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The rise of public cloud computing is awe-inspiring. Companies like Amazon, via Amazon Web Services, are “turning virtual iron into gold” with exponential growth in revenues and operating income. However, as more companies turn to cloud computing, and use the same applications available from a specific cloud provider, there could be danger of losing competitive advantage wrought by technological advances.
These days, if your company smells of cloud, you’re in an enviable position. That’s because according to the New York Times, in October 2015, companies such as Google, Amazon, and Microsoft added more than $100B to their market capitalization, in part fueled by cloud growth. And while some companies are moving to the cloud to take advantage of cloud benefits of elasticity, pay per use, scalability and more, there are downsides to going “all in the cloud” that are sometimes missed.
With a single public cloud provider, the risk of vendor lock-in is often overlooked. Once data are ported en masse to the cloud, it’s much easier to keep data in the cloud than shuttle it around to various corporate data centers or on-premise data marts; especially because bandwidth can be expensive to move large data volumes. Ever hear of the term “data gravity”? It means that for most companies it makes sense to do data processing and use applications where your data actually live. And increasingly, those data are migrating to the cloud.
There’s also a challenge of getting stuck with second-rate applications from your cloud provider. Essentially it comes down to “user inertia”, where for business users it’s simply easier to select applications from a given cloud provider via drop down menu than source a much better alternative. So applications that might be good enough—but not great—may solve a need today, but there’s no thinking as to whether those same applications are the truly the best fit, or can meet tomorrow’s needs.
Because of vendor lock-in, data gravity, and user inertia for application use, there’s a real danger that companies that once cobbled together various best of breed technologies for competitive advantage now must rely on a monolithic cloud entity to introduce innovative technologies at a fast enough pace to keep up with changing market conditions. This is a risky proposition.
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Perhaps for plenty of companies “cloud sameness” is a non-issue, especially since innovative new technologies could be trialed and proved using on-premise servers. Then those same companies can wait until their cloud provider makes those technologies widely available. However, it’s evident that companies that go all-cloud are exchanging control of their technology including “choice” for the benefits of consistency and standardization. In effect, with cloud, someone else is charting your technology roadmap.
But not too many companies are going “all public cloud”. In fact, most companies will continue to employ a hybrid approach of on-premise, public and private cloud computing, to mitigate risks of complete vendor lock-in and control the pace of technology adoption (i.e. retaining the ability to push the gas on new technologies if a cloud vendor is slow to adopt the latest applications).
Of course, competitive advantage is not solely defined by use of technology. But some progressive companies have made a living staying on the cutting edge, using best of breed hardware and software from new market entrants to get a jump on competitors before they figure out which end is up. Adopting the infrastructure and applications of your public provider—without a hybrid approach—could mean that some of the flexibility you enjoy today will go away.
Going forward, will companies be increasingly content to let web giants build out analytic infrastructure and applications for them? What does this mean for technological competitive advantage? I’d love to hear from you.