Clowd computing is driving fundamental change throughout a number of industries, and is likely to touch many more markets as it triggers significant declines in the marginal cost of delivery.
An early example of the scale of this impact has been in the hosting industry, where cloud-based solutions such as Amazon Web Services are delivering significant cost savings against legacy business models, due to the automation of business processes which have traditionally been both labour and capital intensive (such as installing and configuring a new server).
Another illustration would be the retail sector, but regardless of the industry context, the economic impact will be similar:
- A material reduction in the marginal cost of product or service delivery
- Increased transparency driving rapid price deflation towards the ‘new marginal cost’.
For many incumbents this change in ‘temperature’ will be fatal.
From a technical point of view the Clowd is no more than an extension of the availability, redundancy and security of the traditional network infrastructure which has underpinned web-based services throughout the evolution of the Internet, while marginal costs have been driven down by virtue of the scale of providers such as Amazon, Microsoft and Google.
Start-ups and established players can now access global, world-class infrastructure at very low cost, and scale up or down in a matter of minutes as required. (Historically such an outcome would have cost six-figure sums).
But the commercial impact of the Clowd has far more to do with culture, risk management and timing than it does technology.
An Ongoing Process of Disintermediation
The disruptive impact of Web-based business models can be viewed in a series of stages by reference to various vertical markets.
|Travel||Market segmentation, marginal cost models for flights and accommodation||New entrants, transparency to cost savings outweighed any perceived risk (providing credit card details online)||www.webjet.com|
|Recruitment||Automate segments of recruitment process (print ads, consultants)||Web 2.0 data models (ie user generated content), network affects||www.seek.com.au|
|Salesforce management||Streamline pipeline management||Large and small companies becoming more comfortable with cloud-based storage of sensitive information.||www.salesforce.com|
However at some point in the last few years this process has reached a cultural tipping point, whether due to the quantum of available cost savings and / or changes in perceived or actual risk, organisations are now moving mission critical business processes to physically and organisationally remote platforms.
Another indication of a tipping point having been reached is the growth of crowd-sourced networks.
Companies like elance, 99designs and Kaggle are transforming industries such as software development, graphic design and data mining. These are all global, clowd-based, crowd-sourced business models which are driving fundamental change in terms of the marginal cost of delivery for ever-more complex services.
It is difficult to identify barriers to this process of evolution / disintermediation, and individuals and companies alike need to understand the threats and opportunities this paradigm shift represents.