Absolute Power – how cloud communications is the new electricity

100 years ago, most companies hired electricity engineers. They had to: they owned their own dynamos and generators. Yet in just a few years electrical power had become a remotely-administered utility. What does this remind you of?

…How is your search for a new chief electricity officer going? Have you scoured LinkedIn for someone who knows a lot about generators?

And when is the new water wheel being delivered? Let’s hope it’s soon. After all, you are paying a premium on rent to be near that waterfall.

These are strange, nonsensical questions.

They wouldn’t have been 100 years ago.

In the first decade of the 20th century electricity was a new technology. Any company able to harness it had a powerful advantage over the competition.

But accessing electricity wasn’t easy. There was no grid. If you wanted machines rather than people to make your goods, or lights rather than candles to illuminate your factory, you had to generate power ‘in-house’.

Hence the CCO and the water wheel.

But it didn’t take long for this ‘on prem’ model of electricity generation to disappear. Predictably, technology was the root cause. The first generators were based on DC current, which could not travel more than a mile. In time, DC was replaced by AC, which could flow across wires over long distances.

The ‘victory’ of AC paved the way for remote power – and for industrialists no longer to view electricity as a strategic asset to be owned and operated in-house but as a utility to buy in as needed.

Sound familiar?

Yes, for electricity read computing.

In fact, it is 13 years since this fascinating historical parallel was first described in a landmark essay by Nicholas Carr for MIT called ‘The End of Corporate Computing’.

https://www.cs.sfu.ca/CourseCentral/301/cwa50/Readings/end_of_corporate_computing.pdf

Carr was remarkably prescient. He detailed the story of electricity and concluded that “almost exactly a century later, history is repeating itself. The most important commercial development of the last 50 years — IT – is beginning an inexorable shift from being an asset that companies own in the form of computers, software and myriad related components to a service they purchase from utility providers.”

The article makes fascinating reading for anyone in the IT space. There are some amazing parallels. For example, Carr writes that some of the most powerful companies in the electricity industry switched their strategies to adapt to the new utility model.

He describes how supply houses such as General Electric and Westinghouse moved from selling ‘on prem’ electricity components to offering a per-use power source.

Clearly, we can see this exact transition happening today in IT. Microsoft is the glaring example here. But also, in the unified communications space, Avaya. The original pioneer of unified communications is now fully focused on transitioning to a cloud model.

https://www.avaya.com/en/about-avaya/newsroom/news-releases/2018/pr-us-180110/

When Carr’s article was first published, many IT insiders rubbished it. They claimed computing was too sophisticated to follow the same path as power.

Carr countered that, in fact, IT was even better suited to a utility model. His argument was that while electricity can deliver power, it cannot deliver applications. Companies still need to buy lightbulbs and machines. By contrast, IT can virtualise software too.

“With IT, applications take the form of software, which can be run remotely by a utility,” he wrote. “Even applications customised for a single customer can be housed at a supplier’s site. The end user needs to maintain only input and output devices, such as monitors, keyboards, sensors and the like.”

For us, this is the bullseye. Telephony was once the ultimate ‘on prem’ application, requiring wires and handsets. Now, it too can be turned into software, and therefore hosted remotely.

When you move communications to the cloud, you get to choose the telephony services you need – services that are always on, and always up to date.

Interestingly, individuals and smaller companies have been first to make this switch. They moved to VOIP ahead of larger enterprise, which were held back by sunk costs and established processors.

This also happened with electricity. Carr related that it was smaller consumers moved first to the utility ethos. He describes how – without knowing it – they proved to be the pioneers.

He wrote: “They couldn’t afford to build generators and hire workers to maintain them, so they had to rely on nearby central stations. At the time, they must have felt like laggards, forced to adopt a seemingly inferior supply model in order to tap into the productivity gains of electric power. As it turned out, they were the vanguard.”

At Formation, we can see that our mid-market customers are the equivalent of those electrical pioneers.

They too are looking beyond ‘tin’. But unlike those businesses a century ago, there is nothing inferior about their supply model. Cloud-based UC offers knowable costs, an end to maintenance headaches and much more. In many ways, it exceeds what even the newest on-prem equipment can deliver.

We think we – and our customers – are on the right side of history.

Time to put that old PBX next to the decomposing water wheel and think about ordering your UC ‘off the grid.”

To find out more about migrating your voice estate to the cloud join our breakfast briefing at Tower 42 on the morning of 6th December.

https://formationtech.co.uk/register/