The Dawn Of Cloud 2.0 And Why Google Started A Price War
Peter Relan is sucessive businessman-turned-founder of two incubators You(Gaming zone) and Studigo9+ , (target’s on big data, loT, wearables and p2p market places). His evolution include OpenFeint, Crowdstar, Hammer and Chisel, Spaceport and Agawi. Before founding his incubators, Peter held setting-up roles at Webvan and Business Signatures aswell as Executive roles at Oracle and HP.
Recently Google disclosed upto 85% reduction in pricing for its PaaS and BigQuery services. Shortly AWS and Microsoft followed suit. Welcome to Cloud 2.0.
Google did this because it could
Google’s main cash engine is its paid web search/advertising business, which developsd almost $4 billion a quarter from 29% net profit margin. Amazon’s main business, on the other hand, is retail e-commerce, which achieve almost no profit.
Hence Google can muscle its way into the cloud IaaS and PaaS space even though Amazon was the explorer with AWS. Microsoft can, too, with its vast Office and Windows profit engines. AWS may well be the discoverer of Cloud 1.0, but it’s not clear whether it can play a full-on price war with Google and Microsoft — and others stand-by in the wings to jump on new possibilities.
Although Jeff Bezos has get satisfy the street that he can pull a rabbit out of a hat, this one is going to be a hard sell. But don’t risk against him yet. There is still Cloud 2.0 and he can gain things in that space. Bounce back to Google for now.
Google did this because it had to
Even if Google might do it, why did it have to? As mobile get off, Google’s gain on the web is slowing, and it has new contenders, including Facebook, which is killing it in mobile. Mobile handling continues to eat away into desktop usage, browser access on mobile versus app access continues to decline, and mobile snaps produces lower income than desktop snaps.
YouTube is definitely now making more revenues, and Google Docs is surely taking some share away from Microsoft Office, mainly in the SMB market. But guess what? They are basically both cloud plays.
So the next extension engine in five years is self-driving cars, drones or Google Glass? Not likely. The ATAP (Advanced Technologies and Projects) groups are thrilling but not vast develop businesses yet. Cloud services and apps, yet, are expected to grow seriously to over $100 billion of the $1 trillion of spend on software.
Thus Google needs to sharply improve the share in the cloud market. It require to double down on the cloud plays that are working and provide even more in the cloud to seize growth in markets other than web advertising where its growth is reducing.
What does this mean for innovation?
Price conflicts don’t usually predict well for change. It’s often a signal that the contribution has become a commodity. But what it really means is that, while Cloud 1.0 is heading toward commodity, Cloud 2.0 is already set up — and it will be unruly again.
Whatever we expect from the gorillas and the next Cloud startups? They’re muscling for market share with Cloud 1.0. Surely there will be some good change like Google BigQuery, which was out only last year and is based on Dremel, Google’s internal big-data engine. But the disturbing innovation will come from startups. Amazed?
What will Cloud 2.0 innovation look like?
There will be two varieties of startups in the next generation of cloud computing. One will be startups that hold the unbellievable cost structure Cloud 1.0 just attained for them to build cloud apps. Of the $100 billion cloud market, this is the biggest group — possibly half of it, according to develop analysts. Google is already in there with its personal cloud apps like Google Docs. Both enterprise and consumer apps will merge with mobile in new and interesting ways to build huge new companies.
The second type of innovation will be from startups that desigh new Cloud 2.0 services, while the gorillas concentrates on the market-share war of Cloud 1.0 services in IaaS, PaaS and now BaaS.
IaaS innovations will involve software-defined networking, virtualization, edge computing, storage and security advances. By the end of the day mobile apps with cloud-based backends are a new planning.
PaaS innovations would comprise new programming domains and web services like Pantheon that make it smooth and faster to build advance content and app experiences. And BaaS innovations will involve new cloud based back-ends like Kinvey, along with data-mining and analytic services in the cloud.
Cloud 2.0 will be advertise by a bunch of startups already innovating for the next stream while the gorillas who can and have to fight for Cloud 1.0 market share deal the market. Then there will be a wave of purchase as Cloud 2.0 companies gain scale, and Cloud 1.0 gorillas have to discriminate.