For well over a century we have had a global shared communications utility that offers an on-demand, standards-based, pay-for-what-you-use service that we call ‘telephony’. Profits from telephony, with SMS, remain the foundation of the global telecoms business, since (despite recent declines) these continue to pay disproportionately for the infrastructure.
The same attributes – shared, on-demand, standards-based, pay-for-what-you-use – are being used by the IT industry today to develop a new utility computing infrastructure, called the cloud. This is enabling IT to make the same leap of productivity and democratisation as happened for communications in the 19th century when the telegraph was superseded by the telephone.
However, there is a gap between the capabilities of communications systems that support human and machine conversation, and the demands of modern commerce as enabled by cloud technology. Bridging this gap offers a substantial business opportunity.
Cloud computing needs cloud communications
Communications in the cloud is a paradigm shift in which power moves from ownership of data networks to control of software platforms. It sets up a new competitive dynamic between the IT and telecoms industries – and their respective ecosystems – to supply the capabilities that fill the gap.
For communications service providers, the opportunity lies in creating new and improved communications systems that support the needs of modern commerce; the opportunity for enterprises is to consume those capabilities in order to improve existing business processes, as well as invent new ways of doing business.
The challenge for every communications services provider is to engage with enterprises to understand their true needs for communication, and re-think their own business models on the basis of this knowledge. That process has barely begun, because its scale has barely been appreciated.
The true meaning of the cloud
The cloud is an enabler of new patterns of living and doing business. These new patterns demand that providers of communications services rethink their business models to reflect a qualitatively different business environment.
Typical explanations of the cloud focus on the technologies that deliver cloud computing, such as server virtualisation. These are accurate descriptions of the machinery, but are inadequate as a means of understanding the impact of the cloud. It is rather like attempting to understand the automotive revolution by considering the properties of asphalt and oil.
The cloud is a phenomenon that is bigger than just the technology of cloud computing. It can be viewed from a number of angles.
- As a technical development, it involves not just managing data centre resources in new ways through modular hardware and virtualisation. The cloud will also lead to new patterns of distributed computation to manage privacy and security issues. For example, today data is moved to, and stored at, the location where the application is run. Tomorrow, the virtualised application may be moved to where the data is securely stored.
- Seen politically, the cloud blurs boundaries between regulated media, IT and telecoms industries. It makes open government possible by eliminating the distribution costs of data. It allows users to arbitrage different legal regimes for copyright and censorship. The cloud also enables people to self-organise in new ways for both peaceful and violent purposes.
- From a social perspective, the cloud is an overlay of new collaboration and communications capabilities that extend and amplify our ability to co-operate with people outside our immediate organisation or geography. This will change organisational structures of all sizes, from states to firms and families.
- From an economic viewpoint, it is a way of doing business ‘on demand’, providing data processing resources with no fixed overheads and low variable costs. The cloud also represents a shift from buying products – for example, shrink-wrapped software – to services, such as SaaS. This scenario favours more agile and smaller organisations that are able to respond dynamically to customer needs.
The cloud is all of these, as well as a dream come true for every marketer in the technology business who needs a ‘new-new’ thing to hype. However, none of these descriptions truly captures the cloud’s essence, or the magnitude of its consequences for our society, economy and daily lives.
To begin to understand why, we must examine the relationship between communications, computing and commerce, and the data and people that unify these worlds.
The cloud is a socio-economic revolution
The cloud offers not just a quantitative improvement in the cost of computing, storage and transmission; it provokes a qualitative change in the structure of our information society.
The efficiency with which IT accelerates pre-existing ‘industrial’ ways of doing business is achieved through tight systems integration of the manufacturing, supply, distribution and retail businesses; this requires expensive systems integration consultants to develop the software, and systems that are scaled to cope with peak volumes. These capabilities are accessible only to large corporations that can afford the high fixed costs and spread them over large volumes of transactions.
Yet we, as citizens, live in a world of readily-available and low-cost computers, phones, electronic communications and online services. Our social gestures and economic interactions are increasingly taking digital form. The resulting data has the potential to be shared globally, beyond the boundary of the particular device, server or enterprise in which it originates. The form the data takes is increasingly standardised, and comes with metadata that makes it easy to process automatically. It is possible to search, retrieve and process data at minimal cost.
Cheap information as the abundant raw material
Consumer services produce cheap data as the raw material for innovation. Once this data is aggregated, analysed, and exposed it provides the refined fuel for the cloud economy: cheap information. This resource affects our patterns of economic and social interaction as profoundly as did the innovations arising from the technologies driven by steam, electricity and oil.
The cloud is an infrastructure for capturing and sharing cheap information in real time. This cheap information complements many bodies of cheap knowledge such as Linux and Wikipedia. Together these deliver cheap answers to social and economic co-ordination and co-operation problems, making those answers available to every enterprise and citizen.
In the 21st century, the cloud’s new resource of high-quality, relevant and timely information affects our patterns of economic and social interaction as profoundly as did the innovations arising from the technologies driven by steam, electricity and oil. The cloud democratises the tools of global commerce by removing the capital and organisational barriers to creating new information-driven applications and business processes. Conversely, it greatly increases the economic power of the information brokers who enable these exchanges. This new abundance of cheap information, coupled to powerful intermediaries, has real practical implications for business strategy in the present. Old assumptions of cost, scarcity and barriers to entry need no longer hold across many sectors of economic activity.
Narrow thinking causes vanishing value
Yet a narrow focus on technology is pervasive in the IT and telecoms industries: the cloud is seen merely as a new mode of cheap computing, storage and networking, and reduced IT service delivery costs. It’s a better form of data centre, and little more. This is akin to thinking about the benefits of the ‘cheap oil’ economy to horses and carts through creating smoother roads.
The question is: how can we discover valuable new uses for cheap information that will improve how we live, work and trade? The information age has only just begun, and the consequences have yet to unfold. My growing belief is that the role of telecommunications service providers may change far more radically than anybody is currently forecasting. A much deeper re-think of their voice, messaging, computing and broadband businesses is required than today’s mainstream vendors have on offer.
To keep up to date with the latest fresh thinking on telecommunication, please sign up for the Geddes newsletter