Business Brains

Every business a cloud service provider: why not?

Posting in Architecture

A chat with Steve Mills, senior VP of IBM's Software Group, on the transformative effects of cloud computing -- and it may be called anything but 'cloud.'

At this week’s IBM Impact conference in Las Vegas, I had the opportunity to sit down with Steve Mills, senior vice president and group executive of IBM’s Software Group, and one of the company's leading Smarter Planet proponents.

Mills provided his insights on corporate service oriented architecture initiatives and the role of IT, and more details (slightly more technical discussion) can be found at my post here. The shift isn't just technical, though. Mills also sees a shifting role for businesses in the near future,  both as cloud service providers and service consumers.

More often than not, businesses will be playing the role of cloud provider, but may not even call themselves as such. Here are excerpts of the interview, in which Mills points to the blurring lines between cloud providers and consumers, and why every business could potentially also be a cloud provider -- in fact, many are already, but don't call it cloud:

Ten years from now, at Impact 2020, what we will looking back on?

Looking ahead, some of the bigger challenges are going to be more about service orchestration. Were not just simply talking about a loosely coupled collection of services within an enterprise, but now the inter-enterprise service model is going to become much much bigger.

Companies have been de-verticalizing for decades. Henry Ford owned the iron ore mines, steel mills, and rubber plantations. In order for him to create a car back then, he had to have a full vertically integrated manufacturing infrastructure that went all the way back into the raw materials. Ford clearly doesn't operate that way today, there's no need to.

So if you look at that as an analogy, I think if you look at the last 30-plus years of the evolution of the use of IT within business, you'd see an ever-increasing amount of de-verticalization. Companies are becoming ever more flexible and open to the idea that third-party providers of useful business process services are a convenient cost-effective way to get the job done. And that's good news, in terms of improving economics and creating greater flexibility.

Do you see more companies becoming online service providers?

We see a huge number of our customers becoming service providers. Banks are service providers. They offer all kinds of processing services for businesses. Think about what American Express does. They've built a complete model around the idea as a small business participant, besides you get that card, they actually want to get into your billing systems.  And your receivables and payables become an integral part of your processes. Not just a credit card company. So they've clearly adapted their model.

United Parcel Service is a wonderful example. 'What can brown do for you today?' You understand what that model is all about. It really begins with process re-engineering. Ups was founded by process engineers, not by truck drivers, and their whole approach is to look at how to make a supply chain more efficient. How to maximize stocking levels, just-in-time delivery of parts and components. They want to come in and re-engineer your process, and as part of that, they're going to actually operate part of, if not all of your process.  And you will use their trucking and air shipping services, obviously.  The model doesn't start with shipping things. It starts with shipping and supply chain optimization.

Is it fair to say UPS is a cloud provider?

Yes. Now take ADP.  Nobody in the venture space wants to mention ADP in the context of cloud. It sort of demystifies the mystical magical cloud. Its a business process service.

ADP's been in business for nearly 40 years. Very successful company. Delivers services that a huge number of people utilize as part of their primary accounting infrastructure, dealing with aspects of payroll, tax remittance, all kinds of core services are performed by ADP. And you do in their systems.  You don't necessarily care where their systems are, especially these days as bandwidth had gone up. It could be down the road or it could be a few thousand miles away. If you're part of the finance organization within your company, your cloud provider is ADP, your Software as a Service provider is ADP.  That's the way you identify with those ideas.

ADP doesn't present themselves that way, but they're a long-standing cloud company. I think that wider perspective is important, because I think that's really more significant from what's happening in terms of changing business. In the context of applications and business process, businesses are becoming ever more comfortable with using third-party providers.  I use ADP for my basic accounting and bookkeeping. I use Hewitt Associates for employee benefits. Lots of companies are using these resources as their everyday infrastructure.

Will most companies, then, be both cloud providers and consumers?

I'm a consumer, I'm a producer. I don't think it's either/or. This happens all the time in the tech industry, these absolutes. This lives, that dies. There's a winner and a loser. The real world doesn't work that way. The real world is a combination of many different things. Cloud is ADP. ADP is cloud. ADP's been doing it all along.

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure