“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” – Bill Gates, The Road Ahead
Think back to March 14, 2006. IBM and HP dominated the world of information technology with revenues of about $91.5 Billion, each. Almost unnoticed was an announcement from Amazon – that online bookseller – of a new offering, from a new unit called Amazon Web Services (AWS). They called it cloud. You could now buy storage, processing power and network “by the drink”.
Here we are in 2016. IBM has shrunk back to just about where they were in 2006 – if you are an optimist. HP is shattered into two pieces whose prospects look grim. Oh yes, and AWS is a $10 Billion behemoth that grows at over 80% a year dwarfing all its competition.
There are a lot of words being written about: how this happened; how it dropped prices 51 times; what lessons can we learn, etc. But, let’s look at the implications for the future. What does it mean to you? Why is this cause to celebrate?
AWS has driven the next evolution in information technology (IT). IT is becoming a true utility – ubiquitous, inexpensive, and easy to use. In the process it is making everything smarter. It promotes digitization – incorporating the manipulation of information into processes and things to create new value. It can touch anything and in so doing bestows all kinds of seen and unforeseen value into products and services.
Personally, you get the benefit of more convenience in your daily life through a vast portfolio of applications at your fingertips. There’s Maps, Yelp and Spotify. Or, how about services like Netflix, Lyft and Airbnb that were literally not possible ten years ago? At work, the very processes that define work are being changed. You collaborate through Dropbox and have better ways to connect to customers and suppliers through marketing automation, CRM, ERP systems, etc.
Here’s bigger news: these new goods and services are just the beginning. Digitization –– like electricity, is a general-purpose technology that underpins a huge share of economic activity beyond the sector that supplies it. Consider how daily life was transformed by the widespread adoption of electricity. Today, while the electric utility industry constitutes about 6% of the US’s GDP, everyone knows it reaches into 100% of modern life. That’s what we mean by a general-purpose technology.
Just like today’s power utilities are the providers of electricity, so to are cloud companies like AWS – who has ten times the capacity of its next fourteen competitors combined – the underlying physical providers of the new “plant” that enables digitization.
What used to sound like science fiction is right around the corner due to the cloud: self driving cars, personalized medicine based upon your genome, and robo financial advisors with better performance than today’s services, just to name a few. The whole coming Internet of Things can’t exist without the cloud to absorb, store and analyze all the resulting data. The list continues to grow as our imaginations seek its limits – if any.
Change like this does not come without some negative impacts. Along the way, those who did not heed the turn in the market and technology, like IBM and HP, are suffering the consequences. You should not mourn for them. It is part of the natural order of things that firms are disrupted and driven off the field by what at first seemed small, under featured players. (See: Innovator’s Dilemma).
How IT itself is structured and run within government and enterprises will also change. We don’t think of it now, but in the beginning of electrification every company had its own VP of Electricity devoted to ensure the local firm’s own generator plant was stocked with fuel and running smoothly. While the analogy is not perfect, will we one day look back upon having a corporate data center on premise with its management as quaint as having your own power station?
Enterprises both large and small are seeing this potential. Leading industry sectors, primarily high tech and media, as well as digitally savvy firms in others, have embraced the cloud. The roll call of the big boys adopting continues to get more impressive and longer: GE, Capital One, Viacom, and Conde Nast. Cloud has gone mainstream. And, if we look at small and medium sized businesses we see an explosion of creativity enabled by cloud computing.
A recent study indicates that only 18% of the US economy is digitized so far. Yet, the tide is definitely rolling in and you should prepare yourself. Understand it, since it will surround you. You will be using cloud just like you do electricity today.
Going back to Bill Gates quote, we know what the first ten years looked like. Wondering about the next ten? Here is another quote: The future is here. It’s just not widely distributed yet (William Gibson). If not it’s here now; there is cloud in your future.