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Cloud Economics – Introduction

Written By: langdon on December 23, 2013 No Comment

Cloud Economics – Introduction

When cars emerged in the early 20th century, they were initially called ―horseless carriages‖. Understandably, people were skeptical at first, and they viewed the invention through the lens of the paradigm that had been dominant for centuries: the horse and carriage. The first cars also looked very similar to the horse and carriage (just without the horse), as engineers initially failed to understand the new possibilities of the new paradigm, such as building for higher speeds, or greater safety. Incredibly, engineers kept designing the whip holder into the early models before realizing that it wasn‘t necessary anymore.

Initially there was a broad failure to fully comprehend the new paradigm. Banks claimed that, ―The horse is here to stay but the automobile is only a novelty, a fad”.

Even the early pioneers of the car didn‘t fully grasp the potential impact their work could have on the world. When Daimler, arguably the inventor of the automobile, attempted to estimate the long-term auto market opportunity, he concluded there could never be more than 1 million cars, because of their high cost and the shortage of capable chauffeurs.

By the 1920s the number of cars had already reached 8 million, and today there are over 600 million cars – proving Daimler wrong hundreds of times over. What the early pioneers failed to realize was that profound reductions in both cost and complexity of operating cars and a dramatic increase in its importance in daily life would overwhelm prior constraints and bring cars to the masses.

Today, IT is going through a similar change: the shift from client/server to the cloud. Cloud promises not just cheaper IT, but also faster, easier, more flexible, and more effective IT.

Just as in the early days of the car industry, it‘s currently difficult to see where this new paradigm will take us. The goal of this article is to help build a framework that allows IT leaders to plan for the cloud transition. We take a long-term view in our analysis, as this is a prerequisite when evaluating decisions and investments that could last for decades. As a result, we focus on the economics of cloud rather than on specific technologies or other driving factors like organizational change, as economics often provide a clearer understanding of transformations of this nature.

Chapter 2, Cloud Economics,

Chapter 3, Economic implications for the future of IT.

Chapter 4 Important IT considerations

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