Cloud makes anyone and everyone a robber baron

Larry Ellison declared famously in 2009 that, “All that cloud is is computers in a network.” He also used the words “fad”, “nonsense” and “gibberish” on the record when dismissing cloud. But times change and so has Larry’s opinion. Even cloud’s most vocal opponents are starting to realize that cloud computing offers something entirely new: the ability for even the smallest player to scale up an idea with little capital and at the lowest operational cost possible. This is a complete reversal of the concepts that have driven the world since industrialization began.

The robber barons

The robber barrons of the 19th Century amassed their wealth by gradually building out massive real estate, fur, steel, finance, railroad and later, oil monopolies. They crushed their competitors by out-sizing them, making competition impossible by the sheer cost of starting up a rival business. In Newport, Rhode Island, last week, my wife and I strolled the Cliff Walk with our daughter and marveled at the remarkable mansions that face the sea, testaments to the incredible fortunes amassed by the people who’s names we still know as universities, like Duke, Vanderbilt, Mellon, Carnegie, and Stanford. They rightly saw the business world in terms of capital investment and scale.

The wealth they amassed created great debate at that time and since, as it couldn’t have happened without the work of legions of workers, many poorly paid. It wasn’t until worker protections arrived in the 20th Century that the middle class emerged and the robber baron age quietly ended. But the organizational structure never changed.

Scaling out a business

Economies have always been built on pyramid-shaped organizations that grow by increasing the base of the pyramid and driving greater revenue up the geometry of the organization. Today, however, there’s an amazing ability to build out entire companies with a remarkably small number of people. Jon Evans published Economies Of Scale As A Service today on TechCrunch and talks about the remarkable movement toward renting economies of scale in ways that have never existed before. Rockefeller, Morgan and Astor would have never had summer ‘cottages’ in Newport if their empires were forced to compete with someone who could rent an economy of scale.

Cloud is just the logical version of this concept, which is beginning to exist physically as well. Evans described the physical rental of economies of scale this way:

…I think it’s hard to deny that both industries (AWS, Foxconn, etc) and individuals (from AirBNB to Zipcar) are increasingly moving towards collective usage of large pools of widely accessible shared resources. Economies of scale as a service, as Aaron (Levie, CEO of Box) put it. So far the effects are limited to specific sectors and domains — but it’s only a matter of time before this wave of change reaches, and profoundly disturbs, entire industries hitherto untouched by its force.

This idea that any of us can have a piece of anything without the cost of ownership is the driving force behind the cloud revolution and the idea that any one of us can be a robber baron. Anyone can design a chip and license it, as ARM has done without owning a single factory, or sell a company to Facebook for a billion dollars, as Instagram did with only 12 employees. This makes cloud much more than a deployment option, as some will say. Cloud is a rentable economy of scale that offers a low-risk, low-cost way to build out any idea. Anyone can build out an empire on technology ‘rented’ from Amazon, Microsoft and Salesforce.com.

The composable revolution

What’s more, there are changes coming to cloud that are going to take the idea even further, as the cloud enters the phase Neal Ford describes as ‘composable’, where, “Composable systems consist of finer grained parts that are expected to be wired together in specific ways.” When that happens, cloud moves from being rentable (cheaper and scalable) to being something that can be used to create user-defined capabilities and value.

As it stands right now, the SaaS world (and the PaaS world, too) are entirely made up of someone else’s functionality that will hardly differentiate a business. A composable cloud stands to revolutionize the way business is done by giving back control of the nitty gritty (and differentiating) to the user. The future robber barons will build out far more scalable and intricate capabilities using a composable cloud.

James Urquhart talks about ‘Composable PaaS’ entering a second generation with tools that allow far more granular control than a framework or using API’s into SaaS platforms. And it won’t be entirely about development tools. Composability will happen through new integration techniques and platforms that will connect cloud to cloud and cloud to on-premise. It is only a matter of time.

The companies that create these capabilities will build the better mousetrap that will empower the next leap forward in technology.

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Christopher Taylor