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Let It Rise a Special Report on Corporate IT October 25Th 2008

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Let It Rise a Special Report on Corporate IT October 25Th 2008 Let it rise A special report on corporate IT October 25th 2008 CCorpITCOV.inddorpITCOV.indd 1 113/10/083/10/08 110:58:010:58:01 The Economist October 25th 2008 A special report on corporate IT 1 Let it rise Also in this section Where the cloud meets the ground Data centres are quickly evolving into service factories. Page 3 Creating the cumulus Software will be transformed into a combination of services. Page 5 On the periphery The cloud’s communications with its clients will become ever more intelligent and interactive. Page 7 Highs and lows As IT gets cloudier, the economics of the business will change. Page 9 The long nimbus The cloud will make businesses more adaptable, interconnected and specialised and often smaller. Page 11 Information technology is turning into a global cloud accessible from anywhere, says Ludwig Siegele. What does that mean for the way Computers without borders people conduct business? The cloud may be the ultimate form of N THE beginning computers were hu• ingbecame more distributed. globalisation. Page 13 Iman. Then they took the shape of metal Now, this special report will argue, boxes, lling entire rooms before becom• computing is taking on yet another new ing ever smaller and more widespread. shape. It is becoming more centralised Now they are evaporating altogether and again as some of the activity moves into becoming accessible from anywhere. data centres. But more importantly, it is That is about as brief a history of com• turning into what has come to be called a puters as anyone can make it. The point is cloud, or collections of clouds. Comput• that they are much more than devices in a ing power will become more and more dis• box or in a data centre. Computing has embodied and will be consumed where constantly changed shape and location and when it is needed. mainly as a result of new technology, but The rise of the cloud is more than just often also because of shifts in demand. another platform shift that gets geeks excit• The rst computers were indeed peo• ed. It will undoubtedly transform the in• ple. The word originally meant an individ• formation technology (IT) industry, but it ual who solved equations, often using a will also profoundly change the way peo• Acknowledgments mechanical calculator. Hundreds of them ple work and companies operate. It will al• The author would like to thank many people besides those were employed by big companies that low digital technology to penetrate every cited in the text for their time, ideas and kindness during the preparation of this report. They include Marc needed to do a lot of number•crunching, nook and cranny of the economy and of Andreessen of Ning, Brian Behlendorf of CollabNet, Chris such as aeroplane manufacturers. It was society, creating some tricky political pro• Capossella and Tim O’Brien of Microsoft, Simon Crosby of only around 1945 that the word came to de• blems along the way. Citrix, Rob Enderle of Enderle Group, Robert Hodges of Continuent, Dirk Holzwarth of Alstom, Greg scribe machinery. Papadopoulos of Sun Microsystems, Dennis Quan of IBM, But even after that, computing kept un• Promise of heaven Simeon Simeonov of Polaris Venture Partners, Rahul Sood dergoing mutationsor, in the jargon, plat• Here we go again, you may think. In order of SAP and Kishore Swaminathan of Accenture. form shifts. The mainframe, the original to generate new demand, the maturing IT computing platform, was dethroned by industry keeps creating new buzzwords, A list of sources is at minicomputers, which in turn gave way to often with celestial connotations (cyber• www.economist.com/specialreports personal computers, which are now being space, blogosphere), which suggest pushed aside by hand•held devices and some kind of technological nirvana. The An audio interview with the author is at smartphones. With each step the architec• reality is much more down to earth. www.economist.com/audiovideo turethe underlying structure of comput• Hype is indeed rampant in cloud com• 1 2 A special report on corporate IT The Economist October 25th 2008 of cloud service, including web•based Cumulonimbus 1 e•mail or online data storage (see chart 2). A young cloud 2 Cloud computing, average weekly search volumes The best example is Google, the biggest on• Cloud-computing activities, by age cohorts September average 2007=100 line search company by far, which now of• April-May 2008, % of users* fers a plethora of web•based applications 1,000 Ages 18-29 50-64 All internet users/ † such as word•processing or online spread• 30-49 65+ (All laptop users ) 800 sheets. 0 25 50 75 100 600 Learning to oat 56 Web-mail services (64) 400 Companies, too, have been moving into the cloud, albeit much more cautiously. Fi• Store personal 34 200 photos (44) 100 nancial institutions in particular have for some time been building computing 0 Online 29 SOND JFMAMJJAS grids. Firms that provide enterprise soft• applications (38) 2007 2008 ware as a service (SaaS) over the internet, Source: Google Trends Store personal 7 such as Salesforce.com and NetSuite, have videos (13) been growing steadily. Pay to store 2 IT 5 puting. The term entered into •speak In the years to come companies are like• computer (10) only a year ago and has spread vora• ly to venture much farther. For one, opera• files online ciously. Cloud conferences and cloud blogs tors of computing clouds such as Amazon Back up hard drive 5 are multiplying almost as quickly as cloud and Google have shown that this is a far to an online site (9) start•ups. Established IT rms are slapping more ecient way of running IT systems. Have done at 69 the new label on old gear. Secondly, many rms will nd they have least one activity (79) In fact, the cloud craze may have no choice. The way in which their IT infra• Have done at 40 peaked already, if the number of Google structure has grown is proving unsustain• least two activities (52) searches is any guide (see chart 1). Cloud able. Most corporate data centres today are *Survey based on 1,553 internet users computing is bound to go through a complex warrens of underused hardware Source: Pew Internet & †35% of internet users, connecting trough of disillusionment, as Gartner, a that require more and more people, space American Life Project to Wi-Fi away from home or work research rm, calls the phase in the hype and power to keep them going. The current cycle when technologies fail to meet ex• economic malaise will increase the pres• lation and worries about the safety of both pectations and quickly cease to be fashion• sure on companies to become more e• personal and corporate data. able. Much still needs to be invented for cient. More has to be done with less, which Irving Wladawsky•Berger, a technol• the computing sky to become truly cloudy. is cloud computing’s main promise. ogy visionary at IBM, compares cloud Yet even if the term is already passé, the This special report will chronicle the computing to the Cambrian explosion cloud itself is here to stay and to grow. It fol• rise of the cloud and try to predict where it some 500m years ago when the rate of lows naturally from the combination of is heading. It will start by looking at the evolution speeded up, in part because the ever cheaper and more powerful proces• technology. Computing clouds are im• cell had been perfected and standardised, sors with ever faster and more ubiquitous mensely complex, but can be roughly di• allowing evolution to build more complex networks. As a result, data centres are be• vided into three layers: infrastructure, ap• organisms. Similarly, argues Mr Wladaw• coming factories for computing services plications and the periphery where they sky•Berger, the IT industry spent much of on an industrial scale; software is increas• meet the real world. These will be discuss• its rst few decades developing the basic ingly being delivered as an online service; ed in turn. The report will go on to consider components of computing. Now that and wireless networks connect more and the impact the cloud will have on the IT in• these are essentially standardised, bigger more devices to such o erings. dustry and the economy as a whole. The and more diverse systems can emerge. All this allows computing to be disag• conclusion will look at what might stop For computing to reach a higher level, he gregated into componentsor services, the cloud from growing ever thicker: regu• says, its cells had to be commoditised. 7 in IT parlance. This is why European tech• nologists such as Lutz Heuser, head of re• search at SAP, a German software giant, like to refer to it as the internet of ser• vices. The cloud metaphor seems more apt. The internet is used mainly by people with personal computers and a physical network connection. Cloud applications, on the other hand, will be used by billions of devices of all kinds, many of them un• tethered, but will be connected to the in• ternet of things. In some ways the cloud is already hang• ing in the sky, especially for consumers. Ac• cording to a recent study, 69% of Ameri• cans connected to the web use some kind The Economist October 25th 2008 A special report on corporate IT 3 Where the cloud meets the ground Data centres are quickly evolving into service factories T IS almost as easy as plugging in a laser of them one•o designs that have grown Iprinter.
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