Current Business Forecast: Cloudy

I have an article coming out in the November issue of Harvard Business Review telling non-IT executives (HBR’s core readers) what they need to know and do about cloud computing. I make the argument that the move to the cloud is inevitable because of the advantages it offers, so companies and their leaders need to start planning for it now. The cloud will be about as big a shift, both for the IT department and the business as a whole, as the PC and the Internet combined.

A post in today’s New York Times Dealbook blog reinforces the idea that something big is going on in the world of corporate computing. As Evelyn Rusli writes

Silicon Valley’s largest venture capital firms are raising their stakes in so-called enterprise companies, which provide software, analytics and other services to business customers.

They are betting that the emerging players in this space, typically considered the least sexy part of technology, will siphon market share from lumbering giants like Oracle and Microsoft.

“There’s a manifest destiny, and the old guard is slowly being shunted aside, as start-ups eat their lunch,” said Scott Weiss, a partner at the venture capital firm Andreessen Horowitz, whose portfolio includes enterprise players including the data storage service Box and the software maker Asana.

The technological and cultural gap between the giants and the start-ups is vast. Enterprise services have commonly featured costly, multiyear licensing agreements, installed proprietary software and in-house solutions. But the old model is eroding, disrupted by a new group of Web-based companies that offer their products remotely, through what is known as the cloud.

My article and the Dealbook post both make the point that leading tech-heavy companies like Netflix, Zynga, and Twitter are cloud-centric, and don’t buy traditional enterprise IT infrastructure. Weiss makes the amazing (to me, anyway) statement that none of Andreessen Horowitz’s 60 portfolio companies has installed on-premise database software from Oracle.

Oracle, SAP, Microsoft, EMC, and a few other enterprise IT vendors have become so deeply entrenched in most industries that it’s very hard to think of companies scaling up without them. Yet this is exactly what’s happening now in the era of cloud computing, at least within the tech sector. It’ll be fascinating to watch two developments: how quickly other sectors follow suit, and how the old guard of enterprise vendors reacts to the cloud and its upstarts. Fascinating for entrepreneurs, investors, corporate decision makers, and students and scholars of business history.

The early pages of the next chapter of that history are being written right now. My HBR article sketches out why it’s an important chapter, and what I think the next few pages will be. Where do you think the cloud is headed? How quickly will mainline enterprises move into the cloud, and who will be the main beneficiaries of this shift? Or is this all much ado about not much? Leave a comment, please, and let us know what you think.