More than 15 years ago Erik Brynjolfsson set about nailing what had seemed an interminable accounting battle over how to justify IT investments.

It is entirely fair to attribute to Prof. Erik Brynjolfsson the significant step of shifting IT accounting minds away from cost and towards value justifications.  But more than that he legitimised prioritisation of IT investments at the very edges of enterprise boundaries and often, counter-intuitively, just beyond.  As an antidote to the 1980’s disregard of interdependencies, collaborative advantage was the new competitive advantage.

Now, with the dawning of Cloud Computing reality (in contrast to a decade of premature hype), we are significantly better equipped to reconsider and redefine the physical and virtual boundaries of our businesses.

Cloud Computing has, according to Gartner, now reached the peak of the ‘Hype Cycle’ – so it’s reassuring to know that the good professor has not yet retired and, better still, is keeping up the good work.

If you believe the Gartner analysis, Cloud Computing is about to plunge into the valley of despond.  Prof. Brynjolfsson’s latest book, ‘Wired for Innovation’ is not specifically about Cloud Computing but his well-researched messages will not be lost on CIO’s attempting to make sense of their new networked options.

In mapping the outer reaches of a business we might use the analogy of a haphazard patchwork quilt to describe the fabric of the economy in which our globally interdependent enterprises must operate.  Measuring, delimiting, the boundaries of businesses – accounting for them – remains important but, in a globally competitive world emerging unevenly from a deep recession, no enterprise can afford to allow conventional walls to get in the way of innovation.

Even so, the most open-minded of CIO’s must still have regard for the protection of their enterprise – so it is hardly surprising that, before the hype has cooled, not all CIO’s would rush to embrace Computing Clouds with open arms. 

Clouds, of course, come in all shapes and sizes.  Some enterprises may be willing (and legally permitted) to consign their own and clients’ data beyond the distant horizon but the CIO will not be thanked if latency leads to losses in the closing milliseconds of big transactions.  Nor will customers be impressed by pregnant pauses while call centre operators wait for vital account clues to pop up.

The benefits of Cloud Computing are undeniably impressive.  Power savings alone can trump umpteen other reasons to shift computing power outside of your own physical domain.  But without the assurances of peak load performance, access security, data protection conformance, capacity flexibility and interoperability, (and a network environment that’s fit for purpose), a Cloud proposition might begin to look…… well…cloudy?

So although we all know that Cloud Computing can make eminent sense, can free an enterprise to redefine its boundaries, can release brilliant people to spend their time on higher-order tasks (rather than upgrading operating systems or arguing with the CFO on capital expenditure budgets), the real benefits may only shine through if the CIO is prepared to plan for business operating scenarios that are distinctly different to prevailing practice.

What would be the impact if we enabled easier growth by acquisition?  We all have horror stories of fine strategic plans wrecked by the costs and delays of trying to merge incompatible systems - and their people. 

What if the challenge was to efficiently manage a decline in a line of business ? 

What if the strategic gains from transforming a supplier into a partner can only be realised by sharing data that has always been closely held?  How do we do that securely when we know that our partner is also supplying a competitor ?

How can public sector IT plans for lowering costs and improving quality be squared with a schizophrenic media attitude that inverts each localised success into ‘a postcode lottery’ or efficient joined-up government into ‘an information exchange outrage’ ?

There is no doubt that most major IT and systems management companies are convinced that Cloud Computing is about to hit the big time.  In the blogosphere you’ll find endless discussion of the technological concepts.  Those who studied anthropology can marvel at the human anguish unleashed by the prospects of changing the way we do business.  The end of the (IT) world is nigh - they cry – but, in a sector whose raison d’être is to enable change, such complaints seem only to illustrate the need for fresh thinking.

So where now will the CIO turn for solid advice on design, on security, on systems, on performance management and the unbearable lightness of being out-sourced ?  

Oddly the best advice is likely to come not from purveyors of power systems, retailers of racks or shifters of boxes, but from the movers of megabits.

Think about it.  Processing happens.  Where it happens can impact on its cost and safety and adaptability – but all those options can only be effective if the network linkages are fit for purpose.  If cost is of no concern, you can always play safe with massive over-provision.  But if flexibility is valued then network design is a critical factor.

The guys under real pressure- the guys who will, if anyone, make this stuff work – the guys who really understand the dynamics - are the chaps in the middle who must marry their network capabilities to fluctuating performance loads, bandwidth on demand and rapid responses to changing requirements.

Cloud Computing may well bring new business freedoms and flexible boundaries but Gartner’s ‘Trough of Disillusionment’ awaits those who fail to recognise that the underlying network infrastructure represents the ultimate test of good design.

If Cloud Computing makes CIO’s think again, then Professor Erik Brynjolfsson will eventually be able to retire a very happy man.

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'Wired For Innovation' – Brynjolfsson & Saunders MIT - ISBN 0-262-01366-5 - was published in October 2009.  More details at http://mitpress.mit.edu/catalog/item/default.asp?ttype=2&tid=11848 

This ediitorial is the first in a short series focussed on Cloud Computing services and related business management strategies.  COLT Managed Services have provided a further commentary on this editorial as part of their 'Thought Leadership' programme.