applications (and other resources) are shared flexibly
among heterogeneous users. As with any utility system, the shared, or ―multi-tenant,‖
infrastructure dramatically reduces redundancy, improves utilization, and in general
capitalizes on scale economies.

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As defined by the National Institute of Standards and Technology (NIST), the emerging
cloud model has five essential characteristics, all of which relate to the flexible sharing of
assets:

 On-demand self-service. A consumer can unilaterally provision computing
capabilities, such as server time and network storage, as needed automatically
without requiring human interaction with each service‘s provider.

 Broad network access. Capabilities are available over the network and accessed
through standard mechanisms that promote use by heterogeneous thin or thick
client platforms (e.g., mobile phones, laptops, and PDAs).

 Resource pooling. The provider‘s computing resources are pooled to serve
multiple consumers using a multi-tenant model, with different physical and virtual
resources dynamically assigned and reassigned according to consumer demand.
There is a sense of location independence in that the customer generally has no
control or knowledge over the exact location of the provided resources but may be
able to specify location at a higher level of abstraction (e.g., country, state, or
datacenter). Examples of resources include storage, processing, memory, network
bandwidth, and virtual machines.

 Rapid elasticity. Capabilities can be rapidly and elastically provisioned, in some
cases automatically, to quickly scale out and rapidly released to quickly scale in.
To the consumer, the capabilities available for provisioning often appear to be
unlimited and can be purchased in any quantity at any time.

 Measured Service. Cloud systems automatically control and optimize resource use
by leveraging a metering capability at some level of abstraction appropriate to the
type of service (e.g., storage, processing, bandwidth, and active user accounts).
Resource usage can be monitored, controlled, and reported providing
transparency for both the provider and consumer of the utilized service.7

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Along with the cost efficiencies and flexibility benefits that come with shared
infrastructure and applications, the cloud model benefits users by distancing them from
the complexity inherent in building and running modern IT systems. The users purchase
and configure IT services through relatively simple interfaces without regard to either the
location or the architecture of the systems delivering the services. In other words, cloud
systems allow not only the consolidation of physical assets but also the consolidation of
the expertise required to build and maintain the systems. The consolidation of assets and
expertise in large-scale, industrialized IT plants also spurs rapid innovation in data-center
and systems design. Already, for example, the growth of cloud computing has led to
important breakthroughs in energy efficiency and cooling—breakthroughs which in time
will disseminate throughout the industry, benefiting all.

Because information technology is highly modular, new architectural models do not
simply replace old ones. Rather they build on top of, or at least alongside of, the old
models. Companies continued to use mainframes along with client-server systems, and
both those models will continue to be used along with cloud models. Nevertheless,
because of its fundamental advantages in cost, flexibility, energy efficiency, and ease of
use, the cloud model will increasingly be the model of choice for building new systems.
As devices and applications are built to take advantage of cloud systems and central
databases, moreover, the cloud model will gain further momentum and become
increasingly entrenched at the core of modern information processing.

With total worldwide spending on information and communication technology now
exceeding $2 trillion annually, according to the World Bank, the shift to the cloud is
having far-reaching economic implications. The epicenter of the transformation is the IT
industry itself. The industry is being challenged to move from a business model based on
selling or licensing expensive high-tech components (and then assisting buyers in
melding the components into purpose-built systems) to a business model based on selling
services for fees that vary with consumption. This shift promises to make the industry
more capital-intensive, as large IT providers will need to own and operate data-center

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networks, often global in reach, in order to provide services, as well as more competitive,
as companies that once specialized in particular components (Cisco in networking, EMC
in storage, AT&T in telecommunications, Oracle in applications, and so forth) increasing
battle head-to-head.

The shift should also, in the long run, lead to the further commoditization of many of the
industry‘s outputs, particularly at the infrastructural level. The cut-rate, low-margin
pricing of pure-play IT utilities like Amazon Web Services testifies to the pricing
pressures that lay in store for many core IT services. Given these characteristics of cloud
computing, particularly the pressure to achieve scale economies, we will likely see a
further consolidation of many segments of the industry, with success increasingly going
to those companies that prove themselves most adept at building and running multi-tenant
systems and marketing the services the systems generate.

The View from the Enterprise

For large companies, the cloud is typically used today not as a replacement for in-house
systems but as a complement, supplement, and extension to those systems. Software-as-a-
service (SaaS) subscriptions provide an easy, low-risk way to extend or modernize
standard corporate applications, from human-resource administration and accounting to
salesforce automation and project management, while also accommodating the mobile
devices and remote collaboration that are essential to many modern business processes.
Cloud-based programming platforms (PaaS) allow for the rapid development, testing, and
rollout of new software applications and features without requiring investments in in-
house servers and development tools. And the ability to rent large amounts of storage and
server capacity and other infrastructural services online (IaaS) enables companies to deal
effectively with the kind of short-term computing requirements often involved in
conducting research and analysis projects or meeting seasonal spikes in demand.

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The pharmaceutical giant Eli Lilly has made the cloud a central part of its vast R&D
program. The company encourages its scientists to tap into cloud data centers for early-
stage number-crunching in analyzing potential new drug compounds. It has developed
more than a dozen templates for cloud use in different research scenarios, allowing
scientists to rent virtual servers for pennies an hour with their corporate credit cards. ―The
cost is trivial in some cases for what they're doing,‖ Eli Lilly CIO Michael Heim said at
an IT industry conference in 2010. ―It‘s hard to overestimate the value of letting scientists
work at their own pace.‖ Using the cloud for research has allowed Lilly to cancel plans
for building a third in-house data center for R&D. The savings have been so great that the
company is now looking to extend its use of the cloud to ongoing computing needs as
well as short-term projects.8 It is also developing cloud management software that will
allow it to easily shift jobs among different cloud vendors, reducing the risk of getting
locked in to one provider‘s services, and it is looking to set up an industry consortium to
facilitate cloud-based collaboration among drug researchers from different companies.

One leading U.S. retail chain is looking to the cloud to reach a new generation of
shoppers who expect to gather information and services through their smartphones and
other mobile devices—even when they‘re inside a brick-and-mortar store. The company,
according to one of its top IT executives, has spent 20 years building a tightly integrated
suite of in-house systems for managing its far-flung operations, including specialized
applications for purchasing, warehousing, shipping, store management, and
merchandising, and starting from scratch with cloud solutions would be not only
impractical but foolish. In the retailing industry, the executive explained to me in an
interview, ―if you have something that works, you don't rip and replace it. You can add
new things, you can enhance things, but the idea of pitching out the baby with the bath
water is never going to be an option in retail.‖

At the same time, he emphasized that the way companies think about IT has ―changed
drastically‖ over the past three years, thanks in large measure to the new opportunities
opened up by cloud computing. Companies no longer look at IT as ―an infrastructure or a
platform or software or an application,‖ he said. ―Everything‘s a service‖—whether it‘s

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supplied through the cloud or from a private data center. The retailer has already
extended its in-house systems with more than 100 applications provided as services by
outside suppliers, and, according to the executive, it will draw on cloud solutions to
deliver a range of information services and applications to the mobile devices of the next
generation of shoppers. He foresees a variety of web-based apps that will provide extra
value to consumers while also promoting in-store and online purchases.

Not all CIOs are taking a ―slow and steady‖ approach to cloud computing. Bob Rudy
believes that the faster his company takes advantage of the benefits of the cloud, the more
competitive it will become. A former Intel engineer and technology entrepreneur, Rudy
has since 2007 been vice president and chief information officer of Avago Technologies,
a $2 billion semiconductor company that was once part of Hewlett-Packard. His view of
IT is hard-nosed—―I want just enough and nothing more,‖ he says—and for the past two
years he has been aggressively replacing the company‘s in-house systems with cloud
alternatives. ―Owning software doesn‘t make sense,‖ he told me during an interview late
in 2010, making an exception only for the specialized software that directly supports the
company‘s core engineering functions. He feels the same way about proprietary data
centers: ―I don‘t want to own a power plant if I can share a grid.‖

In 2008, Avago became the first company with over a billion dollars in sales to adopt the
Google Apps Enterprise suite of productivity tools, including e-mail and calendars. The
shift is saving the company about $1.6 million annually, but the more important
advantage, according to Rudy, is the gain in organizational flexibility and empowerment.
Avago‘s engineers and other employees no longer have to worry about hitting limits in
their in-box capacity, which in these days of rich media can slow their work and impede
their creativity, and Rudy no longer has to worry about investing precious time and
money in installing ever greater quantities of new storage capacity to keep up with
demand. In addition to Google Apps, the company has rolled out a series of other major
software-as-a-software applications, including ones from Workday, Taleo, Authoria, and
Enlighta. Avago has also moved much of its IT infrastructure into the hands of outside
suppliers, and is encouraging them to use multitenant systems whenever possible.

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The bottom-line benefits of Avago‘s cloud-centered strategy have been impressive. The
company has already pushed its IT costs as a percentage of revenues down to just 1.6
percent, considerably lower than the 4.2 percent average for the high-tech products
industry, and Rudy says that the figure will soon be less than 1 percent. Rudy‘s only
frustration is that he can‘t move even more quickly into the cloud. If he wasn‘t locked in
to long-term licenses for enterprise-resource-planning applications, he says, he would
have been even more aggressive in moving to cloud alternatives. ―We will pursue every
cloud service we can,‖ he declares, arguing that the biggest barrier to cloud adoption
today is ―fear, uncertainty and doubt‖ spread by IT professionals themselves.

What‘s now clear is that there is no one correct recipe for adopting cloud computing, just
as there was no one right recipe for adopting mainframe computers, minicomputers, PCs,
or client-server systems. Different companies and industries have also employed IT in
different ways, and those difference will continue to influence the way they adopt and use
the cloud model. But all businesses need to be aware that the risks of moving too slowly
may be as great, or greater, than the risks of moving too quickly. Past practices and sunk
costs are, as always, weak excuses for inaction. As the competitive pressure to gain the
cost and performance benefits of cloud computing intensifies, complacency will become
an ever greater liability.

A Cloud of One’s Own

What may, over the next few years, represent the largest cloud-inspired area of
investment for large companies has little to do with the purchase of web-based services
from outside utilities. Rather, it involves the construction of so-called ―private clouds‖—
highly virtualized, dedicated data centers that essentially serve as in-house IT utilities. A
private cloud can be owned and operated by the company that uses it or, as is
increasingly the case, it can be built and run on the company‘s behalf by an outsourcing
or hosting firm or other IT services company. Because the transformation of traditional

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data centers into private clouds typically requires substantial investments in new
hardware and software, to facilitate high degrees of virtualization and automation, their
construction has been a boon to many IT vendors. Deutsche Bank predicts that
investments in private clouds will reach $20 billion in 2012.

The case for a private cloud is often compelling today. Because they typically have much
higher levels of capacity utilization and scalability than the traditional data centers they
replace, they can allow a company to gain many of the scale economies and speed and
flexibility benefits of the public cloud while avoiding the security concerns, contracting
issues, and other uncertainties that currently surround pure utility computing. Just as
many large manufacturers originally constructed their own in-house electricity-generating
stations early in the last century, so many large businesses today are building their own
in-house clouds.

FedEx, a long-time IT pacesetter that relies on an array of custom applications to
coordinate time-sensitive shipments around the globe, is in the process of moving to a
private cloud. It is in the midst of a major effort to retool its core apps to run on a
standardized and highly virtualized computing platform, drawing on a common data store
as well as a shared set of data services, such as the provision of a delivery address. As
each app is updated, it is being moved into a large new cloud data center the company has
constructed in Colorado Springs. FedEx CIO Rob Carter is convinced that the cloud
model represents a fundamental breakthrough in corporate IT. ―What's happening now,‖
he recently told InformationWeek, ―is there‘s truly a general-purpose computing
environment that‘s workload agnostic. You can throw different kinds of workloads on the
same computing server infrastructure.‖ Despite the significant data center and application
investments entailed in building a private cloud, the modernization effort is delivering a
very high return on investment, according to Carter. ―For the first time ever,‖ he explains,
―you can make investments in a whole new class of technology for about the same price
of just maintaining the base.‖9

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It‘s important to recognize, however, that dedicated private clouds will in most cases be a
transitional technology, a stepping stone on the way to true multi-tenant systems. At
some point, after all, private clouds will begin to pay diminishing returns; further gains
will require the greater scale that can only come from infrastructure and services that are
shared among many companies rather than within just one company. Even today, the
divide between private and public clouds can be blurry. It‘s possible, for instance, to
operate a private cloud as a ―virtual private data center‖ or ―virtual private cloud‖—a
virtualized assembly of network, security, storage, and compute resources that is
dedicated to a single client but runs on a multi-tenant system. Just as most companies
today are comfortable using virtual private networks to ensure secure communication
while gaining the scale benefits of shared infrastructure, they may well come to embrace
virtual private data centers quickly. In the long run, truly private clouds may end up being
operated only when required to meet legal or regulatory requirements for security or
privacy.

It is also likely that we‘ll see the emergence of ―vertical clouds‖—clouds dedicated to
particular industries, or to groups of related government agencies or educational
institutions, with resources and performance standards geared to the unique needs of
those industries. Bob Rudy, the Avago CIO, has begun talks with other semiconductor
CIOs in hopes of creating vertical clouds in that industry. Sundeep Reddy, vice president
and head of IT infrastructure at Toys R Us, believes that vertical clouds may provide a
way for retail firms to share custom IT infrastructure while also giving them the leeway
to maintain competitive differentiation in their applications. It‘s also easy to see how
specialized vertical clouds, providing the benefits of multi-tenancy while ensuring tighter
controls than is possible with purely public clouds, could be attractive to industries with
unique data-security requirements such as health care and defense. Vertical clouds could
also enable the efficient sharing of infrastructure and applications among state
governments, schools, nonprofits, and other organizations serving similar constituencies.

However the tensions between dedicated and multi-tenant resources and services play
out, one thing seems very clear: for the foreseeable future, most organizations will

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operate in a hybrid IT environment, using some combination of traditional in-house IT
resources, private or virtual private clouds, vertical clouds, public clouds, and software-
as-a-service applications. Developing tools and processes for managing that hybrid
environment and integrating diverse sets of assets, services, and data stores will be a key
challenge for IT departments, and a key competitive battlefield for the IT industry. One
area particularly ripe for innovation is the creation of user interfaces and dashboards that
allow companies to easily build, integrate, and monitor complex virtualized systems that
draw on the full set of cloud assets and software-as-a-service offerings. HCL‘s MyCloud,
HP‘s CloudSystem, BMC‘s Cloud Lifecycle Management, and CA‘s AppLogic are
examples of the kind of cloud-management platforms that could fundamentally change
corporate IT operations, and further reshape the IT industry, in the near future.

In addition to new tools for integrating and managing cloud services, the fulfillment of
the promise of cloud computing will require cloud providers to join together in adopting
the kind of clear, coherent, transparent, and measurable performance standards required
to support contracts, service-level agreements, regulatory compliance, and
interoperability. Much progress remains to be made in this area. A 2010 study of current
cloud-computing contracts, undertaken by the Cloud Legal Project at the Centre for
Commercial Law Studies, Queen Mary, University of London, revealed a lack of
consistency in terms, and also indicated that most cloud providers currently seek to avoid
―any warranty of service or acceptance of liability.‖10 The World Economic Forum‘s
cloud-computing research group has underscored the need for ―more consistent and
comprehensive approaches to accountability for how cloud services are provided‖ as well
as the establishment of clear standards for data portability and interoperability across
cloud services.

Competition among cloud providers may solve these problems, as those vendors that
offer the clearest terms and standards will likely gain a competitive advantage in the
marketplace—forcing other providers to follow suit. But if the industry fails to address
these critical issues, governments may need to establish licensing or other certification
programs for cloud providers, guranteeing a basic level of performance, reliability, and

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security. Establishing and certifying minimum standards in such areas as privacy,
intellectual property protection, and data compatibility will be essential to the broad and
accelerated adoption of cloud computing in the future, argues R. Srikrishna, executive
vice president and head of infrastructure services at HCL.

A Cloud in Every Pocket

The cloud turns many old assumptions on their head. Up until recently, if you wanted to
see the cutting edge in information technology, you‘d look at what big corporations were
doing. They were the ones that had the money and the skills needed to build the most
advanced data centers, procure the latest servers and other gear, and write or buy the most
sophisticated software programs. Today, when it comes to the users of information
technology, the cutting edge is found not inside big companies but rather in homes,
schools, and startups—those are the places where cloud computing is not only firmly in
the mainstream but has already become, in many instances, the dominant form of
computing.

Consider your own—or, better yet, your kids‘—experience with personal computing.
Five years ago, if you wanted to do something new with your PC, your first instinct was
almost certainly to go out to a store and a purchase a packaged software application.
You‘d bring home the box, slide the CD or DVD into your optical drive, and install the
application onto your hard drive, making sure it was compatible with your operating
system and other applications. Every couple of years you‘d pay for an upgrade and go
through the same installation process. That‘s no longer the case. Now, when you want to
do something new with a computer, you fire up your web browser, hop onto the Net, and
find the data, applications, and services you need. Your first instinct, in other words, is to
look to the cloud—where, more likely than not, you‘ll find what you want, and probably
for free.

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The entire Web 2.0 and social networking phenomenon, which has transformed personal
computing in the last few years, is an outgrowth of cloud computing. A social site like
Facebook, which is now the Web‘s most popular destination as well as an increasingly
attractive platform for online games and other applications, is unthinkable without the
cloud. Facebook requires the kind of seamless, large-scale sharing of data and
applications that is only possible with centralized, multi-tenant systems running on the
Internet. Most of the popular apps used on iPhones, iPads, Android devices, and other
smartphones and tablets also rely on cloud databases and services for at least part of their
functionality, even if they also involve the installation of software code on an internal
flash drive. Modern gaming consoles, too, now routinely integrate cloud services served
up from distant data centers. For the first time in the history of personal computing,
consumers are today purchasing computers that actually have smaller storage drives than
the ones they are replacing. Local storage is becoming less important as the cloud
becomes more versatile. It‘s no exaggeration to say that, when it comes to personal
computing, the ―big switch‖ has already happened.

Small companies, particularly entrepreneurial startups, have also often been aggressive
adopters of cloud computing, as have schools, government agencies, and nonprofits. For
these kinds of organizations, which often have limited capital and tightly constrained
budgets, the cloud can be a great leveler. By tapping into cloud data centers and
subscribing to Web-based applications, cash-strapped organizations can gain access to
modern, sophisticated IT services that were once available only to big companies with
deep pockets. Indeed, since cloud systems can be continuously updated, they often
provide superior capabilities to expensive, installed systems, the upgrading of which is
usually costly and time-consuming. As many smaller organizations have found, simply
replacing an in-house email system with a cheap Web-based alternative can free up
considerable amounts of money and avoid maintenance headaches and expenses while
also providing users with far more storage capacity and advanced features than they
would otherwise have had.

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The common theme here—and it‘s one of the central messages of cloud computing—is
the democratization of data processing. By driving down the cost and increasing the
accessibility of computing power, the cloud continues the long-term trend of making ever
more powerful computing resources available to individuals and small groups. If the
arrival of the PC meant that everyone had access to a computer, the arrival of cloud
computing means that everyone has access to an entire data center.

This trend also has important implications inside corporations. As the purchase of
applications and other IT services becomes simpler, faster, and cheaper—as, in other
words, self-service becomes a reality—end users, such as business units, corporate
functions, and even individual employees are increasingly purchasing IT services
directly, without routing requests through the IT department. ―Historically,‖ explains
Kevin Parikh, CEO of Avasant, an outsourcing advisory firm, ―the buyer of IT services is
the chief information officer of a company. And today the buyer—with the advent of
cloud computing—can oftentimes be . . . someone more directly connected with the
service.‖ As the ―Facebook generation‖ enters the workplace, the expectation of self-
service in IT will only grow. A core challenge for IT departments is to facilitate this self-
service trend, and the innovation it promises to engender, while also ensuring the
maintenance of the controls needed to safeguard corporate data and meet regulatory
requirements. Eli Lilly‘s use of end-user templates for deploying cloud services will
likely become a common practice in many companies, as will the use of unified
interfaces that incorporate management controls.

The Path of Disruption

In the end, the best way to understand the import of cloud computing is through the
―disruptive innovation‖ framework laid out by Harvard Business School professor
Clayton Christensen in his 1997 book The Innovator’s Dilemma. Drawing on a breadth of
research into technological advances, Christensen demonstrated that upheavals tend to
follow a pattern. In its early stages, a disruptive technology is characterized by relatively

18

weak performance, which restricts its adoption to companies or individuals with limited
cash, low performance requirements, or both. But the performance of the disruptive
technology advances quickly, making it attractive to an ever broader set of users.
Eventually, the disruptive technology is able to fulfill the needs of even the most
sophisticated and demanding users, at which point it becomes the dominant technology in
the marketplace. Cloud computing is advancing up the performance curve just as
Christensen‘s framework predicts, and it seems only a matter of time before it becomes
the IT model of choice not only for individuals and small companies but for the largest
corporations.

Beyond the technological changes, the advance of the cloud will mean a realignment of
the IT work force, with some jobs disappearing, some shifting from users to suppliers,
and others becoming more prominent. On the supplier side, we‘ll likely see booming
demand for the skills required to design and run reliable large-scale, multi-tenant
computing plants. Expertise in parallel processing, virtualization, energy management
and cooling, security and encryption, high-speed networking and data caching, and
related fields will be coveted and rewarded. Much software will also need to be written or
rewritten to run efficiently on the new infrastructure. In a clear sign of the new labor
requirements, Google and IBM have teamed up to spearhead a major education initiative
aimed at training university students to write programs for cloud systems.

On the user side, as the transition to the utility model accelerates in the years to come,
we‘ll likely to see a steady decline in jobs related to building and maintaining in-house
computer systems, while skills in information management and process design and
automation will remain highly valued. We may see as well the rise of a new kind of IT
professional—a services broker who serves as the interface between cloud services and
business units, crafting a flexible portfolio of IT services to meet business needs. The
most aggressive adopters of cloud computing have already experienced a change in the
makeup of their IT departments. The size of those departments is shrinking, but the
positions that remain tend to be the more senior, more strategic ones.

19

For years, the knock on corporate IT has been that it is out of sync with business needs—
that there is, as the cliché goes, a ―lack of alignment‖ between the IT department and the
business units. The weak alignment, it can now be seen, was a symptom of the isolation
that up until recently served as the foundational assumption of corporate IT—isolated
infrastructure, isolated applications, isolated data, and, all too often, isolated users. This
assumption of isolation conflicted with the assumption of sharing that underpins business
itself. (The reason business organizations exist is to allow collaboration among
employees.) By for the first time making sharing the underlying assumption of IT, the
cloud promises to finally bring IT and business into alignment—at least for those
companies that embrace the cloud‘s promise.

CIOs recognize this opportunity, and they‘re embracing it. In fact, the single most
surprising development in cloud computing over the past three years has been the 180-
degree change in the attitudes of forward-looking CIOs. Far from seeing the cloud as a
threat, as many originally did, they now view utility-style computing as an opportunity to
strengthen their own roles in their companies by shedding or outsourcing non-strategic
activities and focusing their efforts on core business tasks. Early in 2011, I attended a
panel discussion on cloud computing involving a group of prominent CIOs in Silicon
Valley. They were unanimous in their sense that, as one of them put it, the cloud was
making the CIO position ―more relevant‖ than ever. CIOs aren‘t buying all the current
hype about the cloud—they‘re a skeptical bunch—but they now view cloud computing as
essential to the future of their companies and their careers.

We‘re at the dawn of a new era in business. Just as the last century‘s electric utilities
spurred the development of thousands of new consumer appliances and services, so the
new computing utilities will shake up many markets and open myriad opportunities for
innovation. We see this transformation playing out not just in IT departments and the IT
industry but across information-intensive industries like media and entertainment.
Harnessing the power of the electric grid was the great enterprise of the twentieth
century. Harnessing the power of the cloud is shaping up to be the great enterprise of the
twenty-first century.

20

About the author: Nicholas Carr is the author of three influential books about
technology and its implications: Does IT Matter? Information Technology and the
Corrosion of Competitive Advantage (2004), The Big Switch: Rewiring the World, from
Edison to Google (2008), and The Shallows: What the Internet Is Doing to Our Brains
(2010). A former executive editor of the Harvard Business Review, he has written for
many periodicals, including the Wall Street Journal, New York Times, Financial Times,
Atlantic, New Republic, Sloan MIT Management Review, Strategy & Business, and
Wired. Carr is a member of the Encyclopedia Britannica's editorial board of advisors, is
on the steering board of the World Economic Forum's cloud computing project, and
writes the popular blog Rough Type.

About HCL Technologies: HCL Technologies is a leading global IT services company,
working with clients in the areas that impact and redefine the core of their businesses.
Since its entry into the global landscape after its IPO in 1999, HCL has focused on
―transformational outsourcing,‖ underlined by innovation and value creation, and offers
an integrated portfolio of services including software-led IT solutions, ITO and
infrastructure management, engineering services and business process outsourcing. HCL
leverages its extensive global delivery centers and network of offices in 31 countries to
provide holistic, multi-service delivery in key industry verticals including Financial
Services, Retail, Media and Publishing, Pharmaceuticals, Manufacturing, Consumer
Services, Public Services and Healthcare. HCL‘s ―Employee First‖ philosophy has
helped HCL recruit and retain the best talent in the industry, growing to over 79,000
employees from diverse cultures worldwide. Governed by its core values ‗trust‘,
‗transparency‘ and ‗flexibility‘, HCL Technologies is known for delivering consistent IT
and business value in mission critical environments.

HCL Technologies posted its consolidated revenues of US$3.1 billion (LTM as on
December 31st, 2010). For more information, log on to www.hclisd.com and
www.hcltech.com

21

References:

1
Vivek Kundra, ―25 Point Implementation Plan to Reform Federal Information
Technology Management,‖ December 9, 2010: http://cio.gov/documents/25-Point-
Implementation-Plan-to-Reform-Federal%20IT.pdf.
2
Steve Ballmer, ―Cloud Computing,‖ speech at the University of Washington, March 4,
2010.
3
F5 Networks, ―Cloud Computing Survey: June – July 2009‖:
http://www.f5.com/pdf/reports/cloud-computing-survey-results-2009.pdf.
4
Gartner, ―Gartner Survey Shows Cloud-Computing Services Represents 10 Percent of
Spending on External IT Services in 2010,‖ September 22, 2010:
http://www.gartner.com/it/page.jsp?id=1438813.
5
Forrester, ―The State of Emerging Enterprise Hardware: 2009 to 2010,‖ December 1,
2009:
http://www.forrester.com/rb/Research/state_of_emerging_enterprise_hardware_2009_to/
q/id/55175/t/2.
6
Forrester, ―Business Users Are Not Ready for Cloud Storage,‖ January 22, 2010:
http://www.forrester.com/rb/Research/business_users_are_not_ready_for_cloud/q/id/560
65/t/2.
7
Peter Mell and Tim Grance, ―The NIST Definition of Cloud Computing,‖ October 7,
2009: http://csrc.nist.gov/groups/SNS/cloud-computing/cloud-def-v15.doc.
8
Charles Babcock, ―Eli Lilly Ties Future to Cloud,‖ InformationWeek, September 14,
2010: http://www.informationweek.com/news/healthcare/clinical-
systems/showArticle.jhtml?articleID=227400374.
9
Chris Murphy, ―FedEx CIO Explains the Real Power of the Cloud,‖ InformatioWeek,
January 24, 2010: http://www.informationweek.com/news/global-
cio/interviews/showArticle.jhtml?articleID=229100022.
10
Simon Bradshaw, Christopher Millard, and Ian Walden, ―Contracts for Clouds:
Comparison and Analysis of the Terms and Conditions of Cloud Computing Services,‖
Queen Mary, University of London, School of Law Legal Studies Research Paper No.
63/2010, September 1, 2010.

22

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