Frankly, in this class, we're going to look at disruptions. Our point is that disruptions aren't going to stop. They're going to keep coming because the technology is developing so rapidly and developing so many more capabilities. And it's important to remember that one firm's innovation is a disruption for many other firms, at least, potentially so. So, reviewing our definition, a disruptive technology is innovation that is so good and so compelling that everyone abandons their current way of doing things and flocks to this new disruptive technology. Should we be against them? Well, our point all along has been no. Disruption is the basis for progress. Schumpeter talked about create, creative destruction in a capitalist economy. The old ways go out and new ways come in. We've seen cycle after cycle of innovation and disruption leading to more progress. We get new products and services and for many people they enrich life. There's been a lot of historical disruptions beyond technological ones that we've talked about. The horse versus the horseless carriage. That was a major disruption. Propellers versus jet aircraft. Cellular phones versus land lines. Tablets versus PCs. All of these are changes that probably the vast majority of people in retrospect would say, have been very positive. So, we're going to begin and look in this video at something called cloud computing, which is a disruptive technology for many, many people. Going back in history, the very first main frame in computers, IBM and the others, were leased. And then, the manufacturers said, alright we will sell the computers to people. By the time many computers and PCs came along people were buying them, they weren't leasing them for the most part. Cloud computing is a service and we'll explain in a little bit what that service is, but the service model is old. Years and years ago, IBM owned a company called Service Bureau Corporation. So, if you couldn't afford a mainframe computer or you had just occasional use for one or you needed extra capacity, you went to a physical building that was SBC. And they had computers there, and you could use them for a price. Following that, in the 1960s and 70s, there was a movement towards something called outsourcing. Where a company would say we're not going to manage our IT anymore and an outsourcing company would buy their mainframe computers. The outsourcer would generally setup a computer center that had much have a lot of capacity in them, and had its customers execute their jobs in that computing center. And outsourcing is still around, there are outsourcers there who will provide that kind of service for you. They will also go ahead and run the computers in your company and leave them there, if that's what you want. Last PCs grew as the, as, as the technology matured, as, as computers became more and more powerful, we've seen a migration to a client server model. So that there are thousands of servers and one could add capacity in small chunks. In the mainframe era, you might have had to buy a much larger computer than you needed to get additional capacity. The websites that run have huge variance in the demands on them. So, the thought came that somebody else could provide the technology infrastructure for us and solve a lot of problems in the process. So, why the cloud? Well, the cloud is a large collection of servers provided by somebody. It's a shared capacity that you use with other cloud users. And these can be very large facilities. For example, there's a video of tour of a Google data center that has 55,000 computers in it, servers in it. As a customer, you don't have to manage as much, you don't have to invest very much and you have a huge capacity that will scale up as your demands scale up. So, if you're an entrepreneur starting a new company that's based on the web, the cloud is very attractive to you. Now, everything has some disadvantages. First of all, your data, data is stored on someone else's site and that may bother people, particularly some financial services firms. There is the question of security. Is it possible for someone to actually get hold of your data? There haven't been any reports of that happening yet, but is always a possibility. You're also dealing with a variable cost model. That is, as your demands for services go up, so is the amount you're going to pay for the service. If you have your own technology in house, you can probably establish a fairly steady budget or steady cost for that. However, cloud computing appears to have sufficiently low charges that the variable cost for many is turning out to be less than the fixed cost of trying to do it yourself. Who offers these services? Well, very familiar names, Amazon, Amazon Web Services, IBM, salesforce.com, Microsoft's, Citrix. salesforce is an interesting cloud service provider because it provides something known as software as a service. Most people wouldn't go to sales force for general computing. They go because of an application they have for customer relationship management. That's been very successful for them. So, that software, as a service, whereas with Amazon or IBM or Microsoft, you're probably just going for capacity for servers to run your application that you've developed. So, what's the threat here? Well, customers moving to the cloud in large numbers are going to threaten hardware and software vendors to some extent. The cloud providers have to buy technology, but they're not going to be selling to vendors, they're not going to be selling that technology to you. They threaten other services' vendors and there might be a little bit of a threat to the IT profession because people who run large data centers will not be doing that in the companies that move exclusively to the cloud. Though, I think today there are a fair number of companies in transition. So, you have them with internal IT and got that using the cloud for certain applications. So, what's my forecast? I think cloud computing is extremely attractive, especially for internet based services. Its a great for a start up because you don't have to invest and build an infrastructure. As an example, EdX isusing Amazon's cloud. As does our old friend Netflix that we've talked about, okay? It's a less attractive for, say, a large manufacturing control system that might be in, in a number of plants for manufacturing company. I think it's a little less attractive right now for a bank until data security concerns are, are dealt with. But I think the cloud is likely to dominate computing in the future. It's a very attractive model. So, we'll finish this with a quiz to test your understanding of disruptive cloud technologies.
