By Joe Weinman, author, Cloudonomics

Cloud computing is having a dramatic impact on all aspects of our lives: as consumers, we spend our time on cloud-based social networks and using apps downloaded from the cloud; as employees, we use a variety of cloud-based software applications; as citizens, we file our taxes and even encourage social transformation via the cloud.  For such a richly applicable general purpose technology, how can one begin to characterise its benefits?

The conventional answer is that cloud computing reduces costs and increases “business agility,” but the cloud is much more powerful than that.  The cloud can enhance customer experience, by leveraging a dispersed footprint to increase availability, reduce latency for interactive services, and locally customize user interfaces.  It can reduce cycle times and thus accelerate time to market and time to volume by offering “near-infinite” resources to speed tasks such as drug discovery.  It can reduce risk by better aligning infrastructure expenses with variable and unpredictable revenue flows.

The cost and performance benefits can be quantified, using the laws of Cloudonomics as I identified in my book by the same name.  For example, all other things being equal, one can identify an optimal hybrid architecture of private and public on-demand, pay-per-use resources based on the variability of resource requirements and the relative unit costs of a do-it-yourself strategy vs. public cloud provider pricing.  One can associate distributed service node build-outs or on-demand resourcing with latency reduction.

All those benefits are valid, and broadly applicable.  However, where the cloud—and related technologies such as big data and analytics, mobile, social, and the Internet of Things—become particularly powerful is when they are employed by companies to achieve strategic competitive advantage.

I’ve found that companies can use digital technologies in four major ways, which I call “digital disciplines.”

The first is “information excellence,” where companies can leverage information to dynamically optimize manufacturing, service, and other business processes.  Traditionally, analysis was conducted offline and led to long term process improvement; now, data is accessible in real time and heuristics or algorithms can be used to reduce process costs and intervals, increase asset utilization, and reduce unintended variation.

“Solution leadership” is a strategic discipline oriented towards creating differentiated products and services, but ones that rather than being standalone are products that link across networks to cloud-enabled services.  Connected cars and connected activity monitors are examples of this new generation of solutions.

“Collective intimacy” offers the ability to use collaborative filtering and detailed data from all users or customers to provide targeted, individual recommendations to each user.  Movie recommendations and book upselling are good consumer entertainment examples, but other examples include generating specific therapies for patients based on their individual genetic characteristics as well as software-enhanced medical data, such as pathology results.

Finally, the cloud can be used to enable “accelerated innovation,” by enabling low cost experiments but also by creating the necessary infrastructure for new constructs such as idea markets, crowdfunding, crowdsourcing, and open innovation contests.

As individual clouds become increasingly interoperable, thanks to efforts such as the IEEE’s P2302 Standard for Intercloud Interoperability and Federation, and the related IEEE Intercloud Testbed initiative, additional benefits will arise.  On the cost side, interoperability standards will accelerate the development of competitive cloud markets. 

On the benefit side, interoperability will enable various business applications and also devices in the Internet of Things to work with each other, ushering in additional optimization and user experience benefits as well as opening up additional strategic opportunities.  For example, smart cities could dynamically optimize the routes and timing for garbage collection trucks, school buses, and ambulances, given connected vehicles and the right cloud-based software.

One way to look at this is the benefits of on-demand, pay-per-use, elastic infrastructure.  But a more powerful way to think about it is as globally optimal decision-making based on powerful information integration from heterogeneous systems.

Regardless of whether one takes a chief financial officer’s view or that of a chief strategy officer, the cloud and related technologies are bound to continue to have a dramatic and transformational impact on the spheres of businesses and consumers.

About the author 

Joe Weinman is the author of Cloudonomics and the forthcoming Digital Disciplines, and the chair of the IEEE Intercloud Testbed Executive Committee, supported by the IEEE Cloud Computing Initiative.