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Days of Reckoning for the Cloud

Anyone who has been in this business for more than a couple of years knows that new technologies and delivery systems go through a cycle of hype, disillusionment and then either boisterous recovery or quiet irrelevance. The Cloud, as it relates to enterprise adoption, appears to be entering its do-or-die period.

The idea of contracting out for communications service and capability has been around for a long time. Companies that either can’t afford in-house expertise or who prioritize other types of expenditures have been able to buy services from a wide range of providers. And time-sharing on a large computing or communications platform was the original IT model.

Now it must be emphasized that what's being offered to the market today isn't what was being offered to previous generations. Amazon and other large Cloud providers have built massive facilities that run on virtualized systems that make multi-tenant and multi-tasking both practical and affordable (even if the service isn't always available). And communication companies like Twilio and Voxeo have built software stacks and apps that can be plugged onto a platform much more quickly than was ever the case before, and which enable capabilities, either for specific verticals or the broad market, to rapidly go up or be torn down.

These capabilities will only become more sophisticated and nimble in the coming years. Smaller/mid-sized companies and, in particular, start-ups that need to invest in engineers and sales people rather than IT staffs, will continue to heavily rely on Cloud-based services and systems.

Moreover, the longer the economic blahs continue, the more pressure there'll be on companies to focus on core competencies, a list that may or may not include IT or comms. The tough economic times also create more incentives to push expenditures from the CapEx to the OpEx side of the ledger.

So, while there's no question that the Cloud will become a permanent part of the landscape, it's far from clear just how tightly enterprises will embrace it. Enterprises have IT staffs, they often have huge sunk investment in IT/comms hardware and software and, in many industries, corporate data and communications--and the systems and networks on which they run--are the organization's life-blood. Indeed, it's hard to think of an industry that doesn't depend on IT for essential activities, both internal and customer-facing.

So, when I saw this headline a few days ago on the LinkedIn CIO Network--"New data from 1,200 top execs in US. IT outsourcing takes big turn back since mid 2011 and insourcing increased 35%. This is huge change. What are you seeing?"--it gave me pause. While much of the discussion resulting from the post focused more the fate of off-shoring, there was also a strong theme about outsourcing in the context of Cloud communications and IT. Here is a sampling of the comments:

* "It's important to recognize that an outsourcing company both pays salaries and makes profits from your contract, so if you're paying less, you're getting the services of a less expensive employee set, get less units of total service, or a combination. This can make sense in repetitive jobs that are not core to a business where you can constrain focus and impact."

* "I do agree with outsourcing, just not across the globe...too inefficient. Companies need to stay focused on what they are good at...and keep their business model based on being both low cost and communication being in real time (sic). If you do this, then offshore won't be quite so attractive."

* "I think IT service delivery is and must become more productised--so instead of offshoring or outsouring in entirety, a mixed economy model is where Cloud allows us to go. I don't have a clear view of what would be right in this regard in my business, but I am committed to ICT as a Service for my customers. I also believe IT professionals need to spend more time working with services to develop and implement capabilities that enable services to innovate--much of the time the business can't fully articulate what it wants and I think this is the strategic role for IT."

* "People, there is no magic bullet, stop looking for it. No one will ever love your infrastructure as much as your people do unless you pay for that level of love, and you know how expensive paying for love can get."

Lots of opinions and points of view. What's clear is that the Cloud isn't going away, but enterprises will be wrestling with what and how much to shift to the Cloud for years to come.