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The Competitive Advantage of Cloud Computing: Miko Matsumura Explains

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Listen to my podcast with Miko Matsumura, Vice President and Chief Strategist at Software AG, where Miko is responsible for technology strategy. In this podcast we discuss cloud computing and the enterprise: what it means, what it requires, and finally, the competitive advantage that cloud delivers.

Listen to or download the 9:59 minute podcast below:



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---Transcript---

PS: Because we're going to be talking about cloud computing and the enterprise, first of all, how would you define enterprise?

MM: Yeah, this is something I've been working on a bit lately because there's a very strong phase change between enterprise and non-enterprise adoption of cloud. So the reason why I think it's important to define this term is really for people who are listening. I think you have to decide whether you fell to the enterprise or whether you're in the enterprise, or what your interest is in order to be able to benefit from some of these adoption best practices because if you're in a smaller organization then you may not have the same concern.

So the way that I've defined enterprise is really any organization whose mission requires a size and longevity. And if you combine these two aspects, the implication are interesting because with longevity comes the fragmentation of technology into technology silos. And with size, you get the fragmentation of organization into what I call tribes. And so, the natural result of the definition that we're using for enterprise is that you this fragmented technology and organization and this is really I think one of the central challenges in adoption of something like cloud computing.

What do you see enterprise cloud adoption looking like in the next five years?

Yeah, so one of the great things about a five-year horizon is that you really see a tremendous opportunity for a transformation in that horizon. As we know, from this principle of compound of annual growth, you can see that they're huge sort of exponential expansions that occur within these kind of timeframes. So let's just assume that you had a 14% compound annual growth over the next five years. Now, this seems like a fairly modest prediction particularly since most cloud adoption is happening at a very, very small rate of speed. So if you look at 14% compound annual, you end up with a doubling of the total utilization over that time course.

So to me, I think that even with a slow on-ramp, you're going to see a pretty big transformational agenda within that kind of timeframe.

I'd say if you don't see transformation in the next five years for an enterprise, you're going to see extinction. Now, what special competencies do enterprises need to adopt cloud computing?

Yeah, so I believe that it is this disruptive nature that is really one of the central issues around adoption around cloud. I mean I think the first thing that enterprises need to be aware of is that there needs to be a conscious adoption regime. I think there are existing systems for managing adoption of technology but that these existing systems actually have inadequacies when it comes to cloud adoption. So I would if you look at the structures that exist, for example, you look at procurement which is a classic enterprise function. You look at something like the project management organization and you look at things like enterprise architecture.

And all three of these functions in some ways I think have deficits when it comes to essentially managing the adoption of cloud services. I think in particular one of the things that we see in the cloud is that if there is -- to restrict the term at the moment, when we look at cloud from the standpoint of external cloud, public cloud, or Hyperic cloud. This principle that there's a provider that's outsourced and that there's also the propensity for that provider to provide a utility, pay-as-you-use or pay-as-you-go model, then what happens is that the initial contracts tend to fly under the radar of these organizations.

So your project management organization, your enterprise architecture group, and obviously the procurement function in some cases may not even see these adoption events occurring. And the thing that I think is interesting about the disruptive model is its even with these very, very modest growth rates of 14% compound annual, the doubling interval will start to take effect now. I actually predict that in the case of some applications, you're going to see radically different doubling intervals and radically different rates of compound annual growth.

What is the relationship between SOA and cloud?

Yeah, so one of the biggest challenges within the paradigm of the enterprise is to manage the ability to combine different capabilities. So when you look at what's happening within the traditional enterprise and the Service Oriented Architecture pattern, a lot of the emphasis is on the ability to take all of the technology silos and all of the organizational tribes and to enable them to sort of stitch together into a more cohesive and federated model...right. The business drivers for that kind of architecture are very clear, which is that if you have a bunch of organizational tribes that are unable to communicate, unable to interoperate, unable to collaborate, then you don't have any competitive advantage over being a bunch of separate businesses, right.

So in a way, the ability to sort of scale federate, to collaborate, to cooperate across business units is really potentially a source of competitive advantage for organizations whose mission requires them to provide scale and longevity. So that's a fairly long answer. But what I want to do is bring it home, which is that if you start to introduce new sources of services within that environment. You really start to see a need to bring those services into a context where they can be combined and used not just within an individual organizational silo but really in a way that can be much more dramatically coordinated and collaborated across these units.

How will cloud impact business transformation efforts?

Yeah, so this is a very big issue. I mentioned earlier this sort of doubling interval. If you look at the doubling intervals associated with the adoption of technology, one thing you can look at is the rate at which technologies achieved their first 50 million users. So it took the television technology like 37 years to achieve that level of use. And you take a look at something like the Internet and taking something in the order of ten years and you start to get more acceleration as you start to see technologies like the iPhone that took I think three years to 50 million and then Facebook taking about two years.

So the thing that we are seeing with the cloud potential is that we have this scalability pattern that enables this kind of compound groth model. So from a transformational perspective, you can really see the potential for this type of cloud function to be able to participate in the disruption of the business. So when you look disruption, the questions is can disruption be aligned to transformation because that's a real interesting issue; right. So Occam's Razor would potentially cite that, hey, if you have disruption and transformation at the same time, they may as well be the same thing; right.

But my attitude about it that unless you have a conscious program with some kind of deliberate effort to harness this capability, you may be on the negative end of disruption as opposed to the positive end of disruption. The reason why I cited some of these accelerations in the timeframe to adoption is that I wanted to propose that in the case of things like viral adoption, social distribution of applications, and some of these very unusual dynamics that we're seeing in the cloud. You may see rates of adoption that exceed the extremely conservative 14% compound annual growth that I've cited earlier and really only just mapping that to the concept of five-year horizon that you cited using the doubling principle of the multiple of 72.

So the thing that I think is really interesting to kind of contemplate is how can these very iterative growth cycles such as this 14% compound annual translate into these really large scale inversions, large scale transformations within the enterprise. So I think this is really the challenge and something that I think is important for enterprises to be prepared for.

ebizQ’s expert blog team covers a broad range of BPM, business integration, business analytics/monitoring, collaboration, content and related issues.

Peter Schooff

Peter Schooff is Contributing Editor at ebizQ, and manager of the ebizQ Forum. Contact him at pschooff@techtarget.com

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