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Could Computing: Where is the rain?

Kishore S. S. Swaminathan | Nov. 11, 2010
Cloud computing makes traditional IT better, faster and cheaper and it has the potential to change both the business and IT landscapes in fundamental ways.

Consider construction. In the United States, for example, it accounts for approximately 4 per cent of GDP. But it is made up of architects, builders, workers, material suppliers, construction equipment makers, warehouse operators, building inspectors, and many other constituent parts, all with significant dependencies and a need for coordination. Cloud computing, with its exoskeleton model, can serve the entire ecosystem by consolidating their process and data flows. In other words, individual companies are too small to need ERP-like systems, but the industry as a whole does, and cloud computing makes that possible.

This means that there are lots of white spaces to be filled by IT and a lot of wealth to be created.

Prediction 3: Cloud computing will give rise to what could be called business process utilitiescompanies that provide simple and common business processes (say, sales tax calculation, collection and remission) but on a massive scale that will dwarf todays software-as-a-service vendors.

Companies have many common business functions. While complex operations such as supply chain management typically require proprietary processes, simple business functions such as sales tax calculation, collection and remission are relatively standard and fixed. In todays endoskeleton model of IT, these simple functions are replicated over and over in every enterprise.

Take sales tax, for example. While this may be simple as a business function, managing the IT to support it is anything but trivial. If your company does business internationally, your billing system needs to maintain a tableand people to update it regularlyof sales tax tariffs for every province in every country where you operate. The sales tax must then be remitted to the appropriate tax authority, on time and with the requisite documentation. Today, such functions are executed over and over again (in-house) by every large company.

As companies move to a cloud computing model, it will become economical to source such business processes from the outside. Because of their simplicity, these processes will require no customization and can be taken for grantedessentially a business process utility that ones IT systems can plug into. For providers, the simplicity of the processes means theres no need for variations and customizations, so they can achieve scale by providing the same business process as a utility to thousands of customers.

Today, a few such examples exist. VeriSign provides credit-card authorization to millions of e-commerce vendors, and PayPal provides payment options to small vendors and for small transactions. Cloud computing is likely to give rise to hundreds of such utilities specializing by industry and geography. This, in turn, will make enterprise systems simpler by avoiding the replication and maintenance of common business processes.


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