Friday, February 25, 2011

Advantages of Cloud Computing– Part III – Reduced Cost

As we have stated in other articles, Cloud Computing has its roots in “time sharing” incorporating the latest technologies that have evolved over the past three decades. All technology we have used and will use in the future is ‘transitional’ in nature. It is ridiculous to assume that desktop computers using Windows, Linux, Unix and Mac OS are any more permanent than 8-track tapes, horse and buggies, dial telephones or even typewriters.

Desktop computers, like the ones mentioned above, only exist today because of the denial of access to computer technologies in the seventies. Maybe that’s a good thing, because it eliminated IBM’s monopoly to a certain degree and we benefited from that action. IBM didn’t simply ignore the rise of desktop computers, they avoided them like the plague, and when they discovered the error of their ways it was too late to regroup.

Desktop computers were cheaper to acquire, cheaper to implement and much cheaper to run. By the 1990s all that had changed. Companies such as Forrester Research began releasing their costs analysis using a technique called “Total Cost of Ownership” which proved PCs were more expensive than companies realized, but the analyses was doomed from the beginning because most firms didn’t have the rigor to apply the disciplines necessary to come up with accurate figures.

Too much of the cost of information technology was hidden in everyday activities.  For example, how much paper does a company consume that can be attributed only to data processing? How much time in dollars is lost due to network downtime? How much additional cost can be directly attributed to the electrical infrastructure, etc., etc.

So, desktop computers gained a twenty-year reprieve so-to-speak, to mend their deficiencies and they have failed. Rather than things getting cheaper, the cost of data processing is going through the roof. It’s not just the cost of desktop computers, software programs, maintenance and downtime that are at stake here. The inability to integrate with our trading partners is killing small businesses. Interfacing using parsers like EDI and XML is not integration and integration is going to become necessary if we are to ever compete with companies like Walmart, Couche-Tard and Kroger.

Interfacing vs. integration is akin to the telegraph vs. the telephone. Telegraph required a human at each end of the line who acted as parsers between the sender and the recipient. Using a simple open and close switch, the first operator sent dots and dashes singing over the telegraph wires which were intercepted and decoded by the receiving telegraph operator on the other end, and then delivered via foot or bicycle by yet a third employee of the telegraph company. Telephone, on the other hand, connected two parties together, eliminating the middle-men and removing a great deal of the costs, not to mention the delay inherent in telegraphy.


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