Ever wondered why these days there is so much hype over cloud computing?
Do you feel intrigued to constantly hear about a subject which you don't know about?
Read on.......I was exactly at this juncture, when I decided to read about, and introspect....
Hope this read helps to kill your time on a boring Saturday evening when you have got nothing
better do.....
Ever wondered what is the difference of having a washer and a dryer in your own rented apartment,
than as a community service? How does it help you? In the case where the 2 are located in your own
apartment, you do not have to pay up 2 dollars to use them anytime you need. And the convenience
of not taking your dirty out in the public......
Of course you had to pay for the water and electricity that you are using, but that would be much cheaper
for you than paying 2 dollars for the other option.
But we always tend to think from a perspective that benefits us. Think about the apartment owner's
perspective. If one needs to install all the dryers and washers for renting out the homes, then the initial
cost would be very high. Add to that the maintenance cost, of something goes wrong.
But on the other hand, if the apartment owner installs these as a paid service, the owner not only
optimizes the cost, as the number of these that needs to be installed are much less, but also makes
a very small profit, every time you use them. Mind you, that does not reflect on the rent also, as the
rent is more determined on the demand of the apartment itself.
So once you get this analogy, think of the huge companies, with their huge IT requirements.
Currently most of them have in-house servers, for payroll, inventory management and blah blah blah.
They have whole IT departments dedicated to run them, 24/7/365. They have to constantly renew
their software agreements, upgrade them, and upgrade their hardware, as the companies grows,
or as the year passes.
These also add up to their energy bills, manpower requirements, for something that they are not selling. take for example a pharma company like Pfizer. A huge workforce, whether in-house, or outsourced is there, which does not do or know anything about medicines.
What if even part of this huge cost and headache can be given to another company, for a monthly price?
Or a pricing based on the number of users, or transactions, or strictly a fixed pricing model fixed over 5 years or more?
Think of Pfizer using Microsoft servers, and softwares for emails and other documents, and getting licensing agreements for the same, in a bundled manner? In this case, Microsoft is the sole responsible entity of ensuring to Pfizer, that their email service, and other document services, would be up and running, and all these services, would be maintained by MS, using their own hardware, and software. Pooooof....there goes a whole department, a huge server room, licensing issues, maintenance headaches, off the costs of Pfizer. What is added is a monthly cost, given out to MS. And a 24/7/365 guarantee.
Now lets move the spotlight to MS, shall we? By providing its products as services, to different client like Pfizer, MS can achieve a better operating margin, than the individual clients put together, in terms of manpower. It can also demand a lower hardware price from its vendors, if it can become the top service provider. In effect, the dollars are channelized to a lesser number of entities, than being previously done. If hard disk providers like Samsung, can provide the bulk of the storage space, to a single company like MS, it will lower its margins, on individual disks.
Think of Walmart, and Amazon, in the retail domain.
Who benefits from this? Of course the end customer, in this case, Pfizer and other MS clients, and also the service provider, in this case MS.
Consolidation was the name of the game in the retail goods market. It is going to be the same here, in the IT services space.
In the next blog, I will try to dissect what it can mean for the different stakeholders.
For now, blast away your comments.....
Do you feel intrigued to constantly hear about a subject which you don't know about?
Read on.......I was exactly at this juncture, when I decided to read about, and introspect....
Hope this read helps to kill your time on a boring Saturday evening when you have got nothing
better do.....
Ever wondered what is the difference of having a washer and a dryer in your own rented apartment,
than as a community service? How does it help you? In the case where the 2 are located in your own
apartment, you do not have to pay up 2 dollars to use them anytime you need. And the convenience
of not taking your dirty out in the public......
Of course you had to pay for the water and electricity that you are using, but that would be much cheaper
for you than paying 2 dollars for the other option.
But we always tend to think from a perspective that benefits us. Think about the apartment owner's
perspective. If one needs to install all the dryers and washers for renting out the homes, then the initial
cost would be very high. Add to that the maintenance cost, of something goes wrong.
But on the other hand, if the apartment owner installs these as a paid service, the owner not only
optimizes the cost, as the number of these that needs to be installed are much less, but also makes
a very small profit, every time you use them. Mind you, that does not reflect on the rent also, as the
rent is more determined on the demand of the apartment itself.
So once you get this analogy, think of the huge companies, with their huge IT requirements.
Currently most of them have in-house servers, for payroll, inventory management and blah blah blah.
They have whole IT departments dedicated to run them, 24/7/365. They have to constantly renew
their software agreements, upgrade them, and upgrade their hardware, as the companies grows,
or as the year passes.
These also add up to their energy bills, manpower requirements, for something that they are not selling. take for example a pharma company like Pfizer. A huge workforce, whether in-house, or outsourced is there, which does not do or know anything about medicines.
What if even part of this huge cost and headache can be given to another company, for a monthly price?
Or a pricing based on the number of users, or transactions, or strictly a fixed pricing model fixed over 5 years or more?
Think of Pfizer using Microsoft servers, and softwares for emails and other documents, and getting licensing agreements for the same, in a bundled manner? In this case, Microsoft is the sole responsible entity of ensuring to Pfizer, that their email service, and other document services, would be up and running, and all these services, would be maintained by MS, using their own hardware, and software. Pooooof....there goes a whole department, a huge server room, licensing issues, maintenance headaches, off the costs of Pfizer. What is added is a monthly cost, given out to MS. And a 24/7/365 guarantee.
Now lets move the spotlight to MS, shall we? By providing its products as services, to different client like Pfizer, MS can achieve a better operating margin, than the individual clients put together, in terms of manpower. It can also demand a lower hardware price from its vendors, if it can become the top service provider. In effect, the dollars are channelized to a lesser number of entities, than being previously done. If hard disk providers like Samsung, can provide the bulk of the storage space, to a single company like MS, it will lower its margins, on individual disks.
Think of Walmart, and Amazon, in the retail domain.
Who benefits from this? Of course the end customer, in this case, Pfizer and other MS clients, and also the service provider, in this case MS.
Consolidation was the name of the game in the retail goods market. It is going to be the same here, in the IT services space.
In the next blog, I will try to dissect what it can mean for the different stakeholders.
For now, blast away your comments.....
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