Mar 17, 2010
Opportunities for Entrepreneurs
Several corporations are hoisting their computer networks into the “clouds”. Cloud Computing is an emerging IT development, deployment and delivery model that enables real-time delivery of products, services and solutions over the Internet. With cloud computing and associated cloud services coming in a myriad of forms (software-as-a-service, storage on demand, internal and external clouds, etc.), large corporations across multiple industries are now discovering that they can utilize cloud services to achieve cost-savings, expand their businesses, and even decrease their carbon footprints.
When large corporations adopt a new technology, opportunities for entrepreneurs abound. A case in point was the advent of the Internet in the mid 1990’s, which brought with it thousands of new entrepreneurial success stories. Some of these early Internet entrepreneurs created applications and services for the web, while others leveraged those same applications and services to enter new markets. Similar to the way that the Internet allowed an e-commerce boom in the late 90s, cloud computing creates opportunities for the next generation of technopreneurs in 2010 and beyond.
According to the International Data Group (IDG) 2008 blog post1, the growth trajectory of cloud computing and cloud services is more than five times the growth rate of traditional, on-premise IT delivery. With significant industry interest, cloud computing has become lush with opportunities for IT entrepreneurs. Many start-up companies (e.g., Joyent – a California-based company founded in 2004) are leading the cloud craze by providing management services and application development for cloud computing. Others (e.g., Parascale – another California-based company founded in 2004) are building internal cloud computing infrastructure for large organizations. Still others are combating security concerns associated with cloud computing (e.g., IMOD application by Kaavo – a Connecticut-based company founded in 2007).
A second group of entrepreneurs sees cloud computing as an opportunity to add high-end computing power and storage to their tool kit. For instance, new social gaming sites, such as Zygna (founded in 2007) and PlayFish (also founded in 2007) are taking advantage of cloud computing (both Zygna and PlayFish are using cloud computing from RightScale)2. Computationally intensive operations have traditionally been cost-prohibitive for young start-ups. However, cloud computing lowers the barrier to entry and provides start-up companies with access to enterprise-class servers and systems without excessive up-front costs associated with traditional hardware and software licenses. In fact, RightScale is currently offering companies the opportunity to try a cloud computing management for free (http://www.rightscale.com/).
Even for non-computationally-intensive start-ups, cloud computing and cloud services have their niche. The economic goals of start-ups are often more geared toward short-term survival rather than long-term financial efficiency. With cloud computing, electricity costs, real estate expenses to house hardware, and IT administrator fees are largely eliminated. Moreover, the economic benefit extends beyond the direct cost of capital equipment. That is, clouds allow companies to become more agile, with respect to changes in IT infrastructure.
Although there are many benefits to cloud computing, there are also a few liabilities. Some entrepreneurs are concerned with the fallout should there be a problem with cloud hosting: if a cloud goes down, a company could, in essence, be shut down. Fortunately, this outcome is typically addressed by having cloud servicing centers.
As with most web-based innovations, cloud computing is not a universal solution to all computing problems—some companies prefer having local servers and file sharing. With that said, many large, well-established companies (from Merrill Lynch3 to Haagen Dazs4 to Eli Lilly5) are moving towards cloud computing. According to IBM, the global cloud computing market is expected to grow at a compounded annual rate of 28 percent from $47 billion in 2008 to $126 billion by 2012, according to IBM based on various market estimates.6 The US Federal Government alone estimates that it will spend $26.1USD Billion on cloud services from 2010-2015.7
Though entrepreneurs in small start-ups may not be able to reap the full scope of benefits available to larger companies, cloud computing provides a viable path towards cost-savings through the adoption of minimal resources. Who knows? Maybe the cloud craze will spawn the next generation of technopreneur millionaires.
- Gens, F. Defining “cloud services” and “cloud computing”. http://blogs.idc.com/ie/?p=190 Last accessed January 21, 2010.