Heads in the cloud

Cognesia's Simon Roberts heads to Boston and San Francisco to investigate the cloud phenomenon.

I have been travelling in the last week on a UK trade mission to Boston and San Francisco to better understand the implications and trends of cloud computing and listen to many of the leading experts in this field. These include both the key strategists from those delivering the cloud infrastructure including IBM, Google, and Salesforce.com to those taking advantage of what the cloud has to offer through to industry veterans and technologists in a series of panel discussions.

My mission has been both on a business and personal level to unravel and see how it could affect our business and in particular to spot opportunities. From a personal perspective it was also to consider the possible wider ramifications on society and worldwide relations.

Firstly it was very apparent that there appears to be more definitions of what the cloud is than views on tacos in San Francisco (they take it very seriously). We heard all week that the cloud is virtualisation, its a method of sharing resources, software and information on-demand, much in the same way as electricity. To all extent and purposes all are correct but we also have to remember that this audience is a highly technically embedded contingent.

However, I quickly came to the assertion that the term “cloud” was more a means for people to get wrapped up in describing the “stack”, a common term you hear a lot, to describe all the exciting nuts and bolts that go into the engineering feat, which quite frankly is incredible. However you dont describe an Ipod by all the nuts and bolts that it is built upon. Of course the detail is highly important to all the contingent on the mission who are each supplying products into different parts of the stack and who are jostling to slot themselves in, where possible, and look for chinks in the armour where they can help deliver the answer to a problem.

However, from the layman perspective and for those who have not paid much attention to cloud computing, in many respects its a cover for the building of virtual cities, what I would call “virtual cityscaping”. It is the bringing together of all the required ingredients in such a seamlessly integrated two-way communication that everything is in place for you to move your business, part or in whole into one of the rapidly growing virtual cities springing up.  What we are seeing is the birth of IBM city, Salesforce.com city, Amazon city, Microsoft city (not very catchy are they, they might need to work on that) and competing amongst themselves to promote their city, just like a tourist board does. Companies in the next few years will need to consider where they should base their virtual headquarters or at least some of the offices to their virtual city with the hope that one day they will move the whole operation and close down most of the IT back office.

Lets take a look at Amazon city as a case in point, that is without argument the most powerful online retail empire in the world. Jeff Bezos realised that he had invested billions in the most state-of-the-art infrastructure and technology and had tamed the user experience to a fine art. However, he recognised (or I am thinking he did, as I have not asked him personally), that he had both huge excess capacity and unleveraged technology that only he was using, and knowing that Amazon cannot continue to rapidly grow with its retail empire forever, looked again introvertly.  Jeff Bezos looked at what he had and decided that it was not really a virtual shop anymore but a virtual retail empire, sitting in the emptiest virtual city that he had built only for himself. He had the widest streets with millions of shoppers daily, it was open 24 hours a day with bright blue skies all the time, it had the best security manning the doors to his turnstiles into his business but as soon as the customer left his shop they disappeared into the virtual Ether, largely nestling around Google search where users refine their interest and intent.

Therefore what does he do? He goes into the 2nd oldest profession in town and sells real estate, real estate which is arguably infinite in size online. In his city with other companies happily enjoying moving to his virtual city and benefiting from the scalability and reliability of what he has put in place.

You could write a book on the subject, as it appears most people we met in America had already done, but once you consider the cloud computing revolution more akin to cityscaping what can we draw from this and how will this affect business?

The key thing is to understand where in the development phase they are and how much momentum each of the players are to then decide where you can add value or align yourselves. However there are several conclusions I have reached:

Business start-ups taking advantage of the cloud will be able to get to market a lot quicker. There is no longer a very important traditional barrier to entry because you needed to invest $$$ in infrastructure, in fact you can start with virtually no infrastructure commitment, just the knowledge that if your business does well then you will “pay as you grow”, another definition of cloud computing.

This has huge implications for online business in general as not only does it mean small businesses can compete more on an equal footing with large organisations, but with the global internet being as it is, anyone with an idea can build and launch a scalable product through the cloud. Many of the cloud providers also actively market and promote the most successful driving the business onwards.

The 'freemium' business model is one that will remain and for SAAS is now expected as standard. With the likes of IBM, salesforce.com and Microsoft all offering free trials to join their cloud, we have some of the largest companies in the world planting this model. This has changed the way companies are doing business online. Arguably selling to a global audience is hard to do if you are selling one at a time and freemium becomes more of necessity.  The same is true of SAAS that companies expect to ensure that you “solve a problem” and as long as the pain point is removed, companies are then willing to pay for this alleviation of pain in relation to the size of the pain.
 

“	From the layman's perspective, cloud computing is a cover for the building of virtual cities - virtual cityscaping.	”
	Simon Roberts Head of Client Services Cognesia Ltd

Kyle from Dyn.com was an inspirational thought leader in this respect when we met him. He recognised from very early on how the use of freemium together with social media was a great way to generate a large advocate following to help shape his business pipeline and maximise his social media footprint.
 
Productise, productise and productise is a clear message throughout the week that in the world of cloud computing specialist applications are focusing on solving a specific problem. With the benefits of global opportunities it is not so much a requirement to develop an end to end solution, rather it is more important to be able to talk with other complimentary products to provide the complete solution if need be. Salesforce.com recognised this early on and opened the possibility up for complimentary applications to bolt into the central proposition and upsell. As a result Salesforce.com have over 82,000 clients around the world with competition finding it hard to keep up with the pace.

So who out of the virtual cityscapers will win? Given the very wide landgrab going on, with the likes of Google and Amazon offering free rent periods with all fixtures and fittings in place, you can see that gravity will pull certain types of business in one direction of joining a specific cloud. As consumers enjoy the benefits of the improved experience, so more businesses will want to setup business in their virtual city and so on. It is imperative that companies select their vertical and go after it and not try and be all things to all people as different businesses will require different levels of immediacy, latency, security, added value integrations and so on.

This is clearly what you see with salesforce.com. The brilliance of selling a CRM software but then recognising that the best way to protect your clients is to embed deeply with them and to open their platform to other related businesses. In effect, as organisations open for business in their virtual city and integrate with salesforce.com, not only were they gaining access to the clientbase of salesforce.com but also that they were enhancing the salesforce.com proposition. This growth has been breathtaking with 1000s of applications bolted into the core CRM application effortlessly and within a few clicks.

An interesting panel discussion with John Landry made an interesting point. He said that one of the key things for online business, in particular SAS business will be scarcity of resources. It will be unique people in the organisation, unique technological know-how, and very importantly marketing and leveraging brand identity through social media. These are the things that are not quickly replicable.

As these virtual cities take hold it is very much a gold rush of people who can see the implications rushing to these virtual cities. People with energy and ideas are able to emigrate to these virtual cities and setup shop, bypassing traditional boundaries, arguably something that the internet had always created, but there was still barriers to access the same virtual city as others and take advantage of not having to worry about scalability or developing a end -to-end solution.

Something close to my own business experience is how do we visualise the virtual people arriving into the virtual city? What do we know about them, where have they come from, what are they doing, interested in and from a commercial viewpoint, what are these visitors interested in buying? These virtual cities need some ability to provide a unified view of these virtual people and this is one of the key ingredients to providing a better overall experience, without of course impeding on ones privacy but to work in tandem.

Just as humans value their historical self, so the virtual impression of an individual will increase in value as businesses are able to extract the value and the consumers are able to consume. Some balance will be reached where both parties are comfortable.