Cloud computing is more than a technology - it’s also a game-changing business process. The reason it has gained so much traction is because of what it enables for entrepreneurs. A complete discussion of cloud computing must go beyond the technology that underlies the cloud process, to include a discussion of the greater question of what drives cloud computing, and what the social and macroeconomic impact of it may be.

In this book, we choose the term “people cloud” to illustrate how our workforce is scattering in many of the same ways that computing resources have scattered across the cloud. Even more, we are managing people resources over the Internet in many of the same ways that are managing computing resources. As a result of cloud computing as an enabling technology, we are seeing an explosion in entrepreneurship and a decentralization of larger companies.

The workplace has evolved from everyone in one place, to a scattered workplace, and finally to one in which the physical roof is replaced by a virtual roof.  The virtual workplace is again reconnected.

We’ve already seen major changes in the workplace. Companies have embraced a model of decentralization in favor of outsourcing and offshoring. Web 2.0 technologies have enabled a greater level of collaboration, which means two things: First, people no longer need to be physically present at the office, and can instead work from home, or anywhere else in the world. Second, this new level of collaboration allows companies to partner with smaller providers anywhere in the world to get the job done.

Jobs 1.0

The 1950’s mindset of the corporation as a sort of benevolent father is obsolete. That older (and short-lived) way of doing business was what we refer to as “Job 1.0″. During that time, we saw the corporation as a benevolent institution, which looked out after our own well-being. We had an expectation of a 30-plus year career with a single company, an opportunity to rise from within the ranks, and a relative amount of job security. The prevailing philosophy was that company growth was equivalent to the company’s apparent physical size. A company, during this time, that had 1,000 employees was considered to be more successful than one with 100 employees. Companies embraced the in-house strategy with a vengeance, and larger firms did everything from running their own internal print shops, to hosting their own cafeterias for workers.

This is in some ways reminiscent of the old-fashioned “company town,” which went so far as to even provide rental housing for its workers (usually substandard), a company grocery store, and so forth, and in the process, keeping employees beholden to the company, and usually in debt to it.

Job 1.0 came with three illusions: That physical growth of a company’s mass was equivalent to success, and that the “everything in-house” business model was beneficial to employees, and that it created a heightened sense of job security and loyalty.

Jobs 2.0

The “dotcom boom” broke down the illusions of Job 1.0. During this incredible time of entrepreneurism, the notion that a company with 1,000 employees is better and more successful than one with 100, or even one with 10, started to break down. New technologies allowed companies to do more with less. One clerk with spreadsheet software could do the work of ten people in the pre-desktop days.

What’s more relevant is that Job 2.0 started to break down the illusion of a single-company career as being beneficial. The desire for a 30-plus year career with a single company became less desirable, and employees became freer to move from job to job in search of greater opportunity. The dotcom boom ushered in a new era of mobility in the workplace, and at the same time, made it more acceptable and possible for someone to go out on their own and start an entrepreneurial venture.

Still, “Job 2.0″ operated under the concentrated model of corporate communities. Silicon Valley flourished, and contained an incredible concentration of talent, and more high-tech companies in one small region than anybody could imagine. That’s because while the concept of “job” had evolved, the concept of “company” had not yet shifted.

Many high-tech companies during this time were short-lived, but nonetheless contributed to the collective wisdom by creating new technologies that are still used today in the latest iteration of “Job 3.0″. Job 2.0 re-set the tone, breaking down the expectation of a 30-year single-company career, providing the technology for a dramatic change in how business processes are accomplished, and overcoming the ’50s mindset that prevented people from switching jobs or leaving a job to go out on their own entrepreneurial venture.

Jobs 3.0

And so we come to the latest version of what a job really means. Today, two factors are driving a permanent shift in employment patterns:

·         Modern communications technologies and cloud computing

·         High unemployment and a huge recession

These new technologies mean that we now have the technological wherewithal to move away permanently from the centralized model of work and employment. Collaboration no longer requires a physical presence, and this means companies can do more with less. It means that companies are keen to outsource many of the functions that were once done in-house. This means in turn that those functions are being done by people working at home, or for small companies that specialize in specific areas.

When we speak of the macroeconomic realities and how they too have enabled the cloud computing shift, we mean that the recession has made companies take a long, hard look at how they get things done. Companies are looking for new ways to become more efficient, and they are looking for technologies that enable them to do more with less. It’s not just a matter of getting new features or capabilities—it’s a matter of economic survival. The economic downturn transformed cloud computing from a “nice to have” into a “must have.”

The age of the cubicle is over. There are naturally some jobs that must be maintained on-premises, but increasingly, it is just as feasible to accomplish many tasks off-site, either through telecommuting or teleworking arrangements, or outsourcing to a third party provider. Today, the link between corporate size and corporate success is upside down. It is possible for a ten-person company to be more successful and productive than a 1,000 person company. And taking that to the logical conclusion, the possibility of a successful one-person company is now much more realistic than it has ever been.

The notion of working at one’s own home has gone through a lot of iterations over the centuries. In the Middle Ages, it was the standard, as craftspeople and tradesmen plied their trades out of their own workshops behind their homes, but the Industrial Age brought us a new normal. Working outside the home became the standard, and people started to see working at home as less desirable. Today, the pendulum shifts once again, as new technology makes it possible to conduct business from anyplace in the world.

The idea of working from a lounge chair on the beach in a tropical island isn’t that far-fetched. Or for those who don’t have a tropical island handy, at least, working from home. When you call into any large company’s Customer Service department for example, more often than not, you are either speaking to someone on the other side of the world, or someone who is wearing a bathrobe, sitting in their own kitchen with a laptop and broadband connection.

Ultimately, Job 3.0 has led to decentralization not only of the workplace itself, but of the workplace community. We no longer need Silicon Valley. It is no longer necessary for all those high-tech companies to be physically present in the same little section of central California. Silicon Valley has made itself obsolete. And what’s more fascinating is that it has made the very idea of what a “company” is, obsolete as well.

The end of the company as we know it

Cloud computing technology and outsourcing have an obvious symbiotic relationship, and one cannot exist without the other in the real world. Outsourcing becomes much easier and more realistic when there is cloud computing; and cloud computing becomes much more than just a theoretical technology when outsourcing functions as a practical application of it.

What is a job, and what is a company? Those questions seem simple to answer, but the answer isn’t always evident. Today, the answers are changing rapidly. In the last chapter, we talked about what a “job” really is and what it is becoming, now let’s talk about what a “company” is. Sure, in business school they taught you all about corporate structures, and how a corporation is an entity unto itself, but that’s no what we’re talking about.

A “company” has always been traditionally seen as an entity engaged in commerce, which has members (owners and employees) which carry out the tasks related to the company’s commercial endeavor. A larger company has “divisions” of employees, which may carry out tasks such as accounting, human resources, information technology, customer service, sales, and marketing. Seen in this way, a company is a very defined sort of organization that is self-contained. In a limited sense, every company had some interactions with other companies, as the company took on suppliers, vendors, customers, and partners, but still, it stood on its own as an island.

A company today, or “Company 2.0″, operates a little differently. It is still an entity engaged in commerce, but it is no longer dependent on its internal departments and employees to carry out those tasks. Instead, a company’s set of tasks is condensed down to its core mission, with all others being carried out by other companies. As such, the “corporate walls” have broken down and collaboration has built up. When a manager gets his or her weekly reports, they may not come from inside. Customer service may be taken care of by a company in Mumbai. IT is taken care of by a managed service provider in San Francisco, and marketing functions are handled by a handful of small and creative companies that collaborate with each other even further to accomplish the goals of the main company.

Web 2.0 technology, outsourcing trends, cloud computing, competitive pressure and other macroeconomic realities all have converged to make these major changes. Is a company with 1,000 employees more successful than a company with ten employees? The answer is no longer obvious. In many cases, the company with ten employees may be able to accomplish the same thing, reach the same sales goals, and carry out the same tasks as a much larger firm with many more employees.

The Virtual Company

Taking the concepts described in the previous section a step further, we can easily see the shift that has occurred from a workplace organizational structure that was several layers deep, to one that is leaner in nature, but incorporates a “cloud” of virtual extensions. In the past for example, a hierarchical business would include internal departments for data entry, payroll, public relations, IT programming, and so forth. In addition, the same business would retain functions like data storage, telecommunications, web hosting, and server farms internally as well.

The inherent inefficiencies of this hierarchical model are obvious.

The boundaries of the actual “company” have become permeable to the point of being nearly invisible. As a result, we are already seeing the emergence of the “virtual company.” These companies exist in reality today all over the world. A “virtual company” has no corporate walls at all. It may be organized to formally have only one or two employees, yet it may have dozens, or hundreds of people working towards its main commercial goal. The CEO’s office may be a spare room in her house; the “Marketing Department” is actually a virtual group of creatives working in spare rooms of their own, servicing not only the primary virtual company, but several others as well. The entire network of people—we can no longer call them “employees”—are connected in real time through modern collaborative technology, and the entire IT infrastructure exists in the cloud. Virtual private networks (VPNs) ensure that every party can connect to the applications and data they need on a secure basis, from any location and from any machine. At any given time, the Public Relations manager may be working out of a Starbucks, the tech support guy is sitting in his kitchen wearing a headset and nibbling on leftover pizza as he doles out advice, and the Vice President of Operations is keeping everything flowing smoothly from a bungalow on the beach in Thailand. Indeed, it is very possible that most of the members of this “virtual company” have never even met face-to-face. And they don’t need to.

Why does a company outsource?

A company engages in outsourcing because it brings cost savings and efficiencies, and because it has the technological framework to do so efficiently through innovations in cloud computing.

But the bigger question is, does it really make a company more cost-effective and efficient? Since traditionally, we think of achieving gains as something that is done through control, but this is not always correct. Outsourcing actually serves the broader goal of efficiency by breaking down those artificial corporate barriers, exposing processes so that they are more transparent and responsive to the corporate entity, and eliminating unnecessary layers of corporate bureaucracy.

A highly vertical company, which tends to do all functions in-house, will out of necessity have enormous layers of bureaucracy. Processes get bogged down. Reporting may not be responsive enough. Individual fiefdoms within the corporation may have conflicting goals, and may be so caught up in their own domain that they neglect the greater goal of the corporate entity. When a company is so large and organized vertically in this way, it may very easily lose focus and lose its ability to respond to the market quickly and efficiently. As such, the economic advantage is not the only advantage—a less integrated company will simply be able to respond better, maintain its core focus better, and spend its money better.

What makes a good company to begin with? A company that specializes in something; a company that does something or produces something better than anybody else. When a company starts devoting large amounts of energy and resources to tasks that are not related to that thing it does better than everybody else, then that company’s energy starts to dissipate. And more importantly, those peripheral tasks aren’t getting done as well.

For example, a company that makes pizza may make the best pizza in town. They’re good at it. That’s their “thing.” But there are other things they’re not as good at. Good pizza makers aren’t necessarily good marketers, and so that pizza company outsources the marketing function to another company, which is very good at what they do.

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