Cloud Computing Is No Pipe Dream

(page 2 of 2)

Using Amazon's Simple Storage Service (S3), the Times launched a Web application called Times-Machine. The launch took days instead of months, and it cost hundreds of dollars instead of thousands. Users can read PDFs of newspapers from the mid-19th century, zooming in on articles, photos, and even advertising.

Now, consider midsize company Apttus. It's a fast-growing operation that provides software-based contract management systems to corporate clients. Apttus built its prototype using a development environment called Force.com, a cloud service from Safesforce.com (CRM). What would have taken six months of traditional development came to fruition in a "couple of weekends," according to Apttus' founders. Using a third-party platform, they were able to build an enterprise-class system with more functionality than competing offers, while enabling its instant global delivery using cloud servers. After three months of feedback from prospects, Apttus scored its first million-dollar deal. In nine months, the company was profitable. Normally, it would have taken $15 million to $20 million in revenue to reach break-even.

Finally, consider a small outfit like SlideShare. It's a Web startup built to enable users to share slide presentations online. The site quickly became a vibrant community among business professionals, with users uploading decks to share, search, and embed into other presentations. Success created a problem; the more users engaged, the more storage the site required. Like the Times, Slideshare turned to Amazon. Not needing to own and operate servers, firewalls, and security systems, it required little capital to get started. The site's chief technology officer shares his presentation; it's called "Using S3 to Avoid VC."

Millions of Servers in Data Centers

The building blocks of cloud services are data centers, run by tech giants such as Amazon, Google, Microsoft (MSFT), and IBM (IBM), housing hundreds of thousands of servers working together using proprietary operating systems. It's estimated that Google is buying half a million servers a year, while Microsoft is acquiring 200,000. Google alone reportedly has 1.4 million servers operating across its dozen or more data centers today. Moreover, this is not a game that only tech behemoths can play. According to IDC, there are 7,000 data centers in the U.S. alone. The number of servers they house is projected to rise to 15.8 million by 2010.

Gartner (IT) famously estimates 80% of corporate IT dollars go to data center maintenance. If that's true, then companies outsourcing their IT operations to the cloud can focus their technology talent on the challenges unique to their businesses—namely, what really matters to customers. Because cloud environments are shared, collaboration is easier when every application becomes "social" media. That means organizations of all kinds would have new platforms on which to foster cooperation and collaboration, minus the coordination costs typically associated with bringing work and people together. Plus, there's no need to overbuild IT infrastructure for spikes in usage (like seasonality in retail), when you can hand off excess demand to the cloud.

Yes, the vision is still a bit hazy. There's appropriately high anxiety these days about the cloud's data security, consumer privacy, and network downtime issues. There are also plenty of high-level features, such as database management, that cloud services don't yet offer. But these are issues cloud players are addressing. When they do, the cloud will be ready for prime time. In today's moribund economy, it could not come a moment too soon.

Jeffrey F. Rayport is founder and chairman of Marketspace, a digital strategy and customer experience practice affiliated with Monitor Group. Rayport was previously a faculty member at Harvard Business School.

Business Exchange

Track and share business topics across the Web.