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How Cloud Computing is Driving the Next Wave of Productivity

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* The following article recently appeared in Newsweek Japan.
Tech enthusiasts, executives and investors are always looking for the next big, disruptive technology, and they appear to have found it in cloud computing. The movement of IT hardware and software out of offices and factories and onto the web promises to deliver huge cost savings, create new business models, and threaten incumbent technologies and the global corporations that deliver them.

As with any ballyhooed tech revolution, this one is generating lots of hype and smoke. But there’s real fire underneath this trend. Companies already are using the cloud to save money and become more efficient and creative. Wider adoption of cloud computing will lead to a new burst of productivity in the world economy, including in ways not yet widely appreciated.

Consider what I call “employee-led IT.” Cloud computing empowers employees at every level of a company to unilaterally deploy powerful software tools and resources to do their jobs better and cheaper. Once held strictly to the agenda of the central IT department, employees today are taking matters into their own hands by launching websites, applications and other tools quickly and inexpensively as they need them to get more done. This power is unleashing a creative spirit in the frontline employee that will transform many businesses and spark a new wave of productivity. And it is not just employees of established companies who are getting in on the act. This same freedom to deploy powerful computing is enabling entrepreneurs and individuals to get more done at a lower cost in money and time.

Before I show how this is working, let me first make clear what I mean by cloud computing. At its core, cloud computing is nothing more than the ability to buy computing as a service, paying only for what you use. I often compare it to buying electricity from a power company, rather than buying and maintaining your own generator out in the parking lot. Cloud computing not only saves money for businesses; it allows them to focus on what they do best, rather than on buying and maintaining servers and software.

Historically, if you wanted to launch a new employee tool (like, say, a training system) a big hurdle was access to the computing to run the application that stores the content, tracks who views it, and runs learning tests and certifications. You would talk to your IT department, which would in turn hire more staff engineers, add expensive data center space, and order some servers to be delivered, along with networking and security gear.

This initiative would cost big dollars and consume months of effort, while you wait and wait for its completion. Knowing the high costs, in time and money, most managers would not even consider such projects.

Today, however, a whole new model is emerging. Nicholas Carr, an expert on the Cloud and author of the book, “The Big Switch,” was one of the first to compare cloud computing providers to the types of utility companies that have long supplied us with electricity, water, and telephone service. Like those earlier utility services, the cloud is creating a plentiful and easy supply of a very powerful resource.

Leading cloud providers such as Rackspace (my employer) and Amazon Web Services and allow the purchase of computing totally as a service. Go to these provider’s sites, determine how much computing you need, and order it online. Minutes or even seconds later, you have access to machines called servers, which allow you to run powerful business applications. With just a few clicks you can now upload your own application or website.

As you grow, you simply add more computing as you need it. No upfront capital is required. No time is spent messing with the guts of data centers, racking servers or configuring switches.

Not only is cloud computing faster and more flexible, it is cheaper. By pooling resources across many businesses and using software provisioning rather than human operations, cloud computing forces down costs.

Just as the PC era put powerful computing in the hands of all employees, launching the information age and a period of unprecedented productivity gains, the cloud era is adding exponentially to the tool kit now in the hands of each employee.

Today, if you find software that will help you and your team do your job better, you can launch a cloud server, install it in minutes, and get right to work. This is not a minor change. In most companies today, server provisioning times run around nine weeks. Nine weeks until you can even start your project! Recently, we had a customer run a demonstration of launching a new server on the Rackspace cloud and provisioning a WordPress blog on that server. The whole demo took 9 minutes! And, it cost 1.5 cents an hour to run – a fraction of the price that customer would have paid to build the same capability on its own, or through traditional hosting.

And it gets better. You can now easily and cheaply use software from companies that have built their businesses on cloud computing. This new model of delivery, called software as a service, offers a turnkey option of delivering applications (think of that training program or blog software) bundled with computing. Now, you don’t have to set up anything. Want a new tool? Find a vendor, sign up online and you are off and running. Given the cost savings inherent in cloud computing, the tools are accessible for extremely low rates. Need a team area where your employees can share updates, store documents and chat? There are hundreds of tools available you can launch now for a few dollars a month.

This vast expansion in access to computing and software tools can profoundly enhance the productivity of a company that adopts it – and the productivity of the world economy. IT can now reside, literally, everywhere in a company.

What does this mean to you, if you’re an executive or manager? If you don’t have teams experimenting with new cloud-computing tools, they are falling behind. What does this mean to you as an investor? If the companies in your portfolio aren’t embracing the cloud, they will lose out to competitors who are.

At my company, Rackspace, we are seeing an exponential increase in the number of tools, and advances in their use, that are percolating up from frontline employees. And, the results of those innovations are real and tangible. Let me give you a few examples.

Our marketing team has a problem. It needs more information, faster, about what on our website is working to attract customers, and what is not. Once team members have that information, they need the ability to respond in a snap. How do they do it? They use cloud computing.

Today, they tap into Omniture’s online suite, which they can set up with just a few clicks. From an online dashboard they can see virtually real-time stats on which pages and features customers are viewing on our website, and which ones tend to drive them away. With this data, our marketers can change the design and content and navigation or the site, add new headlines and text, try new promotions — and see the results in minutes.

Next, our marketers need to figure out what our customers and potential customers are thinking. How about a survey? Today, our employees can craft a questionnaire in seconds, using the survey tools online at checkbox.com, and send it to our user base. The
results are available almost immediately, as responses flow in, and are presented complete with graphs and breakdowns that help our team make decisions.

Now, it’s time to act. Want to run a new promotion? We can build a quick promotion site and host it rapidly on Rackspace Cloud Sites. It takes about 5 minutes to get the infrastructure up and running and robust enough to handle even the most viral and successful offers.

Want to send and track an email campaign? Icontact or Newsberry have us covered. In minutes and for a few dollars, our promotional email is out, and results start coming in with stats on every click that it produces.

Our marketing team is smaller than it was 5 years ago. Yet it is handling more spending and more data, and is generating far more revenue, than the old, larger team — all thanks to tools made possible by cloud computing.

Name any function in your company and you can perform it more effectively and less expensively using cloud computing tools. At Rackspace, customer service is our lifeblood. We call it Fanatical Support. Walk the floors of our company and you will see support teams using all sorts of cloud-computing tools to serve customers better and faster.

When we need a knowledge base to ensure that vital common knowledge is shared and that new employees can be brought up to speed quickly, PBWiki has us covered. Teams can put all their shared knowledge there (e.g. how do you add a new server to a secure network?) and have it accessible and searchable to the team in minutes.

Want to shoot a video of how to use a new online product or tool? Demo-builder.com will record the actions you take on your computer screen, along with your oral instructions. You can add the video to a website where your customers can see for themselves exactly how to solve a common problem with their servers or email.

At Rackspace and other companies that are embracing cloud computing, we constantly see fresh examples of bottom-up innovation happening on the fly to solve real problems faced by our customers and employees. Thanks to cloud computing, every employee now has the power to take control of her work, improve it and make her customers happier.

This is no small trend. Cloud computing is spreading rapidly. Costs are plummeting. Tools are proliferation. And IT departments are scrambling to adapt. How do they add value to this new way of delivering computing? They can help validate tools, integrate them to core systems, and manage the cloud computing relationships including the contracts. But IT departments need to change their focus. Though computing is more distributed today, each company’s needs to evolve its own IT strategy, by a core group that spends its days thinking of and working on nothing else.

In the early days of adoption, IT departments should focus on bringing cloud-computing ideas to the employees who might not know how the new tools can make them more effective. The key task for IT employees is to make cloud-computing easier for everyone in the organization, while keeping it safe and secure. The winning IT organizations are figuring it out.

Cloud computing will not only make companies more productive; it can do the same for individuals. It is accelerating a trend already underway: the rise of the “free agent” business. Daniel Pink wrote about this trend in his book “Free Agent Nation.” In the US some estimate that 50% of employees will be self employed in the coming decade, most working as free agents selling their expertise. Cloud computing makes this outcome much more likely. It has never been easier to go online and set up a business.

From online templates for legal contracts to email services to web-based invoicing and accounting capabilities, the tools needed to run a business are more plentiful, easy to use, and affordable than ever before in human history. To take just one example: Some 10,000 small businesses, including many one-person companies, are using Freshbooks, a powerful invoicing and bookkeeping tool that costs less than $20 a month.

The power of this development is that the capital needed to start a business, and the risk of doing so, is now at an all-time low. Individuals in between jobs – or weary of jobs — can simply set up an entity, launch software to invoice and track their clients, set up a website in minutes, and get right to work. The results will be many more small businesses, the engine of economic growth.

Finally, the cloud is not just for businesses and employees. It is changing our private lives just as profoundly. The Apple App Store is a product of cloud computing. Today, individual developers are creating tools cheaply and easily that help us get more done. Need directions to the birthday party? Wondering if your flight is delayed? Dying to check the to do list on your computer? Well, as Apple would say, there is an app for that. Cloud computing makes it all possible, and makes it easier to do anything that you want to get done. Google for it, and you will find a service that helps. Groceries lists? Family calendar? Soccer league organization? Fantasy football management? The cloud has a tool for you.

Whether it is making established businesses more productive or helping spawn the next wave of new companies, or giving us back an hour a day that we once spent on chores, cloud computing is already having a measurable impact on our world. It offers, I think, a great reason for optimism about the global economy, and the quality of our lives.

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About the Author

This is a post written and contributed by Lew Moorman.

Lew Moorman is a senior consultant to the top executives of Rackspace, focusing on strategy and product issues. He also serves as a member of the Board of Directors.

Lew joined Rackspace in April of 2000 and has served in a variety of roles, including as President and Chief Strategy Officer, while the company grew to $1.3 billion in annual sales. Before joining Rackspace, he worked for the consulting firm McKinsey & Company, advising technology clients on strategic issues.

A native of San Antonio, Lew received a B.A. from Duke University and a J.D. from Stanford Law School.


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