“Cloud washing” is back. It’s the practice of inflating financial results for a company’s cloud business, usually by redefining existing services and products to fit the cloud umbrella. The SEC accused IBM of cloud washing its financial results several years ago. And some have criticized Microsoft for nebulous cloud financial reporting. Now Oracle is facing a lawsuit from a former senior finance manager, Svetlana Blackburn, who claims she was fired for not going along with its cloud washing. (Oracle denies any cloud washing and has countersued Blackburn for malicious prosecution.)
Who knows what happened between Blackburn and Oracle? I’ll let the courts make the call on that one. But I can tell you that cloud washing has been a systemic problem for the last several years.
At issue is what exactly constitutes a cloud. Big iron providers have been spinning their hardware and software as “cloud based” for years. Why not? Private clouds (meaning on-premises hardware and/or software) are clouds, so these providers can say they are selling a private cloud.
Of course, there is no multitenancy, nor auto- or self-provisioning in these private clouds. But those are concepts that not too many people understand. Let me put them in perspective: It’s like buying a car, then learning it can’t go faster than 10mph and only gets 3mpg. It’s technically still a car, right?
It’s obvious what’s going on: Companies say, “The cloud is hot, so we sell cloud.” If customers and investors believe it, the company becomes more valuable. Of course, providers position any or all their software or hardware as a cloud service, no matter whether it really is.
But there’s a cost to the deception. First, it’s confusing to the buyer, who can’t be sure what they’re actually purchasing. Second, customers risk not getting the value they seek from the cloud, because they may not receive the cloud advantages they were expecting.
I hope cases like the ones between Oracle and Blackburn create useful legal precedents that might provide a legal definition of cloud computing and stop all the cloud washing. Unchecked, it will hurt both customers and their providers.