Innovation, Technology, and Life in the Cloud

George Watt

Is All This Hype Giving Cloud the Business?

Is cloud computing disruptive innovation or great marketing?

For what feels like forever there have been debates regarding whether cloud computing is a game-changing approach or simply an unbelievably well executed marketing initiative. Even as someone who has experienced first hand the changes and benefits cloud computing can deliver I have at times asked this question. This weekend I believe I arrived at an answer that will be extremely difficult to unseat; though I will, of course, keep an open mind.

It’s a floor wax, and a dessert topping!

I will certainly be the first to admit that there has been some fantastic, as well as completely frustrating, marketing related to “the cloud”. There are also some great cloud technologies. It occurred to me as I thought about this that most of the debates focused on technology, marketing hype or both; with an honorable mention to cost reduction (which could be put in the “technology bucket”).

Key elements are often missing from these discussions.

Measuring the impact

Recently I picked up a copy of Michael E. Raynor’s “The Innovator’s Manifesto“, which provides a framework for evaluating disruptive innovation in a business context. It was while reviewing his criteria for innovation that I had my “moment of inspiration”. Building on the work of Harvard professors Michael E. Porter and Clayton M. Christensen, Raynor offers the following three criteria for determining whether an innovation is disruptive:

  1. It has a different business model (than is in use by existing businesses) that defines the maximum value that can be delivered by a company that is as productive as is possible with current technology, processes, management techniques…. (In Porter’s terminology, it “defines a new productivity frontier”.)
  2. Improvements in key enabling technologies increase the maximum value that can be delivered. (They “expand the productivity frontier”.)
  3. The business is able to expand its market share without changing its business model. (The model “breaks trade-offs that define competition in established markets”.)

Hear the thunder!

As I read this it became clear to me that, even in this context, cloud computing is a disruptive innovation. It is NOT simply hype.

  • Cloud computing most certainly employs a new business model. Some would argue more than one new model. The way in which cloud providers approach service delivery and the economic levers they employ such as pooling of resources and expertise, and automation like never before, are markedly different than “traditional” IT business models.
  • Cloud technologies such as virtualization, provisioning, orchestration, and automation are rapidly evolving and with each advance deliver additional value and productivity.
  • Cloud providers have proven they can deliver comparable services and business value (what Porter might call “non-price value”) than is possible through traditional models. They have begun what Raynor refers to as their “up market march”. And the extent to which they can do so, and the range of services they are able to provide, is increasing at a breakneck pace.

As described in the book, “Disruption Theory” further explains that disruptive entrants normally begin by addressing markets that are unattractive to current incumbents. This often occurs through the offering of lower cost, lower value services. As their technology improves, disruptive innovators are able to gain share from the incumbents by leveraging their new model, which is different from the incumbents’That’s a fairly good description of what’s going on with cloud computing now, is it not?

So, what about…

As with most widely debated topics, conversations about cloud computing always enter the “so what about” stage, as they should. That is the point at which people begin to ask “Hey, so what about <name a technology>? Would this alone not explain the new benefits?” Since I love to argue with myself (I never lose) I began to process some of those scenarios. For example, “So, what about virtualization?” Wouldn’t that have changed the game on its own? The answer is, of course, “yes”. Though in a much different way.

Virtualization on its own would have delivered new efficiencies into the existing business model and created more business value for those operating in a traditional IT business model. Raynor would classify this as “sustaining innovation” (still a very good thing). In essence, it expands the productivity frontier of the existing model. There have been countless stories of IT groups leveraging virtualization on its own to drive efficiency and business value. Those can, and were, easily replicated by all incumbents. And while they are definite examples of success, they are not cloud stories. (In the interest of brevity I will stop here, though perhaps I will further explain this in a future article.)

Cloud computing is not solely defined by technology, there is much more to it; not the least of which is a completely different business model. (Oh, and a lot of hype. Though, hey, who doesn’t like fluffy unicorn rainbows?)

So, while based on my own experience I have more or less always held the opinion that cloud computing is more than hype and great marketing, applying this business model (“Disruption Theory”) has helped me to better understand why. I am beginning to think (hope) that it is now more than an opinion.

I realize in a short article such as this I cannot do justice to the work of Porter, Christensen, and Raynor. I also realize this is a discussion that will not end for quite some time, though I feel we are getting closer. I would be grateful for your thoughts on the matter. Do you feel the context of Porter’s “productivity frontier” model and Christensen and Raynor’s “Disruption Theory” help to prove that cloud computing is something other than hype? Would you like to see further and/or more detailed discussion of this?

This blog is cross-posted at Cloud Storm Chasers.

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This entry was posted on November 7, 2011 by in Cloud, Mgt. & Soft Skills and tagged , , , , , , , .

About

This site contains articles regarding the practical aspects of deploying, providing, managing, and using cloud computing, and other technologies. I also share my thoughts and experiences related to innovation, consumer driven IT, social media, management issues, and about what some refer to as “soft skills”.

All works copyright (C) 2009 - 2015 George Watt - All rights reserved.

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