It's 2018: Who Owns the Cloud?

31 Comments

In 10 years, which company will own the cloud computing space? That question has been the subject of long and contentious funding debates over the past year, especially here on Sand Hill Road. And while I know that predicting the future is an inaccurate science, I think that when it comes to evaluating this nascent industry, the VC community has been focusing on the wrong criteria. [digg=http://digg.com/software/It_s_2018_Who_Owns_the_Cloud]

Today, cloud computing offerings are application-specific frameworks that are run by companies both large and small. Google’s App Engine is a cloud for running Python applications; EngineYard is a cloud for Ruby-on-Rails; Amazon’s EC2 and S3 provide generic compute and storage clouds, and so forth. While each of these companies addresses a vertical market need, I believe that by 2018, clouds will instead be evaluated based on three generic criteria: transactions, user experience and presence. And as with any active market, it’s a safe bet that there will be plenty of companies that best showcase each of them. One of the emerging trends in cloud computing is providing infrastructure that allows businesses to perform transactions. Two companies that immediately come to mind are eBay and Amazon; both have significant infrastructure expertise and business divisions devoted to processing their customers’ transactions. Amazon in particular just launched Checkout, which facilitates highly scalable transaction services. Imagine if over the next 10 years these companies find a way to bring their scale and transaction expertise to a cloud offering across multiple industries and market segments.

What will become increasingly critical is providing cloud consumers with a spectacular user experience, something nobody does better than Apple. While I realize the company is not strictly focused on cloud computing today, imagine a scenario in which it leverages the success and elegance of iTunes — essentially a cloud for selling digital media — to other markets. I can foresee a cloud computing environment where Apple allows users to build applications using their user interface templates and designs; every application developer that strives to make their application “as sexy as iTunes” could leverage this infrastructure. A current example of Apple’s approach can be found in its new MobileMe cloud, which emphasizes ease-of-use and user experience for keeping email, calendar and contacts synchronized. Elsewhere, Google Gears and Microsoft Live Mesh are also attempting to be environments in which users develop cloud applications, but they don’t seem to have the same focus on consistency of user experience.

Speaking of Microsoft, when it comes to presence in the computing space, they have an enviable position. With their software presence on the PC, mobile phone, game console, media center and even autos, they’re set up to be everywhere for at least the next decade. And the Redmond giant has recently changed its PR to emphasize software and services, which leads me to think that they’re moving to offer a wealth of cloud-based services.

The key will be leveraging their almost ubiquitous presence across nearly every aspect of the computing space to convert their hordes of desktop and IT application developers to work on their cloud in order to come up with future services for the same markets. If Microsoft can execute on this strategy, use their presence and motivate their developers, they will be a significant player in the cloud computing market in 2018.

It seems clear that the dominant cloud computing company in 2018 will be able to process transactions on the scale of Amazon and eBay, have the eye-popping user experience of Apple and the presence of Microsoft. Which cloud company do you think it will be?

Fellow GigaOM writer Alistair Croll contributed heavily to this post.

31 Comments

James Whitemore

I don’t believe that there will be only one company dominating the “cloud” in 10 years. There will be 3. A consumer “cloud” (my vote goes to apple), a developer “cloud” (my vote goes to amazon) and an enterprise cloud (well, I would have to vote for SAVVIS there).

Allan Leinwand

@Richard – thanks for the comments. I wish my local power plant had a dashboard.

@Dan Oblinger – by “user experience” I really meant “user interface”. Imagine cloud computing infrastructure with a clean and utilitarian interface that looks great. Your thoughts on the cloud are well-taken, thanks.

@ronald – thanks for the clarification and interesting thoughts.

ronald

@ Alan,
I didn’t mean dead. Lets face it there ares still Mainframes around, doing the job they where designed for.
But in general “computing” will be very different from today.
Why am I so confident?
Have you ever seen an equation describing Consciousness, Understanding, Thinking …
Well that has changed. Now we have a base to develop against and more important to test against, fully knowing what we can do and what is still out of reach with current technology. In other words it has come down to an engineering problem, and not some miracle happening if you just throw the right things together (AI).

Dan Oblinger

You raise a very interesting question. But your reply seemed to be based on a flawed understanding of cloud computing. Saying that Apple’s strength in user experience will impact its cloud, is a bit like saying that one believes the applications written on a Motorola CPU will provide better user experience than those written on an Intel chip. The CPU instructions (or cloud APIs) are not at a level to have user experience impact. I guess Motorola (or Apple) could refuse to sell its CPUs (or cloud hosting) to those who deliver poor user experience. It makes little economic sense for them to do this.

But let me take a crack at your very interesting question, what will cloud computing look like in 2018: First I want to distinguish between two very different cloud futures. In one future, cloud farms provide virtual CPUs and little more. On top of that, many specialized applications (e.g. big-table) are combined, in the way that AJAX applications are formed today. The alternate to this “heterogeneous” future, is a “homogenous” one where a single company (e.g. Microsoft with .net + live-mesh or Google with gears, etc.) provides the best overall environment for developing cloud apps.
There are reasons for either future to dominate. In the first case, no companies anywhere in the food chain will be in a position to “lock” users in, so margins will tend to be thin. (as with AJAX, lots of freeware will also be in the mix as well since each layer/service by itself can be somewhat small). Large companies will strive hard to avoid this future of thin margins aiming to provide higher level proprietary services along with their server farm. This can afford them a higher barrier to entry (as the desktop OS does today).
I believe the “heterogeneous” future has a greater than 50/50 chance of being the dominant cloud type in ten years. I believe this because (1) today no single company (i.e. Microsoft .net, Google gears, etc.) are providing a full range eco-system of relevant software layers in a way that provides all features (database, transaction processors, load balancers, etc.) needed by all computing applications. (2) none of these cloud O/Ss today are clearly dominating others, indeed all are evolving fast. (3) Most importantly, it seems that the range of services needed is larger than a single company can provide more quicker than the whole community can move.
Because Amazon’s virtual intel boxes are in significant usage by today, its users support an ecosystem of new companies that are already beginning to provide different layers of the “AJAX like” heterogeneous cake that will support the full range of all computing needs.
Note this is not exactly answering your question. Amazon has no lock on “virtual intel CPUs” so I expect that several large companies will compete with razor thin margins (many not in the US) to provide the actual server farms for the cloud. But most of the profit in 2018 will not go there, instead in will go to those who create the most usable/useful layers (datastore, load balancer, transaction processor, etc.) Because each of those will have a proprietary API they will be able to charge a premium just as Oracle or DB2 do today.
Large companies in are tring to avoid this future that limits their profits, so if I am wrong, it is because either Google or Microsoft by themselves managed to move faster than the community as a whole. … and looking at the pace of announcements of new services are trying very hard to move very fast.

Richard Donaldson

Allan:

Once again, nice piece to begin the prognostications…:-)

One addendum to the user experience is to provide quantification and metrics behind the creation and delivery of power to the destination of the packet. In today’s emerging “cloud” platforms, the piece of the puzzle that I think will actually catalyze adoption will not only be a good intuitive user experience, but the ability to monitor all pieces of the infrastructure – it is a way to allow the customer to feel in control as they give up control.

This “dashboard” has to have access to all things critical to the infrastructure including environmental and power…which is not available today…except perhaps one emerging vendor that I know of…:-)

Also, I think you hit the nail on the head as to who can provide these services in the future – I’d keep an eye on other companies you might not normally think of: BestBuy, Dell, HP, ATT, British Telecom, etc., as they are all going to converge on this space – ATT is supposedly doing in excess of $3Bn in managed infrastructure, which is just a precursor to cloud computing…

Think of the information age we are in and the dataceners are the information (power) plants of 21st century!!

rd

rd

Allan Leinwand

@Husein – Thanks – I think we’ll see some payment processing announcements from eBay soon…. Not sure if clouds will define web3.0. Not sure if we even need another label for the nextgen :) :)

@ronald – Not sure clouds will be dead in ten years. I might argue that they will still be in their infancy in some respects.

@Bob Ngu – let’s hope Apple has this worked out by 2018 ;)

Bob Ngu

“What will become increasingly critical is providing cloud consumers with a spectacular user experience, something nobody does better than Apple.”

I hardly call Apple iPhone 3G activations issues, buggy firmware, and mobileme mess (maybe it should be renamed mobilemess), spectacular user experiences.

ronald

Don’t we have a major shift in computing roughly every 20 – 30 years?
Means cloud computing should come to an end by then. Since we are in the middle of this time period, starting with the web in the late 80’s. Assuming cloud computing is just an evolution from the web, noting that nothing related to time is digital (black and white).
My guess is, and I’m only a little biased, that we will see systems which will take over some of the work we do today with computers. Marking the shift of working with computers to having the computer work for us.
In the mean time, the one who can create information out of data will lead. Just ask Om about queuing systems compared to interruption systems. But that might not be true for Teenagers, so it also depends on the audience.

Husein

Great thought piece. The payment processing angle is unique. I know of a company that is building their platform on Amazon because of 1) the Cloud and 2) the warehouse service and is trying to mimic Apple with respect to User interface. A hybrid approach. The company sell a digital item that creates demand for a third party physical item, thus the Amazon + Apple combination is great. If only Apple offered iTunes as a cloud, it would cut their development cost and time.

Going forward specialty clouds with evolve and we will see CloudMashUps (darn, i just checked, someone already registered the domain LOL). Will this be the definitive Web 3.0 after the bust (yet to come) of Web 2.0?

Allan Leinwand

@Khazret – agreed on the title and good point on the energy reservation needs.

@Shane – good points. In ten years we should have better infrastructure that will allow a cloud to be nearly anywhere on the planet. Leaning on Khazret’s comment – where on the planet could we have great connectivity, skilled labor and cheap energy?

@Loneship – That sounds like fun ;)

@Sam – Good thought. Many folks are talking about large private clouds.

@alain – good thought. If you have any recommendations on folks working in this space, send them my way.

@MADHAVI – thanks!

friarminor

Given that the user experience tops all other factors, i would like to add that the cloud appeal for developers could be a close second.

The transactions and UI templates you speak of are but ‘come-ons’ for developers – both up tail and especially long-tail, designed to entice as many as there are to adopt their cloud versions as the one that provides not just the best deployment environment but one which the developer doesn’t feel in any way threatened should the rug be pulled from under them without warning (lock-in). And with that kind of comfort, real innovations thrive.

Open source, language-agnostic, deploy and forget solutions (plus proven UI templates, built-in transaction infrastructure, control panel, ++) is the kind of cloud that would have a distinct advantage of making it. Other than that, cost and ‘up time’ reputation, there’s the additional renewable energy source aspect that might just be the x factor to sway the market.

Best.
alain
http://www.mor.ph

Sam Johnston

The users themselves will own the cloud, and the providers who know how to keep them happy will profit in the process.

@geo: who said there will even be a server farm in 10 years? Perhaps there will only be a market for 5 computers (each with thousands of cores)? Conversely, perhaps computing will be distributed between powerful end user devices (maybe your neighbour’s otherwise idle computer will end up filtering your email)? Don’t assume that the infrastructure of tomorrow will look like that of today – when Google started out vertical scalability was all the rage and look where we are now…

Loneship

Nobody. Because we won’t need it. In 2012, Photon Belt will be arrived to the earth and Photon Age will start. Mankind will transform to the galactic humans and will use their brains for everything even for instant messaging. Just kidding :)

Shane Jones, CloudRamp

With the amount of money being invested by the tech giants (i.e. Microsoft, IBM, HP, Google, Amazon, Yahoo) I don’t think that we’ll see a single company emerge with dominate market share in cloud computing space. At least not at the infrastructure level. As the datacenter/hardware arms race heats up, we’ll end up with an enormous global cloud capacity that we be useful and valuable to different market segments (i.e. consumer, small business, enterprise).

The user experience will play a major role in what web applications and services people use, but the underlying cloud computing power behind those services could easily be provided by several of the major cloud computing providers. My prediction for 2018 is that no single company will have more than 50% market share in cloud computing and at least one of the top 3 competitors will be based in China or India.

Khazret Sapenov

Article title contradicts common sense (imo) – there can’t be ONE cloud, whatever end user experience it delivers. Look around, we don’t have one bank/car maker/tv channel, who owns financial market etc (see how many alternatives to iPod exists out there).

User experience is just part of equation, also there are huge market segments (in terms of financial attractiveness), where other factors are crucial to cloud adoption. Sometimes economists call it “white spot” markets, that give you temporal advance (several years before others discover this niche).

So title should be re-phrased as “It’s 2018: Who owns retail/end user access to Clouds ?”

Several minor things:

MobileMe is referred as cloud, while it is only as Service yet (smells like an order from Apple to promote the service under popular lable).

Evolution of computing walks randomly between Centralized/Decentralized concepts, it might be either of them by 2018 with equal probability.

Cloud offerings will be affected by those companies, who reserve access to cheaper sources of energy.

cheers,
Khazret Sapenov

Allan Leinwand

@Reuven – I like your thinking. More on thin clients to come (watch this space :)

@Partners in Grime – Agreed. The war has not even begun here.

@geo – Are you sure? There are a LOT of Microsoft developers out there – given the chance to keep their code and migrate it to a .NET cloud could be tempting….

Reuven Cohen, CEO Enomaly

Those who own the user experience will control the cloud. In 2018 the majority will be accessing the internet through mobile devices or thin clients. Companies that understand this transition to a network centric computing environment will prosper. “The Cloud is the Computer”

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