Where's that Cloud We've Been Promised?
WHY YOU SHOULD CARE
The cloud is coming, and you’re gonna love it. All you have to do is wait for the big guys to get out of the way — or wait for the little guys to beat them up.
CEO and co-founder of OZY
Let’s be honest. We hear about the cloud all the time, but unless you’re a serious tech geek, you probably have no clue what it really means. In short: It’s software (email, sales programs, music downloads) that we can borrow or buy from a big computer library in the sky instead of buying it to live on our hard drives.
When you borrow or buy cloud software, you pay lower prices because you pay for what you use, à la carte or à la cheap Netflix subscription. That could signal the end to mouthwatering licensing contracts for software companies, which right now bring the big guys hundreds of millions per client.
For consumers like you and me, the cloud’s our great “revenge of the customer,” as one IBM consultant called it – letting us buy two iTunes singles for $3.00 instead of the whole album for $13.99. You only really wanted those two songs in the first place: Why pay for what you don’t want?
Industry research by the big guys already shows that businesses are saving nearly 25 percent and watching profits rise thanks to the cloud. And if you wanted to start, say, a digital publishing house today, you could save between $2,000 and $8,000 a year – probably more as you grew in size – by using cheaper cloud software from WordPress, Google, Amazon, Dropbox, and Adobe, instead of paying for their bigger cousins.
For consumers like you and me, the cloud’s our great “revenge of the customer,” saving individuals as much as 90 percent annually.
Look, there’s just no stopping it: The market will jump to nearly $100 billion in 2014.
But we could be saving even more — and sooner. My own VP of technology told me about the million-plus dollar contract a past company he worked with insisted on keeping around, instead of switching to a cloud contract, which could have cost around $400,000. It’s not a strange tale: less than half of mid-market companies still use no cloud-based technology, says a Deloitte study, and only a small percentage of the technology that could be on the cloud has migrated there.
Why, then, aren’t we seeing the cloud — and its savings — everywhere? The answer to that question holds a great life lesson about incumbents.
For the big companies, the cost of the transition is scary. A company like Rackspace stands to lose enormous profit margins of more than 90 percent if they were to sprint toward the cloud.
So why should the incumbents hurry up? It’d be like a pharmaceutical company rushing to roll out the generic brand of drug they’ve been pushing on you at brand-name prices for years.
While Amazon, Google and their peers in a cohort of newer, younger companies are happy to give you a good deal (and are rushing to do so), incumbents like HP or Oracle don’t have quite the same motivation.
All technology is getting cheaper or free-er. Once upon a time, we paid for email. Setting up a website costs pennies since companies like Amazon started hosting. Even though some of the classic pay-for-prix-fixe companies like Adobe are moving to the cloud’s buffet model, letting you pick what you want when you want, we still pay more than we should for productivity suites, word processing, file sharing, hosting, backups and physical servers.
We still pay more than we should for productivity suites, word processing, file sharing, hosting, backups and physical servers.
The incumbents have concerns: Is it secure? Is it reliable? (Worries about privacy are the main reason cited by midsize companies for their reluctance to go to the cloud.)
Privacy concerns about the cloud are valid, even smart. But in too many cases, they’re used as a rather awkward smokescreen to hide corporate foot-dragging by companies that don’t want to lose lucrative contracts.
Which is too bad because the folks left waiting for delicious things are you and me — and we’ll never know what we don’t have until the resistance lifts. To be clear, we may not wait forever. And our wait time is in part due to delays that accompany most forms of innovation. But it’s mostly because the incumbents refuse to hurry up. And when the cloud eventually trickles down to the rest of us, it won’t be because the incumbents decided to pick up their pace. It’ll be because the innovative challengers are wielding powerful cash reserves that allow them to bring us great stuff on the cheap. The cloud will come to us on the coattails of business models of companies like Google, Skype or Amazon — companies making money elsewhere and then reinvesting it into free services for all.
So the next time you hear about the cloud, smile — because even though it’s taking some time, something good is coming your way. And you get to watch one of life’s great lessons play out on the big digital stage.