Cloudonomics: The Business Value of Cloud Computing.

• Author: Salons, Deborah J.
• Position: Book review

TABLE OF CONTENTS I. CLOUD COMPUTING CONCEPTS A. Cloud Computing Versus Information Technology B. Mythbusting C. Defining the Cloud. II. THE ECONOMICS OF CLOUD COMPUTING A. On-Demand Properties of Cloud Computing B. Latency Issues in the Cloud C. Availability III. BEHAVIORAL CLOUDONOMICS IV. THE FUTURE OF CLOUD COMPUTING V. CLOUDONOMICS AND THE LAW VI. CONCLUSION An increasing number of products and services are moving into "the cloud." (1) Understanding why this migration is occurring is therefore important not only for the businessperson, but for telecommunications practitioners and policymakers alike. There are many reference books on the market about cloud computing--the question is which resource will be the most useful to the cloud-layman. Cloudonomics: The Business Value of Cloud Computing (2) by Joe Weinman stands apart from other books about) cloud computing because, rather than purely addressing the technology or architecture of the cloud, it incorporates discussion of quantitative and behavioral economic factors affecting the adoption and usage of cloud computing. (3) Weinman brilliantly mixes technology with economics to empirically explore the value proposition of cloud computing and provides a unique and thoughtful contribution to the ongoing cloud discussion.

Weinman first coined the term "cloudonomics" in the summer of 2008 to describe the examination of cloud computing from the business, financial, and economic perspective. (4) Accordingly, in the book, he considers the "core characteristics of the cloud--on demand resources, usage-based charging, resource sharing, geographic dispersion, and the like--and how they map to and drive business--and even societal-value." (5) Weinman asserts that the "laws of cloudonomics" apply regardless of domain and are not restricted to cloud computing. (6) As he describes it, the approach taken in the book is "a sort of freakonomics of the cloud." (7) Cloudonomics "doesn't focus on industry market projections or vendor offerings but rather on strategy, business models, customer value, and their relationships." (8)

The main premise of the book is that adoption of cloud computing can cut costs and "add value." Weinman relies primarily on cloudonomics to reach this conclusion. The amount of research incorporated into the book is astonishing; every point made is thoroughly supported with economics, facts, and citations. The book is not necessarily "pro-cloud" and does not attempt to sell or push cloud computing; Cloudonomics simply provides information for the reader to take into consideration and to evaluate in deciding what is best for his or her organization. Weinman conscientiously presents different perspectives for the reader to consider and recognizes that there is no one-size-fits-all model.

In the first part of the book, Weinman presents a conceptual view of cloud computing. Weinman starts by examining the relationship between traditional information technology ("IT") and the cloud. Weinman argues that cloud computing can complement a traditional IT strategy as well as offer value on its own. (9) Next, Weinman tackles the common assertions made about the cloud and presents examples of what the cloud is and is not. (10) He also addresses the ongoing debate about the correct definition of cloud computing and presents his own definition to provide a foundation for the book. (11)

The majority of the book is dedicated to applying economic reasoning to multiple aspects of the cloud, in order to explain how cloud computing adoption can generate cost savings and value. Weinman uses cloudonomics to illustrate several assertions: (1) the main benefit of cloud computing is its "on-demand" capability; (12) (2) "acceleration" is free in the cloud and can mitigate latency issues; (13) and (3) the "available" nature of the cloud makes cloud adoption compelling. (14) Weinman asserts that "cloud computing should be at least part of your overall enterprise IT strategy," (15) and a "hybrid cloud" strategy is cost optimal. (16)

Weinman also applies behavioral economics to analyze the human factors that affect cloud adoption. (17) This discussion adds an important perspective to the conversation and makes the reader think about the social and emotional issues involved in executive decision-making. The book then examines industry patterns, highlighting the telecommunications industry to bolster Weinman's main argument that the cloud can provide a cost reduction mechanism and additional business value. (18) Finally, Weinman uses economic theory to make predictions for the future of the cloud, discussing possible pricing model variations, third-party industry creation, and collaboration with emerging niches such as big data. (19)

Cloudonomics covers a broad range of topics and is written somewhat sequentially, but the twenty-five chapters are "largely self-contained" so the reader can jump into any chapter of interest. (20) There is no specific chapter dedicated to the law; however, potential legal and regulatory considerations are mentioned throughout the book. The overview below groups Weinman's assertions into the following categories: cloud computing concepts, the economics of cloud computing, behavioral cloudonomics, the future of cloud computing, and cloudonomics and the law.

1. CLOUD COMPUTING CONCEPTS

   Cloudonomics begins with a conceptual overview of cloud computing. (21) Typically, a cloud publication or industry event will begin by attempting to define "cloud computing." In the introduction to Cloudonomics, Weinman acknowledges, "what [the cloud] is, is a matter of disagreement." (22) He quickly presents his definitional mnemonic for C.L.O.U.D., which involves the important attributes of the technology: Common infrastructure, Location independence, Online accessibility, Utility pricing and on-Demand resources. (23) After providing this foundation, Weinman concentrates on defining his concept of "cloudonomics." (24)

   In the first chapter, Weinman compares the cloud computing business model to the business model of the road network of the Roman Empire. (25) Weinman asserts that "[t]he core ideas behind the cloud business model may be thousands of years old, but cloud computing is new and transforming all aspects of personal life, business, and society." (26) This comparison prepares the reader to bridge traditional economic theory with new or future technologies.

   Weinman reinforces the importance of cloud computing by asserting that the cloud is "disrupting every dimension of business" (27) as well as "radically reshaping the relationship among governments, the governed,

   and nongovernmental organizations, [which] impact[s] regional balances of power and global stability." (28) He presents examples of cloud impact across the world, supporting the idea that cloud computing is not just a national phenomenon but also a global one.

   1. Cloud Computing Versus Information Technology

      Weinman goes on to examine information technology ("IT") and cloud computing in the context of competitive strategy, and takes the time to explore different use cases. (29) This discussion is valuable, as most chief information officers ("CIOs") and IT departments are evaluating the multiple trade-offs between cloud computing and traditional IT. Weinman asks, "Does the [c]loud [m]atter?" (30) Weinman explains how IT is strategic and that cloud computing, as a variation of IT, contributes to IT's strategic value. (31) He describes the necessity to

      assess the marginal value created from cloud implementations of IT above and beyond the value from traditional implementations of IT and show not just a correlation between competitive success and basic IT plus cloud value-add but also causality. (32) Weinman concedes that empirical data concerning whether IT generates any return was a challenge to analyze, (33) yet he provides several examples of successful companies that realized the value of IT. (34) Weinman concludes that "[i]nformation technology is the embodiment of a firm's ability to exploit information, and the cloud can offer unique implementations of such technology that otherwise would be difficult, if not impossible." (35)

      Weinman next examines if there is a strategic value of the cloud in and of itself. (36) He recognizes that the term "cloud" seems to be overused and that this "cloudwashing" has generated backlash and understandably a sense of caution for CIOs. (37) Weinman argues that "[c]loud may well be overhyped, but it is demonstrably creating value." (38) Weinman goes on to discuss the competitive advantages cloud...