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Six Perspectives on the Cloud

July 10, 2014 by Andreas Schmitz

Research and analysis company The Economist Intelligence Unit invited a number of experts to comment on how they think cloud computing will impact the character of work and the environment in the future. Their responses appear in an Economist Intelligence Unit report sponsored by SAP partner Fujitsu.

Cloud will change the way people interact in the workplace; IT will become a commodity rather than a technology; and the business world will demand “consumerized” solutions. In short, cloud computing will cause a major rethink on every level. Consumer cloud services such as Dropbox, which allows users to access their data from the cloud from any device, have long since set the wheels of change in motion. Six experts give their views:

1. The workplace: hierarchies are on the way out

According to Mark Ridley, who is director of technology at British recruiting website reed.co.uk, a key driver of change in the workplace is the consumer, the typical Gmail or iCloud user. Ridley writes: “If…I can expect my phone to alert me to emails and chats, store all of my photos and documents and be aware of my availability and location, why should I not expect that from my work device? If I can use Facebook, Snapchat, or Twitter without a training session, why should I need an induction to explain how my HR system works?”

“If I can use Facebook, Snapchat, or Twitter without a training session, why should I need an induction to explain how my HR system works?”

The simpler and more accessible cloud computing becomes, the less point there will be in maintaining a clear distinction between IT and the business. Structures built on departmental managers and hierarchies will be replaced by networks composed of people with the necessary skillsets and relationships to other areas of the company. So, for example, the traditional IT department will no longer have sole responsibility for setting up a finance system. Instead, a mix of people with the requisite skills will work on the project together – right from the start. Ultimately, a person’s value to the team will not be measured by his or her seniority or status. What is not yet clear, however, is who will be responsible for defining the company’s strategic direction. At any rate, the importance of CXO roles is very much in question.

2. Cloud services traded as commodities?

Theoretically at least, cloud services could be bought and sold as commodities – just like products in a department store. And, once clear benchmarks for services are in place, it will indeed be possible to trade them, says James Mitchell, CEO of London-based cloud broker Strategic Blue, which specializes in cloud futures trading. However, the cloud market is not yet sufficiently organized and it still lacks some of the key requisites for trading: One is the fungibility of the commodities on offer: You can’t simply switch a cloud service without compromising on quality. Detailed analyses of services, performance, price structures, and contracts are required. However, as things stand, the greatest hurdle to commoditizing cloud computing is the pricing model. “On-demand” and “pay-as-you-go” tariffs are currently the favored options.

In the same way as you can pay a premium for high-octane gas, you will soon be able to pay extra for higher-specification services, says Mark Ridley.

If customers only pay for the cloud services they currently need, it makes it difficult for providers to supply the resources to match requirements as they arise. It is preferable for them to receive an advance payment from their customers in return for the use of discounted on-demand services in the future. This pricing model has the important added effect of increasing customers’ creditworthiness. In the same way as you can pay a premium for high-octane gas, you will soon be able to pay extra for higher-specification services, says Ridley. This will ensure that cloud service innovations will continue to enjoy a high status in the future.

3. Cloud is accelerating the pace of business

At first glance, cloud computing looks like a promising proposition, especially for its potential to generate new revenue streams. But the realization soon dawns that adopting the cloud will have a massive impact on the existing business. It will even call the company’s business model into question.

Services providers will have to switch their focus from ICT to cloud
One thing is clear: Cloud computing is changing the way customers behave. Cloud services are increasingly moving straight into the business without any involvement from the IT department. Despite this development, too few providers are taking the user experience seriously enough. ICT service providers will have to become cloud-focused, says Tua Huomo, who is a specialist in “Future Cloud” at the Europe Institute of Innovation and Technology (EIT). “If you don’t provide something new, something exciting, on a regular basis,” she says, “you’ll probably be left just looking on as your customers switch to a competitor who does.” The pressure to create new applications and new software functions that exists in the gaming industry is now being felt in the ICT sector too, and the pace of business is increasing. However, while companies need to provide new features quickly and efficiently, they must take care not to lose sight of their mission to deliver value to their customers.

4. Data protection: giving individuals control over their data

Take the misuse of private data seriously, but recognize the value of sharing data: That’s the message from Paul Millera cloud expert and analyst at The Cloud of Data, adding that, when it comes to sharing private data, it is difficult for “individuals and businesses to effectively weigh risks against benefits.” Brands as varied as Amazon, British Airways, and Facebook use cookies to collect personal data – including our purchase history and interests – as the basis for placing targeted ads on the same or other sites that we visit. And, whether you like it or not, there is not a thing you can do to stop them. Almost ten years ago, an organization known as the Attention Trust Consortium came up with the idea of developing tools to enable individuals to make their browser data available to third parties for analysis in return for discounts, premiums, or other incentives. Although this method promised a better quality of data and a solution for data-protection issues, it failed to gain traction. Nevertheless, the idea behind it lives on.

Through cloud service providers, the business of sharing personal data is losing its taboo.
DataCoup, which refers to itself as the “first personal data marketplace”, and Enliken, a company that enables marketing companies to show consumers what information they hold about them, are part of a new personal data-sharing revolution. Their aims are to provide “trusted” data and, above all, to make the use of personal data for market research purposes more acceptable. “Today, individuals have very little control over the way their data are acquired, shared, and used,” says Paul Miller. However, marketers, he explains, are already beginning to recognize how a trusted relationship can improve the quality of data they can collect from customers. Service providers such as Qiy in the Netherlands and MyDex in London are providing users with a personal “data locker” in which they can store valuable information about themselves and that can only be accessed by third parties with the individual’s permission.

Thus, the business of sharing personal data is losing its taboo. “Personal data stores” such as MyDex are empowering individuals to collect and share data in a way that they can control.

5. Cloud is making data centers more efficient

Cloud computing centers typically consume upwards of 20 megawatts of energy, and the demand for new data centers to operate cloud applications means that energy consumption levels are soaring. Market researchers Data Dynamics Intelligence suggest that energy requirements increased 19% in 2011 and 2012, and Stanford University estimates growth at 56% between 2005 and 2010. Despite protests from Greenpeace, says Ian Bitterlin, chairperson of the EMEA Technical Work Group at the Green Grid Organization, the enormous increases of recent years are rarely mentioned.

Server efficiency is growing 70% every year
Figures like this make it all the more important to ensure that data centers are located close to where the energy they require is produced. A “co-location” strategy, Bitterlin explains, reduces the losses in the transmission of energy over long distances by between 5% and 20%. Moreover, state-of-the-art cloud data centers use only one tenth of the power that traditional data centers typically consume to provide the necessary back-up power and cooling. And computer chips are also becoming more and more efficient. In 2008, the first ever industry-standard benchmark for evaluating the power and performance characteristics of volume server-class computers, SPECPower, was created. This revealed that the energy efficiency of volume servers has increased at a rate of about 70% per year. In a virtualized cloud data center, a single server may run up to 40 individual “virtual” machines, which clearly favors better resource utilization and greater efficiency gains.

6. Cloud will have a net positive impact on jobs and the economy

The general belief is that cloud computing will boost productivity in the economy and engender new business models; work in IT will shift from maintenance to high-level tasks and create demand for employees with different skillsets; and it will be easy to offer services worldwide. Jonathan Liebenau from the London School of Economics takes a more guarded and low-key view. The impact of cloud computing, he says, will vary enormously from region to region and from industry to industry. However, his overall conclusion is that, deployed effectively, cloud has the potential to make businesses more productive, to create new business models, and to revolutionize the way people work.

Job market: USA will not benefit more than Europe
Liebenau expects cloud computing to create more jobs than it destroys and to empower companies to harness new business opportunities faster. He singles out the IT sector as a likely beneficiary: While the number of cloud-related jobs in the smartphone sector in Germany almost doubled between 2010 and 2014, job growth in the more conservative aerospace industry was only a third of that figure. Other important factors that will affect the economic impact of the cloud are national energy policies and data transfer regulations. However, despite Americans’ more relaxed approach to data protection, Liebenau does not expect the US to benefit more from new job creation than Europe.

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