The first electric generators were used in industries over 150 years ago. The model was quite straightforward. If a company wanted to use electricity in their business, they went and bought a physical electric motor which they would install in their building. They would run and manage this machine and they would have electricity. Fantastic!

About forty years later, a power station opened in San Francisco. A lot more power stations followed. Companies and individuals were able to purchase electricity as they needed it. If they used loads of electricity one month, they had a high bill, if they used hardly any the next month, the bill was a lot lower. This model had many benefits, including the fact that people no longer needed to purchase expensive generators up front. They didn’t have to manage them or run them and just had the electricity to run their business without as much hassle.

Now, it you are setting up a business, you wouldn’t think about buying your own generator; you’d use the service provided by a power company.

So, what’s the relevance of this post?

Traditionally, a company that wanted to use a piece of software would buy the physical machines to install it on. They would run and manage it themselves and they would have the software. Fantastic!

Now there is the cloud and the concept of software as a service. Like the rise of power stations allowed companies to no longer worry about generating their own electricity, the rise of cloud computing will allow companies to no longer worry about running their own hardware. They will be able to access software as and when they need it, paying for usage as it is required.

With the old model of generators, if you knew your company was coming to need a huge amount of power for a single day in each year, you would have to buy a generator capable of producing it, even if most of the year it produced a fraction of that. Similarly with hardware. If you need to have really high hardware capabilities for a single day, you have to buy in the servers to cope, whether or not you need it the rest of the year. There are loads of organisations that have peaks and dips in their activities. Wouldn’t it be great if they only had to pay for the peaks during the peaks, rather than having machines that run at a fraction of capacity most of the time? That’s one of the benefits of the cloud.

At the moment, the cloud is quite a new concept but it’s gathering momentum fast. It won’t be long before running your own hardware will be as unusual a situation as having your own generator.

I don’t believe on-premise software will disappear completely. Certainly not for a while. After all, there are still some companies, in areas that don’t have reliable power supplies, that still have portable generators to handle some of their power needs in an emergency. But they’re in the minority.

That’s the way software is going.