What Every CEO Needs to Know About the Cloud."

OCTOBER 24, 2011
BY ANDREW MCAFEE : HBR.ORG

I have an article in the new (November 2011) issue ofHarvard Business Review called "What Every CEO Needs to Know About the Cloud." It's aimed at managers and executives who work outside the IT department and might not know or care very much about what goes on inside the IT department. So why should such people be interested in cloud computing?

Because it's going to change both how, and how well, their organizations work. This is a strong claim, and many find it a ridiculous one. After all, companies already have tons of technology; it's not like they're operating at present without hardware, software, databases, and networks. The move to the cloud is just a shift in where these resources are located. Executing this shift sounds like a classic job for the IT geeks, and one that needn't concern the rest of the company.
But it should, and it will. To see why, we need to look back at a previous technology shift. A century ago, manufacturing industries were in the middle of the long process of electrification — of replacing steam turbines with electric motors. Short-sighted factory owners considered this a simple substitution, and ignored the broader possibilities offered by electric power. These possibilities eventually included putting a separate motor on every machine in the plant, setting up overhead cranes, conveyor belts, and assembly lines, and converting factories from tall narrow buildings to long low ones.

All of these advances were invisible at the dawn of electrification. They only became apparent over time to the experimenters and innovators. Lots of successful incumbents were neither, and so lost out over time to their more productive and nimble rivals.

In the article, I argue that the same dynamic will play out around cloud computing. I explain that the cloud offers benefits at the level of the individual, the group, the data, and the application. And these are just the ones that we (or, more properly, I) can see right now. The article discusses, and largely dismisses, reliability and security concerns, and gives advice on how to start moving into the cloud.

Of course, one article can't come close to touching on all the important topics related to cloud computing, and I had to leave a lot out. I don't talk much about mobility and speed, for example, even though these are critically important subjects in business today, and ones where the cloud offers advantages.

Technology has finally caught up with workers who don't sit at the same desk all day, every day. We now have laptops, notebooks, tablets, and smartphones, and a lot of us (most of us?) use them pretty heavily because we're mobile — we move around during the workday and hit the road on business trips.

Thanks to the cloud, our data, documents, applications, communications, and social networks can come along with us, and be available almost no matter where we are. Without the cloud, mobility and the proliferation of devices would inevitably lead to severe fragmentation (where did I put that document?) and frustration. With it, we can be productive virtually everywhere.

We can also be faster. When everyone on a team is online and interconnected no matter where they are, and when they all have access to the same information, they can act more quickly. The delays, redundancies, and misunderstandings that plague so much group work can be reduced. As the pace of business continues to increase, the ability to make good decisions faster becomes more critical, and the cloud becomes more attractive.

The cloud is not the answer to all business problems by any means. But as I hope to demonstrate in the article, it is a significant advance, and it is inevitable. The future path of business is never clear, but it is cloudy.