Updated: Feb 19, 2020

Here at Digital Bridge Partners, we are taking a look back at the history of cloud computing, but first at an understanding of how to put cloud computing into context.

Its easy to lose the forest for the trees by considering how Cloud Computing evolved from time-sharing and outsourcing and utility and grid computing before understanding what Cloud Computing really is.

Then, what is Cloud Computing?  We believe that it is the confluence of Economic and Technological forces built around the creation of “Economies of Centralized Supply.”  It's about the development of IT as a “UTILITY,” to use the economics term.  Special thanks to Nicholas Carr and his book the Big Switch from which the following logic is a summary:

So, what does it mean to say that the Cloud is an outcome of applying the Economies of Centralized Supply to the UTILITY of IT?  Going back in human history, there are a number of these GPTs (General Purpose Technologies) and we think IT as a UTILITY as one of them. What was the first? The movement from hunting and gathering to centralized agriculture, then water transpiration, then the written word, and finally the biggie of the last 200 years, the Electrical UTILITY.

To put what happened more than 100 years back into context, here’s a quiz, who do you think wrote the following statement. “It was not only necessary that the lamps should give light and the dynamos generate current, but the laps must be adapted to the current of the dynamos, and the dynamos must be constructed to give the character of current required by the laps, and likewise all the parts of the system must be constructed with reference to all the other parts, since in once sense, all the parts form one machine.”  The Answer is Thomas Edison. The father, along with Samuel Insull, of the UTILITY of Electricity.

Edison’s idea of a whole, fully integrated product, was as much about economics as it was about technology, but all built on the ability to drive economies of Centralized Supply.

In the early 1900’s factories (like private clouds/in-house data centers) generated 60% of all the electricity used in the US.  Less than 30 years later, by 1930, large Electrical Utilities produced 80% of all the energy consumed in the US.  During this time the electric standard changed from Direct to Alternating Current.

Once factories (big companies) realized that Edison and Insull could produce faster, better, cheaper power, they abandoned their dynamos (a la private data centers) and went to the UTILITY (the Cloud).

So to put Cloud Computing in context, we need to be clear on the following conclusions:

  1. Cloud Computing leverages technologies (virtualization, Grid and Utility Computing, Web services, and fiber-optic networks), but it is really more of an Economic vs. Technological disruption.

  2. The power of the Economies of Centralized Supply are so overwhelming when compared to what can be done in a private data center that its not a matter of IF, but WHEN the balance of power will tip toward IT as a UTILITY being the predominant way that IT is delivered.  Remember that it took less than 30 years in the 1900s for electricity to switch (no pun in tended) from private to public.

  3. As with all Economic disruptions, especially those built around the Economies of Centralized Supply it will be the incumbent operators (CIOs), parts suppliers (Vendors) and service providers (VARs, Sis) who will argue and be highly motivated to maintain the status quo, but they do so at their own peril.

Bottom line, if your one of the group noted in #3, its time to start being forward looking and putting a disproportionate amount of your planning and budgets into how to move to the future rather than being stuck in the past. Sometimes an Alternating Current is better than a Direct one.

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