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From Cloud Computing to Total Information Outsourcing: Where Have the Jobs Gone?

Whenever Valeo, one of the largest automotive equipment manufacturer, outsources its business email to Google1, or whenever Renault, world 2nd car manufacturer, outsources customer relationship management (CRM) to Salesforce.com2, both companies drastically cut costs of their Information System... and take the risk of losing control on their most sensitive enterprise data34. Cost savings of a magnitude of 10 are now possible thanks to Software as a Service (SaaS) and Cloud Computing. SaaS and Cloud have thus become in just a few years a much more cost efficient way to leverage open source technologies than using directly open source software itself.

Technologies behind Cloud Computing and SaaS are now well understood: virtualisation, distributed database, massively parallel activity queues, application provisioning and automated monitoring form their fundamental components. They often derive from scientific researches on parallel computing initiated during the 80s and the 90s. Most Cloud Computing and SaaS technologies are now available as open source, common off-the-shelf, software which are listed for example by the “TIO Libre Initiative5”. Thanks to the wider adoption of alternative open source Cloud Computing and SaaS solutions, risks of economic intelligence found in early proprietary solutions are now reduced.

The social impact of Cloud Computing and SaaS is less known. More than a technology, Cloud Computing and SaaS are a new approach to implementing information systems. This new approach to implementation is based on the automation of many tasks which used to be achieved by local IT engineers. In addition, Cloud Computing and SaaS infrastructures can rely on engineers who work remotely in countries where flexible social legislation and low labor costs contribute to further cost savings. Cloud Computing and SaaS are the first steps towards Total Information Outsourcing (TIO), that is the outsourcing of Enterprise IT to Web based services and the end of Information Systems departments as we know them today.

In 1997, former advisor to President Bill Clinton, Jeremy Rifkin6 described the “end of work”phenomenon, by showing how mechanization of agriculture lead to unemployment and poverty among African Americans in the Southern states of the United States. He then highlights similar phenomenon which happened after automation and robots were introduced in the car manufacturing industry. One could also include as part of the “end of work” automation of administrative tasks in companies through ERPs and application software. The ratio of humanity which is less productive and efficient than a machine has been continuously increasing, despite increased investment in education. The “end of work” concludes that new types of jobs - where social utility is not measured in terms of productivity - must be considered in order to prevent massive unemployment in modern societies.

Total Information Outsourcing (TIO) announces the “end of work” for many IT engineers and managers. After creating technologies which contributed to layoffs in agriculture, industry and business administration, IT engineers are now creating the technologies which could contribute to their own layoff. Let us give some some examples of this new reality. TioLive company, which provides ERP SaaS, is able to configure, monitor and host the ERPs of 1000 small companies with a single IT engineer. Compared to the usual ratios found in most companies nowadays for ERPs, this is at least 100 times less expensive – and most certainly less jobs. AG Projects can provide the complete IP-PABX infrastructure of a mid size telecommunication company in SaaS, for a price of much less than 1€ per account. This is at least 10 times less the normal cost – and less jobs. Lost Oasis can provide a fully redundant virtual server infrastructure for less than 300€ per year and per CPU core. Creating a new server and network only requires to use a simple GUI software and can be achieved in a matter of seconds. This is at least 10 times less the normal time spent – and again less jobs.

As any disruptive technology, Total Information Outsourcing is a source of “creative destruction7”, bringing more competitiveness to early adopters through R&D and cost cuts whereas followers will only suffer from job cuts without benefiting from the new jobs in R&D or from an operational edge.

The Total Information Outsourcing (TIO) industry aggregates today 80 billion dollars in investments8 by companies such as Google, Amazon, Yahoo, Salesforce, etc . TIO blue chips are already proposing to governments in developing countries to fully outsource their IT, rather than trying to manage it by themselves. Although 50% of open source technologies which are used to build Cloud Computing and SaaS originate from outside the United States, 90% jobs for Cloud Computing and SaaS are created in the United States, mostly in research and development. And, whenever the R&D resources are no longer sufficient to feed those companies at home, they open R&D centers in Japan, Europe, Brazil, etc. where they attract the best engineers, usually taken from open source communities, and then file patents on their innovations.

To summarize and simplify, TIO creates two groups of IT engineers. The first group, made up of the best open source engineers worldwide, is leveraging their talent to currently build the proprietary Cloud Computing infrastructure of large US multinational companies. The second group, is comprised of the IT engineers who will slowly lose their jobs because they have become or will become less efficient than the software made by the first group.

Any government including the United States government should seriously consider whether this situation is acceptable for the future competitiveness of their economy. It is never too late to make brilliant decisions.

First, by sponsoring open source technologies to cover all the infrastructure levels of TIO and prevent anyone from capturing its added value. Hardware vendors will likely find natural allies with publishers of open source software for “Private Clouds”. Rather than concentrating all hardware servers in the hands of a few private companies which operate secret Cloud Computing software, open source Cloud Computing solutions such as NiftyName9 or Eucalyptus10 promote a model of distributed Cloud Computing and shared knowledge. With Open Source, even a small data center can compete with the largest data centers because what makes hosting cheap is not the hardware, but the way the hardware is being managed. If all of the software components used to manage the hardware, including the ERP, are open source and free, the standard cost to manage server farms becomes zero for everyone. There is no reason to fear the giant data centers of Google. Let 1000 independent Cloud Computing data centers blossom with open source.

Second, by understanding that the most important added value of Total Information Outsourcing is not the hardware nor the application server infrastructure but the application provisioning software. Hardware costs the same for everyone, thanks to the perfect transparency of the PC server OEM market in Taiwan. Application Server infrastructure and database are now open source for everyone on the Web. They surpass proprietary solutions thanks to a vivid diversity of communities which are challenging each other constantly. The most significant added value of TIO actually resides in the software which provides valuable intelligence to clients by integrating multiple open source components and by automating their provisioning in the form of a useful solution. Such automation software covers tasks which used to be done by system administrators, by developers and, sometimes, by consultants. A system such as TioLive11 already automates most of the complex configuration process of an ERP thanks to a sophisticated provisioning engine. By reducing configuration costs, ERP software which would never have been considered previously by a small company is now affordable even for a Small Office Home Office (SOHO). Looking at ERP in this way it is easy to see how Total Information Outsourcing improves the competitiveness of early adopters. Many other examples can be imagined to automate almost any field in IT consulting. Let us call this new area of research “Cloud Consulting”. It is the new goldmine of IT, the hot topic for governments to invest in and protect their sovereignty, the new SaaS killer applications for Venture Capitalists. Replacing Consultants by Clouds.

As long as Cloud Computing infrastructure is open source,Cloud Consulting can become a transparent and fair market, with no dominant player or dominant country. But what about the IT engineers and consultants who will lose their jobs sooner or later because of TIO? Nations that do not move forward on the “Cloud Consulting” initiative will someday soon face a large population of highly qualified engineers which will suddenly become too expensive to beat a “Cloud Consultant” in economic competition; just like what happened in the telecommunication industry after digitization. Without appropriate government policy – strikes and other social problems will most likely occur, just as it happened in the coal industry in Europe in the 90s and in legacy Telecommunication companies during the first decade of the 21st century. Traditional approaches for industrial restructuring will have to be considered: subsidizing human labor, providing professional training for job conversion, etc.

Pioneer countries and pioneer organizations will obviously not have to consider this issue.


1 http://www.lemagit.fr/article/google-bureautique-cloud-computing-projets-cloud/3405/1/valeo-roule-pour-les-google-apps-mais-sans-soulever-capot/ Valeo roule pour les Google Apps... mais sans soulever le capot
2 http://www.relationclient.net/Renault-Belgique-Luxembourg-booste-ses-relations-clients-grace-a-Salesforce-com_a3437.html Renault Belgique Luxembourg booste ses relations clients grâce à Salesforce.com
3 La panne de la messagerie Google pèse sur les entreprises Les Echos - 2009-02-25
4 http://pro.01net.com/editorial/405039/google-docs-partage-un-peu-trop-les-documents/ Google Docs partage un peu trop les documents
5 http://www.tiolibre.com
6 http://www.amazon.fr/fin-du-travail-J%C3%A9r%C3%A9my-Rifkin/dp/2707127337 La fin du travail – Jeremy Rifkin
7 http://en.wikipedia.org/wiki/Creative_destruction
8 http://www.msnbc.msn.com/id/26015759/ How cloud computing is changing business
9 http://www.niftyname.org/
10 http://www.eucalyptus.com/
11 http://www.tiolive.com
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