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How to crash a cloud

If memory serves correctly, the first random access storage device I seriously considered purchasing, as a preteen with some odd-job money to fuel his insatiable appetite for high technology, was a floppy disk drive that stored 128K per disk.  (Gather round Grandpa’s chair, children of the Web, and let me tell you about the days when we used storage media that didn’t let you randomly access the data…)  I could not imagine how anyone might go about filling a 128K disk with data, but I bought a pack of ten, just to be on the safe side.

Disposable toys hold more than 128K these days; the very idea of “K” as a measure of storage capacity grows quaint.  The incredible explosion of data storage speed and capacity has made entirely new applications possible, including tiny little cell phones that are veritable Swiss army knives of electronic capability.  I recall a Blackberry ad campaign from a few years ago, based on the idea that your entire life is stored in your phone – from music to email contacts.  Insane amounts of audio and visual data can now be stored and shuffled around with incredible ease; the amount of space taken up on your phone or tablet by your library of plain old text-based books is trivial by comparison, and would be even more trivial if e-books weren’t packed with so many nifty accessibility features.

From data on your shelf, we went to data in your pocket, and now data floating in the air… the wonderful Internet “cloud,” where huge libraries of personal data can be stored and accessed from anywhere.  You don’t have to carry around vital documents on even the smallest personal storage devices any more, and you don’t need to install software on any remote computer to edit them; just log into your preferred cloud storage system on a web browser and pull them right up.  The next shelf that’s going to clean off is that groaning pile of DVDs next to your television set.  Cloud storage is growing so cheap and fast that it will seem quaint to keep six or ten gigabytes of movie data on a crude physical disk in a plastic box.  I’ll bet most everyone reading this who has a Netflix or Amazon Prime account has used it to watch a movie they already own on DVD, at least once, just because pulling up the movie online is faster than rummaging through the closet to find a DVD you haven’t spun in a while.

You can look at Business Insider’s story on the “race to zero” as either a beautiful example of competition reducing consumer prices and increasing quality, or a nightmare about competition gone haywire, to the point where a business model eats itself alive.  In essence, the “race to zero” is about mass storage growing so cheap, due to competitive pricing and technological innovation, that it’s hard to see how anyone can turn a decent profit by selling it.  The market is so successful that it’s become a super-dense star of data collapsing into a black hole.

Business Insider credits Amazon.com for driving a competition with Microsoft and Google whose results are an absolute delight for consumers, but troubling for every other player in the industry:

As its costs drop, Amazon cuts its prices for its cloud. Amazon Web Service had 44 price cuts in about the past six years, it says, thanks to a culture of “frugality.”

Amazon is increasing revenue by gaining more customers and adding ever more services for which the customers are willing to pay, even though those customers pay less for each as time goes on.

The company is treating computer services like a retail store. You are more likely to stock up your cart with more stuff if you are getting a bargain on every item you buy.

Microsoft and Google have vowed to keep matching Amazon’s prices while beefing up their selection of services.

And that means the whole cloud industry has to cut prices as time goes on, not raise them.

Aaron Levie, CEO of the cloud storage company Box just told The Information, “We see a future where storage is free and infinite.”

How do you stay in business selling something that’s “free and infinite?”  But if nobody can make a buck selling it, where’s it going to come from?  And if cloud storage is on a death spiral to near-infinite supply at near-zero price, why is every big player in the industry – Amazon, Microsoft, Google, IBM, HP, Oracle, and Cisco – pouring hundreds of millions of dollars into the Cloud Wars?

Part of the answer involves selling value-added cloud storage, with services to assist in professional collaboration, data-mining tools, and enhanced security for sensitive information.  Conversely, some companies give cloud storage away as value-added seasoning for software solutions they sell.  Although Business Insider’s review begins with some ominous talk about the “race to zero,” I think the big picture is closer to that glorious paradigm of competition and innovation in action.  There are ways to make money by selling a near-zero resource, and these competitors are finding them.  They’re betting billions on their ability to bring in paying customers with a commodity that is becoming, in a sense, invaluable.  In a few more years, people will wonder how they ever got by without fast and dirt-cheap cloud storage at their fingertips.  The transformation will not be without cost and a bit of suffering – a time-lapse photo of your favorite local big-box retail store over the past few years would illustrate which brick-and-mortar retail items are being erased by cheap and instantaneous electronic distribution – but the possibilities are endless.

In the late Nineties, I recall Bill Gates of Microsoft saying that computers would become small, empty boxes through which limitless data flowed, with most of the heavy lifting – storage and software applications – handled in virtual space.  We’re almost there.  The race to zero is also the race for infinity.

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