What if your Information Technology and Business Applications were effectively free? Think about what you would do with key information that you could manage and manipulate yourself – easily and anywhere – at pretty much zero cost? A pipedream? An exaggeration? Nope! Not anymore thanks to Cloud Computing. But like most things there is a catch.
Let’s start with a little perspective since this kind of phenomena is not uncommon. In the book “Abundance, The Future is Better Than You Think” the authors start with the tale of when Napoleon III threw a banquet for the King of Siam. The honored guests were given aluminum utensils while the others had to make due with just gold. While aluminum is the third most abundant element on earth, in the early 1800’s extracting it was difficult and costly. Now of course, it is so cheap we wrap our leftovers in it and throw it away when done. So, what has this got to do with cloud?
Today, we are in a similar place with information technology due to the advent of cloud computing. The emergence of electronic computers at the end of the Second World War coupled with the advent of the transistor put us on a new track of exponential cost reduction (See Moore’s Law). We all get this personally. A computer used to cost many millions of dollars and occupy thousands of square feet of specialized facilities. Now we carry a very powerful one in our pockets – a smartphone.
But while that kind of machine and software cost has plummeted, for many decades actually operating them has been expensive, surprisingly labor intensive, and limited to specialized practitioners. This generated a drag on how good things could really be. However, within the last ten years the emergence of cloud computing has now accelerated the cost decline even more. Some people are calling it hyper exponential.
In the cloud, not only the machines get exponentially, cheaper, faster and better; but how we run them and provide solutions also plunges in cost. The result is falling total costs that are approaching zero. There are lots of statistics in support of this. We are now in the Race-to-Zero for the cost of computing.
Here are just a few anecdotes:
- Amazon Web Services (AWS) has cut prices 48 times over 8 years.
- Google and Microsoft pledge to match AWS blow for blow.
- 20 years ago storage cost $9,000 to store one gigabyte of data. Today it costs four cents.
So, by now you may be thinking: This is great! Bring it on!
Not so fast. This phenomena cuts two ways and you need to be careful which way it cuts for you.
Here is a cautionary tale from the “Big Bang Disruption.” Remember those GPS devices from firms like Garmin, TomTom and Magellan. (Yes, I know you use your smartphone today but stay with me and see why). The first Garmin models were in the market in 1991 selling for $2500; by 2000 some models were offered for $120 – once again good old Moore’s law – so far, so good.
But, in 2009 Google launched Google Maps Navigation for smartphones. What was the price? Free! How could they do that? It ran in Google’s cloud scale data centers and they had been collecting this data anyway as part of their search and advertising business. The incremental cost to them was negligible. Today of course, Apple has matched it, and we just talk to the app to get directions on our Apple or Android devices. All of this comes to us through the Cloud.
This sort of transformation is happening with all kinds of applications. For you as a user, this is tremendous power and capability placed in your hands at little or no cost. But, it is also being placed in the hands of your competitors and your customers. Consider the implications. Any industry could be transformed by this, not just tech. Think Uber and Airbnb.
Are you ready? Are you pursuing this potential? Or perhaps this is a threat to your current business model. Unfortunately, you really don’t have that long. Consider poor Garmin: it got chewed up in just five years.