Another Archimedius alarm went off today as I was reading Telematique regarding cloud computing and VM jurisdiction. Rich Miller is justifiably wondering about the impact of international law and transaction locations on cloud computing. One of his links takes us to The Wisdom of Clouds, a blog by James Urquhart. His brilliant June 12 Follow the Law post mixes Nick Carr’s The Big Switch with images of servers moving (VMotioning) around the planet chasing off peak electricity while skipping over various borders.
You don’t have to be an economic historian to calculate the potential income impacts of various competitive advantages when it comes to server location and being in the path of service revenue. Massive server farms may indeed become the factories for innovation and added value for the next century.
A short historical perspective:
Over the last thousand or so years we’ve seen spice trails generate massive wealth in the Middle East, shipping lanes open up sizable agricultural and mining projects in less-developed regions; and steam, factories and electricity generate yet another wave of disproportionate winners. The wealth of North America in the last two decades has increasingly come from information technology and energy as manufacturing has chased low cost labor to nations with lower standards of living.
When spice trade routes shifted to the ocean the overall Middle East economy went from optimism to despair, from science and enlightenment to xenophobia. Factories gradually replaced artisans around the world and agriculture went through a series of cycles depending on access to trade routes and distances from markets (in addition to weather and practices, etc). A coming shift to cloud computing could be as influential in wealth distribution as any previous shift in factors of production and access.
If Mark Anderson is right about cloud computing taking off and changing the nature of the server business, and we’re right about cloud computing generating massive innovation via virtualization, then competitive advantages would be driven by cheap electricity and pipes, sophisticated IT services and a desirable tax and regulatory environment.
Is this the direction in which Google (NASDAQ:GOOG), AT&T (NYSE:T) and others are going? Are they planning to morph into the factories of tomorrow that deliver unprecedented information services and innovations at costs that will ultimately replace the fragmented, disorganized and reactionary world of closets and physical server racks and bureaucracies that we today call operations, networking and security?
Virtualization becomes the critical enabler of the next revolution in information technology production if it can enable these factors, including increasingly powerful and specialized services like security and application delivery/control. Virtualization would spark a new generation of companies, innovations and investments.
It makes perfect sense for AT&T to encourage CSO Amoroso to share the security as a service message with the press. It’s the perfect lead in a world where people are losing trust in the security status quo and the ongoing churn of breach announcements and “oops- we’ve been hacked” disclosures to credit card users. Let’s face it, if the world of network security was running like a well-oiled machine the last thing we would want is the “mother of all RBOCs” running our applications and servers.
Security as a service may be an answer to the otherwise unwinnable war with increasingly entrepreneurial hackers constantly thinning the herd with successful breaches.
Yet on a macro level the cloud computing factors of competitive advantage, from low cost power and real estate to favorable regulatory and policy environments and access to highly skilled IT workers and innovators will also be enhanced by the embrace of true virtualization in the data center.
The proliferation of virtualization-lite by enterprises is a short term tactical step that will inadvertently set up the service providers to replace enterprise IT departments with powerful, efficient and seamless applications as a service. Enterprise IT teams will then become application-layer focused in order to meet specialized, high value needs versus morphing into Carr’s increasingly commoditized low layer taskmasters.
It may only be a matter of time before we hear a politician talk about the evils of “cloudsourcing”.