Microsoft's entry into the so-called cloud computing space sparked off some collateral knock about posts between Tim O'Reilly and Nick Carr with Tim Bray and Stephen O'Grady joining in. At first blush each seems incredibly reasonable. When taken together they become as dense as some of the cumulo-nimbus I've flown through in recent weeks yet contain elements of a broader discussion. Before cracking me over the head with a 'Link bait whore!' flame comment, please bear in mind that I am coming at this as someone who buys into the SaaS argument and many of the other aaS variants.
Tim's argument seems to boil down to the notion that Web 2.0 (as defined by Tim) means we need to look for network effects as the guidepost for the cloud winners:
Everything is moving into the cloud, in whole or in part. The utility layer of cloud computing will be just that, a utility, without outsized profits.
But the cloud platform, like the software platform before it, has new rules for competitive advantage. And chief among those advantages are those that we've identified as "Web 2.0", the design of systems that harness network effects to get better the more people use them.
The company that creates the right platform for network effects in data may well achieve the scale that Hugh Macleod envisioned.
This seems plausible when weighed against the examples Tim quotes. However, it seems to me that Tim is postulating a theory that has yet to be proven as one having general application. Put another way, Twitter seems to be getting better by the day as more applications are built around it and its growth accelerates. But hang on. This is a service that has no business model and I'm betting it will be acquired in the next year. OK - so there will always be exceptions but this is the poster child for open API's leading to better made cloud-based solutions? You can argue PaaS and Salesforce.com with its Force platform. But you know what? I'm not seeing too many stand out winners emerge on Force just yet.
I really want to agree with Nick Carr. His arguments as to why Google has done so well resonate at many levels. I think he misses the most obvious one: Google figured out how to monetize search from a UI that has remained unchanged in 10 years because they got it right from day one. But to conflate Google to cloud monopoly status at this point seems wrong. At least the way Nick has argued the point. It largely ignores the impact of Tim's 'network effects' pillar in a number of use cases that Tim outlines in his post, comments at Nick's site and in a secondary post. Nick comes back, quoting from Prof Hal Varian on the network effects element (or rather absence) in Google's case but to me this argument contributes to the general muddiness of the overall discussion.
Tim Bray has me nodding in agreement on several fronts. Nothing would please me more than to see the breaking down of barriers to interoperability of the kind he describes:
CIOs Aren’t Stupid · They’re bearing the scars of decades of being locked-in by Microsoft on their desktop software, and by Oracle on their databases; the situation where your infrastructure vendors gain control over part of your budget
So you can bet that as larger outfits take a strategic view of cloud computing, they’re going to be appropriately paranoid about barriers to exit. There’s going to be a powerful demand for standards and for demonstrated interoperability.
The big problem with this argument is knowing what events will trigger this kind of demand. I'd like to believe that the current economic downturn will serve as a catalyst. If history is a reliable guide to the present, chances are we'll see a battening down of the hatches and a retreat to 'safe' options. That would be a tragedy. Just as Apple and Microsoft emerged out of tough times, business can benefit from opportunities to change the way they do business for the better. Bob Warfield alludes to this in his playful post where he declares:
Microsoft created a simple network effect in their Office Suite with integration, and in the ubiquity of being able to exchange data with the largest number of users. I might like a particular spreadsheet better than Excel (says he who created Quattro Pro long ago), but I don’t like it enough better to forgo an integrated Word Processor. After a while, even those who did some other spreadsheet well enough to use an alternate word processor can no longer get by because they can’t exchange data effectively with those who use the “standard” Microsoft Office applications. Yes, there are ways around this, but they simply aren’t convincing.
Where I have been completely disappointed by the current crop of Microsoft Office-as-web-app wanna be takover artists (like Google Apps, Zoho, et al) is that they are just a subset of MS Office running on the web with decent but not great data compatibility. And I’m gonna switch for that? Please!
They are so missing the boat by not focusing on what the web enables them to do far better than any desktop application: collaboration. Collaboration, by its definition, would make for an effective network effect for any Cloud Based End User application. Why don’t these vendors get on with discovering and delivering effective collaboration? There are tons of specific uses of these tools, especially for spreadsheets, but also for word processing, that cry out for this. Just look at how painful budgeting in Excel continues to be for most organizations. Roll up a sales forecast using spreadsheets, or do any one of a number of similar exercises. You see my point. (My emphasis added.)
I sense Bob is slightly wide of the mark. On one point I am four square behind him. It has nothing to do with Tim's network effects and everything to do with the pragmatic sense of collaboration as articulated through cloud computing. That was the essence of my last swipe at Tim.
The flaw in Bob's thought-stream is in the implicit assumption that Google, Zoho et al will not get better at this interoperability lark. I just don't believe that. If true then Zoho in particular might as well pack up and go home. The fact Zoho has persuaded GE to at least seriously consider migrating 400,000 users over to its applications as part of a more general overhaul in the way it uses business applications is one heck of a starting point.
Even if that project goes pear shaped then GE's loss is likely to be the cash equivalent of a rounding error. Viewed in that light, the cloud gets more compelling because companies can afford to take the risk of collaborative experimentation without leading to chronic disruption or massive budget hemorrhage. But they will need standards and they will need forms of interoperability that are hard to come by today. OpenID anyone? Which brings me to Stephen O'Grady's post.
Stephen offers an elegant rebuttal of Tim Bray's arguments, which I readily admit to cherry picking in one regard:
As for Hugh’s argument [the emergence of a mega monopoly], I believe that to be unsupportable because:
- The combined revenue from Dell, HP, IBM, Intel, and Microsoft would not be enough to secure even the title of the largest business right now, let alone in history.
- We know Microsoft will be in this market. We know Google will be in this market. And, I’d argue, we know Amazon will be in this market. It’s also likely that some combination of IBM, Rackspace, Sun and others will be players in this market. Irrespective of whether or not we achieve some level of standardization, it’s not reasonable - at present - to assert that we’ll see any one of these players become ascendant and dominant in the way that Google or Microsoft are, because, fundamentally, search and cloud are different. I could easily migrate from Google tomorrow; migrating my application workloads from one provider to another, on the other hand, is non-trivial. Yes, even with Java.Ergo, projecting one massive, monopolistic player in this market - as we see in search - seems at present to be unrealistic.
To me, the monopoly of Google search demonstrates little with respect to the prospects for a cloud monopoly.
A wee digression. Sometime around 2000, I recall Vivek Ranadive, CEO of TIBCO saying (and I paraphrase) that search would be the underpinning for driving the creation of a new class of applications that would run on the Internet. Having search in the Internet cloud would demonstrate cloud utility and power in ways that no other technology had managed at the time. One reading of history suggests he was right. Stephen is suggesting that we've moved on. That's true because as Tim O'Reilly has pointed out, we have a variety of 'flavors' of the cloud paradigm. So why, when taken together, do all these points of view, seem muddy?
Each has an agenda. There is nothing wrong with any of those positions because they provide fuel for these important debates. I have an agenda too.
I believe in the economics of the SaaS model (and a few of the other aaSes) as the basis for delivering the kind of collaborative environment that can offer breakthrough enterprise value. Day in and out I talk with vendors who realize that SaaS isn't just a delivery model but something that offers much more. They're not 'there' in terms of delivery but know it's possible. That's precisely why I have cherry picked on the larger arguments throughout this post.
But...we are all way too early in the game for any of us to declare theories as winning or otherwise and it is in those assertions that I believe we all, to a greater or lesser extent, tend to err. None of us has as yet thought deeply about the elephant that just walked in the room: Microsoft. 24 hours in from its Azure announcement is a little early to fully evaluate Microsoft's impact. Even so, it cannot be ignored. As James Governor said in a Tweet post:
No amount of assertive statements from thought leaders will prevent customers from adopting proprietary technology.
To be continued...
Image courtesy of Hugh McLeod and his originating post that tweaked Tim O'Reilly into the debate.