Cloud Computing
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The Evolution of Cloud Economics: Where We Started and Where We’re Going

Cloud computing has developed into a valuable tool for the fintech industry, so much so that it’s been identified as a highly sought-after tool for economic acceleration. 

James Farhat, CEO, ACTS
James Farhat, CEO, ACTS

In this guest post for The Fintech Times, James Farhat, the CEO of ACTS, dissects the evolution of cloud computing software, how it’s meeting the needs and outcomes that organisations require, and why the future of cloud computing is set to become highly commoditised.  

Cloud computing has come a long way since its humble beginnings. What we define as cloud computing today began around two decades ago. In its infancy, it represented a means to access software on a pay-per-use rather than subscription basis – and today, software-as-a-service is firmly in the mainstream.

At the same time, the ability for businesses to access computing power from a public cloud service provider, only paying for what they use, and being able to scale capacity on demand was revolutionary.

Back then, the beauty of cloud economics lay in the ability to access shared resources and capitalise on economies of scale. This was made possible through a shared fabric and distributed resources being shared by multiple customers.

Cloud worked in concert with ongoing advances in web and network connectivity, and later automation, to make doing business not only faster and more cost-effective but also much easier.

Where Are We Now?

While this evolution is well-understood in the industry, most businesses still find themselves struggling to understand how they can leverage the cloud not just for the sake of cloud, but to drive better, tangible economic outcomes.

To understand the economics of cloud in the business context, let’s consider the core outcomes that any organisation seeks: driving operational efficiency and growing market share.

So, the obvious first question is, “How can I use the cloud as an accelerant?”

At a basic level, the ability to tap into the data centre of a third party rather than build, operate, and maintain your own is one avenue to remove CAPEX expenditure from the balance sheet. That expense now becomes an OPEX one. It’s a more efficient model, and the savings you realise can be channeled into product and service enhancements that help build that all-important market share.

On paper, the economics of the cloud are compelling. But let’s not forget that technology works for people, not the other way around. The human factor is something many businesses struggle to factor into the cloud economics equation.

Factoring People Into the Equation

Many employees will recoil when faced with the prospect of large-scale change. A data centre administrator who’s been using an on-premise application for a decade might question why they’re being forced to start using tools and processes with which they’re entirely unfamiliar.

That’s perfectly normal. And it’s not just relevant to discussions around the cloud. Any business that procures a new asset or embarks on a merger or acquisition needs to anticipate and acknowledge that some of their people will feel nervous, even fearful.

The Invisible Hand

That’s where the value of empathy can’t be overstated. It’s incumbent upon leaders to prioritise crafting a change management roadmap and balance the business need for change with people’s natural human apprehension.

Leaders need to make people feel safe, as if there’s an “invisible hand” carrying them through what, for many, can be an uncomfortable experience.

Think of it like getting in a bathtub. To be comfortable, you need a blend of hot and cold water. If you add too much or too little of either, you’ll never be able to bring yourself to get in.

The Next Frontier: Looming Market Commoditisation

Businesses need to make sure that they channel consistent energy and effort into bringing their people along on their cloud journeys. That being said, they also need to keep a keen eye on evolving cloud market dynamics – specifically commoditisation.

There are undoubtedly imminent regulatory changes on the horizon. I like to compare this to the evolution and economics of the telephone. In its early years, the telephone was a one-dimensional, isolated service or resource. Today, we’ve moved into a shared telephony fabric. Thanks to some degree of deregulation, there’s greater competition, we’re not tied to one vendor, and we can port our numbers and our services at will.

Right now, that’s what companies like AWS, Microsoft, and Google are all talking about. They’ve got their eyes firmly set on finding ways to run their fabric “somewhere else.”

All this means that the cloud marketplace is set to become highly commoditised and hyper-competitive. The basic underpinnings of computing power, storage capacity, and security that all run in the backend will soon become little more than table stakes, and the game will be won by those who can create and deliver the best context.

Enterprise Architecture Considerations

As the market dynamics between the cloud hyperscalers play out, what can leaders do to ensure their businesses are ready to ride the next wave of cloud evolution?

I believe that architecture considerations should move front and centre. That’s because one of the trickiest challenges you’ll need to master is being able to access and optimise the new capabilities that ongoing innovation is spawning. Every day, vendors and cloud platform providers release thousands of new features. Figuring out which ones you should leverage and how becomes extremely important – but if you get it right, you’ll drive a better economic outcome.

When designing your architecture, ask yourself, “Can I permeate? Am I allowing for fluidity? Am I building a foundation that’s malleable enough that I can quickly adopt a new technology or take advantage of new features, keep on adding them, or even switch among them?”

Ultimately, the future masters of cloud economics will be those who thoughtfully and deftly synthesize their resources. After all, cloud economics is all about resources: technology resources (your software, hardware, tools, security, and cloud platform) and your people.

An adaptive, cloud-centric technology estate that’s functioning like a well-oiled machine will lead to lower costs and happier people. And we all know that happy employees mean happy customers.

This brings us full circle back to my original premise about what constitutes successful cloud economics in the business context – driving operational efficiency and growing market share.


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