Incentives and Cloud Computing Interoperability

To succeed, cloud interoperability must drive down costs for cloud computing vendors, both established and aspiring. This is how interop has been achieved throughout the history - look at car industry, railroads (selecting rail gauge), etc. Or check out Wikipedia article on Standardization in general. Indeed, for something to be adopted, it makes sense for all parties to reap the benefits. Throughout the history, standardization resulted in reduced supply chain costs (same car parts, same freight cars), so everyone was interested and everyone participated.

When interop does not reduce costs for vendors and there exist competing proposals, history shows us that we end up with format wars - Betamax vs VHS, Blue-ray vs HD-DVD. Want an example of something close to a format war in technology? How about use of slash (/) or back-slash () in file paths.

How is this related to cloud computing interoperability, you might ask. There are many things that customers get with cloud interop - easier migrations, no lock-in, standard interfaces, standard integration libraries, flexibility, vendors competing on price instead of on substance of their offering.

But what will interop do for cloud vendors?

On a high-level, a cloud vendor faces the following major categories of costs:

  • materials (datacenters, computers, storage, network gear)
  • operations (electricity)
  • labor (engineers)
  • costs associated with acquiring new customers (mainly facilitating systems integration)

What I am trying to say is that for established vendors, cloud interop does not significantly drive down any of these categories of costs. For all other market participants or those who want to enter the market, interop can only significantly drive down the last category - costs associated with acquiring new customers.

Imagine what if 90% of the world’s railroad traffic was carried on a 10”, 11” and 12” rail gauge. Would it make sense for established railroads to sit down with newcomers and discuss interoperability? Or would newcomers be better off adopting whatever rail gauge was already there? Looks to me like a rhetorical question.

I believe that this is why we won’t see the Big 2 (Amazon and Google) actively involved in cloud interop at this point, and frankly this is exactly why I think cloud interop efforts are premature.

If you are interested in learning more about how standards emerge, please check out this paper titled The Emergence Of Standards: A Meta-Analysis.

I am not saying that interop efforts can not or should not continue if Big 2 do not join - as a developer and systems architect, I will use whatever is easier to use and has an active community. I just wanted to highlight this aspect of interop, because I think it has been missing from the general discussion.

Additionally, I would like to point out that there could be other efforts where both customers and vendors, both established and aspiring, could collaborate to achieve win-win results. For example, Cloud Security Alliance. CSA is very different from interop efforts regarding how incentives are positioned - both vendors and customers will benefit immensely if the industry reaches a better consensus and understanding on host security, data security and compliance in the cloud. Less security-related FUD - more customers will embrace the cloud (win for vendors) and enterprise already in the cloud will feel safer (win for customers). Hence, from incentives perspective, there is no reason why Big 2 won’t join or contribute to CSA cause.

Correctly aligned incentives are a powerful engine of innovation and should not be overlooked.

Categories: cloud-computing | economics |