In the legend about the invention of chess the inventor humbly requested as his reward that he receive one grain of rice placed on the first square, doubling to two on the second, doubling again to four on the third and so on until all sixty-four squares were covered.
The king, believing he just got a great deal, readily agreed. When the results were calculated, not all the wealth in the kingdom could support it. One grain turned into over 461 Trillion metric tons. This is a mountain of rice bigger than Mount Everest and a 1000 times greater than the world’s annual rice production.
Often, like our poor king in the legend, it is hard for us to grasp this potential magnitude since we are used to thinking linearly: tomorrow will be like today except a little bigger. Exponential growth – doubling every period – is staggering in its outcomes.
Is this where we are with cloud? Ray Kurzweil, a noted futurist, inventor and entrepreneur coined the term the “second half of the chess board”. While the first half of the chessboard produces a large amount – about 100 metric tons of rice – the second half of the chessboard is vastly larger – Four Billion times larger!
The point Kurzweil makes is that we often do not see the staggering implications of a new technology in its beginning days – even after many years. The impact seems to appear small relative to the total market. However, we could be at the cusp of this new product or service expanding and dominating the entire field. The key is to see how it has been growing – exponentially or linearly – when it is seemingly “small”.
Cloud today – all varieties – make up only about 10% of new IT spending in dollars and analysts are predicting an over all growth of 25%+. Now, that’s not bad considering the other elements of IT spend are growing at less than four percent per year. But when you add in all the other costs that it takes to bring IT services to life, like labor, power, cooling, facilities, etc. – Cloud looks like it is a still a pretty small expenditure in the big IT picture.
But, what about growth in units and not in total dollars? After all, we expect the price per unit of tech to decline. Therefore, total growth in spending will logically be at some rate lower than the unit growth. But unit growth would reveal how pervasive and widespread the adoption is becoming. Consider how cheap per unit, but now ubiquitous, mobile devices have become. In a few short years another billion people will be on-line due to these devices. The personal and professional implications are staggering and global. Is there a doubling per year going on with cloud?
Tracking unit growth in cloud is difficult since like-for-like comparisons are almost non-existent. We need a surrogate to provide an indicative sense of what is going on. So why not use the grand daddy of cloud, Amazon Web Services (AWS). At their recent conference they revealed some numbers that made me pause. AWS’s storage service shows 132% Year-over-Year (YoY) unit growth since 2011. AWS’s computing services showed 99% YoY unit growth in the same period. That looks like doubling in my book.
Just to be sure, since AWS has had the market to itself until the last couple of years, I decided I’d better check out Microsoft’s cloud growth. They have made quite clear their intention is to be a major force in the cloud. Microsoft said its cloud was growing at 100% to 150% per year and had hit an annual run rate of over five percent of its yearly revenues. Looks like 2X again. Could it mean we are at, or near, the 32nd square of the board?
Bill Gates observed: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”
We are now eight years into cloud – time to buckle up?