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Will Cloud Computing Providers Become Too Big to Fail?

Let's Think This Whole Thing Through

It's a beautiful Sunday afternoon in the SF Bay Area, and I can think of nothing better to do than sit on my tail and write up some recent thoughts.

Let others hit the beaches, walk in the redwoods, cruise one of the three wine countries he have here, enjoy The City, or maybe sneak up to Tahoe for the last of this year's skiing. Today, I'm all about Cloud Computing and its place in history.

I'm not a technical person, as anyone who has ever read my stuff can attest. So I won't tell you how cloud will affect EJB or you PHP/Perl/Python folks, or whether open-source will boon in a cloud-obsessed world.

Truth is, this last sentence was a straw man, as we all know that technical discussions about cloud--at least as they relate to application development--miss the point. Cloud Computing requires a very high-level, organizational dialog.

Therein lies Cloud's vast potential. Because it is through this dialog that decades of mutual misunderstanding and mistrust between IT and the business side may finally come to an end.

One does not have to know a whit about IT to know that letting another company deliver computing power as if it's electric power is a world-shaking idea that on the surface seems to exude risk.

One does not need to be sympatico to business a whit to know that this idea, with enforceable SLAs, is no more risky than the current situation of in-house IT fraught with a nightmarish complexity among servers that leads to innumerable 3am phone calls.

It occurs to me that if Cloud Computing takes hold in a big way and Amazon, Google, and Yahoo become successful in gaining high-majority market share, we may face the dreaded "too big to fail" argument should something go wrong.

Will it be a smart move to move a significant percentage of the world's IT resources to just three companies? Since the companies don't tell us much about their operations, where they are, and how they work, can we be sure that they are failsafe enough to withstand HAL episodes, the ironic electricity blackout, or dare I sound rabid, terrorist attack?

Business leaders live in an amoral world, one in which stonewalling and obfuscating is perfectly acceptable behavior. Google has already been accused of being "moral pygmies" by one influentail politician, a man (the late Tom Lantos) who was prone to bluster as much as anyone but who had a moral compass inside of him that knew where true north was.

But don't think for a minute that there is any other company on the planet that wouldn't sell its users down the river. Google's biggest crime was being clueless about what they were doing and in getting caught.

My point here is, can we trust any mega-provider to provide us the truth about the reliability of their service and how the risk their other business activities incur may affect the service they are providing to us?

If the stock market goes south on them, if they run into a cash crunch, or should they "be struck by a bolt of lightning" (apologies to Francis Ford Coppola) , will they make the argument that they are too big to fail and hold the IT operations of untold numbers of companies hostage?

"Too big to fail" is the most weasely argument I've ever heard. Guys, the Roman Empire was not too big to fail. Nor were countless other empires over the past several thousand years. The Soviet Union was not too big to fail.

And this just in, the United States is not too big to fail. There is no such thing as "American exceptionalism" unless its people and its leaders continue to be exceptional in meeting exceptional challenges. Look around today, what are the odds?

So, it seems as if one of the following scenarios will unfold in the next five to 10 years (from least likely to most likely, imo):

* Cloud proves technically infeasible on a grand scale, fizzles, joins Teletex, ISDN, and "chiclets"

* Conservative IT grudgingly deploys resources to cloud providers, but stealthily builds in 100% local redundancy, thereby negating savings and increasing overall IT costs

* Cloud wins a few high-profile accounts, more than 50% of IT runs on cloud provided by The Big Three providers, things look great all the way to the horizon

* A welter of new providers jumps into the competition, driving utility costs down, increasing the deployment of cloud dramatically, lessening the big vendor's market share to about 30%. The truth no one tells is that companies use multiple vendors for their cloud deployments, just to be safe.

* The above scenario, followed by a big consolidation among a few vendors, led by either a late-to-the-party Borg or by a twin-axis enterprise run by Larry Ellison and Rupert Murdoch. IT rebels and starts moving resources back in-house, the industry is in a huge muddle. An isolated guerilla attack in Moldova or Indonesia precipitates a massive house-of-cards destruction in global IT provisioning, once again it looks like the world is going to end, bailouts ensue, we are told to stop being reliant on oil and change our consuming ways, and a couple of young hackers go to jail for a few months. In other words, the same old same old.

So yes, Cloud Computing will take hold. It holds the promise of reducing costs, increasing corporate agility, and freeing up vast new resources for innovation (more on that in a later post).

But back to the beginning of this column, the most important thing about it is that it will force IT and business to talk--clearly, unambiguously, and maybe some day, honestly.

Cloud's day-to-day benefits will accrue slowly and incrementally, but not fundamentally change the fact that we humans are still in charge. And when humans are in charge, things never turn out as planned.

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More Stories By Roger Strukhoff

Roger Strukhoff (@IoT2040) is Executive Director of the Tau Institute for Global ICT Research, with offices in Illinois and Manila. He is Conference Chair of @CloudExpo & @ThingsExpo, and Editor of SYS-CON Media's CloudComputing BigData & IoT Journals. He holds a BA from Knox College & conducted MBA studies at CSU-East Bay.