Cloud Computing has been a hot topic lately and seems to have gathered some public opinion momentum as of November 2012.  Is it hype or reality?  If it is hype, will cloud vendors succeed to convert hype to reality?   If it is the way to go, how should we go?  This article examines the questions by applying 2 analogies which we know very well.  In all situations, we must remember that every move we take should be fit for purpose and the most cost effective for our organisation.  The context here is not for the average consumer but for business decision makers.  The discussion will explain what the 1st and 2nd iterations of cloud computing are.

Concept of Virtualisation

Virtualisation in the computer industry refers to the separation of physical device and user applications.  For example, a computer can have several virtual machines and each machine user thinks he has dedicated or exclusive access to computer resources.  This is made possible by adding a layer between physical device and user applications to allocate and match resources with applications. Users no longer need to know or manage physical devices.  Another profession of people know and manage the new layer, and they make money too.

When we send out a snail mail or email, we do not know or care how the mail reaches our intended recipient.  In a way, the post office or Internet operators provide a layer of separation.  This is the 1st iteration of cloud computing.

Electricity Analogy

Proponents of cloud computing pointed out that electricity was first generated locally in about 1880 and it became a utility about 50 years later.  Apart from hospitals, large process plants, and some mission critical operations, all people take electricity from the national grid and most of us pay for the electricity we use.  We do not own or operate our own electricity generation plant at all.  We do not dispute the above as it has indeed happened.  Proponents then pointed out that computing will go down the same path for the same reason.  The reason is economies of scale.  Individual organisation does not generate electricity for self use as economically as buying from the national grid. Fair enough.

Electricity is a commodity.  Whether it is generated in Huntly from coal or Clyde from water does not matter to the consumer.  Whichever electricity coming out of the national grid and distribution network is equally good or bad for activating our vacuum cleaner or keeping our fridge cool.  Electricity is indeed a gift of civilization and technology advances.  We cannot live in the city without electricity at all.

Are our accounting data, design scripts, operating manual, building construction proposals, and so on in the same category of commodity as electricity?   Can we take any budget prepared by someone somewhere sometime on the Internet for our purposes?  Casual consumers may say yes.  Serious organisations will say no.

Highway Analogy

The previous cabinet of NZ Government appointed the same minister to oversee road transport and the launch of the $1.5 billion ultra fast broadband (UFB) project.  This happened because both road transport and UFB are considered infrastructures of the country.  Infrastructure is indeed a better word to describe the Internet than commodity from the electricity analogy.  Electricity generation, transmission, and distribution in NZ have since been privatized (and prices have hiked for users).

Vehicles of all sorts use highways and they carry passengers and cargos of all sorts.  This is the same on the Internet.  Each packet we send through the Internet is a vehicle and indeed the Internet Protocol Stack TCP/IP has been designed to achieve this analogy.  The packets that belong to Organisation A are not to be used unless stolen by Organisation B.  Data packets are not commodity. 

Being an infrastructure, highways are normally managed by the government to ensure equal access and fair use.  The Internet is managed by private bodies which should also ensure equal access and fair use by charging users a price.  All private economic activities happen outside of highways except petrol stations.  Similarly all private economic activities should happen outside of the Internet except those maintaining the infrastructure.  Are data centres which sell cloud computing similar to petrol stations?  Data and petrol are not in the same category.

Observations

The Electricity Age has created the term middle class in the last century.  Middle class are people who are not landlords or plant owners and they create wealth around the use of electricity, such as wash machine manufacturers and factories producing a variety of products via machine or process automation.  The Computer Age has created a new term called the Computer Class in the last 20 years.  Large computer vendor corporations such as Microsoft, Apple, and Google have made their founders extremely rich.  The difference of the two phenomena has revealed that the Internet is cheaper to build out to cover the globe and to enable the highest level of economies of scale.   We no longer buy cloud computing service from Huntly or Clyde but from Amazon or Silicon Valley.   

When data is critical for our operation, strategy formulation, competitiveness, productiveness, we should keep our data under direct control and this is fitness for purpose.   Buying our own assets and paying for people to maintain the assets may be expensive upfront, however the long term cost of ownership is not higher for the purposes achieved.  Loss of data could be fatal.   This observations lead to a mix of approaches- local assets and cloud access, as determined by fitness of purpose as the loss of some data is not fatal. 

2nd Iteration of Cloud Computing

The world has accepted the 1st iteration naturally and without questioning.  Technology leaders are proposing the 2nd iteration to us.  They suggest that they will provide computing assets and services in the cloud for us.  Should we take the offer without questioning?  It depends on who we are- casual consumers or serious businesses.