A couple of weeks ago I was moderating a lunch time discussion called “The cloud – myths and realities”. Invited key speakers were Graham Taylor who is the CEO of OpenForum Europe, and Mikael Bäck who is responsible for strategy and portfolio management for Ericsson’s fixed and mobile networks. Guests also included members from EuroCloud as well as representatives from several media outlets.
Unlike cloud talk of late, this discussion was refreshingly free from over-hyping, striking more of a “swings and roundabouts” tone.
Graham Taylor’s point on IT savings
Perhaps obvious, but something I must admit I had not fully considered before, was a point that Graham Taylor made about the IT savings often touted as a benefit of cloud computing could partially or fully be eroded by increasing purchasing and legal costs.
My thoughts on the cloud
Having signed contracts for cloud-based services myself I can see Graham’s point. Buying a traditional software license and server is something we all understand and know how to do. We are good at calculating the future costs, judging risk etc. However purchasing cloud-based services is something new. Instead of familiar license and support agreements, there are subscription agreements, service level agreements (SLAs) etc. Since it is new, the suppliers of these services often have rather generous (to themselves) agreements. I have seen examples of service contracts where the supplier reserves the right to “materially change or withdraw” the service with a months notice. How do you judge the business risk of using that?
Perhaps what cloud can save us in our IT departments and on IT services, we will end up spending on more complex purchasing, service monitoring/renewal and legal counsels? Personally, I don’t think that will be the case, at least not in the longer term when cloud services have become more commoditized and we have all got a bit more familiar with procuring as well as using them. Nevertheless, it serves as a reminder that what saves you money in one place often costs you somewhere else.
Mikael Bäck’s observation
Mikael Bäck also brought a swings and roundabouts observation, namely that Ericsson has never been getting as many new big-name customers and partners as they have in recent years when more and more consumer services have moved from the local PC and to the cloud.
It has often been argued that with Google, Microsoft, Apple and others reaching consumers directly through the Internet the telcos are being marginalized. You know the story—what used to be our mail program, our picture album program, and our music collection on our PCs have now become Hotmail, Picasa, and Spotify. All services in the cloud accessed via the Internet. However with increased use of cloud services come increased expectations on performance, availability, and a great user experience. According to Mikael, the providers of these services are now realizing that in order to deliver a good experience, they are dependent on the networks and infrastructure that consumers use to access the services. This dependency only grows as more service usage moves to the mobile networks.
I asked Mikael whether he thought that all this would lead to mergers between software service providers and telcos. Although he did not exclude it, he initially thought that it would play out as partnerships rather than anything else. I guess for companies like Ericsson who have a fairly finite list of potential customers in the worlds telecom operators, it should make for interesting times if all the sudden the giants of the software industry come knocking on the door. Mikael has said that “selling premium access to the cloud” is part of Ericsson’s strategy. Question is who pays the bill – the consumer or the cloud service provider?