Enterprising Developments

Cloudify a Mess, Get a Cloud Computing-Enabled Mess

Joe McKendrick
Insurance Experts' Forum, March 2, 2011

There's been plenty of discussion about the security implications of cloud computing, and many insurance IT executives have been understandably reluctant to move to the cloud for this reason.

But there's always been an underlying assumption that the value proposition of the cloud is too compelling to ignore—the provisioning of applications and processing power almost “too cheap to meter.”

One new study, however, questions the assumption that companies will kick into hyperdrive as they adopt the cloud model.

A recent analysis out of the UK, however, says that aside from some cost savings up front, cloud may not help all that much. Gary Kim, writing in InfoTech, reports that the findings of a report by the Centre for Economics and Business Research concludes that cloud computing is not going to yield much, in terms of growing small business productivity.


Overall, the CEBR analysis is favorable to cloud computing and, indeed, the cost savings are nothing to sneeze at. CEBR estimates that private cloud could cut IT capital costs by at least 17%, along with an 18% reduction in storage costs and 44% in network hardware costs. Adoption of public cloud services could shave 40% off IT capital budgets.

However, as Kim highlights in his article, any benefits beyond cost savings will not be realized. The CEBR reports it examined the productivity metrics of various companies between 1997 and 2007—a period of intense digitization—and found squat. No productivity improvements resulting from technology adoption. There's no reason to assume cloud-delivered IT would change this equation.

The authors of this study hit the proverbial nail right on the head here. Years ago, Michael Hammer, co-author of the classic business book Re-engineering the Corporation, A Manifesto for Business Revolution, put it this way: “Automate a mess, get an automated mess.”

In other words, if you have inefficient processes or a creaky, hidebound management culture, don't expect technology to smooth things over. If anything, it could amplify the problems, and you will be making the same mistakes a lot faster. The move to new technology paradigms needs to be part of an overall transformation strategy, one that emphasizes innovation and inspired leadership. You won't find those qualities in the cloud, just as you won't find them in the server closet.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.


Comments (1)

Can you accurately quantify and assess the cloud as upfront cost savings only? What about the customer? The single most important element/potential of the cloud should be - will it improve/innovate the customer experience?

Overall, discussions regarding benefits and limitations of the cloud is a healthy debate - however, I'm not sure a generalization of its applications can, nor should be stated as fact; there are far too many potential markets and functions to be lumped into this microcosm analysis. The above analogy more likely reveals a nervous sector that see's the landscape changing before them. It is agreed that moving clutter from one closet to another you will still likely have a messy closet. The strategic importance of the cloud provides an opportunity to declutter and reinvent. If you are not measuring the probable and vast cloud assets such as improving the customer-connection, customer retention vs. acquisition, among so many others then I believe this is a short-sided view of its impending growth. Yes, the cost savings study alone should be enough to get ones attention, but virtualization of non-core apps, mobile-ready web, customized/personalized user interfaces, innovating antiquated processes and allowing SME's to evolve along with their customer's expanding social behaviors is without a doubt the future. What the cloud can deliver to a small and medium, as well as even some large enterprises in terms of improving the customer experience was once only available to the richest companies. Whether downplayed or embraced it's truly the democratization of the business-web.

Posted by: Jamie G | March 8, 2011 9:07 AM

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