This is one of the best synopsises I’ve seen for why companies are choosing the could.
By Michael Wolfe, On startup #4 and counting.
- We don’t own servers (we only own laptops for development).
- We don’t have a lab, no data center, no racks, no cables.
- We don’t own software licenses (except for a Rails IDE)
- We store/sync/backup our data in the cloud.
- Our source code control system, bug databases, and Wikis are in the cloud
- We don’t have Exchange or Active Directory (we use Google Apps).
- We don’t own enterprise software (we use services like Expensify, Zendesk).
- We are paying almost nothing (in our case $2/day) to run a alpha instance of our app at Amazon (via Engineyard).
- As we go into production, that will go up to perhaps hundreds or a few thousand per month to run our service. We will only pay for exactly what we use. (Right now we pay more for coffee than we do to run a production web application!)
- We pay little for bandwidth and power (since we don’t run a production site.)
- We don’t really care much what OS or even web server our service runs on (OK, we know but don’t need to interact with it very much.)
- Our expenses are almost 100% people, not capital. None of our funding has gone to capital. We don’t have any equipment financing.
Net is that cloud computing is:
- Pay as you go
- Completely elastic
- All service/subscription, not product
- Cheap (Amazon has made it a low-margin business)
- Allows you to spend your time on your app, not on servers, software, racks, power, bandwidth, licenses, backup, OS licenses, applying patches, etc.
- Radically lowers the entry barrier for new services, both by startups and increasingly coming out of large companies.
The legacy IT guys are entering a long, slow decline:
- They sell servers – people are going to stop buying servers.
- They sell OS, web server, app server licenses – people are going to stop buying those
- They sell premise-based software licenses – the world is moving to Saas/subscription licensing.
- They have high margins – Amazon (by far the cloud market share leader) has Walmart-like margins.
It is practically a textbook case of a disruptive technology. Smaller companies like mine that can start with a blank slate can run entirely in the cloud with “good enough” technology. But the technology gets better every year. By the time we get to 100 employees, we will still be 100% cloud based. When we get to 1000, we still will. And you will soon see existing SMB and mid market companies running entirely or substantially in the cloud. When that starts to happen, the industry will never be the same
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