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Is cloud a commodity ( or will it be? )

Joseph Glanville | 27 September 2011


As it is often cited many people believe that cloud computing is another step in the commodisation of compute capacity and data storage. By what is commoditization, how does it relate to cloud computing and is cloud really a commodity? ( or will it be )

Firstly the term commodity is well described in this excerpt from Wikipedia:

"A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. A commodity has full or partial fungibility; that is, the market treats it as equivalent or nearly so no matter who produces it. Examples are petroleum and copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Stereo systems, on the other hand, have many aspects of product differentiation, such as the brand, the user interface, the perceived quality etc. And, the more valuable a stereo is perceived to be, the more it will cost."

Now, the important aspect of this passage is that the wares offered, in this case - cloud computing, need to be standardized across all sources in order for a global commodity market to emerge. In it's current state without formal open standards or even agreed industry standards cloud computing is a far stretch from achieving this. There is however some initiatives like the Open Virtualization Format and the Open Cloud Computing Interface that are gaining steam but wide spread adoption has not yet taken place.

Because of this cloud computing is about as far from commodity as it can get currently, vendors offer many levels of differentiation - be it varying interfaces, performance, value-added products and support.

For the sake of argument and pondering of possibilities lets assume that cloud will be standardized (at the container and API layer) at some later stage. If this can be achieved nothing stands in the way of a global market for compute.

Another interesting fact about cloud computing as a commodity is it's more of a utility, in this way it is comparable to power and mobile phone networks for instance. Conversely it is also global, free of the geographical constraints of the two former examples, I can use OrionVM from Bangladesh for instance, but I probably can't use Telstra Next-G. :P

The consequences of this are enormous as it places it in the realm of natural resources like copper and coal - being global markets that intrinsically change in value according to demand, yet still retaining some requirement of locality due to the properties of latency.

But can this last gap really be achieved? Is it possible to standardize soft qualities like customer service and support? How about geographical locality what part would that play considering hot topics like data sovereignty, latency and local support?

I believe what represents the largest barriers to commoditization are what I like to refer to as "People Problems", more scientifically - political, emotional, sociological and business (read profit) problems, whether real or perceived.

Technology has already gotten us 80% of the way there, but the last 20% is going to take 80% of the time as per the omni-present 80/20 rule.

To summarize, cloud is not yet a commodity but it's quickly heading in that direction. Is that good or bad? Maybe the topic of another blog post...