You can stop writing the $1 million cheque.
I dropped into the Big Picture conference for Microsoft partners at Darling Harbour in Sydney yesterday. It was a showcase for all the elements of the Microsoft cloud – software-as-a-service (Office 365, CRM Dynamics Online, InTune) and platform-as-a-service (the Azure cloud).
Steve Vamos, former CEO of NineMSN and now head of a thinktank called the Society for Knowledge Economics, gave the keynote and made some great points that explained the slow takeup of cloud computing despite its many attractions over on-premise servers.
“The mindset of most organisations and people within them is still industrial age” and as a result we are fixed on the status quo approach to business. There is too much emphasis on hierarchies, lines of command, rigid job profiles and so on, Vamos said.
The classic hierarchical structure, with the boss sitting at the top of the pyramid and a level of management above siloes of employees, was wrong. Instead the actual lines of communication and power looked more like a web.
“We are all players in a social network. The notion that we control any part of it is a delusion,” Vamos said. “The world is now a highly connected, fast changing system.”
Vamos also mentioned how people in their 40s and older were dismissive of Generation Y when really they were much more in tune with a connected world. But the truest part of his speech was how older generations were reluctant to choose better ways of doing things and break out of established patterns.
“The mindset of a connected world is really about embracing change. I don’t think we’re really that good at it, at managing change. It’s not a competency that’s been bred in us,” Vamos said.
Immediately after the speech a Microsoft partner told me about a retail customer who experienced huge amounts of traffic one day of the year. The customer had paid $1 million for 20 servers to handle that peak demand even though the rest of the year the demand was just one-hundredth.
This is a classic case for a cloud solution such as Azure (or Amazon, Rackspace and so on) where virtualised servers can be created on demand to handle peak activity. A business pays several cents per hour for each server and can instantly add as many servers as required to meet a spike in demand.
Then when the peak passes they delete the surplus servers until they are down to the handful required for daily traffic.
The servers are virtual – no-one is running around buying hardware, installing operating systems, loading up databases and connecting it to the network. All a business does is rent capacity from one of these enormous cloud data centres.
It’s a far cheaper, more flexible and smarter way to handle peak traffic.
I asked the partner why on earth he didn’t tell the CEO to stop writing the $1 million cheque and tell him to use Azure instead. Two reasons – the CEO hadn’t heard about it but more importantly he didn’t feel comfortable with the concept.
The CEO, like many others I’m sure, can understand the general concept of cloud computing but needs to be reassured that it will work exactly as advertised in his specific case.
The partner created one virtual server in Azure and showed the retailer how the virtual server’s “heartbeat” and critical statistics could be viewed on the same monitor as the servers in the next room. The CEO has now stopped ordering new servers and has committed to using Azure as the first port of call.
Vamos reminded the audience about two mighty IT manufacturers from the 1980s and 90s who have now disappeared, Wang and DEC. “The reason those companies aren’t here today is their mindset. Because they didn’t change, they died,” Vamos said.
Today’s business leaders are mostly blind to the opportunity for change in front of them. They’re happier writing $1 million cheques for hardware that in many cases is frankly unneeded. All that’s required is a little research and a leap of faith from own-your-own to rent-on-demand from the powerful, invisible networks that support society and business.
“I believe we’re playing catchup. We have to consider whether we as individuals in the way we do our work or as managers in the way we lead are doing it in a connected way,” Vamos said.