Now the Cloud Wars (Really) Begin

Thomas Watson, the founder of IBM, famously predicted, "I think there is a world market for maybe five computers." While this sounds absurd today, it's becoming a reality in the cloud computing era. Companies are realizing that investing in their own server farms, software stacks, middleware, disaster recovery, security, and networking hasn't provided the differentiation they sought.

The Consolidation of the Cloud

Nearly every business, from large corporations like GE and Coke to small businesses, has had to replicate millions of computers globally to perform similar tasks. Few possess the technical talent or economies of scale to do this efficiently. Watson's vision of a few dominant "computers" (now clouds) operating with sufficient volume to compete on price and performance is materializing. The companies vying to be these dominant players are some of the largest on the planet.

Cloud Computing: Still in its Infancy

Despite rapid SaaS adoption, the cloud is still in its early stages, comparable to the PC market in 1983, the smartphone market in 2003, or the search market in 1998. The current leader, Amazon Web Services (AWS), despite celebrating its 10th anniversary, has a $10 billion run-rate in cloud revenue. This is minuscule compared to the trillions spent globally on enterprise IT, indicating immense room for growth.

Amazon Cloud

The Battlegrounds: Pricing and Performance

The first phase of the cloud wars is dominated by pricing and performance. Amazon has consistently cut prices to remain competitive and preempt new entrants. Google has pledged to continue lowering prices in line with Moore's Law. These tactical pricing maneuvers are expected to continue as workloads shift from on-premises to the cloud.

The Next Phase: Differentiation and Specialization

Competing solely on price is unsustainable. The next phase will focus on differentiation. Microsoft will likely leverage its premium enterprise software and services, integrating them with its cloud offerings. IBM will emphasize industry-specific solutions, consulting, and cognitive computing. Google will capitalize on cost advantages and its mastery of hard-to-replicate technologies.

Amazon, true to its core business, will likely continue offering low-cost solutions with a wide selection of services. Other players like Oracle and potentially Facebook will develop their own unique models.

This is not a winner-takes-all market, but a fierce battle for developers and enterprises worldwide. Computing costs will continue to plummet, and innovative solutions will emerge to tackle complex IT challenges. The cloud wars have truly just begun.

Key Players and Strategies:

Amazon: Leverages low-cost offerings and a vast selection of services, similar to its e-commerce model.
Microsoft: Focuses on premium enterprise software, services, and synergistic integration.
Google: Capitalizes on cost advantages and advanced, hard-to-replicate technologies, bolstered by strong AI leadership (Diane Greene).
IBM: Emphasizes industry-specific solutions, consulting, and cognitive computing.
Oracle & Facebook: Expected to carve out their own niches.

Emerging Trends:

AI Integration: AI is becoming a critical differentiator, with companies like Google leveraging their AI expertise.
Industry Specialization: Cloud providers are developing solutions tailored to specific industries.
Cognitive Computing: Advanced capabilities like cognitive computing will play a larger role.
Developer Ecosystems: Building a robust developer community is crucial for cloud success.

The Future:

The cloud wars are a generational struggle. While early battles have been fought, the most significant developments are yet to come. The market will continue to evolve, driven by technological advancements, strategic partnerships, and the increasing demand for scalable, efficient, and intelligent computing solutions.

Topics: Cloud Computing, AI, Enterprise IT, SaaS, Cloud Infrastructure, Cloud Services, Cloud Wars, Cognitive Computing, AI Adoption, Cloud Platforms, Cloud Migration, Cloud Security, Cloud Economics, Server Farms, Middleware, Networking, Tech Industry, Cloud Strategy, Cloud Adoption, Cloud Computing Trends, Future of Cloud, IT Infrastructure, Data Centers, Cloud Computing Market, Tech Innovation, Digital Transformation, IT Services, Business Technology.

Author: Aaron Levie, Co-Founder, Chairman & CEO of Box.

Date: March 20, 2016