Mike Kirkwood of ReadWriteWeb recently wrote a piece asking the question “Will One Company Become the Dominant Player in Cloud Computing?” Kirkwood offered a series of arguments both for and against the idea of the market being one where a “natural monopoly” might occur and a few of his arguments are worth exploring in greater depth.
Addressing the potential for vendor lock-in (think Outlook .PST files), Kirkwood points out that cloud customers may demand data portability:
If customers demand solutions where they can move from vendor to vendor freely, it will impact the landscape. Companies with cloud solutions in the marketplace could be required by these customers to remove barriers to moving data and services between different entities.
Kirkwood should know that this is already happening. CRM solutions like HighRise by 37Signals and cloud-based office solutions like Google Apps already have these features built in. One of the biggest reasons that many companies are moving to cloud-based applications is because they’re weary of being locked-in to solutions that hold their data hostage. It’s doubtful that these exit doors will disappear when things like office suites, CRMs, accounting software, and other software categories are almost exclusively offered as cloud applications or web apps. Customers already expect and will continue to demand the freedom to move their data around—a new culture of data portability is being created as a part of the shift to the cloud and that consumer expectations may be permanently altered because of it.
So long as data is portable, it seems doubtful that any vendor will be able to gain anything near a monopoly status through the use of tired proprietary software shenanigans. Huge capital expenses, like those associated with setting up an Exchange server and installing the latest version of Outlook on hundreds of desktop machines is also a thing of the past. The massive upfront costs are being replaced by cheap subscription models that easily scale as a firm’s need for a given sort of software grows. This means switching to a new vendor in the cloud involves little more than an export and important of data, followed by an email supplying co-workers with a new URL, username, and password.
The one area that Kirkwood doesn’t explore which may have some potential for a would-be monopolist is exploiting possible network effects—the idea that everyone uses brand X because everyone else uses brand X. This makes sense when you think of something like Facebook, where the sole value of the product is derived from the fact that a lot of people use it—otherwise why would anyone use the abysmal site? But does this sort of logic apply to accounting software? Would I choose to use something from Intuit instead of FreshBooks because my friends use it?
No, but I might choose a software titles because my potential employees are more likely to already be familiar with it and those potential hires might choose to learn one software title over another because employers are more likely to be using it. This is the kind of a snowball effect that could give one vendor an advantage that has nothing to do with the quality of their product.
But here too I see the culture of the emerging cloud applications market being a strong force against this kind of software/employee compatibility lock-in argument. Aside from wanting to flee the world of proprietary standards, expensive servers, in-house IT staff, client-side software, and other technological nightmares that come with so many non-cloud applications, companies are fleeing the world of terrible user interfaces. The cloud based-apps that I use—BaseCamp, HighRise, MailChimp, Google Apps, FormSpring, WuFoo, Mint, as well as many others—are all orders of magnitude less daunting and needlessly complex than something like the UX abomination that is the Microsoft Office suite. (Hint: If the “plain and simple” guide to your software runs 384 pages, you’re doing it wrong.)
Cloud software creators seem to actually care about user interface, somewhat negating the notion of user training related network effects—fostering what I will now officially dub “user portability.” Again, one could argue that when some software categories become predominantly cloud-based, and cloud software creators are not longer selling the concept of web software itself along with their specific services, that this emphasis on user interface could be phased out in favor of making more “ribbons.” But because of the new culture of data portability, user portability is likely to be maintained as well because bad user interfaces will be punished through losing customers to a better UX that is just a export, import, and quick staff-wide email away.
I’m really interested to hear my fellow TLFers and our readers’ thoughts on this issue. Is the cloud a near-perfect market or am I just a naive idealist who doesn’t see the vapory beginnings of a future cloud monopoly looming in the distance?