The ‘Cloud’ Commoditized

Written July 27, 2017 by
Jack Bouroudjian
Chief Economist

As a former board member of the CME Group, there were few things which were painfully apparent; The IT budget becomes a ‘black hole’ for capital and resources if not managed properly.  And more important, advances in technology creates opportunity for efficiency and increased Operating Margins.

Case in point would be the procurement of compute resources by enterprise organizations today.  In many ways, it resembles a monopoly for pricing.  The decision makers in the ‘C’ level suites, too often, are at the mercy of lower level technologists who have built virtual ‘moats’ around their job titles. How can one manage risk when they don’t understand technology on which they are becoming more and more dependent?

For those old enough to remember, the procurement of cloud services is much like that of the airline industry 30 years ago.  There were only a few carriers which allowed for a noncompetitive atmosphere. Competition changed all that.  The result was a cost savings for the end users with nothing else compromised.  Now a low-cost airline competes directly with the big boys and usually does a better job.

The reality is that cloud services are different than the airline industry.  There are issues dealing with security, and confidentiality which change the dynamic of the industry and leave board members up at night worrying.  But as technology leads us to easy migration of workflows, it becomes self-evident that the cloud is a true commodity.  If one were to walk into a datacenter it is surprising to learn that most all CSP’s use the same equipment.  Same mother boards, same cabinets, same security.  Yes, the cloud is a commodity. And as such it should be treated as one on the balance sheets and in the decision-making process of every enterprise organization. Think of it this way, when you turn on your lights at home do you care where the electricity came from?  Certainly not.  All that matters is that the lights simply go on.  Compute resources are no different.

It’s time for those who are decision makers to understand a simple fact; IT spending will not decrease over time, in fact for an enterprise to survive it will only go higher.  It is now imperative to understand and manage the fastest growing line item in the budget.

Growth can be painful but not managing risk can be deadly!