The Innovative Disruption of the Cloud

During the recent Azure nationwide tour, James Staten, general manager of Cloud and Enterprise Strategy for Microsoft introduced a phrase that should be the mantra for all organizations competing in today’s economy, “If you don’t disrupt, you will be disrupted yourself.” During the following session, a presenter then demonstrated the speed and agility of Microsoft Azure by provisioning a SQL Server with half a terabyte of memory within minutes. What was even more impressive, however, was when he revealed the “dynamic pause” feature which enables efficient optimization of its resources. In the cloud, you only pay for what you use. In other words, a business only has to pay for a SQL Server when the server is actively working and adding value to the company. When it isn’t contributing it can simply be put on hold by the click of a button. That, ladies and gentlemen, is disruption. (To learn more about cloud expenses, see How Cloud Hosting Costs Can Creep Up on Unsuspecting Companies.)

Access Trumps Ownership

In 2001, author Jeremy Rifkin released the book, “The Age of Access,” in which he argued that we are entering a new era in human civilization and business in which ownership of assets is no longer a winning strategy. He argued that as long as you have access to an asset, who owns it is irrelevant. Says Rifkin, “Ownership of physical capital, however, once the heart of the industrial way of life, becomes increasingly marginal to the economic process. Concepts, ideas and images – not things – are the real items of value in the new economy.”

Consumers have enjoyed the benefits of subscribing rather than buying when it comes to items such as a cell phone or a TV satellite dish for many years. The cloud is now allowing this on a grand scale when it comes to server infrastructure. A business doesn’t need to own a data center any longer, it just needs access to one. As Forbes Magazine wrote in 2014, “The world’s most advanced technologies are not only available to large enterprises who can afford to maintain an expensive IT staff, but can be accessed by anybody with an internet connection.” Somehow we have reached a time in which an on-premise data center with a full IT support staff is no longer an inherent advantage for larger enterprises.

This isn’t just about cost savings, however. As Mike Webster, senior vice president of Oracle says, “While cost savings provided by a cloud-based IT model drives many decisions, they obscure what I consider the cloud’s biggest benefit: accelerating speed to value by delivering innovation faster.” Clayton Christensen, Harvard Professor of Business Administration and acclaimed author and consultant coined the phrase, “disruptive innovation.” He describes it “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.”

Size and Legacy No Longer Matter

Economic Darwinism as it applies today doesn’t mean that the biggest will prevail. It means that the most innovative will prevail. In fact, economic Darwinism is more prevalent than ever before in a global economy in which competitors in nearly every industry are contending in a race to value. In today’s competitive environment, you must now be able to deliver “what you know” as quickly as possible, before someone else does or before the window of opportunity begins to close.

In an era in which it was originally thought that corporations would rule the world, disruptors are everywhere and they are more than a mere nuisance for even the biggest players on the block. CNBC recently reported that Uber now accounts for 41 percent of ground transportation charges that workers expensed to their employers in the fourth quarter of last year. Agility and elasticity are the winning attributes in business today and the cloud provides those.

Although they may have been late to the game, today’s largest enterprises are scurrying to the cloud and transforming their infrastructure from the rigid and unyielding hardware-based data center to a software-driven one in the cloud. GE announced last year that it is scaling 34 data centers down to four which will only host GE’s most critical secrets. Everything else is being migrated to Amazon Web Services. GE’s CIO, Jim Fowler, reiterates the innovative speed which the cloud has brought them in describing a configurator application used by salespeople. Prior to the cloud migration, changes to this critical application took 20 days. Now they can deploy code in less than two minutes. It is examples such as this that has driven more than one million customers to AWS as of last year. Microsoft Azure, Google, VMware and other cloud providers are reporting unparalleled growth as well. (For more an AWS, see Are You Missing Out on Amazon Web Services?)

Disruption Is Here to Stay

If the cloud provides the infrastructure to implement disruption throughout markets and industries, it is the app, that unintimidating foot soldier of the cloud that delivers new ideas, products, services and innovation in real time. The app is able to obtain nearly ubiquitous presence in the daily lives of potential customers and is able to accomplish this completely under the radar of its established legacy competitors. Through installed beachheads on phones, tablets and other devices, these disruptors can deliver a constant stream of new experiences to their users. These apps are not only the delivery mechanisms of innovation, but also serve as learning mechanisms that absorb information about the users that interact with them. These apps learn the motivations and preferences of users, channeling all of this data into virtual storage pools in the cloud where advanced analytics can dissect this continual information. This allows disruptors to constantly refine and target services and provision new products and innovations. In a breathtaking brevity of time, established static competitors are displaced.

We have witnessed this progression acted out many times in the last several years with disruptors such as Uber and AirBnB. In essence, businesses today must operate at the speed of software, and the software it implements must operate at the speed of business. Behind the scenes, all of this software is orchestrated by the cloud, from which there is nowhere to hide, which means that everything and everyone is vulnerable to its disrupting forces that are echoing throughout the world. It is a whole new world, a world of great opportunity for those who embrace it, and eventual demise for those who choose to ignore it. In the end, disruption is what you make of it.