I’m at the Dagstuhl Seminar “Information Management in the Cloud” where I keynoted about cloud computing businesses models. Given that I’m hardly a cloud computing expert this may seem like a stretch, however, the organizers had asked me to talk about my open source experience and relate this to cloud computing. This perspective turned out to be surprisingly fruitful. By realizing that both open source and cloud computing are disruptive innovations that enable a new generation of business models, I believe I was able to draw reasonable conclusions on the future of cloud computing from the history of open source. I reason by analogy, and here are the main conclusions:
- Cloud computing, like open source, is not a business model in itself, but an enabler of business models
- Cloud computing is not a business model but a distribution (read: sales and marketing) strategy
- Cloud computing, like open source, will have a novel type of business model built solely from commodities (distributors and utility computing, respectively)
- Cloud computing, like open source, will have a novel type of business model using proprietary software (single-vendor/open core and single-source clouds, respectively)
- Truly new businesses built using cloud computing need to educate their customers, i.e. rapidly grow the market; while doing that it is a landgrab
- Cloud computing, like open source, will be commoditized over time, where a commoditization frontier drives an innovation frontier to keep expanding
- Open source and cloud computing work synergistically, helping each other, as examples like SugarCRM show
I expect 2. above to be most controversial. That’s because many cloud experts talk about cost of providing the cloud service first before they talk about customer value, implying that customer value is a consequence of cost. Which is obviously getting it backwards. The core cloud computing customer values of try-before-you-buy, pay-as-you-go, higher quality of service, etc. are enabled by novel technology, which can also come with a lower cost structure.
Cloud computing is a sales and distribution strategy because the fine-grain provision and releasing of resources and the matching fine-grain pricing schedule drive adoption of cloud services through the line-of-business rather than the IT department. Open source strategy, anyone?