Cloud Computing and Your Business

Cloud computing is rapidly transforming the financial industry. The pace of change is as swift and unrelenting as the forces that have altered the music, newspaper, and advertising industries. This article will discuss the history of the traditional business structure, define cloud computing, and describe the effects that cloud computing are creating to potentially bring the largest technological change to the financial industry in our lifetimes.
The traditional corporate structure is a remnant of the Industrial Revolution’s assembly line of the early 1900s. Workers commute to a single office, sit in a small cubicle from 8 a.m. to 5 p.m. with time away for lunch and short breaks. Worker compensation is more closely tied to time in the job or in the seat than to outcomes that add value to the company’s customers or shareholders.
The effect of Cloud Computing is its ability to untether workers from working in a traditional office environment during set hours of the day. Workers are freed to seek a better balance between the work, family, and recreational aspects of their lives. Employers focus on outcomes, productivity, and what the worker is doing to add value to their company’s customers, rather than keeping tabs on where they are or what they are doing at any point in time. It is a way of doing things that is totally familiar to the Net generation (1977-1997). However, it is a more foreign concept to the Baby Boomers generation (1946-1964), a generation long accustomed to the command and control corporate hierarchy of the 8 a.m. to 5 p.m. workplaces.

What is Cloud Computing?
In the traditional corporate structure, companies store their data, applications, and services on internally owned mainframe computers or servers. Workers access that data from desktop PCs connected to the servers/mainframes within the company’s closed system. With Cloud Computing, you are no longer required to maintain hardware and software within your own data center. Your company can choose to rent servers and access the data from an independent source at a fraction of the cost through the Internet. This independent source (e.g. a data center, server farm) then delivers your company’s security encrypted data to you to wherever you are accessing a high speed Internet connection.
An example of this transformation occurred during my childhood. As a member of the Baby Boomer generation, I grew up in the upper Midwest in a house (built in 1904) that was heated by coal. To stay warm in the winter, my father had to call the coal company who sent a truck full of pieces of black coal that were unloaded into a bin at the side of our house. The bin dropped the coal into a basement “Coal Room”, where every evening my father would take a shovel and load coal from the basement room into our coal burning furnace. Later, utility companies were established. They burned enough coal and sent the generated electricity across power lines to our residential home—freeing my father to only adjust the thermostat before bedtime every evening.
By analogy, Cloud Computing makes the storage of a company’s data a utility—an expense when shared by all, reducing business costs like hardware, software, and commercial office space. The confluence of mobile communications, high speed digital internet connections, and information technology efforts to integrate work processes is working together to make all of this possible.

Delaying Going Digital = Huge Risks
Financial Services companies with traditional corporate structures that stick their heads in the sand about going digital/virtual face enormous risks. They will have to compete against “virtual” companies whose overhead for hardware, software, and commercial real estate is only 10-50 % of the traditional company’s overhead. Additionally, financial services products, unlike product inventory that is manufactured, are intangible. Intangible services can be 100% digitalized or electronic. Money has become essentially an electronic representation (debit, credit cards) as paper currency has become less pervasive in our daily lives. Financial firms are moving in the direction of a business model that is driven by electronic funds transfers and transactions. The traditional firm that delays reorganizing their internal operations to a virtual/digital format may face large competitive disadvantages, as their product already has or is well into the process of going digital.
Cloud Computing is creating new markets for digitally connected products and services. People in parts of the world that were never previously connected with wired telephone systems now have access through mobile phones , creating massive new global business opportunities. In addition, Cloud Computing will open up more job opportunities for women in the financial industry. Women will be able to work from home, better balancing work responsibilities with the upbringing of children.
And it’s happening now. Work is anywhere or anytime. The freedom Cloud Computing offers is changing the way we perceive work, placing more of an emphasis on the work itself. Work becomes something that you do, not someplace where you go.
This new way of organizing business structures will over the next two to ten years begin to displace the traditional corporation as the primarily wealth creator of our economy. Like the music, newspaper, and advertising industries, major financial employers will find their business models shifting under their feet. Cloud Computing may bring the largest technological change to the Financial Industry in our lifetimes.