The cheap, convenient cloud | The Economist
As cloud providers rush to build new data centres, and battle for market share, businesses are finding that the cost of putting their computing and data storage into the online cloud is getting ever cheaper. In the past three years prices are down by around a quarter, according to Citigroup, a bank; and further significant falls look all but inevitable. Some providers, such as Microsoft, have started providing their services free to startups, in the hope of turning them into paying customers as they grow.
It’s sad for Microsoft. I do see some newsletter writers drumbeating Microsoft’s attempts to “educate” startups for AI, it’s primarily a paid promotion for their Azure offerings. As much as they polish the turd, the end result will remain “brown”. However, this post is not to diss Microsoft, but to focus on the larger trends in corporate IT.
The cheap, convenient cloud | The Economist
Similarly, there are now two kinds of IT firm: those native to the cloud, led by Amazon, on the one hand; and the incumbent sellers of hardware and software, on the other, which are struggling to adapt to the new age. Software firms are not just having to rewrite their applications so they can run in the cloud, but also to switch from a business model in which they get much of their revenue from large, upfront licence fees to one in which they receive smaller, recurring subscription payments. A few have already made headway in this, such as Adobe, a maker of publishing software. Others are only at the beginning of the journey, including Oracle and SAP, two big providers of business applications.
There’s a vertical split in IT management – one that’s managing the “legacy software”; others native in the “cloud”. I have been a strong votary of on-premises hardware. The enterprise must define workflow processes being shifted in the cloud and on hardware not owned by them. Always remember that cloud computing companies will impose some “egress” fees, because the cost of acquisition for a “me-too” business is huge. This is similar to the “BYOD” movement of 2012-14, and effectively led to the death of BlackBerry devices.
Here’s something more on the startups and the cost of starting them up:
Startups are cheaper to build, but more expensive to grow – here’s why at andrewchen
Startups should be getting cheaper to build. After all, the industry’s created several waves of innovation that’s supporting this across multiple layers in the stack:
Open source software instead of paid developer tools
AWS instead of your own datacenter
Per-click ads instead of Superbowl commercials
Off-the-shelf SaaS tools versus building your own
App stores for efficient global distribution
The cost of acquisition of paid consumers is getting higher. That’s why the startups are trying to leverage social media channels to create presence (in whatever way). Here’s the degree of virality (from the linked post above):
These draw lessons for healthcare enterprises – if they need to innovate and start something new, it must be cloud computing, and then mirror on-premises. Data breaches are costly. The regulatory market hasn’t opened completely, and despite all the noises around it through policy channels or industry associations, regulators will likely step behind to see what kind of policy frameworks are required.
I am not much in favour of “disruptive startups” (partly because I have aged and become more cynical). Manufacturing remains the bedrock. For every start up, that’s trying to gnaw at the edges, and the best brains trying to define the shortest route to deliveries (for example), no one’s asking if there was any problem to be solved. The lure of becoming a monopoly is too strong, which explains the investor’s “confidence”.
Why manufacturing matters to economic superpowers | Financial Times
Manufacturing matters. While it has become increasingly automated and globalised over the past several decades, it still holds a special place in the national psyche in the US and other big exporting nations, such as Germany, China and Japan.
Part of that is down to its disproportionate benefits to the economy. In the US, for example, although manufacturing represents just 11 per cent of gross domestic product and 8 per cent of direct employment, it drives 20 per cent of the country’s capital investment, 30 per cent of productivity growth, 60 per cent of exports and 70 per cent of business R&D, according to figures from the McKinsey Global Institute. Manufacturing’s share of the economy in many other developed countries is far higher.
The next battle is for semiconductors, because they define the economic contours now. Whether its startups or cloud computing, the classical principles still hold merit- manufacturing matters. Not everything needs a cloud, though.