In 10 years, which company will own the cloud computing space? That question has been the subject of long and contentious funding debates over the past year, especially here on Sand Hill Road. And while I know that predicting the future is an inaccurate science, I think when it comes to evaluating this nascent industry, the VC community has been focusing on the wrong criteria.
Today, cloud computing offerings are application-specific frameworks that are run by companies both large and small. Google's (GOOG) App Engine is a cloud for running Python applications; EngineYard is a cloud for Ruby-on-Rails; Amazon's (AMZN) EC2 and S3 provide generic compute and storage clouds, and so forth. While each of these companies addresses a vertical market need, I believe that by 2018, clouds will instead be evaluated based on three generic criteria: transactions, user experience, and presence. And as with any active market, it's a safe bet there will be plenty of companies that best showcase each of them.
One of the emerging trends in cloud computing is providing infrastructure that allows businesses to perform transactions. Two companies that immediately come to mind are eBay (EBAY) and Amazon; both have infrastructure expertise and business divisions devoted to processing their customers' transactions. Amazon in particular just launched Checkout, which facilitates highly scalable transaction services. Imagine if over the next 10 years these companies find a way to bring their scale and transaction expertise to a cloud offering across multiple industries and market segments.
What will become increasingly critical is providing cloud consumers with a spectacular user experience, something nobody does better than Apple (AAPL). While I realize the company is not strictly focused on cloud computing today, picture a scenario in which it leverages the success and elegance of iTunes—essentially a cloud for selling digital media—to other markets. I can foresee a cloud computing environment in which Apple allows users to build applications using their user interface templates and designs; every application developer that strives to make its application "as sexy as iTunes" could leverage this infrastructure. A current example of Apple's approach can be found in its new MobileMe cloud, which emphasizes ease-of-use and user experience for keeping e-mail, calendar, and contacts synchronized. Elsewhere, Google Gears and Microsoft (MSFT) Live Mesh are also attempting to be environments in which users develop cloud applications, but they don't seem to have the same focus on consistency of user experience.
Microsoft's Wealth of Services
Speaking of Microsoft, when it comes to presence in the computing space, it has an enviable position. With its software presence in PCs, mobile phones, game consoles, media centers, and even autos, it's set up to be everywhere for at least the next decade. And the Redmond (Wash.) giant has recently changed its PR to emphasize software and services, which leads me to think it's moving to offer a wealth of cloud-based services.
The key will be leveraging the company's presence across nearly every aspect of the computing space to convert its hordes of desktop and IT application developers to work on their cloud in order to come up with future services for the same markets. If Microsoft can execute on this strategy, use its presence and motivate its developers, it will be a major player in the cloud computing market in 2018.
It seems clear the dominant cloud computing company in 2018 will be able to process transactions on the scale of Amazon and eBay, have the eye-popping user experience of Apple, and the presence of Microsoft. Which cloud company do you think it will be?