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How cloud computing puts adverse selection in its place

Bernard Golden | Oct. 31, 2013
For years, operations departments have used adverse selection principles to allocate resources, often deeming small projects unworthy of enterprise computing power. Today, though, the cloud makes computing so cheap that there's no reason to deny any project, no matter how small. Doing so will simply push users to the public cloud -- and beyond IT's control.

Someone who's going to run some analytics on a standard Hadoop setup doesn't need anyone to hand configure a cluster. For people such as these, automated self-service is more than capable of addressing their needs. If manual procedures designed to address more complex requirements are imposed on them, they'll seek out a more convenient alternative to solve their problem.

Here's an analogy. If I have an extremely high fever, I definitely want to see a doctor - a skilled professional with enormous knowledge and experience. On the other hand, if I have a headache, I'll just go to a drugstore and buy some ibuprofen. If someone tried to impose a rule that I need to see a doctor in order to get a prescription for ibuprofen, I'd just ignore it and make my own way to the drugstore, thereby solving my problem in a way that's convenient to me.

As I see it, the biggest threat to existing IT groups is that they misunderstand the demand profile for computing resources. Because it's been so hard for application groups to obtain resources, only the most important - that is, the most complex production applications - have traditionally been able to get their needs addressed.

Simple, quick-and-dirty applications can't justify the cost and overhead of the traditional provisioning process and, inevitably, are ignored. They are, in a sense, not important enough to warrant the attention of the high-touch practices associated with traditional operations practices.

Adverse Selection Will Turn Off Would-be Corporate Cloud Users
Cloud computing now offers those users with overserved, "unimportant" applications a way to get their needs addressed. It's the computing equivalent of the self-serve drugstore. Failing to satisfy these users with streamlined, self-service resource provisioning practically ensures they will flee to public cloud computing environments.

As I said, the critical question is how large a proportion of total demand these kind of applications represent. It's difficult to answer that question; historical practices mean that most of this type of demand is unexpressed due to the difficulty of justifying it. I believe, however, that it in fact represents a very large majority of total potential demand - and that failing to address it via automation poses a real problem for IT.

This is because of what might be termed the problem of IT adverse selection. This concept, as you're probably aware, is one associated with insurance - and much in the air recently as a result of the launch of the Affordable Care Act. No matter what perspective one holds regarding the Act, all parties agree that one of the critical issues that health care must address is the makeup of the insured population - how to ensure that a large enough number of subscribers are in the insured population and that they represent a mix of healthiness.


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