Could Cloud Computing be Commoditized?

There is a common conception that hardware and software will eventually be commoditized and all significant computing will move to the cloud. This trend will supposedly result in the hardware companies like DELL, HP and even Apple finding themselves selling commodities with little or no profit. Likewise, software will also be commoditized so that software companies like Microsoft will find their profits eroded.

Google has strongly pursued this strategy. Besides search and advertising, Google has consistently tried to commoditize software. They started by basically copying MS-Office with Google Docs and providing it for free. The aim was to make all computing happen inside a web browser, so that Google could place Ads. This was again the strategy for Android. They wanted to commoditize mobile operating systems so that any hardware manufacturer could easily enter the market, driving down prices. By commoditizing the OS, they assumed hardware commoditization would follow.

Their are many issues with this argument.

One is the assumption that the Cloud is harder to commoditize than hardware or software.

This is definitely true for search. Microsoft and Yahoo have tried to compete with Google in search, and have found it very difficult.

However, there is little evidence that the Cloud is harder to commoditize for web applications like Google Docs. These web applications are basically applications, hence the same market and technology dynamics affect how the market progresses. For example, OwnCloud provides an open-source implementation of DropBox that you can run on your own servers.

I think that the idea that commoditization linearly progresses from hardware to software to services (the Cloud) is a huge oversimplification, and that in reality, there are many case where this does not fit. Reality is probably that any market in which any significant innovation occurs will become de-commoditized. Likewise any market, including the Cloud, will be commoditized when real innovation is lacking.

Whether or not the Cloud will eventually be commoditized depends on whether the Cloud allows a pace of innovation that cannot be matched by hardware or software. If Cloud computing allows companies to make significant innovations much faster, then it will escape commoditization.

I don’t think that this is the case at all.