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Cloud Computing - 4 Drivers Leading to Exponential Growth

The staggering growth in cloud computing shows that, like many consumers, the business world is choosing the Access Economy over the Ownership Economy.

Like the average American, I own a number of albums that I've collected over the last couple of decades. I also own a number of DVDs that I've collected over the same period. Additionally, I own a number of books that I've amassed over an even longer amount of time.  All told, out of all of those media stockpiles, the times that I actually listen, watch or read the stuff I own is close to zero percent.

Of course, I still spend a lot of time listening, watching and reading media. I'm just not doing the whole "ownership" thing any longer. With access to 30 million songs on Spotify and tens of thousands of titles on Netflix and Hulu, I've got my listening and viewing needs covered. And, thanks to Amazon Kindle Unlimited, I can instantly download nearly a million digital book titles any time I'd like, all for a nominal monthly fee.

Like the average American, I also own a car. And, much like the average American car owner, mine probably gets driven around 5 percent of the time. Like my media stockpiles, many of which have become stowed in my attic or basement, my car just sits in my driveway, waiting for that slight fraction of time in which I actually use it. 

Unlike my media consumption, though, I still haven't given up car ownership. Yet, as my car just sits in the driveway, quietly draining value from itself and my bank account, there are others adapting to a new mindset. They're recognizing that, in the case of a vehicle, it's the ride rather than the physical car that provides the true value. They don't need ownership, only access to a car when needed. And so they're turning to services like Uber to fill their automotive access needs.

It's this new model of business- this Access Economy, which is transforming the way we view ownership. And it's this new format of commerce which is disrupting markets in some substantial ways. For example, some analysts predict that once services like Uber are finally able to harness driverless cars, the great American business of car ownership will take a 40 percent nosedive.

And now the business world is looking to the Access Economy for themselves, but this time, they're looking at it from the consumers point of view. 


 

Cloud Computing - The Uber of Computing

This conversion from products to services (car to ride, book to read, ownership to access/subscription) where experience or service trumps material ownership is taking hold for businesses when it comes to computing infrastructure, software and services under the broad umbrella of cloud computing. Business needs access to data and the tools that help analyze and provide insight from that data. The infrastructure, hardware and software are just means to an end for the majority of business that are not providers of either, yet they spend many resources in continuously maintaining and upgrading both hardware and software.  Many of them do not always maintain  or upgrade as they would like and aging technology can cause major disruptions and financial pain like the recent problems Delta Airlines experienced.

The growth in cloud computing services has been staggering - from around $ 5 billion in 2008 to about $ 96 billion today and expected to reach almost $ 200 billion by 2020. Even more staggering is the fact that even today only about 5% of all data resides in the cloud and the remaining 95% is still in private IT facilities. Amazon Web Services (AWS) will reach $ 10 billion in annual revenue after only starting 10 years ago. Microsoft, Google and IBM are following Amazon's lead and building billion dollar businesses in cloud computing.

The following are 4 drivers leading to the exponential growth these companies are experiencing when providing cloud computing services.

1. Access to Scale 

The knowledge on the internet is highly decentralized and has given power and information to billions of people. The irony is that the network, platform, software and infrastructure used to store and distribute that knowledge has become highly centralized giving rise to the big five- Apple, Google, Amazon, Microsoft and Facebook. Perhaps this can be debated from a political or philosophical perspective. However, from an economic perspective centralization has merits. It's logical to concede that 100 data closets converted to a single datacenter would reduce hardware, software, and resource (energy and human) costs significantly while improving quality, redundancy and physical safety of the data per dollar spent.  Just the energy needs to store and distribute all this data is immense. The move to datacenters and now to the cloud has helped reduce the number of servers needed as well has improve the energy use of these technologies. Magnify that to the hyperscale facilities being built by the cloud computing providers and the cost and efficiencies are even more attractive.

2. Access to Technology

Perhaps ten years ago or so we were a small consulting firm with our own in-house email server and a small financials software package running on server in our office and many other applications running on individual laptops for CRM and other needs. We were in the business of providing IT services for clients but providing IT services for ourselves was a major distraction.  We would have one of our consultants drive into the office at 2 AM to restart our email server on a few occasions. Local power outages left us without email. 

Today we don't have a single server in house that we have to maintain. However, that's not the major change. Far more important is that we have access to Financials, CRM, Marketing, HelpDesk/Ticketing, Email, Document Storage and Collaboration software, that once would only be affordable for larger companies. All in the cloud with the ability to grow with us fairly seamlessly.  Our physical office became a large expensive file cabinet where documents only flowed in rather than out so we even virtualized our office.

Startups and small companies have been taking advantage of cloud services for some time. It's been an equalizer that  has set the stage for some major disruptions to larger competitors by much smaller firms where before technology was a barrier.  

3. Access to Advanced Technology

For larger companies efficiency, flexibility and access to technology may not be enough to move to the cloud aggressively enough so Microsoft, Google, Amazon and IBM are developing advanced technology that will be difficult to replicate in house. Thanks to pop culture, when it comes to Artificial Intelligence, we usually think of it as a potential replacement for humans in their jobs or potential replacement altogether.  But before that may ever happen, AI will be a tool to improve many business and consumer activities via machine learning, deep learning, big data analysis and IoT sensors. The four companies above have a large advantage in the talent, skills, experience, hardware and software required to effectively apply AI to business activities.  Now they are offering these services through the cloud to customers either through machine/deep learning models or APIs.

Microsoft and Google offer AI services for computer vision, translation and speech recognition. Speech recognition can be used to greatly improve customer assistance programs that are primarily of a rigid menu-driven variety today. Amazon offers data mining and predictive analytics services. In the future AI technology can improve security with facial recognition or biometric analytics information.  Most of these services require large amounts of data and incredibly fast GPU- both strengths of cloud service providers. Google, who is currently behind the others in cloud computing but one of the leaders in AI, has an opportunity to use this technology to catch up to Amazon and Microsoft. 

The advantage of these technologies, along with access to a much larger set of data, will be the next phase for the further exponential growth of cloud computing.

4. The Access Economy

The Boomer Generation is know for global material domination and the Millennial Generation is becoming know for shifting the precept of consumerism to one of experience over material. By the way, my Generation X is known for watching television and being latch-key kids. Someone had to do it.

If you visit a mall you will begin to see fewer stores selling stuff. Quickly being replaced by ones selling experiences- virtual reality rides, entertainment, video games, dining experiences, etc. I think maybe the Millennials have it right. Most of the value in products tend to be the experience we get out of it, and when that is over, it usually ends up stowed in the attic or basement. Even the automobile is being transformed into a oversized smart device that we ride inside of rather than carrying. With their growing connection to the wireless grid and array of onboard apps and entertainment features transforming the true value over to the experience of the ride and the access to the world outside our driveways. 

These massive changes in attitude, whether generational or just due to the available technology advances, are happening for consumer driven companies already. Now they're also happening for businesses inside all industries. For most businesses, the value isn't in the hardware or software they use, but the data and analytics they can access to improve their business.  So why not access rather than own that also?

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