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Wednesday, September 16, 2009

Quick musing on Cloud Computing

I just heard the phrase "Everything as a Service" during a presentation on Cloud, SaaS and other forms of managed service offering.

I have no problems with hosted software in general - I use enough myself for email, blogging and so forth. I also outsource an awful lot of other things - financials to my accountants and so on.

But I can't get around the feeling that there's a fundamental lack of awareness among people in the tech industry, that every individual and company has specific criteria for owning vs. renting anything.

There are some things for which people prefer opex (renting, 3rd-party services, leasing etc) and some for which they prefer capex (buying stuff outright). This applies to all aspects of expenditure, from hardware to software, from physical infrastructure to one's personal possessions.

Some people rent houses, some own them. Preferences vary by individual and by cultural background. Some companies prefer to own and control their IT and communications elements, others prefer the predictability of outsourcing or "cloud services".

I've yet to see any good analysis of exactly what determines the optimum mix of rent vs. buy, or how this changes over time. Clearly there are hard aspects to this, like cost of capital, or the tax treatment of depreciation or capital investments. There are practical concerns, like uptime or connectivity limitations. Yet there are also softer issues, like trust or fear of lock-in. For consumers, there's even an emotional element - how many people would choose to use a "jewellery service" to rent their wedding rings?

This isn't an area where I have very strong opinions - but I do think it's important to have a good set of filters and questions to sift through some of the rhetoric and hype.


Chris said...

I completely agree. A lot of the preference will also come down to accounting treatments of different types of cash flow and assets within the business. Owning something new has a value on the books which is sometimes good depending on how you want your business valued.

Unknown said...

Have you read the "Above the Clouds" paper? It should answer most of you questions: