By: Gigaom
Why monopolies and commoditization would pollute the cloud
There's a common assumption that the Cloud's destiny is to be a public utility. Mark Thiele, of data center operator Switch, argues that would kill competition and innovation, and that IT can be a better option.

One of the prevailing assumptions around the cloud computing market is that it will drive towards an über-simplified delivery model that is similar to a utility. Further, this utility model will largely remove the potential for differentiation by most vendors and will lead to a race to the bottom from a pricing perspective.

There is ample evidence commoditization is occurring, and we could point to almost any area of IT to see it, from servers, PCs, virtualization, storage, networking, and so on. However, what is often lost in the obvious is that it’s not that simple.

IT commoditization vs cars

It’s true that with a modern server and chip combination you could likely solve almost any specific workload demand of a modern application. The inherent risk though is that there’s always someone out there looking to make a better rat trap, and the market continues to show that there is real demand for differentiation – consider the viability of both ARM and Intel chips for use with different job types.

For instance, in the case of Intel you could easily brute force the same workload that an ARM chip could handle, but processor by processor you would likely be very inefficient from a utilization and power consumption perspective. The same is true for ARM chips being used where a larger Intel processor might be more effective. While the aforementioned example is a simple one, it applies across most layers of infrastructure: storage, network, I/O, virtualization, and so on.

To make an analogy: Cars have been around for over 100 years now, they must be commodity by now, right? They all (mostly) have four wheels, two or more doors, a combustion engine (mostly) and generally get you from point A to point B successfully.  Are cars a commodity compared to each hand-built car of the late 1800s and early 1900s? Maybe. But only in the sense that we can each buy a Ford Focus with the exact same feature set as another Ford Focus.

You can also buy a Ferrari, which is excellent for country highways and tight corners, or you can pick a Dodge minivan, which is better at hauling the soccer kids around. Each of these two cars have substantially different features and solve different problems, yet they are both cars. So, the simple answer is no, they are not commodity if by commodity you mean there is little or no profit or differentiation to be found.

Drivers that make unique IT solutions critical

CPU Performance – There are some tasks that will need the fastest possible processors. The benefit comes from the time reduction associated with running a workload. The time is so valuable that the cost of the infrastructure and power is immaterial. In many cases this type of environment is refreshed 18-month cycles, but sometimes as few as every six months.

Network Bandwidth – Critical if the data being manipulated or distributed is being moved outside the confines of where the compute resides, or needs to be moved fairly quickly in very large amounts.

Network Performance – In terms of not just bandwidth but also latency. In some cases customer demands are on the level of differences of nanoseconds.

Storage Scale vs. I/O – Similar to networking, the type of storage you need is dependent on the type of work being done. You don’t solve an I/O requirement by just buying bigger arrays with more and larger SATA disks. You also don’t put large cache or expensive memory on storage that is mainly used for archival or lower performance requirements, such as for photos.

These only scratch the surface of the variables associated with building an infrastructure environment, but clearly it would be difficult to create a small handful of solutions or solution providers to take care of every IT workload demand. To the contrary, in my work I regularly see a significant number of players enter the market that either fill an unmet need from an industry perspective or enable new types of performance and pricing models.

Why commodity IT is a bad idea

Not only do I think we’re many years away from having a small handful of service providers deliver us compute on demand, I propose that more importantly, we should all hope that the day never comes anyway. I am against the idea of a utility form of compute delivered to everyone much the same way for many reasons, but the two that I think are the most critical are monopolies and innovation.

Cloud monopolies would be bad

The arguments against service providers acting under the pretext of a public utility are legion: inefficiency, waste, corruption, etc.  (For more detail, refer to the eye-opening book “The Fine Print” by David Cay Johnston.) Considering the importance of compute to the global economy, the last thing we should ever want then is for it to become a monopoly. If we allow a few companies to push the technology to a true commodity business model, then we could count on real competition for service delivery to disappear, as there wouldn’t be an easy way for the little guy or regional player to participate in the market. And it’s the ability for little guys to introduce innovation that sparks competition and evolution.

If Cloud were to become a monopoly service, we would quickly find ourselves suffering the same issues with many other public utilities:  running on older equipment, getting charged for non-existant services or things we don’t understand, and having no one accountable to address complaints.

Innovation would be stifled

Beyond that, Innovation in any market only occurs through necessity. Without real competition, the commodity cloud services would begin to act like so many of the early infrastructure outsource providers did and only deliver to the lowest common denominator. They would make changes more slowly and as customers we would be forced to plan our businesses around what providers were willing to do. IT will be its most successful when the business customer doesn’t have to consider the “limitations” before advancing strategic opportunities.

While there’s little doubt that several big players would come to dominate the market as is already the case today, we cannot afford to be without all those spunky new companies looking to carve out a market for themselves. These little players will force the larger players to stay honest, to bill correctly, to offer new services, and to continually innovate.

The Good News

I don’t really think we have anything to worry about, because as I’ve already indicated I don’t believe we are at any near-term risk of getting to a utility-type delivery of compute resources market. There are just too many ways to (in this case) build that car. So rest easy: We’re going to continue to see lots of great innovation in the infrastructure and application services and delivery space for some time to come, but keep your eyes and ears open all the same.

Mark Thiele is executive VP of Data Center Tech at Switch, the operator of the SuperNAP data center in Las Vegas. Thiele blogs at SwitchScribe and at Data Center Pulse, where he is also president and founder. He can be found on Twitter at @mthiele10.



Related Stocks:
Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here