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Few technology trends have captured as much popular attention as Cloud Computing. The level of hype associated with the ‘Cloud’ hasn’t been seen since the hoopla created during the Dot.com era. As a result, there has been plenty of debate about whether the Cloud Computing phenomenon is headed to a similar demise.

Of course, I can point to plenty of proof-points which clearly demonstrate the differences between the false promises of the Dot.com era and the tangible benefits of today’s Cloud Computing solutions. However, the recent Comcast outage (CMCSA) raises an even more serious concern — are businesses moving to a far less reliable operating platform when they turn to Cloud services to support their corporate operations?

I was confronted with a similar question after giving a keynote presentation at the Connecticut Venture Group’s Software Industry 2010 meeting. A member of the audience suggested that the rapid adoption of Cloud services reminded him of the broad-based acceptance of subprime mortgages before the bubble burst in 2007. He viewed the subprime mortgage business and Cloud Computing as similar in the following ways,

  • Each has emerged and grown on a virtuous premise — making mortgages and computing power available to a broad, previously disenfranchised segment of the market.

  • Each has relied on a new operating model which enables providers and customers to take advantage of a new set of pooled resources.

  • Each experienced rapid growth based on an assumption of infinite scalability under a set of loosely governed rules and regulations.

Kind of makes your stomach turn when you think about the parallels between the subprime mortgage mess and the Cloud Computing phenomenon.

In simple terms, the subprime mortgage industry depended on the continous rise in housing values to safeguard against suspect loans. We all know what happened when housing values dipped and the subprime ‘house of cards’ collapsed.

What would happen if the fundamental premise of the Cloud Computing’s infinite scalability, reliability and security was derailed by a major service disruption or broad-reaching security incursion?

We got a glimpse of the potential ramifications when Comcast’s DNS servers failed just before Cyber-Monday kicked into full gear.

When confronted by this question at the CVG event, my immediate (knee-jerk?) response was to suggest that the Cloud Computing industry depends on a different combination of factors to ensure its long-term stability and success:

  • Better educated consumers, both IT and business decision-makers.

  • More incremental procurements which mitigate the risks of wholesale adoption.

  • Spot and subscription pricing/packaging which requires Cloud providers to continuously improve the quality and reliabilty of their services to ensure customer satisfaction, renewals and add-on sales.

  • Greater transparency as a result of a growing number of online dashboards, user groups, social networks, etc.

Salesforce.com’s (CRM) latest quarterly financial results and the estimated revenues being generated by Amazon (AMZN) Web Services (AWS) are a clear indication of growing user interest in SaaS/Cloud alternatives. And, unlike the questionable value of the services offered during the Dot.com era, THINKstrategies’ Best of SaaS Showplace (BoSS) Award and Cloud Computing Business Value (CCBV) Award programs are continuously illustrating the measurable business benefits being delivered by today’s SaaS/Cloud providers.

But, skeptics can still argue that these benefits don’t prevent potential disaster in the Cloud. Until housing values declined, few complained about the growing availability of subprime mortgages. First-time homeowners, existing homeowners watching their home values rise, mortgage brokers, investment bankers, and 401k account holders were all happy with the rapid rise in their respective purchasing power and investment portfolios.

Some could suggest that the subprime mortgage illustrates the shortcoming of ‘crowdsourcing’. The question is whether cloudsourcing can safeguard against a similar collapse.

John Taschek of Salesforce.com suggests in a recent blogpost that this kind of combination of forces are at work to offset the potential disaster of a Cloud implosion.

While I generally agree with John’s views, the Cloud Computing industry must do more to prove to IT and business decision-makers, as well as evangelists like myself, that the service delivery infrastructure and financial framework underlying SaaS/Cloud Computing solutions are truly scalable and reliable to support the rapid growth of this market today and over the longhaul.

Disclosure: None

Source: Comcast's Outage, Cloud Computing and the Subprime Mortgage Crisis