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If cloud is the next oil, then how do you trade it?

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Cloud infrastructure is quickly becoming the next hot commodity, and a number of companies have started to quite literally trade it as such. Strategic Blue Founder and CEO James Mitchell told the audience of GigaOM’s Structure: Europe conference in London Wednesday that his company used to trade oil and coal.

In 2009, it started to trade cloud infrastructure, and Mitchell was the first to admit that this hasn’t always been easy. One problem: Oil and other commodities are traded based on common units, but cloud providers offer a lot of slightly varying services running on different platforms. “That is frankly a big mess,” Mitchell said.

The other problem: Not every vendor wants third parties to start trading their compute instances. However, 6Fusion Co-Founder and CEO John Cowan argued that this is less problematic over time, as new providers emerge. “You don’t need to have AWS bless an open market,” he said.

Regardless of these issues, cloud commodity trading is starting to become big business: The entire public cloud commodity market is already bigger than the U.K. electricity market, Mitchell said.

Check out the rest of our Structure:Europe 2013 coverage here, and a video embed of the session follows below:
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A transcription of the video follows on the next page

3 Responses to “If cloud is the next oil, then how do you trade it?”

  1. James Mitchell

    The commodities that are best to trade are those that are tightly coupled to other associated commodities. The price of natural gas often tracks the price of oil. Electricity tracks gas, and aluminium tracks electricity. When the variable cost of a commodity makes up a large percentage of the sales cost of another commodity, the prices tend to be coupled. Non-proprietary data/content could be another commodity that follows the price of cloud, but the two are definitely different.

    Enron was about to start trading communications infrastructure shortly before the company went into administration. In fact it was the Enron’s huge spending on bringing bandwidth from 20+ providers that gave the Switch SuperNAP datacentre in Las Vegas its amazing connectivity. There are other issues with trading bandwidth that in my opinion make it feasible only once cloud trades properly. It is a bit like trying to trade power transmission without being able to trade the power markets that is connected by that transmission capacity.