The early 1900s witnessed a massive public shift from traditional horse-drawn carriages to the greatest invention of the 20th century, pre-dating sliced bread.
The transition was stark and irreversible.
An age-structured demographic theory of technological change – Scientific Figure on ResearchGate.
Available from: https://www.researchgate.net/figure/Transition-from-horse-drawn-carriages-to-petrol-cars-in-the-1920s-data-originally-from_fig1_236202800 [accessed 25 Aug, 2021]
Data centers are the horse carriages of this century; cloud dominance is here to stay.
Horse carriages didn’t just give up to cars that easily, but it was not a fair fight in all honesty. The case is the same with data centers attempting to compete with the cloud. There are rumblings in the industry, such as this a16z article, which argues that the cloud is depressing the market cap for companies. In reality, this is far from the analytical truth. It has been proven that effective cloud deployment increases companies’ capitalizations (Source: McKinsey).
While data centers are the right solution for some use cases, a quant fund is unlikely to put its trading algorithms on a public cloud. Also, some mission-critical applications need a dedicated administrator on site who can ensure availability and security. Archival needs for regulatory purposes for large insurance companies do benefit from specialized storage data centers.
Still, if business agility is a priority and your focus is on increasing the pace of innovation, the cloud is your answer. Otherwise, born-in-the-cloud businesses will give you a run for your money.
The productivity and acceleration of innovation that the cloud unleashes are unparalleled. By delegating all your undifferentiated heavy lifting to the cloud provider, the engineering resources can laser focus on business innovation.
The shorter innovation cycle results in a competitive advantage, which should increase your market cap. And it is in a company’s best interest to not only adapt, but invest in the cloud to unlock its full potential.
My next blog will touch on an essential skill large organizations have to build, taking cues from nature’s mean machines.