Free Market Clouds

This is Part One of a two part series on how Cloud Computing will reinvigorate capitalism.  My intent is to provide a more socio-economic view of the cloud computing impact across business, government, and society. I hope it promotes deeper thought around the societal and economic impacts of this exciting new IT service delivery model that we call Cloud Computing.

I propose that market economies, otherwise known as capitalism, will be impacted significantly by cloud computing. In this blog, when cloud computing is operating in market economies, I refer to this as free market clouds, which is the coexistence of cloud computing and market economies (i.e., capitalism).

I predict that free market clouds will unleash a wave of economic growth and opportunity, creating new benefits for individuals and firms by facilitating access to massive amounts of IT resources and services. Let’s consider how free market clouds can impact business, government, and society, including:

  1. Who will be the early adopters?
  2. How will free market clouds deliver benefits to business, government, and society?
  3. What will be some threats to a thriving cloud computing ecosystem?

On Capitalism

It’s important to provide some history on the origins of capitalism. Here are two definitions by two respected business historians, Thomas K. McCraw and David S. Landes:

What exactly does “capitalism” mean? At a minimum, a capitalistic system is organized around a market economy that emphasizes private property, entrepreneurial opportunity, technological innovation, the sanctity of contracts, payment of wages in money, and the ready availability of credit. Under capitalism, property must be “alienable,” that is, freely bought and sold. The “value” of a good or service means whatever price someone will pay for it…“Capitalists,” then, are people who make bets on the future. The essence of capitalism is a psychological orientation toward the pursuit of future wealth and property. It’s all about aspiration and striving, measured by gains and losses in wealth and income. It rests on the belief that economic growth, even substantial growth, is possible and desirable — for an individual, a family, a business firm, an industry, even an entire country.

The decisive and most distinctive American innovation, though, was not any particular device, however important, but a mode of production — what came to be called the American system of manufactures. This was a creative response to (1) a market free of the local and regional preferences and the class and status distinctions that prevailed in Europe, hence ready to accept standardized articles; and (2) the scarcity of labor relative to materials. The two were related. In a labor-scarce economy, standardization was a way of dividing, hence of simplifying, tasks and making them repetitive, thus substantially enhancing productivity.

So then, capitalism is a combination of economic and cultural principles based on free markets, private property, freedom to take risks, access to wages and credit, the right to accumulate wealth, specialization of labor, and deep-seated values among individuals and firms to strive for their full potential and growth.

Early Adopters

According to David Linthicum, a recognized IT industry expert, areas where cloud computing might be a fit are:

  1. When the processes, applications, and data are largely independent (loosely coupled).
  2. When the points of integration are well-defined.
  3. When a lower level of security will work just fine.
  4. When the core internal enterprise architecture is healthy.
  5. When the browser is the desired interface.
  6. When money is tight.
  7. When the applications and/or services are new

I can’t argue with these technical postulates since they make good sense, but I’d also add other profiles:

  1. Early adopters will include businesses that need to improve communication with their customers and business partners. (This does not rule out many.)
  2. Early adopters will include innovative, small businesses that need ready access to IT and global markets in order to grow and compete against incumbent corporations. (The surrealistic ideal of David beating Goliath can become a reality for start-ups.)
  3. Early adopters will include industry verticals that have been served poorly by traditional client/server computing models.
  4. Early adopters will include businesses within a common industry that have much to gain by centralizing data in order to share information better with their customers, like healthcare.
  5. Early adopters will include research entities — such as engineering and research labs at universities or pharmaceuticals — that require analysis of massive amounts of data and access to high performance computing resources.

Free Market Clouds Will Deliver Benefits to Business, Government, and Society

Benefits to Business

It’s easy to create a quick (though incomplete) laundry list of potential business benefits if we assume the following positive impacts of free market clouds:

  1. Self-service (no third-party intervention needed to access IT services).
  2. Metered access to IT resources and services (pay-as-you-go).
  3. Scale up, scale down capability.
  4. IT standardization, including widely accepted APIs to prevent cloud service provider lock-in.
  5. Dramatically lower upfront cash outlays (CapEx) for on-premises IT equipment.
  6. Easier broadband access to compute, data, and networking resources.
  7. Less expensive broadband access to compute, data, and networking resources.
  8. Ubiquitous, mobile access to reams of compute, data, and networking resources.
  9. Customer and product focus vs. “on-premise technology distraction.”
  10. Easier market analytics (i.e., consumer behavior metrics).
  11. Intense competition among cloud service providers.
  12. Free and easier information sharing.
  13. Lower IT labor costs for firms.

I anticipate that these free market cloud impacts will then benefit business in many areas, including:

  1. Increased product innovation.
  2. Increased research and engineering effectiveness.
  3. Net job creation as innovative ideas turn into new businesses.
  4. Improved employee productivity.
  5. More customer choice.
  6. Lower supply chain costs.
  7. Lower customer prices.
How do you see Cloud Computing benefiting a Free Market system?  How has Cloud Computing enabled your business to do more with less?  Your comments (below) will be most appreciated and will help many others.
Ed Lucente Network Application and Cloud Solutions Application Sales Executive AT&T About Ed