Who should get the credit? The person to came up with the idea? Or the person to did something with it?
I’m with the implementers. Thomas Edison might be remembered for the lightbulb, but Samuel Insull‘s hard work enabled everyone to have one in their homes. We also forget that it wasn’t even Edison who invented electric light (though you could argue that he perfected it). Edison was one of many who happened to have the same good idea. Insull changed society forever.
The wisdom of the crowd seems to have decided that both cloud computing and its sibling SaaS are cost plays. You engage a cloud or SaaS vendor to reduce costs, as their software utility has the scale to deliver the same functionality at a lower price point than you could do yourself.
I think this misses some of the potential benefits that these new delivery models can provide, from reducing your management overhead, allowing you to focus on more important or pressing problems, through to acting as a large flex resource or providing you with a testbed for innovation. In an environment where we’re all racing to keep up, the time and space we can create through intelligently leveraging cloud and SaaS solutions could provide us with the competitive advantage we need.
Could and SaaS are going to take over the world, or so I hear. And it increasingly looks that way, from Nicholas Carr‘s entertaining stories about Sameul Insull through to Salesforce.com, Google and Amazon‘s attempts to box-up SaaS and cloud for easy consumption. These companies massive economies of scale enable them to deliver commoditized functionality at a dramatically lower price point that most companies could achieve with even the best on-premises applications.
This simple fact causes many analysts to point out the folly of creating a private cloud. While a private cloud enables a company to avoid the security and ownership issues associated with a public service, they will never be able to realise the same economies of scale as their public brethren. It’s these economies of scale that enables companies like Google to devote significant time and effort into finding new and ever more creative techniques to extract every last drip of efficiency from their data centres, techniques which give them a competitive advantage.
I’ve always had problems with this point of view, as it ignores one important fact: a modern IT estate must deliver more than efficiency. Constant and dramatic business change means that our IT estate must be able to be rapidly reconfigured to support an ever evolving business environment. This might be as simple as scaling up and down, inline with changing transaction volumes, but it might also involve rewriting business rules and processes as the organisation enters and leaves countries with differing regulation regimes, as well as adapting to mergers, acquisitions and divestments.
Once we look beyond cost, a few interesting potential uses for cloud and SaaS emerge.
First, we can use cloud as a tool to increase the flexibility of our IT estate. Using a standard cloud platform, such as an Amazon Machine Image, provides us with more deployment options than more traditional approaches. Development and testing can be streamlined, compressing development and testing time, while deployed applications can be migrated to the cloud instance which makes the most sense. We might choose to use public cloud for development and testing, while deploying to a private cloud under our own control to address privacy or political concerns. We might develop, test and deploy all into the public cloud. Or we might even use a hybrid strategy, retaining some business functionality in a private cloud, while using one or more public clouds as a flex resource to cope with peak loads.
Second, we can use cloud and SaaS as tools to increase the agility of our IT estate. By externalising the the management of our infrastructure (via cloud), or even the management of entire applications (via SaaS), we can create time and space to worry about more important problems. This enables us to focus on what needs to happen, rather than how to make it happen, and rely on the greater scale of our SaaS or cloud provider to respond more rapidly than we could if we were maintaining a traditional on-premises solution.
And finally, we can use cloud as the basis of an incubator strategy where an organisation may test a new idea using externalised resources, proving the business case before (potentially) moving to a more traditional internal deployment model.
I wouldn’t be too surprised if the Australian government passes legislation requiring all residents to shower with a friend in an effort to save water. We’re in a bit of a bind; the longest drought in living memory combined with global warming and climate change means that there is just not enough water to go around.
It’s not just a lack of water causing problems though. Manufacturing more energy (electricity) requires huge amounts of water (for steam), while manufacturing more water requires huge amounts of energy (for desalination). Factor in a growing and increasingly urban population and you quickly realize that washing your car every few weeks and buying energy appliances just won’t cut it.
Take the electrify industry for example. Today’s electricity utilities follow a model that is relatively unchanged since Samuel Insull’s day. Electrons are manufactured in large power stations before they are trucked down wires to where they are consumed by consumer and industrial devices. Demand dictates supply. Electrons are shared equally among devices and if we don’t have enough to meet demand, then everyone gets less than they need. The result is brownouts: motors fuse, traffic lights dim and people crash. Life generally stops.
Micro-generation and CHP (combined heat and power) will alleviate the problem somewhat, but if we want an electricity supply for a sustainable future then we need to completely rethink how electricity is managed. We need to move from a demand-driven system, to a supply-driven system. Rather than racing to manufacture enough electricity to fulfill demand, the focus would be on effectively using the energy available to us.
The technology required to reinvent electricity distribution is already emerging into the commercial world. The global rollout of smart metering is providing us with the basic infrastructure for a new, smarter energy distribution system. The challenge is to move beyond conventional centrally run demand management programmes, and adopt more distributed approaches. Technology is already emerging into the commercial arena demonstrating the first tentative steps on this journey.
Imagine if we could import the retail electricity spot price into the home or factory via smart metering. We have national energy markets, so why not create an energy market inside our houses? Local generation (solar, wind, CHP) would have a price set based on required required return on investment, while energy is imported (if required) based on the spot price. The decision if and when to consume electricity is then devolved to the appliances (fridge, air conditioner etc) by letting them bid for the energy they need.
The intelligence to support this complex behavior might be buried inside the appliance itself, or mediated via a smart plug. A hot water heater would trade of electricity price, usage profile and current water temperature to optimize its operation. Air conditioners might let the internal temperature rise a couple of degrees if its exceptionally hit out side. A dish washer might wait until a quiet period late at night—long after you’ve gone to bed—before running it’s cycle. Lights would always turn on (of course), but would also turn off again if they cannot detect anyone in the room.
Given an understanding of our usage patterns a market can be used to turn of appliances we don’t need, harvest power then it is cheap (by using waste solar power to pump water up hill), or even sell our excess. Technology enables us to understand our usage patterns and align them with the internal and national energy market to most effectively use the energy available to us.
The new complexity this approach creates could be packaged into solutions. Energy retailers could offer energy plans, analogous to mobile phone plans. Each plan would be tailored to suit different habits and needs. Plans might include value-added solutions, such as installing solar or wind power on premises, integrated into the home market.
In the same way that Threadless and Rolls Royce mined the synergies between business and technology to reinvent their respective industries, some companies might use a supply driven network to transform their business models. Rather than selling electricity (generating more profit by selling more) they might reconfigure themselves into power management companies who help you manage your consumption (generating more profit by selling less). This could range from configuring, monitoring and managing you home appliances to match their performance to your needs, through to installing solar panels on your own roof—at their own cost—so that that they can offer solar power on your internal energy market.
What are the challenges and opportunities created when we move to a supply driven model? What happens when we have supply driven homes? Supply driven committees? Supply driven regions? Or when entire networks become supply driven?
Smart metering and smart plugs are showing us the way. We already have a demand signal, though somewhat delayed, and we can retro-fit appliances with smart plugs to support demand management. The next step is to make this infrastructure a little smarter; upgrading the sensor network to support more distributed command and control, and embedding decision making in the home and, ultimately, the appliances themselves. This enables us to push decision making to the edge of the network where it can scale more effectively, provides us with a generation of much more efficient applications, and sets us up for the future.