You are an ISP or an internal IT Provider in a large corporation ?
Here is a good reason, why you should care about Cloud Computing. The Cloud will attac your datacenter. Your datacenter will be flooded. You are doomed.
Well, we are a little more optimistic here. We take a more detailed look into your datacenter revenue/earning stream:
The Head
To the left, the red area, you see all your services that make only little revenue per incident, but usually appear in very large numbers.
A good example for this kind of applications are:
- File and disc Services aka user storage
- Mailboxes
- Backup space for endusers
If you are CIO, you will make a good amount of revenue or cost coverage with these kind of offerings. Every user needs them. If you run a datacenter supporting 200.000 employees, these basic infrastructure service will be a big deal. Easy to manage, long term revenue stream. Small revenue/cost coverage per unit, but high ammout of users.
As these applications require lots of servers, storage etc. they give you the purchase power. Every hardware vendor is very pleased about large numbers. You need them on the hand to optimise your cost structure and on the other hand they still give you a good revenue stream.
The right part aka The Long Tail
These are the services that are used and requested only a few times in your datacenter. Samples here is a Oracle RAC installation, or a warehouse application running on 3 machines that require a full audit or a FDA validation. The service is only rarely, they are complex and expensive to set up and maintain. But they still are important for you overall balance sheet.
Low purchase pricing (caused by The Head) combined with high margin Services from the Long Tail.
How is the Computing Cloud moving into you datacenter ?
Remember my blog entry "climbing climbing" ? In this order external Cloud suppliers will enter your organization. Endusers or whole subsidaries will get offerings for easy web services, sometimes cheaper than anything you have ever seen. I know examples, where a large SW vendor offered a complete hosted mail platform in a Cloud cheaper than the licence cost for the same amount of users. And this is just the beginning. Remember: There are no market prices for Cloud Computing services. All prices are, let's say marketing / political / strategic etc..
Whatever you do as a ISP or Internal-IT department:
The Cloud Computing offerings come with extreme low price and margin. Because all suppliers know how to act in a low margin market.
This is the point where things get ugly for you. The "red" area aka "The Cloud Target" will erode. The easy but high volume services will leave your datacenter.
This will cause two main effects:
- As your purchase volume shrinks, your purchase power is reduced and your average cost will rise
- Your overall revenue will shrink, with negative effects on cost degression
But as all the more complex services still remain in your datacenter the most cost effective services will remain. Double trouble.
Do not worry about the Long Tail. As these services are complex, have high requirements for validations, testing or compliance:
These services will never be hosted in a Cloud. At least not in Europe. My bet.
OK, got it. What can I do ?
- Take Cloud Computing serious
- Make your own Cloud offerings
- Run a Private Cloud for easy services
- If your customers, internal an external request services from a Public Cloud: Provide the contract. Remember: You must not allow somebody else to step into your contractual relationship with your endcustomer. Using Cloud Services from one of your subsidaries may be acceptable for you if YOU own the contract.