Cloud Computing: What Clayton Christensen Can Teach Us

Is cloud computing a sustaining or disruptive innovation? Both. But it's utltimately likely to be disruptive, despite the efforts of many IT organizations to corral it as a sustaining innovation. If that's you, your job's in peril.

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Unlike virtualization, cloud computing can have a significant impact on end users. In particular, two aspects of cloud computing provide much more direct interaction for application creators and users:

The first is self-provisioning. You can go to Amazon and create a running instance of a virtual machine with no interaction with another human being. All you need is a valid credit card. This enables an end user to create a virtual machine instance with no need to interact with IT. This is far different from the typical extended process required to obtain internal IT resources. And, by the way, an end user organization, even if it lacks technical capability itself, can hire a consulting company to provision up an Amazon instance. In other words, end users can obtain IT capacity without interacting with IT. In this respect, cloud computing is analogous to SaaS, but with the proviso that cloud computing offers far more flexibility; in other words, an end user isn't limited to what the SaaS provider offers; rather, the end user can create any kind of application it wants.

Metered usage. Instead of a lump sum transfer or a long-term commitment, Amazon allows payment according to actual usage. Most IT organizations are not even set up with basic chargeback associated with use; instead, a crude accounting based on numbers of servers, or cost assessment according to end user organization size, is used. A by-the-minute or by-the-gig charge mechanism is out of the question. Amazon allows users to pay according to use, shifting costs from up-front to pay-as-you-go, and from capital expense to operational expense. This has significant implications for budget process, which is where end users and IT organizations meet. Greater end user control. An end user can directly manage (or have someone manage on its behalf) its cloud instance. No need to put in a request to a help desk or a monthly project prioritization meeting where it will be put onto a priority queue that the requester doesn't control. Amazon enables direct control via the Internet.

All of these aspects of cloud computing allow end users to bypass IT, should they choose. While Amazon EC2/S3 does not address many issues that concern IT (e.g., data retention and discovery, to mention just one), it delivers a refreshing immediacy of availability and a comprehensible cost structure clearly tied to use.

How IT treats cloud computing will dictate whether it ends up being a sustaining or a disruptive innovation.

To the extent that IT examines the aspects of cloud computing I've outlined above and figures out a way to modify existing processes to incorporate them, cloud computing can be a big win for it and the larger organization. IT will continue to be the premier provider of data services.

However, to the extent that IT does not make those aspects of cloud capabilities more transparent to the end user—in effect, shielding the end user from the self-provisioning, metered usage, and greater control available via cloud computing -- then it will create an incentive for end users to go directly to an outside cloud provider.

One of the most worrisome things that I've heard from IT organizations about cloud computing is to treat it as a great internal optimization ("this lets us configure systems much more quickly") while still expecting end user organizations to maintain the same rules of engagement with respect to IT sevices. The phrase you often hear is "internal cloud." All too often that's a code word for "internal to IT," not a more transparent use pattern for end users. Treating cloud computing as a purely internal IT initiative, a sustaining innovation, will ultimately cause end users to treat IT as an impediment to be bypassed. Once they've tasted the fruits of direct control, it won't be easy to serve up the same old menu.

Many IT organizations raise issues about why they can't provide the same services as Amazon. Data treatment, already mentioned, is one. Another common one is security. A third is legal and regulatory requirements. And one often hears that internal IT can't justify investing in hardware that might not be utilized except at peak periods. While all of these are valid and important, posing them as reasons why IT can't provide more cloud-like capabilities will only further cement a reputation as unresponsive, and for these issues to be viewed as rationalizations.

What is Christensen's antidote for Innovator's Dilemma? What can an organization that wants to successfully respond to innovation do? Christensen recommends setting up a separate subsidiary and forcing it to play by the rules appropriate to the new market. In the example of the discount stores, he would have recommended keeping the discount chain separate, despite the supposed higher costs of running two different organizations. Only in this way can the organization not be outflanked by innovation.

Applying this prescription to IT and cloud computing would recommend setting up a separate IT cloud computing organization and staffing it with people committed to its requirements and processes. Have the new organization mirror common cloud provider practices. Let both the established IT organization and the new cloud-based IT group offer their services to end users with complete description of the strengths and weaknesses of each offering; e.g., Cloud IT allows you to directly provision systems that we provide or that you obtain from somewhere else. The data is always current, with no data snapshots made, unless you wish to take advantage of that service, which has an incremental cost.

I can hear your response now: that all seems complicated, and a lot of work, and jumbles up all our carefully designed processes. Why should we go to all that bother. That's what disruptive innovation always looks like. A lot of bother that one would rather avoid dealing with. It's much easier to go on doing things the way they've always been done. And that's why established players fail when confronted with disruption. But there's always someone else ready to take on the bother and succeed in its face. So really the question is, do you want to meet the challenge or be found obsolete in the future?

Bernard Golden is CEO of consulting firm HyperStratus, which specializes in virtualization, cloud computing and related issues. He is also the author of "Virtualization for Dummies," the best-selling book on virtualization to date.

Copyright © 2009 IDG Communications, Inc.

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