Ian Rae put up a slide with a less than glowing endorsement on Canadian capabilities and self-worth (along with those of Australians, no judgement)... Can the cloud help fix that?
Rae's working to build Canada's cloud ecosystem by contributing to it directly with CloudOps and "...building long term supportable solutions for just in time, right-sized IT solutions."
CloudOps' goal is to provide Canadian organisations with a home grown alternative to cloud services based in other countries. It's up to Canadians to provide decent cloud based services otherwise the $$$ will just go elsewhere.
Showing posts with label economic benefit. Show all posts
Showing posts with label economic benefit. Show all posts
Oct 15, 2012
Apr 3, 2012
The Need for a National Cloud Interest Group in Canada
It's been a while coming. Many people with whom I have spoken have been saying that there is little in the way of direction in Canada with respect to cloud computing. Such an organization would help to shape Canada's nascent cloud market and would help the Government of Canada develop its national strategy for cloud computing including how legislation would fit into the picture.
Over the past few years, several events that are focused on cloud computing or that have dedicated tracks related to cloud computing have cropped up in the US (see Cloud Connect, Interop, etc.). However, there have been few, if any, national non-partisan conferences aimed at helping Canadian organizations make decisions about cloud computing, whether these organizations are consumers or service providers, for profit or not for profit, government, of private sector.
It is pretty well known that Canada lags behind the United States in terms of IT innovation and adoption rates and cloud computing innovation and adoption is no different. At this point, it is fair to say that we are anywhere between 1-3 years behind. Suffice it to say, Canada needs to catch up. And, as long as there is no unifying organization that can provide some direction and cohesion in the market, it will remain behind with a fractured market and consumers who are confused as to offerings in the market place. Shaping the market and guiding users should be an overarching goal for any national organization.
Another way a national cloud interest group would help advance cloud computing in Canada is by advocating it with the Canadian Government, both from its position as a potential user and its position as legislator and regulator. Relatively speaking, we are still in the early days of cloud computing, but it is not the wild west. Governments are trying to make sense of this new business model. What are the impacts on privacy? What is the impact on e-commerce? What is the impact on the economy? What about jobs? For example, Microsoft recently commissioned a study that examined the question of jobs: the implication is that cloud computing will create 70,000 jobs in Canada by 2015. A national interest group would be in a position to accumulate relevant information and prepare briefs for government officials who are responsible for the day-to-day management of the country and its laws and regulations.
Lastly, it is of paramount importance that any emergent national cloud interest group remains impartial with respect to service providers and not promote one's services over another's; transparency will be key in maintaining impartiality so as to avoid any perception of conflict of interest. This impartiality will be important to maintain the thought leadership that it will inevitably generate through its activities and exposure to the cloud community in Canada and the United States.
Over the past few years, several events that are focused on cloud computing or that have dedicated tracks related to cloud computing have cropped up in the US (see Cloud Connect, Interop, etc.). However, there have been few, if any, national non-partisan conferences aimed at helping Canadian organizations make decisions about cloud computing, whether these organizations are consumers or service providers, for profit or not for profit, government, of private sector.
It is pretty well known that Canada lags behind the United States in terms of IT innovation and adoption rates and cloud computing innovation and adoption is no different. At this point, it is fair to say that we are anywhere between 1-3 years behind. Suffice it to say, Canada needs to catch up. And, as long as there is no unifying organization that can provide some direction and cohesion in the market, it will remain behind with a fractured market and consumers who are confused as to offerings in the market place. Shaping the market and guiding users should be an overarching goal for any national organization.
Another way a national cloud interest group would help advance cloud computing in Canada is by advocating it with the Canadian Government, both from its position as a potential user and its position as legislator and regulator. Relatively speaking, we are still in the early days of cloud computing, but it is not the wild west. Governments are trying to make sense of this new business model. What are the impacts on privacy? What is the impact on e-commerce? What is the impact on the economy? What about jobs? For example, Microsoft recently commissioned a study that examined the question of jobs: the implication is that cloud computing will create 70,000 jobs in Canada by 2015. A national interest group would be in a position to accumulate relevant information and prepare briefs for government officials who are responsible for the day-to-day management of the country and its laws and regulations.
Lastly, it is of paramount importance that any emergent national cloud interest group remains impartial with respect to service providers and not promote one's services over another's; transparency will be key in maintaining impartiality so as to avoid any perception of conflict of interest. This impartiality will be important to maintain the thought leadership that it will inevitably generate through its activities and exposure to the cloud community in Canada and the United States.
Dec 30, 2010
More on Cloud and the Environment
Obviously I've been on hiatus for a little while, mainly due to work obligations (I was Sessional Lecturer at McGill University and taught Managing e-Business to BComm and MBA students this fall in addition to my regular responsibilities). So, without further ado, I'll get on with my post.
This past fall, Jirka Danek, CTO of Public Works and Government Services Canada (PWGSC) addressed an audience regarding cloud computing, the environment, and how Canada can be a leader in this space. I've had several discussions around these points and I'm happy to see that they've been heard and are being promoted.
Essentially, Danek discussed several factors that could contribute to Canada's leadership in the cloud computing space, including:
This merits the industry's attention. The cloud market will grow* to $40.5 billion by 2014 (IDC) and $121.1 billion (MarketsandMarkets) and, since the technology is evolving rapidly and doesn't seem to be a huge competitive differentiator at this time, the larger future economic profits will go to those who have leveraged the cost reducing advantages.
* There doesn't seem to be any consensus on the market size and growth among industry analysts. Evaluation is done using various estimating methods and include or exclude various segments.
This past fall, Jirka Danek, CTO of Public Works and Government Services Canada (PWGSC) addressed an audience regarding cloud computing, the environment, and how Canada can be a leader in this space. I've had several discussions around these points and I'm happy to see that they've been heard and are being promoted.
Essentially, Danek discussed several factors that could contribute to Canada's leadership in the cloud computing space, including:
- Cheap, green energy--Quebec has an extensive hydro-electric power generation infrastructure
- Favorable climate--by virtue of the cooler environmental temperatures, cooling costs would be lower
- Government is moving towards cloud adoption as a means of reducing its costs
- The US, one of the largest global markets, is geographically adjacent to Canada
This merits the industry's attention. The cloud market will grow* to $40.5 billion by 2014 (IDC) and $121.1 billion (MarketsandMarkets) and, since the technology is evolving rapidly and doesn't seem to be a huge competitive differentiator at this time, the larger future economic profits will go to those who have leveraged the cost reducing advantages.
* There doesn't seem to be any consensus on the market size and growth among industry analysts. Evaluation is done using various estimating methods and include or exclude various segments.
Sep 24, 2010
Two years on and SaaS is still around!
I came across an interview I read a while back (August, 2008) in which Harry Debes, CEO of Lawson, claimed that SaaS was a passng fad that would pass like its previous incarnations, "service bureaux" and "application service provider".
Well, here we are, two years later, and SaaS has picked up steam. The main strength of SaaS is the huge savings on CAPEX that Debes neglects to mention in his interview. It's true that, on the surface, SaaS appears to be a form of software license financing; a monthly charge per user that includes licensing and support/maintenance instead of an upfront license fee and annual maintenance fees.
That said, there are benefits for both the customer and vendor. The customer, obviously, benefits from the reduced investment in infrastructure required to run software on premises. The vendor, however, can leverage the same environment for multiple customers which increases the utilization rate of the infrastructure but lowers the monthly cost to its customers (or pockets the extra margin).
Organizations use SFDC because it works and it's relatively cheaper than installing servers and DBs to run a CRM application on premises. If it were not available in a SaaS format, would it be as popular? Possibly. But if it didn't work that well, would it be as successful as either a SaaS or on premise offering? Probably not. The market has a way of weeding out bad software.
Theoretically, all software that is offered on premises and as a service has a tipping point at which the decision to build or buy is made. This is why, regardless of what Harry Debes or Larry Elllison say, organizations need to evaluate the costs of each option, the total cost of ownership, and make an informed decision based on that information and not the hype.
Well, here we are, two years later, and SaaS has picked up steam. The main strength of SaaS is the huge savings on CAPEX that Debes neglects to mention in his interview. It's true that, on the surface, SaaS appears to be a form of software license financing; a monthly charge per user that includes licensing and support/maintenance instead of an upfront license fee and annual maintenance fees.
That said, there are benefits for both the customer and vendor. The customer, obviously, benefits from the reduced investment in infrastructure required to run software on premises. The vendor, however, can leverage the same environment for multiple customers which increases the utilization rate of the infrastructure but lowers the monthly cost to its customers (or pockets the extra margin).
Organizations use SFDC because it works and it's relatively cheaper than installing servers and DBs to run a CRM application on premises. If it were not available in a SaaS format, would it be as popular? Possibly. But if it didn't work that well, would it be as successful as either a SaaS or on premise offering? Probably not. The market has a way of weeding out bad software.
Theoretically, all software that is offered on premises and as a service has a tipping point at which the decision to build or buy is made. This is why, regardless of what Harry Debes or Larry Elllison say, organizations need to evaluate the costs of each option, the total cost of ownership, and make an informed decision based on that information and not the hype.
Jun 9, 2010
More on ROI and the Economics of Cloud Based Services
InformationWeek::Analytics issued a report earlier this month entitled, "Cloud ROI: Calculating Costs, Benefits, Returns," which compares the costs of acquiring hardware and the costs of utilizing cloud based services and the associated ROI. While the basic analysis of the costs makes sense, the comparison is flawed: the difference between the two is cost savings, not ROI.
The spreadsheet attached to the report is fairly straightforward. All costs involved in the acquisition of capital assets vs. leased assets (i.e., on demand) and the related costs are listed and compared. A present value calculation is performed to show the total cost of ownership over a number of years. It is evident that cloud based services are cheaper than acquiring capital assets for the same purpose. This forms the basis for the ROI calculation but the report never actually calculates the ROI; it gives the reader just enough information to be misinformed...
To make the numbers make more sense, the report needs to add a revenue stream. That revenue stream would allow the reader to find the breakeven point. And, if there was enough time, the report could go further and examine the impact of asset lifecycle and the replacement of capital assets versus using leased assets over time. In this case we would see the economic value of using assets on demand instead of acquiring them.
The one statement, from Lew Moorman, Chief Strategy Officer of Rackspace, with which I agree is that organizations need to evaluate how to make cloud based services fit into their IT service catalog rather than whether they can save money by migrating everything into the cloud. The latter discussion is probably not going to be very productive since not all services can be or should be moved into the cloud though, financially, it might make perfect sense. IT and Finance often butt heads.
In previous posts (here and here) I discussed ROI of Cloud Based Services and how it is often confused for cost savings, touching briefly on the concept of breakeven.
The spreadsheet attached to the report is fairly straightforward. All costs involved in the acquisition of capital assets vs. leased assets (i.e., on demand) and the related costs are listed and compared. A present value calculation is performed to show the total cost of ownership over a number of years. It is evident that cloud based services are cheaper than acquiring capital assets for the same purpose. This forms the basis for the ROI calculation but the report never actually calculates the ROI; it gives the reader just enough information to be misinformed...
To make the numbers make more sense, the report needs to add a revenue stream. That revenue stream would allow the reader to find the breakeven point. And, if there was enough time, the report could go further and examine the impact of asset lifecycle and the replacement of capital assets versus using leased assets over time. In this case we would see the economic value of using assets on demand instead of acquiring them.
The one statement, from Lew Moorman, Chief Strategy Officer of Rackspace, with which I agree is that organizations need to evaluate how to make cloud based services fit into their IT service catalog rather than whether they can save money by migrating everything into the cloud. The latter discussion is probably not going to be very productive since not all services can be or should be moved into the cloud though, financially, it might make perfect sense. IT and Finance often butt heads.
In previous posts (here and here) I discussed ROI of Cloud Based Services and how it is often confused for cost savings, touching briefly on the concept of breakeven.
May 19, 2010
More on Cost Savings and ROI
I recently came across the following Google ad on a UK web site.
(The ad, admittedly, was much more fun to watch on the site, with spinning dials and all...)
It was also a link to a calculator to estimate the cost savings that an organization could realize by migrating their users from the traditional MS Office suite (Outlook, Word, Excel, PowerPoint, etc.) to Google Apps provided over the web (Gmail, Docs, Spreadsheet, Presentation, etc.). (This link brings you to the international version of the calculator.) The site allows visitors to calculate their potential savings on a 3 year engagement based on the number of users served, the hourly cost of the IT manager's time, and some basic assumptions on hardware and license costs. By itself, this is a compelling argument to switch to SaaS.
The interesting thing about this ad, is that Google called it the 'cost savings' and not the 'ROI' of switching to Google Apps. The calculator does the calculations and then shows the costs of both MS and Google scenarios and the difference in TCO between the two. If one is lower than the other, there is a cost savings for switching to the solution with the lower TCO.
Kudos to Google for getting it right!
May 17, 2010
What, exactly, is ROI?
The acronym, ROI, means 'return on investment'. In other words, if I make $1.10 for every $1.00 spent on a project, my return on the $1.00 invested is 10%. Used in the context of cloud computing, this is incorrect.
When we talk about the economic benefit of cloud computing, we assess the difference between the total cost of ownership (TCO) of owning and operating the necessary infrastructure to make our applications available to customers and the TCO of of leasing that same infrastructure on demand. All else being equal, more than likely, the cost of owning and operating will be higher than leasing on demand. This is a cost saving proposition, not a ROI. In this case, we should be looking at the breakeven point--the point in time at which we have paid off the expense and get into the black.
What is usually missing from the evaluation of these cost savings is the sunk cost of application development: either way, those $ are going to be spent and are considered to be an investment. Aha! Now we're talking about investment. If TCO is (assumed) to be lower when leveraging a cloud environment, then it follows that the ROI will be higher.
Consider the following basic scenario:
Note that the OPEX is higher in the lease/on demand scenario. This is because most of the CAPEX that would have been incurred in an ownership scenario become OPEX in a lease/on demand scenario. So, when comparing the ownership and lease/on demand scenarios, the economic benefit, or return on the initial development investment, would be greater in a cloud based scenario. If we had considered an pre-existing application and its displacement to the cloud, then we would have been discussing a cost savings, and not a ROI.
When we talk about the economic benefit of cloud computing, we assess the difference between the total cost of ownership (TCO) of owning and operating the necessary infrastructure to make our applications available to customers and the TCO of of leasing that same infrastructure on demand. All else being equal, more than likely, the cost of owning and operating will be higher than leasing on demand. This is a cost saving proposition, not a ROI. In this case, we should be looking at the breakeven point--the point in time at which we have paid off the expense and get into the black.
What is usually missing from the evaluation of these cost savings is the sunk cost of application development: either way, those $ are going to be spent and are considered to be an investment. Aha! Now we're talking about investment. If TCO is (assumed) to be lower when leveraging a cloud environment, then it follows that the ROI will be higher.
Consider the following basic scenario:
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