Cloud Computing in the Web 2.0 Summit

In the Web 2.0 Summit, Padmasree Warrior (Cisco CTO), Paul Maritz, Kevin Lynch, Dave Giroaurd, and Marc Benioff were in a panel debating the future of cloud computing.

Two main views emerged. The ones that think that Cloud Computing will evolve following the Internet model and we will have a “federation” of clouds and the ones that see Cloud Computing evolving following the pattern of telcos, we will therefore see different and incompatible offers aiming, among other things, to lock in customers.

Which model is going to prevail?

In my view answering to answer this question we have to look at the growing mechanism and understand it. For that, the best way is to look at the incentives and possibilities of the individual agents, to look at the mechanism at the micro level.

What were the incentives that drive Internet expansion for, let’s say Microsoft? They clearly were around capturing market share and dominating the communication channel (the browser in that case). Let’s note that these incentives were perfectly aligned with the growth of Internet, as MS captured more market share (normally by fostering Internet expansion – e.g. putting its browser in every copy of Windows), Internet as a whole benefited from that.

If we compare that situation with the one in Cloud Computing, we can see important differences. Again the incentives are about dominating the channel but there is no need to share the platform with anybody because the access – through Internet – is guaranteed. The main incentive for Amazon, MS, Rackspace, Google, etc… is to have big and small applications that generate traffic and to keep them there – a.k.a. customer lock-in. Therefore the incentives are headed to a proprietary model, meaning an incompatible one because user-level interoperability is ensured by the Internet.

This is not necessarily wrong, because among other things fosters competitiveness and allows innovation. However and there is a big however, we must be attentive to monopolistic practices, because there are clear scale economies and clear network effects for the winner(s).