Cloud Computing – No Borders but Different Rules

Vital Wave Consulting provides services to large technology companies, capital investors, and foundations, but we have a typical Silicon Valley soft spot for hopeful start-ups. Earlier this week came the news of an Australian couple, John and Jeanne Nicholls, who emerged from their garage with a $100 palm-sized device that relies on “cloud computing” for processing and storage. Their company, ThinLinX, will soon launch several models of the Hot-E, a solid-state thin client aimed at “cost- and power-conscious small and medium businesses, schools and developing countries where fully-fledged PCs are prohibitively expensive, impractical or draw too much power.” The Nicholls claim to be partnering with a large but unnamed software company to develop the device.

Much of the value proposition cited by ThinLinX (e.g., affordability and low power consumption) is reminiscent of previous ill-fated devices such as AMD’s Personal Internet Communicator (PIC). Success in this category of device depends almost entirely on availability of broadband and the viability of cloud computing. Cloud computing, or remote software delivery and data storage, is the subject of intense interest (and investment) by Sun, Google, IBM, Microsoft, Amazon, and others. Merrill Lynch estimates the cloud computing market will grow to $95 billion by 2013, and IBM will spend $360 million for a new cloud computing data center in North Carolina (their ninth such center worldwide). So far, however, enterprise has been reluctant to relegate their storage and processing to server farms due to security concerns, and consumers seem resistant because of a lack of broadband access or unfamiliarity with the model.

New devices like the Hot-E, along with a growing host of cloud-based applications and online operating systems (e.g., OpenOffice, GoogleApps, Glide) may not be enough to draw the masses into the clouds. But additional efforts by Microsoft or top global PC manufacturers could tip the scales for broader adoption. Whatever serves as the catalyst for mass adoption of cloud computing, there will be dazzling opportunities for many companies, from garage-dwelling entrepreneurs to small software developers to multinational IT companies. Success in emerging markets will likely come to those who understand that, while cloud computing services are technically available anywhere there's a broadband connection, adoption and use will not not necessarily follow the pattern of mature markets. Successful cloud computing companies will do their homework on local issues like broadband availability and reliability, business model appeal, user preferences and price sensitivity, while carefully choosing partners who contribute toward a strong and financially viable value chain.

Also in the news:

• Asustek anticipates healthy ‘09
• IBM sees continued strong growth in emerging markets
• Yahoo! struggling with low ad revenues