CIOs continue to resist Bezos Law at their own peril

Amazon CEO Jeff Bezos speaks at a news conference during the launch of Amazon's new tablets in New YorkI just returned from CIO Magazine’s CIO 100 Symposium and Awards where the “Top 100 CIO’s” were recognized for their achievements. I was shocked to find that even among this elite group of CIOs there were still a significant amount of CIOs who were resisting the cloud. They had a multitude of reasons or rationalizations as to why they were not embracing the cloud.

When asked what I was most proud of I said “getting out of the datacenter business” and returning the on-premise square footage to the business. Many heads nodded in agreement but there were also many CIOs who thought I was crazy. In discussing why they felt this way I came to the conclusion that many CIOs rose up thru the technical ranks and they derive their sense of self esteem and job security around their historical success of owning and understanding the technology. The cloud was perceived as just too risky for them to give up control.

Many CIOs rationalized they were in the cloud by stating they had a “private cloud” and when I pressed them on what they meant by that  they told me about how virtualized their datacenter was as if VMs somehow equaled cloud. I asked them what the attributes of a cloud was to them and they kept coming back to VMs. Virtual Machines are rapidly becoming yesterday’s news as Containers like Docker are becoming the most efficient way to run workloads. But even this misses the point entirely as I pointed out in a previous post “What does Bezos’ Law mean for CIOs?”

Then, today I read this article by Greg O’Connor, “Bezos’s law signals it’s time to ditch the data center” and it further laid out the case for embracing the public cloud and getting out of the datacenter business. In it Greg points out:

“Previously, I posited that the future of cloud computing is the availability of more computing power at a much lower cost. I termed this “Bezos’s law,” and defined it as the observation that, over the history of cloud, a unit of computing power price is reduced by 50 percent approximately every three years.”

“Now comes new cloud computing data based on Total Cost of Infrastructure (TCOI), proving cloud providers are innovating and reducing costs in areas beyond hardware. The result is a more compelling case for cloud as a far cheaper platform than a build-your-own data center. Further, the economic gap that favors the cloud provider platform will only widen over time.”

This seems so obvious to me but clearly many CIOs don’t get it. I stand by my statement that “Bezos Law is today’s version of Moore’s Law and CIOs who do not recognize this will be rapidly replaced.”




What does Bezos Law mean for CIOs?

Amazon CEO Jeff Bezos speaks at a news conference during the launch of Amazon's new tablets in New YorkWhen Greg O’Connor the CEO of AppZero proposed in this post a cloud version of Moore’s Law called Bezos’s Law for Amazon CEO Jeff Bezos, it got me thinking about the implications for CIOs and IT departments. He defined it as the observation that, over the history of the cloud, a unit of computing power price is reduced by 50 percent approximately every three years.

If Bezos’ Law reflects reality, which the numbers support, then the only conclusion is that most companies should get rid of their datacenters and move to the public cloud to save money. Clearly, public cloud, as opposed to building or maintaining a datacenter, is a much better economic delivery approach for most companies. But the cloud is much more than saving money. The primary value of the cloud is agility or time-to-market, or more accurately, time-to-value.

What is driving Bezos Law? Clearly there are efficiencies in the cloud computing model over the owned and on-prem model but the main driver is the fact that Amazon, Microsoft and Google are in a race to the bottom. The strategic importance of developing a public cloud platform coupled with the lead Amazon Web Services has built up, force Google and Microsoft into scrambling to match each other’s price cuts in order  to remain competitive. They, and others who are trying to become players in the public cloud space really don’t have any choice due to the paradigm shift that cloud computing represents.

So, what does this mean for CIOs? Many CIO’s I know – especially ones in large enterprises – are in cloud denial. They rationalize that the cloud is not secure or doesn’t provide advantages over their own”private clouds”. This is absurd. With few exceptions in really large companies private clouds are not viable and they do not have nearly the security knowledge or staffing relative to the big public cloud vendors. These CIOs align themselves with the traditional IT vendors who are desperately trying to cling to their old ways while they reinvent their businesses to provide cloud services. In many cases, they are just cloud-washing their product lines while trying to sell CIOs on continuing to buy on-prem hardware and software.

The reality is the owned and operated vertical technology stack model cannot meet the needs of today’s mobile world. The center of gravity has shifted from the desktop to the pocket. Mobile is the direction in which business and society are going, and companies who don’t keep pace will be left behind. Either you aggressively embrace the cloud to leverage it’s inherit advantages for mobile computing or your successor will. It’s as simple as that for today’s CIOs.

And how can an enterprise datacenter possibly keep up with the hyper-competitive innovation from Amazon, Google and Microsoft? CIO’s who get it know how this is going to play out. They’re way ahead in asking: “Why should we continue to saddle our company with a huge cost anchor called a datacenter or a private cloud?” Forward looking CIOs are viewing this as an opportunity to re-allocate budget and headcont towards creating business value instead of “raking and stacking” and “patching and plumbing” on-prem hardware and software.

Bezos Law is today’s version of Moore’s Law and CIOs who do not recognize this will be rapidly replaced.