Over the last half-decade, I have used the term “Cloud Czars” for what other reporters call big tech.
That’s because what distinguishes our economic leadership today is the ownership of “hyperscale” cloud data centers. Cash flow of $1 billion/quarter was just the ante into this game. The Czars’ capital budgets are now reaching $25 billion/year. That’s why Apple, Microsoft, Amazon, Google, and Facebook are now the 5 most valuable companies on the planet, with a combined value of about $8 billion.
The Czars have become so dominant that governments want to take them down harder than they do Bitcoin. So do media and telecom companies, both supplanted in recent years by the Czars. Calls to “break up” (Amazon, Google, Facebook) ring out in the night, as losers use government to destroy what they can’t compete with.
But change is constant, and change continues to accelerate. You no longer need $1 billion/quarter of free cash flow to become a cloud player. Now you can become a cloudless cloud.
Oracle, which resisted cloud for a decade, finally got serious and last year invested $500 million/quarter in its data centers. As a result, the database software company gained over $80 billion of market cap. Founder Larry Ellison is now worth over $100 billion, nearly twice what he was worth just two years ago. Oracle is doubling its capital budget.
The fourth-leading cloud vendor today, according to Cloud Wars, is Salesforce.Com. Their capital budget was about $700 million last year. But they’ve tied up partnerships with all the larger Czars in the market, becoming a “hybrid cloud” that can in-fill capacity wherever it can guarantee traffic.
As is true everywhere else hardware is becoming software in the cloud. SAP, Workday and ServiceNow can now ride the hybrid cloud road to greater influence. Any company with a big enough workload, and some free cash flow, can do the same. I wouldn’t be surprised if we soon see an Adobe cloud (not just a cloud-delivered service) or a Walmart cloud. The returns are magnificent, and you don’t have to re-invent the wheel. Just use cash flow, not debt.
Plans for building a cheap cloud are right at-hand, thanks to Facebook’s Open Compute Project . The plans have been around for a decade. All this means the cloud will evolve, based on software and services, and no lead is safe.
When the Web was spun, less than a generation ago, IBM and AT&T defined technology leadership, but they sat on their leads and lost out.
It’s going to happen again.
