Saturday, May 1, 2010

Build your own cloud, why not?

Three huge global banks are about to announce the formation of an IT buying consortium intending to not only drive down their costs but also giving them the option of creating their own highly secure global cloud infrastructure and network.

"Commonwealth Bank of Australia has teamed with Bank of America and Deutsche Bank to create a global technology buyer's consortium that will strip away billions of dollars in back-office computing costs by combining the purchasing power of the three institutions,” according to the Australian Financial Review.

"To be launched on May 17, the formation of the bank-owned purchasing syndicate poses a formidable challenge to technology heavyweights including Microsoft, IBM, Hewlett-Packard, and Oracle which, for the last 20 years, have reaped huge profits collecting the equivalent of annual rent for their products."

Reflecting back on my time at IBM CHQ, I can envision a whole flock of market planners assuming that customers would buy their cloud services from IBM, and that these services would be rolled out in a manner that increased IBM revenues by stressing new cloud services over displacement of existing software and equipment. Offering cloud services that would reduce IBM’s revenues would be highly unpopular. Most likely, planners at Microsoft, Hewlett-Packard, and Oracle had similar thoughts.

Reducing expenses is clearly more attractive to the customers than to their current vendors. "We've got 50 per cent to 80 per cent of all what we spend a year tied up in infrastructure and that infrastructure isn't conferring any strategic advantage, it's just a cost of doing business," says Michael Harte, CIO of Commonwealth Bank..

“Just goes to show: whenever we think that this business is all grown up, and that all the drama is past, and that things are quieting down, something unexpected happens and the competitive balance gets turned upside down. It's just hard to imagine that when the executives at Oracle or HP or IBM looked out at the world to assess where the next wave of competition would come from, that they decided it would come from three very large and very impatient global customers,” writes Bob Evans in Information Week.

“This one's going to be very fun to watch.”

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