Nicholas Carr Says: The Cloud Is Real Today

During his keynote at the ConnectWise Partner Summit, Nicholas Carr, author of The Big Switch, showed clear evidence that cloud computing is real today.

Following the opening keynote from ConnectWise CEO Arnie Bellini, Carr walked attendees through the past, present and future of IT. And he compared IT to the evolution of electricity services.

In the early 1990s, he noted, many companies and factories had their own internal electric power plants. But as electric utilities came onto the scene, businesses found that it was far more efficient to outsource their electricity needs to the emerging electric grid.

“IT will be the next resource that goes through a very similar shift,” asserted Carr. Here’s a more extensive look at Carr’s keynote, and its implications for managed service providers.

“I’m not trying to suggest IT and electricity are similar at the technology level,” said Carr. “But they are similar in terms of economics. They are both general purpose resources.”

Electricity and IT are like platforms, he added, where you can continually add new services and applications on top of those platforms.

Big Iron, then PCs

Carr next jumped to the mainframe age, which was highly efficient but very impersonal and could not be applied by individual employees who had day-to-day work.

Once PCs and LANs burst onto the scene, the modern client-server data center became messy but shifted personalized power out to users. “It was almost the opposite of the mainframe era. Everyone could  use PCs for their particular jobs,” said Carr. “But that introduced an explosion of complexity and cost.”

HP Labs says the average server only uses about 20 percent of capacity. Network storage is only 35 percent utilized. But the biggest IT cost is now labor. “What we see, the average company has 70 to 90 percent of their IT labor costs tied up in maintenance,” said Carr.

The bottom line: “There’s a huge IT tax on the business economy,” said Carr. “In the mainframe era, IT was les than 10 percent of the capital equipment budget for companies. By 2000, IT represented 45 percent of the entire capital equipment budget of a company.”

Shifting to SaaS and Utility Computing

“If there was a way to take a lot of today’s IT, consolidate it, centralize it and share it, you could bring down IT costs and free up huge amounts of capital,” said Carr.

Clearly, Carr was setting the stage for the big transition to SaaS and managed services. “Finally, we have the opportunity for a new model of IT supply,” he said. “A new world of cloud and utility services.”

Answering the Skeptics

Carr conceded that some earlier utility efforts — such as the failed Application Service Provider (ASP) age — didn’t live up to expectations.

But Carr predicted the SaaS, cloud and managed services era will succeed because of Moore’s Law: Suddenly, computing power is cheap enough to start centralizing all of these IT services in massive data centers.

The other big inhibitor to centralized IT service was bandwidth. But in the last 10 years, with the build-out of the broadband Internet, the network is finally expanding at the same pace as computing power, asserted Carr. “Finally, the network is catching up to the computer,” said Carr. “You can now provide over the network very sophisticated services — all of which used to have to be done locally.”

“The World Wide Web,” quipped Carr,” is turning into a world wide computer.”

The Cloud is Real Today

The cloud computing model is not a theory. It’s taking over the IT space, asserted Carr. He pointed to popular social networks and Web 2.0 sites (FaceBook, Digg, Joost, Google) as the evidence for his believe.

“When you want to do something with your PC at home, you don’t go out and buy software,” said Carr. “Instead, you fire up your browser and go out and find the application or service you want.”

As more and more consumers reach into the cloud for applications and services, those consumers will take that “on demand” mindset from their homes into their offices — and businesses will increasingly shift to SaaS and other IT utilities.

“It’s the wave that’s coming up and going to hit your business, and will be a disruptive technology,” said Carr. “The new model will begin to outpace the old model. We’re early on this path, but we’re going down it very quickly.”

SaaS certainly faces a few challenges. Companies like Amazon.com have suffered from SaaS outages, and many businesses remain wary of “outsourcing” their applications. However, Carr made a very strong case for the inevitability of SaaS, cloud computing and managed services.

During a day when many MSPs and investors are concerned about the US economy potentially going into a nosedive, Carr’s vision provides some welcome relief. MSPs need to hear that they will be strategic players in the new world of IT. The shared utility model, he assured attendees, is for real.

It’s hard to argue with him.