Cloud Computing Technologies: Reducing Risk in a High Risk Environment

Information Week recently published a list of organizations known as the Startup 50. This is a list of new technology companies(less that 5 years old) to watch. The companies were evaluated on a number of criteria including

• Innovation in technology
• Business model innovation
• Business value : lowered costs, increased sales, higher productivity, improved customer loyalty

From the companies that made the top 50, the biggest concentration of product areas were in three cloud computing related subjects: virtualization, cloud computing, software as a service

In my last blog I commented on an article claiming that IT professionals considered the risks of cloud computing outweighed the potential benefits. With IT risk fresh in my mind, the information Week article got me thinking that in the high risk environment of startups, cloud computing technologies can actually significantly reduce the risk involved with starting a new company. Further, for established organizations, whether developing new products to be delivered as a service, or as end users of new products delivered as a service, cloud computing can lower the initial investment required and thus associated project risk. I believe cloud computing can help reduce risks in the following two ways.

1. By utilizing Infrastructure as a Service(IaaS). Consider a company developing a new software product to be delivered as a service. This potentially requires a significant investment in scalable hardware and software (infrastructure) to meet an as yet unknown demand in service usage. Building this infrastructure is costly. Utilizing cloud computing’s on demand, pay as you use infrastructure, eliminates the large upfront investment required and replaces it with costs that are proportional to usage which should be proportional to revenue growth and thus self funding.
2. By utilizing the cloud as a product delivery mechanism. With this mode of delivery the risk to potential customers is minimal as they do not have the large upfront cost of buying the product. If after using it for a while the product turns out to be unsuitable, they stop using it and stop paying for it. Contrast this to the risk of paying upfront for an expensive product without actually knowing for sure that it will be suitable for the organization.

Hopefully this post has highlighted how cloud computing can actually lower risks for many organizations, from startups, cloud service providers through to cloud end users. Let me know what you think.

Chris