Technology, Money & Questions

Every industry goes through the commoditization phase. Every new innovation resulting in any new product, finally ends up as a commodity. Main reason being, any successful innovation always gets copied by all the competitors or all the providers in the business. Lets say, if an innovation leads to a new product, within no time of releasing the product, all the other competitors will also have such a product in their product stack.

In the initial stages, features provided in the product plays an important role in product differentiation and even manufacturers mainly market their products on the basis of the provided features. But, in due course, when the product gets matured and if there is nothing more to add to the product, the product becomes a commodity. Once a product becomes a commodity, feature becomes irrelevant and customers chose the products purely based on price and quality of service. We can see this life cycle in almost every different manufacturing industry.

Now we are going through a commoditization phase in our IT industry. Of course, not all products of the IT industry are mature enough in-order to sell as a commodity, at the same time, we just cannot deny the fact that some of the IT activities have become more common. These IT activities are ready to be served as commodities or services rather than products. This is what exactly cloud computing is about.

Cloud computing is not a thing. As we discussed earlier, cloud computing is a paradigm, a paradigm shift of providing these IT activities as a service over internet. As of now, we have clouds providing following IT services:

1) Infrastructure as a service (IaaS)
2) Platform as a service (PaaS)
3) Application as a service (SaaS)

We just can't shun ourselves from this paradigm shift, we just can't continue with our traditional way of innovation and productization cycle when the whole industry is following a new approach. If we don't make ourselves ready for the change, we're clearly staying away from the competition.

Now we know what cloud computing means and where is it taking us to. So, it is time we think about the actual impact of this shift in the IT industry.

How does this impact IT?

1) Disruption
I strongly believe that cloud computing will be a hugely disruptive trend for the entire enterprise information technology market. With Infrastructure, platform and application as a service, the current trend of trade in information technology is surely going to get disrupted.

2) Accelerates development time
When any enterprise can readily get stable infrastructure, platform or any essential subsystem in a need basis, the development time of their product will drastically reduce. Enterprises no longer need to provision for peak times, rather they can consume all the services on pay-as-you-use basis. Hence, they get to scale their computing power up or down as needs dictate. More than that, all they need to worry about is their actual product. Because of this commoditization, they need not worry about the necessary infrastructure or the platform.

"The rate of evolution of a system solely depends on the rate of evolution of its subsystem".

3) Relationship between the business actors
The total business model gets impacted because of this paradigm shift. currently, enterprises have their own Infrastructure, platform and applications. Most of the time we outsource some part of the application subsystem to a third party and the communication required is very minimum. Whereas now, the enterprise can outsource the total infrastructure, along with the platform and the application subsystem to some one else . This approach takes the relationship between the vendors to a whole new platform. In SaaS world, an enterprise can outsource the application to the SaaS provider. Most probably, the SaaS provider would have outsourced their platform to a PaaS provider and in turn, the PaaS provider can outsource their infrastructure to an IaaS provider. This model introduces a whole lot of new dependencies and opaque relationships.

4) Choice
Actually no choice. Do we have any choice to not to get into this model? No. As I said earlier, we just have to make ourselves ready for the happening change in order to maintain our fitness relative to others in our information technology market.

Now, What is cloud computing?
With all these new light, I'd say that, "Cloud computing is not a thing... it is a term used to describe the disruptive shift from the product to commodity world... a move towards a service based IT economy..."

The benefits one can reap from cloud computing is really worth the change, but we'll have to consider the other side of the coin as well. We'll discuss about the benefits of cloud computing and the inherent risks, in my next article.