The Cloudy Future of Corporate IT

As cloud computing gathers momentum in the business world, so too do its critiques and detractors. They tell us that the cloud is insufficiently secure, robust, and stable. That it might suffice for lower-level activities like email and calendaring, but won’t handle chores that require massive computational power, transaction volumes, or bandwidth. That it’s not well suited for a truly mobile worker. That cloud applications are trivialized versions of desktop and client-server ones. That to give up local control over data, software, and infrastructure is to strike a Faustian bargain — one that will someday bring grief. That the full-fledged desktop computer and self-managed data center are here to stay because real industrial strength corporate computing require them. That the cost savings available from the cloud are minimal or nonexistent. And so on…

None of these claims is ridiculous. Each of them, in fact, has a lot of merit. But how many of them have lasting merit? As I listen to most critiques of the cloud I’m not sure if they’re addressing the cloud as it exists now, or the cloud as it will ever exist.

I was reminded again recently of how critically important this distinction is as I was doing background reading for the book I’m digging in on (book #1, on Enterprise 2.0, comes out later this year). This book will be about IT’s impact on business and competition. To better understand this phenomenon I’ve been learning about previous technologies that were a big deal for the economy. Electricity is one of the most obvious of these, and anyone hoping to understand the digitization of business will learn a lot of lessons from the electrification of American manufacturing.

I came across a wonderful 1983 paper by Warren D. Devine, Jr. in the Journal of Economic History called “From Shafts to Wires: Historical Perspective on Electrification.” Devine combed through the contemporaneous business and technology press to learn what ‘experts’ were saying as manufacturing switched over from steam to electrical power, a process that took about 50 years to complete.

Three main points stood out for me as I read this paper with cloud computing in mind:

The real impact of the new technology was not apparent right away. Electrical power didn’t just save costs or make factories a bit more efficient. It allowed radically new designs and approaches. Prior to the advent of electricity, factories were powered by a single big steam engine. This power source drove all the machines in the plant via a complicated system of shafts and belts, an arrangement know as ‘line drive’.

Electric motors were first used as simple replacements for steam power, and factory layouts remained unchanged. But engineers and designers eventually realized that electric motors could be shrunk down and used to power smaller groups of machine in a configuration called ‘group drive.’ This reduced power losses from friction, let parts of of the factory run independently of each other, and increased uptime. Motors were then shrunk even further and applied to each individual machine; this ‘unit drive’ arrangement is the one we still use today.

The shifts from line drive to group drive and group drive to unit drive opened up new possibilities for reconfiguring factories, allowing them to become bigger, more efficient, more flexible, more robust, etc.. US manufacturing became enormously more productive in the first decades of the 20th century. This was not so much because electrification let motors become better, but because it let factories become better.

This happy result was not obvious at the dawn of the electric era, when electricity was seen just as a replacement for previous power sources. Devine includes a couple great quotes to this effect. Prof. F.B. Crocker of Columbia wrote in 1901 that:

There were many factories which introduced electric power because we engaged to save from 20 to 60 percent of their coal bills; but such savings as these are not what has caused the tremendous activity in electric power equipment that is today spreading all over this country . .. those who first introduced electric power on this basis found that they were making other savings than those that had been promised, which might be called indirect savings.

He cited many types of ‘indirect saving.’ For example, electrification eliminated the need for overhead shafts. With them gone, overhead cranes could be installed to carry heavy loads. In 1895, Crocker said:

I do not think any of us rightly conceive of the great convenience and rapidity of work that is coming from the handling of our… loads by [cranes]… this is going to be one of the direct results of the clear headroom brought about by the use of motors.

By 1912, Devine points out, writers about factories considered the value of cranes “so generally recognized as to require no comment.”

The transition to full exploitation of the new technology was long, but inevitable. Electrification of industry in the US began around 1883 and continued for more than half a century. Devine shows that as late as 1930 nearly 20% of factory power was still supplied by steam engines; he also notes while line drive configurations became rare after World War I, they persisted in some old factories into the 1960s.

Full electrification took a long time for a couple reasons. For one thing, it was often cheaper to continue running an old factory the old way than it was to build a new electric one, or even to replace a steam engine with an electric motor. Electrification also required the development of power generating utilities and a transmission grid, both of which took time. It also took time to spread the word and the knowledge about the new technology throughout different regions and industries.

Despite these impediments, though, the march of electrification was inexorable. In most sectors a factory that continued to rely on steam power, or on line drive or group drive configurations, would simply find itself unable to compete with an electrified rival using motors and unit drive. The factory using the legacy technology would be too much less productive, efficient, and agile to stay in business.

At the turn of the 20th century electric motors and unit drive seemed the stuff of science fiction; Crocker wrote in 1895 of “the extreme view… that a motor should be applied to every tool.” But by the 1920s this extreme had become the norm.

There were detractors and skeptics about the new technology throughout the transition. In 1891, Dr. Louis Bell presented the results of his analysis showing that electricity made sense in situations where only small amounts of power were required, but steam was best otherwise. And experts argued about the right answer for powering and configuring factories throughout the following decades. As Devine writes:

… the merits of driving machines in groups or driving them individually were discussed in the technical literature throughout the first quarter of the twentieth century. Between 1895 and 1904, this subject was vigorously debated in meetings of technical societies; neither technique could be said to be best in all cases… And, over 20 years later, group drive was still being strongly recommended for many applications… Two textbooks printed in 1928… make it clear that there were many situations in which group drive was justified.

The people arguing for steam power, line drive, and group drive may not have been wrong about the ‘right’ answer at their particular point in time, but I’m left with the impression that they were concentrating on a moment and ignoring a trend. In other words they were making simple static calculations and failing to take into account that technical progress would, within a few short years, cause the same calculations to come out very differently.

This short-sightedness matters because factory owners made long-term bets at the time they built their plants. If they built for steam power or line drive or group drive they were constrained by these choices, and often unable to take full advantage of electrification even when they woke up to its power. A factory configured for electricity and unit drive from the get-go, in contrast, could take full advantage of all the direct and indirect benefits of electrification as they presented themselves over time.

I hope my purpose here is clear. I’m not bringing up this chapter in business history just because it’s interesting (to me, at least). I’m bringing it up because the analogies between electrification and cloud computing are very tight ones, and are highly relevant for anyone trying to understand how the corporate cloud is going to play out.

So based in part on what I’ve learned about electrification, here’s are my predictions about the move by businesses to cloud computing: It’s going to be a long transition, but an inexorable one. There will be skeptics all along the way, many of whom will have objections and arguments that are valid at particular points in time, but not over longer periods of time. And the longer time periods are the ones that matter, because the move to the cloud is going to be accompanied by benefits that we can’t yet perceive, but that will be substantial.

I believe that what Nick Carr calls The Big Switch is underway. Business computing is in the process of moving to the cloud just as surely as factories moved to electrification about a hundred years ago. We’re at the early stages of this process and it will take a long time to unfold, but it will happen. And business owners who ignore this transition or choose not to participate in it will eventually find themselves constrained and left behind to the same extent as factory owners who sat out electrification.

I know that at present the answer to the question “Should we move this task / process / application to the cloud?” is usually “Well, it depends.” But that’s only because we’re at the relatively early stages of the long transition period. The day will come, probably sooner than many of us think, when the answer to that question becomes simply “Yes.” (or, more likely, something like “Well, duh.”).

There’s clearly a great deal more to say about cloud computing and the transition we’re now going through, and I’ll be writing more about it here and elsewhere. I wanted to kick this topic by looking at a relevant previous period in business history because as Mark Twain said “The past may not repeat itself, but it sure does rhyme.”

What do you think? Do you think the move to the cloud is inevitable? If not, what are the best arguments you’ve heard for why business computing will remain locally owned and operated? And do you think the example of the electrification of industry is a useful one for understanding how cloud computing will play out? Leave a comment, please, and let us know.