This document discusses how cloud computing can improve business agility and reduce IT spending. It argues that adopting a free market approach to allocating IT resources within organizations, by allowing business units to purchase services from multiple suppliers on the open market, leads to greater efficiency compared to a centralized planning model. While cloud computing makes individual workloads less expensive, organizations may end up spending more in total as cloud adoption enables new applications and greater overall consumption of IT services, in line with Jevons' Paradox.

1. Dogfighting, Communism and Coal
Understanding Business Agility and IT Spending
in the Age of Cloud
Dave Roberts
Vice President
dave.roberts@servicemesh.com
@sandhillstrat

2. Dave Roberts
Vice President
dave.roberts@servicemesh.com
@sandhillstrat

4. @sandhillstrat

5. Why is cloud important?

6. “History doesn’t repeat
itself, but it does rhyme.”
-- Mark Twain

13. What if your competition
embraces cloud
computing before you do?

14. Cloud computing is a
strategic weapon,
for or against you.

15. Most of your competition
will “do it wrong.”

16. What are the benefits of
cloud computing?

18. 1. Decreased IT spending.

19. 1. Decreased IT spending.
2. Improved business agility.

20. Is this correct?

28. What is agility?

29. What is agility?

30. USAF Fighter Weapons School, Nellis AFB

31. Col. John Boyd, USAF

32. 40

33. 40 Seconds

35. Boyd never lost the bet.

36. Why?

37. OOD A
Loop

38. O
O
D
A

39. O bserve
O rient
D ecide
A ct

45. Fast Transients
Worst&
Slightly&
Be/er&
Best&

48. Lesson:
Whoever can handle the
quickest rate of change
survives the fight.

49. 1. Small loops (small teams)

50. 1. Small loops (small teams)
2. Communicate high-level intent

51. OODA(
Central(
Authority(
High3Level( High3Level(
Objec9ves( Objec9ves(
OODA( OODA( OODA( OODA(

53. Cloud shrinks the loops
involving IT.

58. How can we best ensure the
right resources get to the right
people at the right time?

59. Spectrum of Economic Models
Top$Down( Bo5om$Up(
Command(and(Control( Decentralized(
Socialist( Free(Market(

61. Central Planning

62. Central Planning
Given enough inputs and smart people, you can
efficiently plan almost anything.

67. Source:(h*p://kcmeesha.com/2010/02/20/behind9the9iron9curtainshortages/

68. Source:(h*p://kcmeesha.com/2010/02/20/behind9the9iron9curtainshortages/

69. Ludwig von Mises

70. Ludwig von Mises Friedrich Hayek

71. The Economic
Calculation Problem

72. The Economic
Calculation Problem
1. You can never know everything.

73. The Economic
Calculation Problem
1. You can never know everything.
2. Things change all the time.

76. Shortage / Make More

77. Glut / Make Less

79. Conclusion:
Central planning loses for
nation-states

80. What about smaller
organizations?

81. Thesis

82. Thesis
Individual firms that allocate IT resources
using free-market principles will do better
than firms that favor central planning.

83. Products$sold$at$market$price$
Business$Unit$
Raw$materials$&$labor$
purchased$at$market$price$
“Monopoly$pricing$&$
monopoly$money”$
Firms$
IT$Dept.$ Raw$materials$&$labor$
purchased$at$market$price$
Free$Market$

85. Symptoms of IT Inefficiency:
BYOD
Consumerization of IT
Shadow / Rogue IT

87. True Free Markets:
Multiple suppliers
Competition
Freedom of choice
Competitive failure

88. Products$sold$at$market$price$
Business$Unit$
Raw$materials$&$labor$
purchased$at$market$price$
Market$compe;;ve$ Allow$BUs$to$purchase$
offerings$and$pricing$ from$mul;ple$suppliers$
Firms$
IT$Dept.$ Raw$materials$&$labor$
purchased$at$market$price$
Free$Market$

89. Products$sold$at$market$price$
Business$Unit$
Raw$materials$&$labor$
purchased$at$market$price$
Market$compe;;ve$ Allow$BUs$to$purchase$
offerings$and$pricing$ from$mul;ple$suppliers$
Firms$
IT$Dept.$ Raw$materials$&$labor$
purchased$at$market$price$
Free$Market$

91. Cloud delivers the machinery
for accurate, granular
accounting and
billing.

95. What sort of IT cost reduction should
we expect from cloud computing?

96. What sort of IT cost reduction should
we expect from cloud computing?

97. 1865

101. When would Britain
exhaust its coal mines?

102. When would Britain
exhaust its coal mines?

103. The Jevons’ Paradox

104. The Jevons’ Paradox
Greater Efficiency ➡ More Consumption

105. ?

106. The Jevons’ Paradox
Greater Efficiency ➡ More Consumption

107. The Jevons’ Paradox
Greater Efficiency ➡ New Applications
New Applications ➡ More Consumption

109. Cloud will make individual
workloads less expensive.

110. Cloud will make individual
workloads less expensive.
But you’ll use more, and
thus costs will increase in
aggregate.

117. Thank You
Dave%Roberts%
SVP,%Strategy%and%Evangelism%
%
Email: % %dave.roberts@servicemesh.com%
Web:% % %h>p://www.servicemesh.com/%
Company%Twi>er:% %@servicemesh%
Personal%Twi>er:% %@sandhillstrat%
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