Tuesday, February 18, 2014

Cloud computing: what's that about?

Following up on Cath Jenning's article from back in 2009, where numerous supply chain experts converged on the opinion that cloud computing would revolutionize the industry over the next two to three years in an ERP-like fashion, I felt compelled to take a panoramic look at the global supply chain industry of 2014 and try to figure out what become of these people's predictions.

What do people mean by "cloud computing"?

Even though "cloud computing" has become a more and more frequently used term in our everyday lives -which in and of itself denotes a sense of ubiquity for this technology-, for most people the cloud is still a very abstract concept that consumer oriented companies tend to throw as a catch phrase. Cloud computing is nothing more than the collective utilization of network-connected resources in order to perform some sort of computation. We might feel inclined to believe that this trend is a fairly recent technologic development... but we'd be wrong. The concept of cloud computing can be dated all the way back to the 1950s, when the processing power of a mainframe computer was first made available to less capable clients over a distributed system.

Take a look at this awesome video briefly and easily explains cloud computing, as well as related basic concepts such as IaaS, PaaS, SaaS, virtualization and other major concerns:



Impact of the cloud over supply chains

Over the years, cloud computing being backed by its endless possibilities for improvement, has overcome the initial cultural resistance of companies that believed that trusting outside resources with their information was something way too risky to even consider. Nowadays, cloud computing has found its way to pretty much every industry on the planet in various versatile forms such as e-commerce, information sharing, resource sharing, IT outsourcing, among many others. The world's supply and demand are now matched with the help of virtual markets where firms from around the globe dynamically negotiate and commercialize their products and services. Thanks to this, supply chains have grown ever more flexible and responsive to network changes -for instance, they are now less vulnerable to the bullwhip phenomenon.

The Walmart example

The Walmart example described in this article from The Economist perfectly describes the way that cloud computing has brought different links in the chain together through a more seemless communication process. Based on my personal work experience with Walmart -I was involved in the migration of Walmart's suppliers from a traditional order system to Retail Link for some time-, I can say that the business impact of instantly providing suppliers with updated dashboards of information about stock levels and order status over a real-time web-based interface is anything but negligible. If you want to see the benefits that Retail Link has had on Walmart's supply chain first-hand, check out this video (it's a little old, but the concept still holds).

So where are we today?

Back to our 2014 panorama exercise, it is easy to observe that companies have indeed undergone a cultural shift and are now more prone to outsource part of their resources to a new breed of cloud-based service providers as it was predicted in Jenning's article. We find these providers present all over our business and personal data: Dropbox, Google Apps, audio and video streaming services, web-based applications, online collaboration, SaaS, and much more.

Amazon's Web Services (AWS) -probably the fastest growing cloud provider in the world today- is a result of Amazon's keen eye to identify and take advantage of the industry's tendency to migrate to the cloud. Through AWS, Amazon provides raw server capacity, compute, networking, content delivery, storage, database, deployment, management and app services to growing companies worldwide that do not have enough funds to finance overly expensive IT equipment. At the same time, Amazon benefits by reducing the fraction of improductive or idle resources it maintains.

In the end, and regardless of all the marvelous benefits that the innovative clouds have brought with them, I concur with this MIT article by Cynthia Rettig, that advises companies not to lose track of reality and to remember that cloud computing is not their one panacea for all IT headaches, but rather a very helpful tool to bring them closer to the fulfillment of their respective strategic goal.

What other major players in cloud computing can you think of? How do they influence our everyday lives? Do you think they'll manage to make an impact on the market in the near future?

References
http://www.computerweekly.com/feature/Cloud-computing-The-answer-to-supply-chain-woes
http://www.economist.com/node/15557465
http://sloanreview.mit.edu/article/the-trouble-with-enterprise-software/
http://en.wikipedia.org/wiki/Cloud_computing
http://www.xbitlabs.com/news/other/display/20130529304227_Amazon_s_Web_Services_Threaten_Almost_All_IT_Companies_Morgan_Stanley.html
http://www.docstoc.com/docs/76252727/Impact-of-Web-Service-Technology-on-Supply-Chain-Management
http://www.youtube.com/watch?v=SUe-tSabKag

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