Forbes.com, 4/18/12 - Guest post by John Connors and Brad Silverberg
John Connors and Brad Silverberg are partners with the venture capital firm Ignition Partners. Connors is a former CFO at Microsoft. Silverberg spent 9 years at Microsoft; from 1990-1995 he ran the company’s Windows business.
It’s no secret that recent consumer-technology innovations, from social networking to online chat to iPhones, are fundamentally transforming corporate IT. At the office, people are now demanding the same types of easy-to-use devices and social features they use at home. Witness new corporate-software products like Salesforce.com’s Chatter product, a sort of Facebook for business, or the decline of BlackBerry maker Research In Motion. That device is losing dramatic market share in corporate environments to the application-rich, consumer-focused Apple iPhone.
But there’s another, much bigger story to this “consumer-ization” of IT. We call it the “re-platforming” of enterprise computing. By that, we mean a move by enterprises to build the next generation of new applications and core services on top of the emerging “cloud-computing” and mobile-device platforms. This re-platforming will fundamentally re-shape the enterprise and usher in a massive new wave of tech innovation, just as similar platform waves such as the personal computer, client-server and the Internet did in the past.
What’s fascinating to us – veterans of tech giant Microsoft, a company that has transitioned through many waves of corporate computing – is that this enterprise-focused re-platforming grew out of the better-known consumer-Web world. Many of the household names that have pioneered this new cloud-based way of computing, including Google, Yahoo, Facebook, Twitter and Amazon.com, have been able to change consumers’ lives so profoundly only because they’ve built such sophisticated, back-end computing and data-analytic environments that can quickly process and analyze stunning volumes of data: searches, tweets and other content running through their sites each day.
Many of these systems are based in the cloud and were built using massively distributed computing, virtualization and “big data”, among other technologies. This enables them to take maximum advantage of computing resources at unimaginably low per-unit costs. As these consumer companies have grown, they’ve evolved into hothouses of innovative best practices that other big enterprises, from banks to retailers to insurance companies, are now scrambling to understand and replicate.
Cloud computing and virtualization, which allow Internet companies to quickly add or subtract computing power on demand, have proved more flexible and cost-effective at handling events like a surge in online shopping around Christmas season, or a spike in Facebook postings around the Super Bowl. Traditional data centers, by contrast, were built to handle peak loads of Web traffic. That forced companies to spend more money on more servers – most of which sit idle most of the time. Now enterprises are moving more of their operations into cloud-based, virtualized environments. Several large financial-services companies we know well are building “private cloud” environments and are requiring internal business units to bid between these newer systems and legacy, non-cloud infrastructure. This type of change will be replicated throughout businesses worldwide. The net result will be lower costs for basic computing and more IT resources devoted to innovation, especially advanced data analytics. The dramatic innovation in data analytics will impact every business over the next ten years.
As that happens, many corporate-IT departments will follow the lead of consumer giants like Facebook. That company has been a pioneer in using a new database technology called NoSQL that can sort through and store massive amounts of unstructured data – things like the messages, music and photos Facebook’s users are uploading every day in such copious quantities. (Facebook has grown into the largest photo-sharing site on the Internet.) NoSQL gets its name because the technology doesn’t use SQL, the standard computer language used to run queries on relational databases. And Facebook isn’t the only one harnessing the power of NoSQL: Recently, a major U.S. retail bank used a NoSQL database to analyze 150 million customer voicemails that it converted to text files. Previously, the bank just deleted the messages, unable to find a way to process them. The next Oracle will likely be a company based on NoSQL technology.
Similarly, a pioneering, data-focused computing platform gaining traction at many corporations today called Hadoop had its origins inside Yahoo. Hadoop is a new model for computer programming that is relatively easy to use and takes advantage of massive “parallelism”, or concurrent programming for tens of thousands of computers. Hadoop is now helping crunch and analyze data at massive Web sites like those of Facebook, Twitter, eBay and others. But it’s also behind big-ticket, corporate tech offerings being sold by enterprise giants like IBM, EMC, Oracle and Microsoft. Hadoop can help companies analyze “unstructured” data like text, tweets and videos, in addition to traditional, structured data such as sales figures.
Perhaps the most salient example of a consumer company influencing enterprise computing today is Amazon.com. The company’s Amazon Web Services offering – which, as anyone in Silicon Valley knows, allows companies to outsource their core computing power to Amazon-owned servers in the cloud, and pay for it like a metered utility – has transformed the Web bookseller into one of the most forward-thinking, enterprise IT companies on the planet. (Wall Street analysts still don’t pay enough attention to this side of Amazon’s business.) Now, tens of thousands of businesses, including many of the startups in our own investment portfolio, are running their businesses in this way, and larger companies are considering it as well. Microsoft is investing heavily in its cloud service called Azure and is almost certainly going to be a major player in this space. Every single large technology provider is scrambling to catch up. This intense competition will drive innovation and lower computing costs.
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