Irving Wladawsky-Berger

Services, Production and Clouds

Last week I wrote about the workshop I recently attended in IBM’s Almaden Research Lab on The Co-Evolution of Future Technologies, Skills, Jobs, and Quality-of-Life.  In particular, I discussed the talk on the IT-based transformation of services given by John Zysman, professor of political science at UC Berkeley and co-director of the Berkeley Roundtable on the International Economy.

Professor Zysman key premise is that the service transformation we are going through is truly an Algorithmic Revolution, that is, the ability to formalize and codify the activities underlying services, express them as computable algorithms and capture them in software.  Given the major advances in the power and costs of information technologies, many more such service activities are now amenable to be transformed into algorithms and embodied in software.  This is profoundly changing the nature of business and just about all other institutions in society, as  they increasingly turn to IT-based services to add value to their offerings.

Over the past several years I have given a number of seminars on technology and innovation in services.  It has been a tough subject to teach.  Services, along with their creation and consumption, have been difficult to define.  So, like many others, I have discussed services and their attributes in contrast to what they are not - physical products that are generally manufactured in factories.  But, while such a definition of services and the service sector of the economy may have worked well in the past, it does not work so well now.      

One of the major consequences of the IT-based transformation of services is the blurring of the lines between manufactured products and products delivered as services, as well as between the industrial and service sectors of the economy.  The distinction between products and services blurs, as physical products are increasingly embedded into service-based solutions, where the clients pay for the services they receive, not the products embodied in the solutions.  The traditional boundaries between the industrial and service sectors of the economy have been breaking down.

The IT-based Transformation of Services

On September 27 I participated in a workshop at IBM’s Almaden Research Lab on The Co-Evolution of Future Technologies, Skills, Jobs, and Quality-of-Life.  The key objective of the workshop was to explore how new technologies are changing the economics of work activities, and to understand the frameworks, theories and models that might help us better deal with these economics changes.

In a series of talks and panel discussions, the workshop first reviewed the historical patterns of technology innovations and economic cycles, and then looked at the future of work economics in three key areas: technologies and societal infrastructure; skills and jobs; and careers and quality-of-life measures.  I gave a presentation on Job Creation, Education and Entrepreneurship in the Emerging Knowledge Economy.

John Zysman, professor of political science at UC Berkeley and co-director of the Berkeley Roundtable on the International Economy, gave an excellent talk on Production, Clouds, and the Transformation of the Global Economy.  He presented a particularly interesting point of view on the ongoing IT-based transformation of services, which he calls an algorithmic revolution.  His discussion of services is largely based on his 2006 paper, The 4th Service Transformation: The Algorithmic Revolution, which was later followed by a more comprehensive 2010 paper, Services with Everything: The ICT-Enabled Digital Transformation of Services co-written with Stuart Feldman, Jonathan Murray, Niels Christian Nielsen and Kenji E. Kushida.

The Limits of Meritocracy

In March of 2010, The Atlantic published an excellent article by Don Peck which painfully described the dire consequences of a long period of high unemployment on US society -  How a New Jobless Era will Transform America.  According to Peck, the consequences of prolonged unemployment are not only bleak but truly systemic in nature -  “a slow-motion social catastrophe.”  Joblessness is more devastating to families and communities than poverty, he wrote:

“The Great Recession may be over, but this era of high joblessness is probably just beginning.  Before it ends, it will likely change the life course and character of a generation of young adults.  It will leave an indelible imprint on many blue-collar men.  It could cripple marriage as an institution in many communities.  It may already be plunging many inner cities into a despair not seen for decades.  Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.”

Peck just published another very good article in the September 2011 issue of The Atlantic - Can the Middle Class be Saved?  In this article, his focus is on what he refers to as The Culling of the Middle Class:

“Arguably, the most important economic trend in the United States over the past couple of generations has been the ever more distinct sorting of Americans into winners and losers, and the slow hollowing-out of the middle class.  Median incomes declined outright from 1999 to 2009.  For most of the aughts, that trend was masked by the housing bubble, which allowed working-class and middle-class families to raise their standard of living despite income stagnation or downward job mobility.  But that fig leaf has since blown away.  And the recession has pressed hard on the broad center of American society.”

The Passing of an Era

The IBM Personal Computer was announced on August 12, 1981.  Having sold its PC business to Lenovo in 2005, IBM itself did not mark the occasion, and as far as I know, neither did Lenovo or the other companies still selling IBM PC’s.  But, the 30th anniversary of this important event in the history of computing was duly noted by IBM Fellow Mark Dean, - a member of the small team that designed the original machine, - in a nostalgic and thoughtful blog.  At the beginning, Mark writes:       

 “It’s amazing to me to think that August 12 marks the 30th anniversary of the IBM Personal Computer.  The announcement helped launch a phenomenon that changed the way we work, play and communicate.  Little did we expect to create an industry that ultimately peaked at more than 300 million unit sales per year.  I’m proud that I was one of a dozen IBM engineers who designed the first machine and was fortunate to have led subsequent IBM PC designs through the 1980s.  It may be odd for me to say this, but I’m also proud IBM decided to leave the personal computer business in 2005, selling our PC division to Lenovo.  While many in the tech industry questioned IBM’s decision to exit the business at the time, it’s now clear that our company was in the vanguard of the post-PC era.”

“I, personally, have moved beyond the PC as well.  My primary computer now is a tablet.  When I helped design the PC, I didn’t think I’d live long enough to witness its decline.  But, while PCs will continue to be much-used devices, they’re no longer at the leading edge of computing.  They’re going the way of the vacuum tube, typewriter, vinyl records, CRT and incandescent light bulbs.”

A New Style of Work

About a year ago I wrote a blog on the post retirement phase of my life.  Tom Foremski, a journalist blogger and friend who reports on the business and culture of innovation in Silicon Valley Watcher, wrote an interesting comment in my blog:

“In some ways, I see your post-retirement life as being somewhat futuristic, in that it will be the way many people will be working in the future.  It's what I call an "atomic" model - collaborating with others on specific tasks/projects and then dissolving those collaborations as you work with others on different projects. In some ways, this is the way Hollywood has been working for decades.  And it's also one that I increasingly see in Silicon Valley.”

“It's a model that increases individual productivity and also organizational productivity because you bring in consultants/experts for specific tasks.  Why have them sitting around on salaries in-between projects?”

“You've retired from the old style of working and you are now pioneering the new style of working :)”

Tom himself made such a transition when in 2004 he left his position as the Silicon Valley reporter for the Financial Times to found Silicon Valley Watcher, one of the first journalists to leave a position with a major newspapers to make a living as a journalist blogger.

I have been very intrigued with this new distributed work phase of my career, where I am associated with several institutions instead of one primary one, as was the case when I worked full time at IBM until I retired in May of 2007 after 37 years with the company.  In particular, I have thought a lot about the role of the Web and related technologies as key enablers of such a distributed style of work.  

The Modernization of the State

I spent the first week of June in Chile, my fourth visit in the last five years.  I was there at the invitation of Fernando Flores, President of the National Innovation Council for Competitiveness, to assist in the Modernization of the State initiative, one of the major projects in the administration of Chile’s President Sebastian Piñera. 
 
The Modernization of the State initiative is being led by Rafael Ariztia under the General Ministry of the Presidency.  It has four major objectives:

• Improve in the overall services that the government provides to all its users
• More effective and efficient government institutions
• Improve the effectiveness of government employees
• Facilitate the decentralization of the country

I first met Fernando Flores during a trip to Chile in August of 2006 to attend an international conference.  He was a Senator then, a position he held from March of 2002 until he was appointed by President Piñera to his present position in March of 2010.  We discovered that we had a lot of common interests and have since become friends.  I continued to meet with him during subsequent visits to Chile.  He knew about my strong interests in cloud computing, and last year I invited him to a briefing on the subject in IBM’s headquarters in Armonk, New York.

Flores has been very involved in the Modernization of the State initiative, both because of his position as president of the Innovation Council as well as his personal expertise in technology and management.  He holds a Ph D from UC Berkeley, has worked extensively in the fields of organizational leadership and human cognition, and written a number of books, including Understanding Computers and Cognition: a New Foundation for Design and Building Trust: in Business, Politics, Relationships and Life.

Flores feels that cloud computing has a major role to play in helping to achieve the objectives of the Modernization initiative.  We talked about his ideas earlier this year, which I thought were right on the mark.  He later invited me to assist in these efforts by coming to Chile for meetings with Rafael Ariztia and the key groups woking on the initiative, as well as to give a seminar explaining cloud computing and its potential to Chilean government officials.

The Evolution of the World's Digital Payments Infrastructure II

In part I of this entry, I discussed  the need to significantly transform the world's digital payments infrastructure to support the emerging evolution toward univeral mobile digital money.  This transformation is a very complex an undertaking that will require significant research and innovation, and will likely play out over many years.  Let me summarize some of the key challenges and opportunities.  

Payment Hubs and Clouds

There is near universal agreement on the need for new payment hubs.  As McKinsey's Payment Hubs: Redefining the Industry’s Infrastructure observes:  “Banks are struggling to cope with transaction platforms that no longer serve their needs.  A legacy of silo IT architecture combined with the need for data integration is leading these institutions to investigate payments hubs as a solution.  There seems to be little consensus, however, as to what a payments hub is (even among those who are building them) and where it sits in the overall payments system.”

The study identifies three major kinds of consolidation or aggregation payment hubs.

The Evolution of the World's Digital Payments Infrastructure I

The huge success of the Internet and World Wide Web was made possible by the continuous advances in digital technologies over the past few decades.  The technology advances were absolutely necessary, - but not sufficient.  The underlying IT architecture supporting the new Web-based applications had to radically evolve as well in order to take advantage of the advances in technology.  And the organizational architecture of the private and public sector institutions that were embracing these new Web-based applications had to similarly change, in order to translate these technology advances into productivity and quality improvements.

Web applications typically run on a three tier IT architecture.  In tier one, users link to the Internet with their PCs, smartphones and other devices, and access the Web with their browsers and related software.  These tier one clients connect to the tier two http-based web servers, which process the browser requests, access tier three back-end systems as required, collect all the needed information and send it back to the clients.  Tier three comprises the different applications and information in back end systems, including mission critical transaction processing and data bases.

This three tier architecture has contributed greatly to the success of e-business solutions, by making it possible to quickly combine the standards, universal reach and connectivity of the Web-based systems in tiers one and two, with legacy and new applications, data bases and other back end resources in tier three.

As we now contemplate the evolution toward universal mobile digital money and smart digital wallets, I believe that we are facing major changes not unlike those that accompanied the advent of the Web and e-business, which will require similar technology, architecture and organizational innovations.  The need for privacy and security concerning money, credit cards and personal IDs requires a highly sophisticated IT infrastructure to support this transition.  Today’s payment systems and the organizations that operate them will need to significantly evolve in order to handle the combination of huge transactional volumes, very low costs and high degree of security, as well as compliance with the variety of financial regulations in countries around the world.

The Evolution of Money

In 2010, the BBC and the British Museum collaborated in a project called A History of the World.  The heart of the project was a BBC Radio program which focused on one hundred objects from the collection of the British Museum, around which you can tell the history of humanity over the past two million years.  That history is presented in a series of fifteen minute podcast about each of the objects, written and narrated by British Museum Director Neil MacGregor and broadcast over the BBC throughout the year.

The objects and podcasts are organized into a number of themes.  Money is one of the themes.  It is represented by four objects:

• one of the world’s first gold coins produced over 2500 years ago in Lydia, western Turkey, whose last king was Croesus, of rich as Croesus fame;
• a 1375 banknote from the Ming Dynasty, one of the world’s first paper banknotes;
• a silver coin minted in Bolivia in the late 16th Century; these were known as pieces of eight and used as the world's first global currency throughout the Spanish Empire;
• and a plastic credit card exemplifying the changing role of money in the modern world.

Money, as one of the podcasts observes, has been one of the great constants in human affairs, right up there with sex and war.  Money was not necessary when people lived in small communities where they knew and trusted their neighbors and could therefore exchange labor, food or goods in kind.  But the need for inventing money arose once civilization started to expand and people were dealing with strangers they may never see again and could not trust, as was the case in Lydia and neighboring communities a few thousand years ago.  Money has played a major role in the world ever since, giving rise to commerce and economies, enabling the organization of companies and public institutions, and helping communities become more productive and raise their standard of living.

Entrepreneurship and Innovation in Large Companies

In March of 2009, The Economist published a special report on entrepreneurship.  Its lead article said: “For most people the term “entrepreneur” simply means anybody who starts a business, be it a corner shop or a high-tech start up . . .  A disproportionate number of entrepreneurial companies are, indeed, small start-ups.  The best way to break into a business is to offer new products or processes.”

But the article then went on to define entrepreneurship as something that applies not only to new or small companies.  It defined the term as: “somebody who offers an innovative solution to a (frequently unrecognised) problem.  The defining characteristic of entrepreneurship, then, is not the size of the company but the act of innovation.”

Given my forty year association with IBM, as well as my more recent involvement with Citigroup, it is not surprising that I am particularly interested in entrepreneurship and innovation in large companies.  I have little experience with startup companies, but I have lots of experience with large, global companies, not just IBM and Citigroup, but many others I interacted with as part of my work, or that I closely followed because they were competitors.

Open Innovation Re-visited

Recently, some colleagues were talking about the upcoming LinuxCon 2010 in Boston - “The Linux Foundation's annual technical conference that provides and unmatched collaboration and education space for all matters Linux.”  Hearing about this conference brought me back to 1999, when we started a number of studies that culminated in the announcement of the new IBM Linux initiative in January of 2000.

By the summer of 1999, Linux was picking up steam in the marketplace, especially in areas where IBM was very involved, including Internet infrastructure and supercomputing.  At the time, a number of research institutions and leading edge companies were already using clusters of Intel processors running Linux as a way of building relatively inexpensive, and increasingly powerful supercomputers, as well as highly scalable web servers, distributed file and print servers, network firewalls, and other Internet infrastructure applications.

We commissioned a couple of studies, one focused on the use of Linux in supercomputing, and the other on Linux as a high-volume platform for Internet applications.  Both studies strongly recommended that IBM embrace Linux across its product lines, that IBM should work closely with the open Linux community as a partner in its development, and that we should establish an organization to coordinate Linux activities across the company.

I was given responsibility for our new Linux strategy and organization.  A few weeks after we announced the initiative in January of 2000, I gave a keynote presentation at the Linux World conference in New York City.  I used this opportunity to explain IBM’s decision to embrace Linux across all its products and services.  Around the same time, I also discussed IBM's Linux strategy in an interview with Charlie Rose - A Conversation about Linux.

Mainframes and Clouds

On July 22, I attended IBM’s announcement of its new generation of mainframes, the zEnterprise System in New York City.  As you would expect with any product announcement, this new mainframe is significantly better and faster than its predecessors.  The new z196 platform has better and faster processors, more processors per box and offers significantly greater energy efficiency.

But, what I found most compelling about the announcement, is its role in the continuing re-invention and evolution of the mainframe, which was first announced as S/360 in 1964.  With this announcement, IBM is positioning the mainframe as an architecture for integrating and managing heterogeneous systems in the data center, not just platforms based on the z processor architecture, the descendant of the original S/360.

IBM’s engineers have deconstructed the mainframe architecture into two major parts:  the processor architecture, including its instruction set, which is mostly implemented in the hardware of the machine; and the management architecture, including virtualization, which is mostly implemented in firmware and software although it is often supported with some hardware assists.  The major new part of this announcement is that the mainframe management architecture is now being supported not just on systems based on the z processor architecture, but also on systems with totally different processor architectures. 

IBM is now extending the benefits of its mainframe management architecture, including high efficiency, scalability, security and reliability, to other platforms in the data center, starting with Intel-based Linux systems and Power-based Unix systems.  This means that you can now integrate heterogeneous systems in the data center and manage them using the mainframe management architecture, which most everyone agrees is the most advanced in the industry.  This is important because the ability to operate highly efficient, reliable, safe data centers with different platforms and workloads is an absolutely critical requirement in the age of cloud computing. 

IT in the Age of the Cloud

IT is undergoing its biggest changes since the advent of client/server computing in the 1980s.  These changes are being driven by many factors, chief amongst them the emergence of a different model of computing, - cloud computing.  We are entering the Age of the Cloud.

For the IT industry, a new computing model is a very big deal.  In the fifty years or so since there has been an IT industry, this would be only the third such model, centralized and client-server computing being the two previous ones.  Not surprisingly, there are lots of discussions underway on the implications of this major transition to all aspects of the industry, from the technology and education requirements to the future roles of the corporate IT functions and the CIO position.

I recently came across a very interesting study on The Future of Corporate IT by The Corporate Executive Board, a consulting firm that provides research and analysis to business executives and professionals around the world.

The Executive Board study investigated the five-year outlook for corporate IT.  It interviewed and surveyed hundreds of IT and business leaders.  Its overall conclusion is that fundamental changes, already underway, will take place in how the IT function is organized and managed: 

“The IT function of 2015 will bear little resemblance to its current state.  Many activities will devolve to business units, be consolidated with other central functions such as HR and Finance, or be externally sourced.  Fewer than 25% of employees currently within IT will remain, while CIOs face the choice of expanding to lead a business shared service group, or seeing their position shrink to managing technology delivery . . . This study argues that the changes will be rapid, permanent, and radical.  We have advocated for a decade that IT leaders become demand shapers, not order takers.  Similarly, we now recommend that IT leaders devote the time, energy, and resources to actively shape the coming transition.”

Extreme Scale Computing

Supercomputing has been a major part of my education and career, from the late 1960s when I was doing atomic and molecular calculations as a physics doctorate student at the University of Chicago, to the early 1990s when I was general manager of IBM's SP family of parallel supercomputers.

The performance advances of supercomputers in these past decades have been remarkable.  The machines I used as a student in the 1960s probably had a peak performance of a few million calculations per second or megaflops.  Gigaflops (billions) peak speeds were achieved in 1985, teraflops (trillions) in 1997, and petaflops (a 1 followed by fifteen zeros) in 2008. 

The supercomputing community is now aiming for exascale computing, - 1,000,000,000,000,000,000 calculations per second.  The pursuit of exascale-class systems was a hot topic at the recent SC09 supercomputing conference. 

In the quest for the fastest machines, supercomputers have always been at the leading edge of advances in IT, identifying the key barriers to overcome and experimenting with technologies and architectures that generally then appear in more commercial products a few years later.

Cloud Computing and the Evolution Toward the "Outside-In," Virtual Enterprise

A couple of weeks ago, I attended a very stimulating meeting in Madrid sponsored by the Bankinter Innovation Foundation.  The Foundation was started in 2003 by Bankinter, - one of the largest commercial banks in Spain, - in order to foster entrepreneurial innovation in the country.

One of the the Bankinter Foundation’s main initiatives is its Future Trends Forum (FTF), a multi-disciplinary international think tank of over 300 experts that together aim to anticipate the major social, economic, scientific and technological trends driving innovation around the world.  The Foundation holds two meetings a year in Madrid, each focused on a major trend previously chosen by the FTF members.  In addition to a subset of the members, subject matter experts are invited to attend and speak at the meetings.

After the meeting is over, all relevant information and discussions are analyzed, and the results are published in a document that is made publicly available on the Foundation’s web site.  Twelve such documents have so far been developed, on topics ranging from mobile technologies to reinventing sustainable developments.

The 13th FTF meeting took place the first week of December.  The topic was “The Crowd in the Cloud.”  Given my interests in cloud computing, I was invited to participate.

Reflections from Another Part of the World and a Different Side of My Brain

I spent the first week of September in Chile and Argentina.  Three yeas have elapsed since I last visited Santiago, and I have not been to Buenos Aires for almost four years.  It was very good to be back in these two very nice cities.

I love to travel in Spanish speaking countries, - I go to Spain and Mexico from time to time in addition to Argentina and Chile.  The reason is not just because the people are so wonderful.  After all, in my experience, the people have been very nice in just about all countries I have been to around the world.  But, being totally immersed for days on end in my native language, is a particularly pleasurable experience, and one that, as I have thought about it, is not only personally appealing but also important to my mental health.  Let me explain.

It is well accepted that a good physical exercise plan should include different kinds of workouts, some focused on aerobics to increase cardiovascular endurance, and some anaerobic in nature to strengthen our muscles.  In addition to its benefits on our physical health, a regime of exercise also improves our mental health as well as helping to reduce depression.But, advances in brain sciences have begun to show the importance of also exercising our mental faculties.  Throughout our lives, our brains need stimulation to be healthy, in the same way that our bodies need physical exercise.  A lack of mental exercise and stimulation can result in severe problems, from the time we are born to old age.

I am convinced that as we learn more about the workings of our brains, we will learn how different kinds of stimulation best help different parts of our brain, much as we have learned how to best exercise different parts of our bodies.  Furthermore, I am sure that future advances in functional magnetic resonance imaging will show that for those of us who were immersed in different languages at different times in our lives, we can best reach feelings and concepts stored in our brain by using the language were were speaking at the time we experienced and learned them.

The Data Center in the Cambrian Age

When I started to seriously think about Cloud Computing a couple of years ago, the metaphor that first came to mind was that the IT industry was now entering its Cambrian age. 

The Cambrian geological period marked a profound change in life on Earth.  Before it, most organisms were very simple, composed of individual cells, sometimes organized into colonies, such as sponges.  But, starting around 550 million years ago, and over the following 70 or 80 million years, evolution accelerated by an order of magnitude and ushered what is termed the Cambrian Explosion, -  a highly diverse set of larger, more complex life forms.

Although with far shorter time periods, the IT industry has been going through something similar.  Over several decades, we were perfecting our digital components - microprocessors, memory chips, disks, networking and the like, and we used them to build a variety of computers.  Then about ten years ago, the digital components started to become powerful, reliable, inexpensive, and ubiquitous.  The acceptance of the Internet introduced a whole new set of technologies and standards for interconnecting all these components, not only in IP networks but across the World Wide Web, different kinds of communications, computer Grids, distributed applications, and so on.

Today, digital components are becoming embedded into just everything and connected to the Internet through an IP address, so that personal devices of all sorts, - consumer electronics, medical equipment, cars, buildings, and just about the whole physical infrastructure around us,- is now part of IT’s life forms.  We are using variations of the same digital components to build very large servers and supercomputers with hundreds of thousands of nodes.  When we look into the future, we see a not far-off world of billions of mobile devices, trillions of smart-sensors, and a variety of million-node servers, all optimized and co-evolving to support different kinds of workloads.  Indeed, it feels like IT is now entering its own Cambrian age.

The 2009 MIT Sloan CIO Symposium

Last week I participated in the MIT Sloan CIO Symposium.  The CIO Symposium is an annual one-day conference on the MIT campus, now in its sixth year, “where CIOs and other senior business executives from around the world gather to explore how leading-edge academic research and innovative technologies can help address the challenges faced in today’s changing economy.”  The theme of this year's Symposium was Sustaining CIO Leadership in a Changing Economy. 

The MIT Symposium consisted mostly of interactive panel discussions, including broad audience participation.  Two key themes kept recurring throughout all the panels and discussions.  One was cloud computing, the other was the evolving role of the CIO. 

As is typically the case, panelists used somewhat different definitions of cloud computing, as they each talked about clouds from his/her own point of view.  This is what you would expect if you agree with the view that cloud computing refers not to any one product or service, but to an emerging model of computing beyond the centralized and client-server models of past decades.

Cloud - the Emergence of a New Model of Computing

The buzz and excitement around cloud computing has been steadily building over the last year.  There is general agreement that something big and profound is going on out there, although we may not be totally sure what it is yet.  "There is a clear consensus that there is no real consensus on what cloud computing is," was one of the key conclusions at a recent conference on the subject. 

I believe that one of the major reasons for both the excitement and lack of consensus is that we are basically seeing the emergence of a new model of computing in the IT world.  For the IT industry, a new computing model is a very big deal.  In the fifty years or so since there as been an IT industry, this would be only the third such model, centralized and client-server computing being the two previous ones.

What characterizes a computing model?  There is no single dimension around which to define a computing model, which I believe accounts for the variety of definitions of cloud computing.  It’s like the fable of the blind men and the elephant.  Each one touches a different part of the elephant.  They then compare notes on what they felt, and learn that they are in complete disagreement.

The Industrialization of Services

In the late 18th century, the Industrial Revolution started the transition from a manual-labor based economy towards an economy based on using technologies, tools and machines to significantly improve the manufacturing of physical goods.  Over the next two hundred years we have seen the industrial sector of the economy achieve major improvements in the productivity and quality of manufacturing, ranging from very simple to highly complex physical objects.

A major step in that remarkable story of innovation occurred around thirty years ago.  Before that time, most manufacturing plants were fairly inefficient by almost any contemporary measure, and were turning out products of varying quality.  Then, driven by the huge success of Toyota and other companies around the world, the industrial sector and academia discovered the merits of applying engineering discipline as well as a holistic, systems-wide approach to manufacturing processes.  Company after company embraced the Toyota Way, Six Sigma, Lean Production and similar methods in their manufacturing and logistics operations, which have brought the industrial sector of the economy to a whole new level of productivity and quality.

The rise of IT in the last several decades has enabled us to start applying technologies to the large and diverse world of services.  In the beginning, computers were used primarily to perform calculations.  In the 1970s, we started to make a lot of progress automating highly repetitive, back office tasks like processing financial transactions, inventory management and airline reservations.  Then, a decade later, the personal computer enabled us to develop all kinds of productivity applications like word processing and spreadsheets.  The 1990s brought us the Internet and World Wide Web, which introduced revolutionary ways of dealing with content, communications and commerce.

Cloud Computing: the Internet of Services

The October 25 issue of The Economist includes a special report on cloud computing - seven articles plus an introduction.  It is an in-depth look at this new model of computing, its implications, its value promise to companies and societies, as well as the pitfalls against which we have to guard.

In the lead article, Ludwig Siegele starts out his definition of cloud computing by first giving a very succinct history of computing:

"In the beginning computers were human. Then they took the shape of metal boxes, filling entire rooms before becoming ever smaller and more widespread.  Now they are evaporating altogether and becoming accessible from anywhere."

"That is about as brief a history of computers as anyone can make it.  The point is that they are much more than devices in a box or in a data centre.  Computing has constantly changed shape and location - mainly as a result of new technology, but often also because of shifts in demand."

He then goes on to define cloud computing:

"Now, this special report will argue, computing is taking on yet another new shape.  It is becoming more centralised again as some of the activity moves into data centres.  But more importantly, it is turning into what has come to be called a 'cloud', or collections of clouds.  Computing power will become more and more disembodied and will be consumed where and when it is needed."

"The rise of the cloud is more than just another platform shift that gets geeks excited.  It will undoubtedly transform the information technology (IT) industry, but it will also profoundly change the way people work and companies operate.  It will allow digital technology to penetrate every nook and cranny of the economy and of society, creating some tricky political problems along the way."

What is Cloud Computing, Anyway?

In a recent blog I summarized the discussions around cloud computing at the conference I had just attended by writing that "something big and profound seems to be going on, although we are not totally sure what it is yet." 

Cloud computing is the kind of wide-ranging initiative that different people can look at from their own point of view and come up with their own, somewhat different definitions.  This is not surprising in the early stages of such a comprehensive initiative.  When the Internet first broke into the wider world in the mid 1990s, you similarly heard lots of different opinions on what it was and what it would be good for.

In reading through the assorted cloud definitions, five key themes keep coming up.  Let me say a few words about each of them.

The Promise and Reality of Cloud Computing

Cloud Computing continues to be a very hot subject.  At the end of June, I participated in a conference in Cambridge on The Promise and Reality of Cloud Computing, sponsored by Xconomy - a communications company whose tag line is Business + Technology in the Exponential Economy. 

The sense of the meeting was succintly captured by Bob Buderi, founder and CEO of XConomy: "There is a clear consensus that there is no real consensus on what cloud computing is,"  following his earlier summary:

"Our speakers put cloud computing in its historical context - from the Cambrian explosion all the way through the rise of electric utilities.  They showed how businesses today can use this emerging technology for cost-effective and powerful computing solutions. And they also gave us a feel for the real paradigm shift the cloud could bring to the computing world, especially how large software companies might find themselves vulnerable to disruption (although some firms are still in denial about this)."

In other words, something big and profound seems to be going on, although we are not totally sure what it is yet.

Reflections on Cloud Computing

Over the last year, I have become intrigued by the rise of cloud computing.  An increasing number of articles are being written on the subject, as a quick online search of the term will attest.  More and more companies are taking a serious look at cloud computing.

Last summer, IBM launched a study of cloud computing sponsored by the IBM Academy of Technology and led by our top experts in the area.  The study was very positive about the opportunities of cloud computing for the IT industry.  But it also highlighted the many challenges to be addressed in deploying cloud computing, especially in existing data centers.

So, what exactly are we talking about?

A Kind of Cambrian Explosion

Over the last few years, the complex engineering systems community has been turning to biology as a source of new ideas for dealing with the kinds of systems that we are now increasingly able to develop.  As digital components continue to become ever more powerful, inexpensive and standardized, these complex systems are growing in breadth and capabilities at a dramatic rate.  Moreover, the kinds of problems we are now able to address are significantly different from what they were in the past.

IT systems are "going up the stack."  They are increasingly being used for businesses and societal applications that need to be able to change and adapt to whatever is going on in the marketplace, and those changes are coming at a very rapid pace.  These market-facing, people-oriented complex systems need to be flexible and adaptable.  Biological systems clearly exhibit these kinds of properties - flexible, adaptable, highly complex and continuously evolving, - which is why biology has become such a source of inspiration for the study of dynamic, complex engineered systems.

Looking at biology as a metaphor, - and begging forgiveness for any poetic license I might have taken in a subject that I am far from an expert - one can very roughly speaking identify an era where the cell was perfected and single cell organisms made their appearance several billion years ago.  This was followed by  multi-cell organisms a billion years ago or so.  Then, around half a billion years ago another dramatic change took place, which is known as the Cambrian Explosion.  Evolution essentially took off, accelerating by an order of magnitude, ushering in a highly diverse set of organisms that were far larger and more complicated than anything that existed before.

The IT industry has been going through a similar process.  If we think of digital components as playing the role of cells in biology, for the first several decades of the industry our focus was to improve and perfect these components - microprocessors, memory chips, disks and so on.  We were building computer systems that were mostly based on a relatively small number of processors.  The lack of standards made it difficult to cluster or network large numbers of such processors into an integrated system.