Cloud: The Next Industrial Revolution

“You have to ask yourself whether you’re inherently a commodity business or inherently an innovation business.”

Those words were spoken in 2005 by then Procter & Gamble CEO A.G. Lafley. But it may not be so easy to divorce commodities from innovation. In fact, without commodities, innovation would be nearly impossible.

When the world started to trade power from steam, coal and natural gas as commodities, entire industries skyrocketed to new levels of innovation. For instance, power-fueled advancements in transportation and heavy machinery revolutionized agriculture, infrastructure and medicine, along with countless other industries, forming what’s now known as the Industrial Revolution.

Fast forward nearly two centuries and, today, the cloud possesses much the same transformative potential for the 21st century. In its current state, the market for computing resources is very similar to the world prior to the Industrial Revolution. Resources are scattered, pricing for services varies greatly — the system as a whole is inefficient. But that won’t last forever, as cloud computing is increasingly how computing resources are delivered to customers and even how they are traded among producers. These very computing resources are the basis for much innovation, and innovation is where new business opportunities are born. Available to everyone, there is no limit to how they can be used by creative minds. The opportunity for cloud service providers is how they deliver that computing more effectively to customers and the toolset they give them to maximize the value from those very same resources. After all, a gig is a gig is a gig. It’s what you do with it that matters, and that’s what people are slowly but surely coming to realize.

A Cloud Chain Reaction

Cloud is a fundamentally more efficient delivery system for large-scale computing resources, as utilization is much higher than dedicated hardware solutions; plus, it offers automation and elasticity for customers. In most cases, utilization for public cloud solutions is at least double that of traditional dedicated solutions. And, as those benefits filter into the general economy, they have the capability to dramatically increase the efficiency of computing resource delivery. As the cloud matures with increased interoperability, data portability and price/performance transparency, there will be a domino effect on the economy. Providers will have to compete based on how they innovate in delivering computing resources as well as how they can meet the needs of specific clients and use cases.

For example, if one cloud provider has better resource allocation logic and can run its capacity at 90 percent utilization versus 80 percent for the market as a whole, they have a significant advantage equivalent to being able to extract oil more cheaply than anyone else. Likewise, specific sectors have certain needs. The financial services and healthcare industries, for instance, rely heavily on ultra-secure data transfers to protect sensitive information that could potentially be targeted by hackers. For them, a provider offering innovative private patching technology would be an ideal partner. Moving forward, businesses will be able to choose cloud infrastructure providers based on real value propositions like this, taking us from a market focused on opaque pricing of cookie-cutter services to the highest value approach focused on price/performance and service fit through customized offerings.

As more and more industries rely on compute power, cloud resources will help fuel worldwide economic growth. Like steam, coal and other power sources centuries ago, this new way of looking at cloud infrastructure, where it is shaped primarily by the needs of the user, will enable customers to use commoditized resources as a launch pad for revolutionizing their industries yet again. Commodities and innovation are inextricably linked. Commodities are the foundation without which we’d still be traveling in horse-drawn carriages and communicating via telegram. So, imagine what could happen with the cloud.

The impact that a lower oil price has on the world economy is well understood economically (it is both significant and positive!). But, the question is, where will a massive increase in accessibility to computing resources and a dramatic lowering of computing resource prices take us?

It’s Not a Matter of “If” but “When”

Some of the world’s most challenging problems are limited by our computing power; three quick examples include climate prediction, genetics analysis and high-energy physics, which helps in understanding our universe better. No one can deny the impact of accelerating progress in even one of these fields, never mind all of them. As the focus shifts from how many gigs of RAM you can get for the lowest price to which provider can offer the best performance and infrastructure customized for your specific use cases, we’ll see entire industries able to develop new apps, products and services that change the way we work, play and live. They’ll do it better, faster and more efficiently; and, just like the Industrial Revolution, global output and productivity will reflect this shift.

According to a recent KPMG survey of business leaders from a broad range of sectors, the cloud was identified as one of the top three vehicles expected to act as the driving force behind the next wave of indispensable technologies in the coming years. Respondents indicated that they believe we are still in the early stages of the cloud innovation curve, and that the most significant developments are still to come. They’re just waiting for — and expecting — the cloud to kick-start that next revolution. But, what will it look like?

The Cloud Revolution in Action

If we look at computing use cases as Olympic athletes, we start to see the cloud for what it is and what it could be. Sheer athleticism is a must for a successful Olympic athlete, but it far from guarantees a gold medal. For instance, you wouldn’t put a world-champion swimmer in a 400-meter sprint against Usain Bolt simply because the swimmer is athletic. And, while athleticism cannot be undervalued, all we have to do is look at the differences in the physiques of swimmers versus runners versus weight lifters and so on to realize that they spend years tailoring their bodies and skill sets to specific sports. So, why should computing requirements be any different?

A media and entertainment company in Hollywood will have different needs when it comes to cloud infrastructure and services than a scientific research organization like CERN, even though the underlying computing resources powering their platforms (i.e. computing resource commodities) may be the same. So, as an Olympic athlete’s body needs to be tailored to specific events, cloud infrastructure needs to be shaped into a form conducive to the needs of its users.

The move to cloud as a delivery mechanism for computing resources paves the way for true innovation, both in terms of efficiency gains by providers in delivering those resources and the ability for customers to make those resources mold to their needs. The innovative breakthroughs that can be made with the right foundations in place are what breed success, push entire industries into the future and create new ones that change how we live our lives, day in and day out.

Robert Jenkins is the CEO of CloudSigma, a European and U.S. public IaaS cloud provider.