A couple of months ago, Hugh Macleod created a bit of buzz with his blog post The Cloud’s Best Kept Secret. Hugh’s argument: that cloud computing will lead to a huge monopoly. Of course, a couple of weeks ago, Larry Ellison made the opposite point, arguing that salesforce.com is "barely profitable", and that no one will make much money in cloud computing.
In this post, I’m going to explain why Ellison is right, and yet, for the strategic future of Oracle, he is dangerously wrong.
First, let’s take a look at Hugh Macleod’s argument:
…nobody seems to be talking about Power Laws. Nobody’s saying that one day a single company may possibly emerge to dominate The Cloud, the way Google came to dominate Search, the way Microsoft came to dominate Software.
Monopoly issues aside, could you imagine such a company? We wouldn’t be talking about a multi-billion dollar business like today’s Microsoft or Google. We’re talking about something that could feasibly dwarf them. We’re potentially talking about a multi-trillion dollar company. Possibly the largest company to have ever existed.
I imagine many of my friends who work for the aforementioned companies know all about this, and know how VAST the stakes are.
Windows vs Apple? Who cares? Kid’s stuff. There’s a much bigger game going on… And for some reason, its utter enormity seems to be a very well-kept secret, at least to non-combatants like myself.
The problem with this analysis is that it doesn’t take into account what causes power laws in online activity. Understanding the dynamics of increasing returns on the web is the essence of what I called Web 2.0. Ultimately, on the network, applications win if they get better the more people use them. As I pointed out back in 2005, Google, Amazon, ebay, craigslist, wikipedia, and all other other Web 2.0 superstar applications have this in common.
Continue reading @ O’reilly