Cloud Computing: The Next Disruptive Technology (and not just a new fad!)

‘It’s too limited!’ ‘It doesn’t work the same!’ ‘I don’t understand it!’ ‘It’s not safe!’

You may think that I’m talking about the ‘new and scary’ Cloud Computing or Software as a Service, but whilst these are some of the things that people are saying about the new online technologies, I’m actually talking about some of the things that were said about steam trains when they were the latest technology.  My point being, that whenever a new disruptive technology comes along (and yes, I do believe that this is the new disruptive technology!) that’s destined to revolutionise the way we do things and render the old technology obsolete, this is people’s first reaction. 

In some cases, it’s a fear of the unknown (why use a DVD recorder when you can cope perfectly well with your trusty, familiar, VHS recorder?!), but in a lot of cases it’s scaremongering on behalf of the people who rely on the existing technology and can see their livelihoods slipping away from them.  And I don’t blame them, change is always scary, however, if, going back to my train analogy we look back (with the benefit of hindsight) at how things played out, we can see that the online technological revolution is already a significant way down the same path, and there can only be one conclusion. 

Steam trains didn’t just arrive on the scene in the 19th Century out of thin air.  They were, as online technology is today, a product of their time.  Many people had come up with the same sorts of ideas to improve transportation from the convergence of several different existing ideas and trends (we already had railways, steam engines, a purpose-built transport network of waterways).  Similarly, Cloud Computing has been born out of the convergence of a number of current ideas and trends (mobile remote and flexible working and new online technology, and capabilities, broadband) and so we have recently seen an explosion of web-based phenomenon (twitter, youtube, facebook, flickr, ITunes, Wikipedia, Google) of which online software is only one.

The first steam trains were run on a circular track, like a giant train set (think of BETA testing software or the first wave of online apps that worked online but didn’t do very much).  People were convinced that they would die from travelling so fast, that the trains were giant wild beasts, and that there wouldn’t be a mass market for trains because there wasn’t a network of tracks to run them on.  At this stage they were an unproven technology – slow, expensive and unreliable – and at the end of the day, they said, ‘well we’ve got canals, why do we need trains!?’ This is probably the stage things were at just before we first launched Liquid Accounts in 2005 – broadband was starting to become the norm, but it was still fairly slow and limited and there was definitely no mobile broadband and wifi hotspots, and people just couldn’t see the potential or didn’t get the concept of doing things online – they said, ‘but we’ve got software – why do we need to go online?’

But then, some early pioneers started to build railways and make use of steam trains in industries built around moving large quantities of heavy goods such as coal and people started to recognise the potential and advantages of them.  Most started out by using a combination of steam trains and traditional horse-drawn trains, but it soon became clear that steam trains could haul bigger loads much faster and so horses were phased out.  At this point, however, steam trains and canals coexisted with trains mainly carrying passengers and light goods and canals bulk items.   

Then, as people began to see other advantages to railways (package holidays, newspapers and post, commuting, and even the standardisation of time), they started to build railways everywhere, most financed by industry who wanted faster delivery, bigger quantities, reduced costs, and access to bigger markets.   

This is process we’ve seen over the past 4 years at Liquid Accounts – our early customers were mainly people who had a specific need that wasn’t being addressed by offline software, others wanted to try it alongside their existing software in order to compare them.  Now, however, people are using online apps for all sorts of things and every coffee shop, train station and airport has wifi. But at the moment, whilst online software is gathering momentum, it is still just an alternative to offline software.   

And as a result, we’re seeing more and more companies coming into the online market place, lured by exactly the same benefits as the railway companies 150 years ago – faster delivery, bigger quantities, reduced costs and access to bigger markets (we for example have picked up clients in Ireland, Switzerland, New Zealand, South Africa and the Far East, just by being online), whilst offering the same sorts of benefits to their clients.

So what happens next?  Well by looking back at what happened on the railways we know that there were 3 outcomes:

  1. The existing technology (canals) went into decline and never recovered
  2. Trains became the dominant technology
  3. The winners were those who embraced the new technology and kept adapting with it.

But before all that there was an almighty fight, instigated by the canal companies who, backed into a corner, did all they could to undermine the image of train transportation – they dropped their prices, they pointed out the problems, they said it wasn’t mature or established, that there were risks (sound familiar?!)  But the real problem was that a canal haulier couldn’t change what he did or how he did things in order to compete – he couldn’t get a boat that went as fast as a train! 

And yes, there were teething problems – lines were owned by different companies with different prices, rules and standards (or they didn’t even join up at all) – and there weren’t any timetables – but what everyone had forgotten was that there’d been the same issues with the canals when they were the latest thing too (canals were different sizes, and goods often had to pass from boat to boat, different canal companies charged you for using their canal) and over time these things were ironed out, or people just put up with them.  

And once people started creating a rail network, it became quicker and cheaper to lay more track and quicker and cheaper to transport things by rail, and that became the dominant technology and the norm, until the next big thing came along (cars and planes).

What we’re talking about here, is technological revolution, rather than evolution, and throughout history you can see the same processes and protests happening over and over again (as a proud Yorkshireman, trains and canals are in my blood, and my ancestors were probably Luddites – the mill workers who futilely protested about the advent of machinery that could do their jobs for them).

So, in conclusion, I believe that modern ‘Luddites’ who are spreading mistrust and misinformation in order to try and hold back the tide of change (in articles like the recent one on AccountingWEB entitled, ‘Don’t overlook the risks of Cloud Computing’) are, like the canal companies of the 19th Century, fighting a losing battle and may be cutting off their noses to spite their faces!  (Within days of this particular article Microsoft had announced its own plans to enter the Cloud and the UK Marketing Director had left to join online pioneer, Xero.)

Cloud Computing isn’t its infancy – yes, take-up may be in its infancy, but development isn’t – Salesforce for example has been working in the Cloud for 10 years, and we at Liquid are in our 5th (although our development team have been creating online apps for 8!).  (And in the current climate, longevity/maturity doesn’t necessarily mean reduced risk as we’ve seen a number of High Street names, including banks fold!)  Yes, it is still an emerging market without clear standards and expectations, but these are just the icing on the cake, and that comes later on in the process (as we said earlier, railways didn’t arrive with full timetables and uniform pricing structures, as people didn’t know they need them until trains had arrived!).  And any responsible, serious and mature Cloud company (like Liquid) will have already thought about and addressed the issues around data hosting, service agreements, customer exit strategies and security – and at the end of the day, which is more likely – that a company with an out of date, unmaintained server hidden away in a cupboard, will lose some data, or a responsible Cloud company using a managed, maintained, state-of-the-art, bomb-proof, climate-controlled data centre?  Upgrades may happen at inconvenient times, and cause issues, but this isn’t an issue exclusive to online software (Microsoft update, anyone?!) and at least you’re being kept up-to-date and won’t have to deal with additional costs and huge changes once your existing software eventually becomes obsolete (whether you like it or not!).  And would you rather have the new VAT rates there ready for you on the day they come into force, or 2 weeks later when your offline software company can manage to send something out to you? 

And the idea that ‘under this model the software cannot be changed, making it more difficult to customise or integrate it’ is just completely untrue – in fact, if anything, Cloud technology has the potential to give companies more flexibility, customisation and integration (we for example, allow companies to build their own package to suit them, and can offer e-commerce and Ebay integration) and with the recent emergence of Cloud Platforms things are only going to get better!  Again, the development of ‘middleware’ is a refinement to a new disruptive technology and we’re just getting to the point where the different Cloud companies, like the rail companies before them, are starting to work together to create a joined up network.

Cloud computing in the 21st Century, like railways in the 19th, is creating a revolution, but this time in transporting data and virtual goods along invisible tracks, rather than physical goods along real tracks, and I for one am glad to be along for the ride.  There will be problems along the way (a man was run over and killed at an early competition to choose a steam train design, but it didn’t stop them being developed!), but we’ll learn from our mistakes and keep improving.  But I would say that wouldn’t I?!

Matt Holmes (as well as being a bit of a train and canal spotter) is Chair of the BASDA Special Interest Group on Cloud Computing and the MD of UK online accounting pioneer, Liquid Accounts, who were voted Best Web-Hosted Accounting Software at the Software Satisfaction Awards.