Like many people out there I’ve been pretty interested in finding out more about Microsoft’s Cloud Computing Operating System that they announced this week – Microsoft Azure. I won’t go into too much detail on what it is here, firstly because it was only the inspiration for this post not it’s subject, and secondly because there’s much better analysis elsewhere (here and here).
What I want to talk about here is a potential business model for Personal Cloud Computing, how it could earn the big players great revenue streams, could create a thriving ecosystem for smaller companies, and most importantly give the rest of us consumers free (or at least cheaper) laptops!
Cloud Computing – an overview
Google Apps is a great example of cloud computing. When we refer to something being in “the cloud”, what we really mean is stored on the internet. Traditionally, if I wanted to write a novel, a script, an essay for college or a letter, I might start by opening Microsoft Word. I would type a few paragraphs and then save it to my My Documents. This is the old paradigm, where information is kept locally. It has it’s advantages, that as long as I have my laptop I have my data. But it has it’s disadvantages – if I lose my laptop, bye bye essay!
This is where cloud computing comes in. If I log onto www.google.com/docs I am presented with an internet based word processor. I can write documents in my browser just like in word. I can save just like my regular documents. The only difference here is that this time the essay is stored in Google docs and not on my laptop. As you can imagine, this has many cons and pros. The upside being that I can access it from any machine, I don’t lose it if I play frisbee with my laptop, it doesn’t take up space on my hard disk etc.
Physically, this document is stored on a Google server somewhere in the world, maybe in California, the UK, Germany or god know’s where, and that’s the point – it’s not saved on my machine… it’s in the cloud.
Powering the cloud
So that was an example of an application on the cloud. If it sounds familiar, that’s because it is! The idea has been around for a while. E-mail used to be something that was in our Lotus Notes, Microsoft Outlook or Eudora, and then hotmail came along and gave us email on the web. Apple’s Mobile Me lets us store contacts on calendars in the cloud and access them on multiple devices. Facebook lets us store our contacts, our pictures and our conversation in the cloud. Salesforce let’s businesses conduct their CRM activities in the cloud.
Note: Generally what is called a program on a computer, is called an application on the internet.
Recently Amazon, Google and others have taken this one layer deeper. Instead of offering cloud based applications to end users, they have launched services offering application providers the scalability of the cloud. So if I develop a small photo editing application (for example) that I want to provide to customers, instead of investing in my own servers to host it, I can use the Google Apps Engine or Amazon S3. This pooling of resources let’s Google and Amazon build huge server farms and rent out space to small players like me for much cheaper than it would cost to host the application myself. As my photo editing application gets more popular and needs more server bandwidth and storage space I can just scale up my Apps or S3 account – a big increase in usage for my little application will be a drop in the ocean for Google’s servers.
The IBM mainframe and terminal
This was the way business computing started out. All data would be stored on a huge supercomputer in the basement, and each worker would have a simple, cheap, minimal computer (terminal). These still exist in banks, EPOS stock checking terminals in supermarkets etc. By pooling all the storage needs of 1,000 staff into one big computer, it is much more efficient than buying 1,000 fully equipped PCs. This is still the way my office is set up to a degree. However, this is only generally practical in large organisations – because you need a signifigant amount of staff to justify having a large central server. This also only worked in the enterprise space because the terminals and the server were in the same building connected by a cable, or in the example of the ATM network, each ATM terminal is connected by dedicated line to the Bank’s mainframe server with all the customer’s data. With the rollout of broadband and the increases in speed in recent years this is no longer a limiting factor, the end user and the server can be miles and miles apart, and so cloud computing is beginning to fourish.
And Now For The Consumer
This is working for businesses. When I am at home, I power up my mac and I log into it. When I am in work, I power up my laptop and log into the network. My documents are all stored on a server (in Germany somewhere I believe).
However, in the consumer space, unlike enterprise, this model has only gone as far as cloud applications taking the place of local programs (Google docs vs MS Word) and has yet to extend to the terminal-mainframe/client-server model that exists in the enterprise sector.
This now brings me back to Windows Azure, which Steve Ballmer referred to as a Cloud Based Operating System. What Azure actually is, appears to be a lot like Google Apps Engine and Amazon S3. But that’s not important, what is important is what I assumed Azure was going to be! I jumped to the conclusion that this would be a consumer-facing, subscription based, Personal Computer on the cloud. I think this concept, combined with two others, could be the next revolutionary leap in personal computing. This is the software, and the two other pieces of the puzzle are the hardware (the netbook) and the business model (the mobile phone industry).
The concept of the netbook, as I understand it, is a laptop built to be as lightweight and cheap as possible with the assumption that it’s user will be able to get from the internet that which is missing from the laptop. As a netbook user, I wouldn’t need Microsoft Outlook, because I’d have hotmail, I wouldn’t need a word processor because I’d have Google Docs, I wouldn’t need a media player because I’d have last.fm and youtube, and I wouldn’t need a large amount of storage space because I’d have Apple’s iDisk for regular files and facebook for my photos (uploaded directly from my cameraphone!).
If I’ve misunderstood again, and this isn’t what netbooks are, then – at least for this example – I think it’s what they should be. Since the dawn of the personal computer laptops and home PCs have been packed with more GB of hard drive space and processing power because that has been the most efficient way to deliver digital storage and personal computing to the market, but with the birth of the internet age, with increased bandwidth speeds and ubiquity, that may no longer be the case.
The Mobile Phone Bill
This is how the Mobile Phone industry works in a nutshell: Vodafone has customers. These customers pay bills and give Vodafone a monthly income. These customer’s need handsets (made by Nokia, RIM, Samsung etc.) to make calls, and most of them appreciate nice handsets (with cameras, calendars etc). Vodafone leverage this desire to make a sale and gain/retain a customer.
Using example figures: Vodafone buy a phone from Nokia for €100. They have two price plans, one for €30 per month and one for €50 per month. Both come with a 12 month contract. If a customer wants that phone, Vodafone would offer them the phone for €20 on the lower price plan or free on the higher price plan. If a customer get’s the phone and choses the higher price plan, here’s what happens:
1. The manufacturer – Nokia – makes a sale and earns €100 and is delighted
2. The customer get’s a €100 phone for free and mobile phone service and is delighted
3. The service provider – Vodafone get’s a revenue of €600 over 12 months for a cost of €100… and is delighted!
And Finally… Our Free Laptops
This next paragraph needs to be taken with a pinch of salt, and is more of a thought experiment than anything else, but please do try imagine with me.
Now let’s put those three ingredients of the Cloud Based personal computer, the netbook and the device subsidy/service contract business model:
I go online to amazon to buy a laptop because I’m starting college, or have got a new job (yes, the recession is over by the time this will happen!) or have some spare cash (see last comment). I can buy a standard laptop for €599, or I can get a very similar one for free! Knowing a thing or two about technology and being an early adopter I go for the netbook option. I sign up to a 12 month Windows Cloud contract for €10 per month.
A week later my laptop arrives. It is fully WiFi, WiMax and GPRS enabled. I can get great speeds in my house on my wifi, in the city on WiMax and on the bus/train with HSDPA from mobile phone networks. I power up my laptop, it connects to the internet and it logs me into my virtual desktop. Everything I’m seeing here, all my songs, my documents and my pictures aren’t actually on my computer, they’re on the cloud. Probably on some Microsoft server somewhere. My netbook has a small amount of memory for storing these things locally while I work on them (i.e. a cache). To be honest, songs are the only things I really keep on my Cloud Drive, because all my photos are on facebook and all my college notes are in Google Docs. That too will change because iTunes are soon to release cloudTunes; I buy a song, they store it on my account and I can listen to anytime I’m logged in.
I no longer install programs, I just add applications. I could get the Microsoft Office add on, which is €2 per month, but I use Google docs for free so I don’t bother. I have the iTunes add on which is a pretty neat browser/music player hybrid. Apple made it once for the Microsoft Cloud OS, and I just added it to my account. It got upgraded last weekend with an added super-genius menu!
It’s now 6 months since I bought my netbook and Microsoft Cloud subscription. I’ve finished college and started work as a freelance photographer. I needed much bigger storage space so I upgraded from 20GB to 100GB on my MS Cloud Disk, which has cost an extra €3 per month. I remember the days when that would have meant I needed to get a new laptop! MS Cloud has been upgraded a few times (it’s now OS V1.4) but I didn’t need to do anything, it was just rolled out accross all user accounts over a weekend. So much nicer than upgrading to Vista 🙂
Today I got an app recommendation from the Cloud Application Marketplace. It noticed i have some photo editing software and recommended I add the Adobe Photoshop application to my package. €1.50 extra per month is a bit pricey, but it’s worth trying it for a few months.
It’s now a year since I bought the laptop. I upgraded my account from student to professional, and now have a few add ons. I’m looking at moving to Apple’s X-Cloud which has a nicer interface, or maybe gCloud which has more free apps, or maybe even Amazon Cloud which is the cheapest of the lot. Microsoft have offered me an upgrade laptop for €50 which has a much nicer screen, a free mouse and a faster processor.
I’ve decided to stick with Microsoft. They now have a steady revenue stream, as do Adobe and some other application providers. I got a cheap laptop and only pay for the computing I need in small monthly increments. Consumer Computing is cheap because these big companies have huge cost efficient clouds and we consumers just take whatever little pieces of it we need. Applications are easy to discover and great developers are being rewarded with huge revenue streams. My Adobe, iTunes et al keep getting upgraded and fine tuned to ensure I maintain my subscription.
The Personal Computer is dead, long live the Personal Cloud!