What I Learned at the Cloud Computing Revolution

October 1, 2012: 1:56 PM ET

By Alan S Cohen, contributor

FORTUNE -- I recently spent the past year on the front lines of the computing revolution, bringing network virtualization technologies to dozens of telecommunications companies, new cloud computing entrants, and enterprises that are changing their business models through Cloud.  Cloud promises to profoundly transform how we produce and consume information and information technology (IT).  If you drive up and down Route 101 here in Silicon Valley today, there is a hot billboard war going on; if you drive up and down Main Street someplace else, there is a quieter but no less compelling revolution.

The current computing model was pretty simple: your business bought the hardware and software required to run key applications, the storage devices to maintain your data, and the networks to allowed it all to flow. Today, however, there is a range of new choices, which including renting some or all of the IT supply chain.

Computing is not just important because it is a big industry -- $3.8 Trillion annually worldwide according to Gartner -- but because everything else in our economy is dependent on it.  Computing is inside every steak, potato and glass of red wine you eat.  It's in your car, your iPad delivered Netflix, and it's your money.  So there is a lot at stake.

The Cloud however is not being driven by vendors but by users.  Let me share 3 observations:

  1. 1.     Shadow IT is Going Mainstream  

Businesses do not care about hardware and software: they care about capabilities and processes to run their business.  When IT shops could not provide what businesses need, nature found a way and "shadow IT" was born.  This initially spawned new Software-as-a-Service offerings such as Salesforce.com (sales process automation).  Today entire processes like collaboration are occurring on new offerings such as Box (inter-company collaboration).  Functional groups will bypass IT and purchased these services directly.  Now companies (frequently led by IT) are embracing third party capabilities and purchasing the actual computing cycles directly through cloud infrastructure providers such as Amazon and Rackspace.  If you can, securely, get what you need from the Cloud, does it matter if you own the gear/software and is running in your building?

  1. IT Wants to Go Fast

In his hilarious spoof of race car driving, Talladega Nights, Will Farrell plays a race car driver named Ricky Bobby who run around saying "I want to go fast" and "if your not first, your last."  What business wants to be the 2nd or 4th entrant into a new market?  IT and business people alike have lost patience in how slow traditional IT delivers key capabilities.  During the past year I spoke with automobile manufacturers who told me IT was inhibiting their ability to launch new models as well as Cloud providers that want to be your new IT shop, changing the rate and pace of new businesses when computing can be turned on and off like electricity, removing both human middleware and delay in gaining compute resources.

  1. It's About the Developers

For the past few decades, the power elite for IT in the Enterprise has been operators, people who purchase and maintain IT hardware and software.  IT vendors spent decades catering to this crowd and feting them at annual buyer conferences bespoke with star-studded speakers and rock concerts.  The primacy of this group though is steadily being usurped by developers: architects and software programmers who are responsible for designing and delivering new capabilities. And developers are getting together and collaborating in new forum like OpenStack (a cloud computing group creating an open source approach to computing) and shared code repositories like GitHub.

Watching the change in the IT industry driven by Cloud is a little like Downton Abbey on steroids.  Just as the British television series chronicles the maelstrom and decline of the Edwardian British aristocracy, cloud computing is uprooting the existing IT order, both by establishing new buying centers and approaches.

When the IT world turned from mainframes to client server (the PC/Internet era), the industry fragmented from a monolithic model "stack" dominated by 1 company (IBM) to a fragmented, but very innovative model now dominated by a few dozen companies and a variety of partnerships (e.g., "Wintel").   But they had one thing in common: they sold you IT gear you managed in your buildings.  Think of the parallel in the consumer world: when I got hooked on Apple's iTunes, I stopped purchasing CDs and downloaded my music. Since I signed up for Pandora 2 years ago, I stopped downloading music and consumed it directly through the Cloud.

Alan S Cohen was until recently a Vice President at Nicira, a network virtualization company recently acquired by VMware for $1.26 Billion.

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