CE#573: The Cloud Warning: Andrew Mcafee

As I wrote in my recent HBR article, a few Web-centric companies like Zynga, eBay, and Netflix are also deeply embracing the Cloud. So we see this approach to computing taking off in companies that don’t have much of an installed base of IT, and in a few older companies that perceive a sea change.

Most of the rest of the incumbents are holding back and being very cautious about the Cloud. They think it’s immature and insecure, they don’t perceive its great benefits but clearly see the massive costs of untangling their legacy spaghetti to the point that it’s Cloud-ready, and they have great difficulty justifying walking away from on-premise hardware and software, lots of which is fully depreciated, in order to write monthly checks to Cloud vendors.

The incumbents’ perspective is not ludicrous. In fact, it makes a lot of sense. Which is exactly why it’s potentially so dangerous. American industry went through a remarkably similar transition a century ago, and it didn’t end well at all for established firms.

A hundred years ago, American factories were in the process of converting from steam to electric power. It was a long, slow, uneven process. And it was led by startup companies and new buildings —  the older ones just couldn’t justify the switch to themselves intellectually or financially — it wasn’t clear why electricity was so much better, but it was clear how much it would cost to convert an incumbent.

Read full article here

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