Thursday, May 15, 2008

Digital cameras? It'll never happen ....

It might seem as though the computing industry is drowning in a sea of aaS, so I thought I would simply explain what the big deal is.

The fuss is simply about the progression of the computer industry from a product based economy to a service one.

Whilst a product based economy is built upon buying and maintaining products, a service based economy depends upon you renting services that are managed by someone else, such as with Amazon EC2. Whilst there are risks associated with being locked-in to one particular provider, the benefits include :

  • more efficient resource and energy usage.
  • more rapid release of innovations on the web through componentisation.
  • lower cost & capital expenditure for business.

The risks can be overcome with portability between providers, which in turn will lead to competitive utility computing markets. Naturally, there is more variability in applications than in frameworks and more in frameworks than in hardware. So whilst we should see a couple of Hardware "as a Service" marketplaces, there will be hundreds of different application markets.

None of these ideas are new, they've been common fare for many years. The transition to a more service based economy, the use of open sourced standards, the creation of such computing marketplaces and the control of such markets through reputation and trademarks are commonly discussed subjects. None of the mechanics of any of this is the big deal.

In this new world competition is not going to be based upon product but on service and all the current mantra about product being a source of competitive advantage will be flushed away. Many of the big players will be too wedded to their existing value networks to react to this disruptive innovation.

The initial stages of this new service world have been about proprietary systems which have proved their value to startups, SMEs, skunk works and some larger companies. The next stage requires portability between providers. During this time you would expect that the product focused companies will entrench to niche high margin areas like finance and major corporations as well as attempting to exploit new geographical markets.

The question has always been, who of the big companies from IBM to Microsoft to Oracle to SAP is so tied to a product focus that they won't see the change until it is too late. The change isn't about simply providing "our product" as a service, it's about an entire shift to a service based economy. It's not about "product" at all.

So who is going to end up the next Polaroid? That's the big deal.

Post a Comment