The cloud: it's not about technology, but economics

Clouds are grey fuzzy things that rain on you. So why have organisations ranging from aid and development charity Oxfam to low-cost airline easyJet decided to trust their IT infrastructure to 'the cloud'?

It's certainly not because they like playing with technology. They have better things to do with their time. Anyway, the cloud isn't about technology.

There is very little, technically, you can do in the cloud that you couldn't do on a mainframe decades ago.

The cloud is really all about economics. By bundling up the technology and delivering it in a new way, the cloud enables a new economic model. It allows people to rent resources such as computing power and storage as they need them, rather than buy them.

That's hardly earth-shattering, either. People have been renting resources for millennia.

So what is new?

The thing that is different about the cloud is abundance.

Computing power has traditionally been scarce: it was specialised, expensive and tightly rationed. The cloud, on the other hand, makes this power commoditised, cheap and abundant – and managing abundance is very different from managing scarcity.

Most organisations are set up to manage resource efficiency. Resources are scarce, so people grab them and hold on to them tightly. They analyse and optimise resource utilisation. They protect their resources as much as possible.

That's all wasteful when resources are abundant. It consumes energy with no real benefit. When resources are abundant, you just take what you need, when you need it. You spend resources to buy knowledge, to increase flexibility, or to deliver earlier. You experiment rather than analyse.

Managing abundance is hard

There are fewer constraints, so you have more variables to consider. You have to work your resources more intelligently than your competitors (who also have abundant resources). That's a big change from managing efficiency.

The organisations that make this shift in management thinking, from efficiency to intelligence, will be the winners in the cloud.

 

THINGS TO DO WITH ABUNDANCE

The cloud shifts the basis of competition. You compete through intelligent use of abundant resources, rather than the ownership of scarce ones. So what might you do with those resources?

1. Analyse more data – Take steps to analyse your customers against a wider range of variables. Build deeper, more nuanced segmentation models.
2. Analyse the data you acquire more thoroughly – Instead of using simplified models, examine how specific customers act as they explore, buy and use your products.
3. Analyse data in a more timely way – Analyse customer interactions as they happen: hence, tailor the offers you make to them in real-time.
4. Deliver new features more quickly – Provide product teams with the development and test environments they need to deliver more effectively.
5. Test new features more thoroughly – Set up rigorous A/B tests to determine how customers are really responding to the new features you are creating.
6. Create new types of product – Use the information from the above to identify new customer niches and needs.

 

Graham Oakes is a technology consultant. He can be contacted via www.grahamoakes.co.uk or graham@grahamoakes.co.uk.

His book Project Reviews, Assurance and Governance is published by Gower.

This article was first published on marketingmagazine.co.uk