Cloud Requires a Market Maker

The business model of cloud computing is boiling down to keeping marginal cost of providing capacity to a marginal demand from mostly corporate user. Even though the cloud enthusiasts continue to believe all corporate computing will move to the cloud, it is not happening and unlikely to happen. The marginal demand though is moving to the cloud and many corporations are designing an overflow capacity in the cloud (kind of like line of computing account). Serving this marginal demand with capacity at a marginal cost that covers the service provider margin requirements is becoming the biz model of the cloud. We have seen the ramification of this on data center site selection and facility design. Now the ramifcations are becoming apparent in the infrastructure that gets deployed in these data centers. Few standouts are ...

Fungible is perhpas the most important requirement for any infrastructure that will be deployed in a cloud. No bells and whistles is another requirement. Basic bare bones is winning over hardened and over engineered systems. The datacenter managers use software to fill the gap between the skeleton and skin. Another standout is virtualization is not a  key requirement. In fact, as more applications onboard it is becoming apparent that cloud based service has to be hybrid of virtual and physical. All of these put together still not enable datacenters to serve the marginal demand at the lowest cost in almost real time. I don't think this can be solved technically, it  is really not a technical initiative, it is a market initiate. Makes sense as demand and supply are really market forces.  Customers engaged in price discovery need a market to query and a market maker to take the order. You can look at airline industry or the securities industry to get a feel for how this might evolve. Consolidators buy blocks of tickets at steep discount in anticipation of demand. Market makers take position in stock with similar intentions. In both of these industries the market maker is a critical element without whom the industry would not function.

This is what we need in cloud industry as well. Something or entity that plays the role of a Goldman or Priceline. I am waiting for the day when AWS starts a program which uses the rack of computer in my garage as capacity to sell to their customers. Kind of like the smart grid or SETI program. We may after all realize the vision of grid computing. The missing link is the market maker.