Im coming to the end of the blog now but have possibly two or three posts left.
Today’s post is surrounding a fantastic book I have started reading, and one that to me sums up the challenges we face.
The first Chris Anderson book I read – The Long Tail – really gave me some background on how the flattening of the world’s economy and the influence of the internet has allowed anyone to sell ‘a product’ and make a living. This phrase gained popularity in recent times as describing the retailing strategy of selling a large number of unique items with relatively small quantities sold of each – usually in addition to selling fewer popular items in large quantities.
The days of only a few making all the money is over,and the ‘man in a garage’ selling his particular wares to someone across the timezones is now part of every day living. Ebay is good example but for corporates so is cloud and all that is brings
Let me give this conversation some context. Look at backup. We all need it and for a business it is part and parcel of protecting the business from data loss or disaster. For many years large traditional software companies had this particular market sewn up with their annuity driven licensing models. You could predict what a company would use for backup without even stepping foot into their datacenter. The cloud changed all that. New software companies – large and small – entered the fray with a plethora of niche backup solutions that offered ‘in the sky’ backup services. These ‘cloud players’ combined backup with other services such as laptop backup and cloud to cloud backup. Others offered mobile backup. More will offer free support. Charges will be based on volume of data backed up not numbers of servers needing backed up. The list goes on and on and so does the list of cloud backup vendors! A glance at Google reveals there are hundreds of cloud backup vendors. The monopoly of the big software companies has gone.The Long Tail is alive and well as people who didnt exist 5 years ago suddenly build up a service probably working with cloud brokers to promote their wares. The cloud backup market place is alive and well and most definately very long.
So this leads me to Anderson’s next book coming my way simply called – Free. As I said I am still reading this book, but the first chapter struck a familar chord with me. I started to see a synergy between the Long Tail and the concept promoted by Anderson that smart businesses are now seeing profit by giving something for free. Let me explain.
Anderson is highlighting examples of the act of giving something away for fre has made the owner of the idea very rich. Monty Python extolled the free concept by fighting back against digital piracy by giving their DVDs away online for free in return for people buying their movies online.As a result they climbed to Number Two on Amazon’s best selling movie list. Gillete famous for the razor did a similar thing as they shook up their particular market place by giving away a basic blade. There are numerous examples. So this is the context.
Now cloud is offering free. You can get free storage space. Streaming music is free. The internet is most certainly free.Downloading a free app onto your tablet or mobile phone is about as free as you can get in our technology world. You dont have to worry about whether the app will work with other apps you have downloaded. you dont have to worry about training others to use the app. You dont worry about whether the app is going to crash and burn. Moving to a new app is easy and you dont worry about whether your data is backed up. There is no contract and no one gets taken to court. It is what it is – free and millions of free apps are available at the touch of the screen.
Moore’s Law is happily proving that the internet will grow and grow and continue to be free. ( Moore stated that the number of electronic components that could be fitted onto a single wafer of integrated circuit boards would double every two years – and performance therefore would increase by this factor too )
But for corporates there is no such thing as a free lunch. CIOs and CFOs do not compute with the concept of free. Look at open source. The idea that you could build a server running business software without having to buy into licensing models has been exceptionally attractive and for thousands and thousands of companies – large and small – has given choice to what was before a lockin by Novell, HP, IBM and most notably, Microsoft. But no one believes that open source is free. There is always a cost. The hardware obviously but most importantly, the effort cost. The people cost. The process cost. Open source may save on licensing but it doesnt save on all the other aspects. Moving to virtualization isnt free. Moving workloads to the cloud isnt free. Each time you step through a computing wave the costs tend to go up as you learn what you didnt know.
What Anderson is saying is that everything seems to be given away for free nowadays with the expectation that something else will be sold on the back of it. So I give you free backup but if you want to backup more then you pay. Or you can stream so much music for free but then have to pay to get more. The perfect loss leader.
Now a CFO or CIO doesnt participate in this free economy. They know that anything promising free carries a cost.Even if it was free they know that isnt the case.
A vendor offers a large multi-national organization free storage space. Unlimited with no restriction. Or free application development capability so they could move all the critical workload testing into the cloud. No costs at all. Support will also be thrown into the pot. On paper it appears to be saving $$$$ with no small print exclusions. Totally free. Just like a free mobile app.
The CFO looks at the offer and considers how much money this will save. The CIO looks at the offer and considers how much cost is involved in moving to this free world and how it will change the existing processes and procedures for managing the infrastructure. The CFO and CIO meet up and discuss the pros and cons. The CFO is in favour naturally but the CIO is cautious. The CIO realises the benefits but sees many too many pitfalls. He knows that he will have to integrate the cloud service into his service processes, enteprise architecture, workflows, security models and so on. The free aspect will be swamped by the impact on his existing IT service. The CIO eventually wins the day using risk as a major factor and talks about compliance and governance. The CFO is convinced and they tell the vendor thanks but no thanks.
However the CFO notes this event and explains to the CIO that next time the vendor comes knocking they will be taking up the offer. He will explain that IT costs too much and the opportunity to wipe off $$$ from IT operational costs is too good an offer to turn down. The CFO will mandate the CIO ( because they will probably be the CIO’s boss ) that they need to build a future model that accomodates free cloud services and changes the processes and procedures to ensure that free means lower costs for delivering and supporting the changes free brings. The CFO puts the CIO on the clock to accept the free offer next time it comes around. The pressure on the CIO is that the free cloud is all around and there is little time for the CIO to understand how to restructure the IT service. THe CFO will knocking on their door soon.
For me the concept of free doesnt compute for a corporate ( today ) but what it is doing is resetting the agenda by making the conversation for a corporate to move towards the impact of cloud ‘free’ services on existing expensive processes and procedures. IT serice management or ITSM will need to adapt to the free concept to survive in my opinion.
I remember well someone saying to me ‘even if it was free I dont want it’ ( a $$Million licening deal was being negotiated) because they knew the ‘cost’ to their business would cripple the running of IT. What they meant was that their internal processes and people were too immature to exploit the flexibility and value of the new software that they would spend more cash trying to deploy, integrate and manage the free software. To this person there was no loss leader. Free was a bad thing.
However, I believe that more and more organizations will know look at the ‘free cloud’ services once they start to understand how to reconstruct internal service processes and IT fulfillment delivery models. Basically how the impact of moving workloads to the cloud changes how to deliver basic IT services and the way they deliver IT to their customers who appreciate the speed and benefit of accessing their IT from the cloud.
By the way when I say free I dont mean zero cost – I mean cloud services sold on a utility basis where incremental costs relate to volumes and quantities as opposed to perpetual license agreements with mandatory maintenance contracts. Free doesnt have to mean zero – it can mean a small cost compared to the traditional fixed costs associated with its predecessor.
I will continue to read Anderson’s book and I dont want to presume the ending but I am thoroughly enjoying the read.