> Vince Marco wrote:
>> However, on the flip side of this you have an opportunity for existing
>> global companies to leverage their data centers by becoming "cloud"
>> providers.
>
> That's pretty much what Amazon did isn't it?
Something that should give us pause is that purchasing somebody's
excess capacity at an attractive price is building a business on a
waste product. But what happens when enough demand builds for the
waste product that it's not a waste product anymore?
(Sidebar: Back around 1900, refineries were built to produce kerosene.
Rockefeller made his millions removing the lighter petroleum fractions
-- aka gasoline -- that made lamp oil explode in the lamp. What to do
with this junk was a problem... burn it off, maybe. The automobile was
a great device for using up this waste product, but after the
ascendance of the auto, for a long period of time, the heavier
fractions became the waste: through the mid-'70s diesel fuel was way
cheaper than gasoline. But then auto mfgrs started pushing diesel
cars, with the result that increased demand for diesel raised its
price roughly to parity with gasoline; increased demand for jet fuel
probably helped, too.)
When EC2 is full to capacity all the time, what will Amazon do? Will
they double their prices? Will they build out their Grid? (Umm, excuse
me -- Cloud :-) -- but I'm of the opinion that it's "their" Grid and
"our" Cloud .)
If they build it out for the primary purpose of supplying Cloud
services, how much will they have to charge to get a reasonable return
on their investment? How should they size it? If they size it too
small, their service will suffer, driving customers away; if they size
it too large, they will they will have wasted money. Either way, ROI
(however you compute it) will suffer, unless they can raise the price
and still remain competitive with in-house (as well as other Cloud)
services.
A touted advantage of Cloud for small-to-medium-size enterprises is
that with Cloud, such an enterprise doesn't have to worry about sizing
an in-house data center, nor make these difficult decisions. But Cloud
providers will have make these sorts of decisions if Cloud is
successful, and once Cloud becomes a driver of data-center operation,
anything could happen to the cost of Cloud cycles.
-P.
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