“The credit crunch and liquidity crisis will make the invisible hand of economics the visible fist of innovation.” This comment from a thoughtful colleague brought several loosely related ideas into much clearer alignment. It comes from Michael Bogovich, an international program manager at Abbott Laboratories.

His comment came up in a conversation we were having about the effect of technologies like cloud computing, software-as-a-service (SaaS), server virtualization, and open source software. Michael was commenting on a feature interview I did regarding this subject for a show called BetterManagement Today. Depending on your beliefs, this interview is 21 minutes of either brilliant insights or else tragically misguided opinions (here’s the link; the button labeled “Feature” takes you right to my interview). Michael and I both believe economics is once again driving a big change in the way companies use and pay for computing and application system resources.

Historical Analogy Sheds some Light on What’s Happening Today

My hometown of Chicago is the birthplace of the modern steel frame skyscraper and when those first skyscrapers were built around the turn of the last century they had big electric power generators installed in their basements to provide light and power for the people who worked in those buildings. Then during the 1910s owners of those buildings started shifting away from their internal electric generators and relying instead on the public power grid provided by electric utility companies.

Imagine the debate that happened between those who thought they would be better off and more secure by keeping the power generation function in-house and those who thought it would be more cost effective to shift that function to outside vendors. I imagine it was probably the finance guys (those heartless penny pinching sons-a-guns) who kept pointing out that the electric utilities were able to deliver electricity at lower and lower costs per kilowatt hour as compared to the in-house guys. I imagine the in-house power guys countered with the argument that relying on outside utilities was a performance risk and a security risk. How do we know if outside utilities will deliver reliable power, and what if someone cuts the power lines to our building?

But alas, money talks, and by the late 1910s the power utilities were the clear winners of this debate. So here we go again. As we head into the 2010s the arguments and concerns are in many cases so similar to the electric power debate of a hundred years ago that all we have to do is substitute computing power for electrical power and the rest is pretty much the same. And it’s clear which side is going to win (hint – they’re the heartless penny pinching sons-a-guns).

Cloud Performance and Security Concerns are being Addressed

As it was a hundred years ago, the two main concerns in today's debate revolve around issues of performance and security. Because of the opportunity created by current economic imperatives (credit crunch and liquidity crisis) there are lots of technology vendors busy creating products to address these performance and security concerns. In the last few weeks I’ve spoken with a couple of these vendors. One vendor addressing performance concerns is Nimsoft and a vendor addressing security concerns is Cisco.

I spoke with Gary Read the CEO of Nimsoft a company that makes performance monitoring tools for cloud computing and SaaS environments. Right from the start his company has designed their performance monitoring products to address cloud and SaaS environments; they are not repurposing older tools built to monitor performance on internal LAN/WAN networks.

During our conversation an interesting fact came up; Gary

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