Economics Always Guide Adoption

October 25, 2009. Categories [ Cloud Computing Economics ] Tags [ Amazon Web Services, AWS, cloud computing, cost savings, time-to-market ]

In her recent article, "Study Says Economics Not A Driving Factor in Cloud Computing Adoption", Lori MacVittie reports on several studies that show that the current macroeconomic climate is not having a big impact on cloud computing adoption. In particular, the cost-savings purported to be offered by the cloud do not seem to be the major selling point. And yet, companies are adopting cloud computing technologies left and right, so it must make business sense: in other words, economics are driving adoption.

Many analysts look solely at virtualization and elastic computing services like Amazon's EC2 as the major technology at play in the infrastructure-as-a-service market. While certainly it takes less time to spin up a virtual machine image in the cloud than it does to rack and install actual hardware, this is probably not the major contributor for cost savings; at even a modest enterprise size, it's still cheaper to run the servers yourself. Indeed, even with virtual hosts, you must still manage capacity, allocate applications to servers, and monitor application health, meaning your technical operations staff is still very much needed.

Overlooked in many ways here are what I would call application building blocks available in the cloud, like Amazon's Simple Storage Service (S3), Simple Queueing Service (SQS), and SimpleDB. Google App Engine has its BigTable-based datastore, which with a modicum of effort can be exposed as a GData-style data webservice. In all of these cases, these application building blocks offer:

very simple programming interfaces;
automatic distribution of data across data centers;
easy scalability; and
understandable cost models

These capabilities would require a significant amount of effort for an enterprise to develop for itself. For example, I estimate developing an internal, enterprise-class S3 service might require a half million dollar investment in labor and servers, assuming you already had multiple data centers in place and could leverage existing open source software like Cassandra, Project Voldemort, or Dynomite.

Instead, time-to-market pressures are the real forces behind cloud computing adoption in the enterprise. These application building block services allow for rapid prototyping of new functionality, where the production architecture and the development architecture are the same. Where business agility to react to new opportunities is crucial, especially in the ever-changing Internet landscape, the ability to rapidly bring features to market, test their adoption, and then evolve is the key to long term competitiveness. Companies that cannot roll out new consumer value out quickly will find themselves left behind by more agile competitors. As the competition adopts cloud computing and gains time-to-market advantages, companies are forced to follow suit.

Cloud computing adoption is always about economics.