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Reporting on last week’s Web 2.0 Summit in San Francisco, CNET’s Dan Farber notes that

“The cloud was omnipresent,”

before going on to close his report with;

“cloud computing won’t be very compelling without what is variously called Web 3.0 or the Semantic Web.”

Indeed.

For too long, the emphasis in Cloud Computing circles has been almost exclusively upon provision of rapidly scalable and ad hoc remote computing on top of cost-effective commodity hardware. The Cloud play from Salesforce, Amazon’s EC2 and the rest has been dominated by the implicit assumption that these Cloud-based resources are an extension of the corporate data centre; a way to simply reduce the costs of enterprise computing.

There is value in this business, but there are bigger opportunities.

Nick Carr is amongst those to fear that a small number of players may come to dominate the provision of Cloud resources. He outlines many of these arguments in his latest book, The Big Switch, and more recently has been involved in an interesting discussion with Tim O’Reilly on the topic. Justin Leavesley shares some of Talis‘ views on the economics behind all this over on Nodalities, broadly agreeing with Tim O’Reilly;

“It’s pretty clear that utility cloud computing is highly capital intensive so it should come as no surprise that there are powerful economies of scale to be had. But the bottom line is that you are talking about plant and power. These are rival goods, scarce resources that are created and consumed. This is not different from many utility industries with one exception: the distribution network has global reach, already exists and is very cheap compared to existing utility distribution networks. It is a lot cheaper to access a computing resource on the other side of the planet than it is to send electricity or gas across the globe… [So] what is to stop economies of scale turning this into a global natural monopoly?

Actually, unless there are some large network effects, quite a lot stops single companies ruling entire industries. For a start, without network effects, economies of scale tend to run out: the curve is usually U-shaped. Telecoms, Gas, rail companies have strong network effects from their infrastructure-it makes little sense to have duplicate rail networks or gas networks in a country. Utility computing does not have this advantage because the distribution network is not owned by them.”

Continuing the conversation, Carr captures the usual widely held perception of Cloud Computing nicely;

“The history of computing has been a history of falling prices (and consequently expanding uses). But the arrival of cloud computing - which transforms computer processing, data storage, and software applications into utilities served up by central plants - marks a fundamental change in the economics of computing. It pushes down the price and expands the availability of computing in a way that effectively removes, or at least radically diminishes, capacity constraints on users. A PC suddenly becomes a terminal through which you can access and manipulate a mammoth computer that literally expands to meet your needs. What used to be hard or even impossible suddenly becomes easy.”

This is quite true, but continues and further entrenches the misapprehension that the Cloud is little more than an adjunct to the corporate data centre; a misapprehension that we shall get down to challenging in a moment.

About Paul Miller
Paul Miller works at the interface between the worlds of Cloud Computing and the Semantic Web, providing the insights that enable you to exploit the next wave as we approach the World Wide Database.

He blogs at www.cloudofdata.com.

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