Tuesday, December 3, 2013

More Sunshine on Cloud Computing

The New York Times and other media are back touting cloud computing.  Cloud computing players will come in all weight classes, but the NYT names the heavyweights as Amazon, IBM, and Google.  Curiously missing  from the roster is HP.

Unfortunately, none of this really makes it any clearer who is going to carry the day as far as supporting the migration of mega-cap, public multinational corporations to a public cloud computing infrastructure. Will one or more of these companies really want their entire IT infrastructure to reside with a bookseller and operator of global merchandise bazaars?  Will a CIO really want to give over her IT infrastructure to Google? This is a company not known for transparency about its own operations or about its actual privacy policies.

All the talk in these articles is about unused, read 'cheap,' computing capacity, or the ability to get the power of a supercomputer by linking hundreds or thousands of servers together.  All of this is very loose talk.

Connecting servers together to do relatively mundane tasks is, or has to become, a commodity function.  Moving an entire corporate IT infrastructure to a public cloud, and for the CEO, CFO, CIO or others to sign off on the existence and effectiveness of a system of internal controls for this kind of setup, is a really risky venture, philosophically, financially and from the litigation standpoints.

Microsoft has reported good uptake of its Azure offerings.  Google claims to have $1 billion in revenues from cloud computing, although with Googleyness, it's not at all clear how this number is derived. HP, on one of its recent conference calls also cited $1 billion of cloud revenue, although the CEO quickly put in the caveat that not all of this number was 'incremental.'  At least she was honest.

Microsoft is also taking out full page ads for large corporate adoptions of  Office 365, and this is part of Microsoft's cloud numbers.  This certainly makes sense for these types of users, and the economics are hopefully superior to the licensing model, as they should be.

If Amazon is indeed selling at 150 times forward earnings, then its domination of cloud computing has already been discounted into its price.

Ask your favorite corporate CIO what he or she thinks about all this.  I'd bet you will hear a litany of buzzwords, and see a rather glazed look in their eyes. If you press for details and numbers, little of value will be forthcoming.

Check the list of risk factors in the 10-K too to see if something is really getting off the ground. Ask what the CFO thinks: most of them are worried about bigger business issues. This story is just beginning, and the real winners may be a different set from that of the New York Times.

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