Gartner: After Surviving the Dot-Com Meltdown, Is a ‘Cloud Meltdown’ Inevitable?
Intriguing title, but this is actually one of the weaker Gartner reports that we’ve read recently. The argument is that because cloud computing is an emerging technology, there will be many new entrants to the market – and the resulting rapid proliferation of services will have parallels to the dot com era. While that may be true on the surface, to take that argument to the conclusion that we may see an implosion similar to what we saw with the dot com bust is one part stating the obvious (nearly every emerging market with low barriers to entry experiences growth among entrants before entering a cycle of maturation and consolidation), and two parts flawed logic. The reasoning doesn’t hold up, at least at this stage of cloud computing’s evolution, for a number of reasons:
- We are in a much different capital environment and are facing greater aversion to risk than with the dot com boom; entrants to the cloud computing market are lured by the long-term opportunity, and in many cases the ideology, as opposed to the availability of capital. We’re not in this for a quick exit and a huge payday…this isn’t San Francisco’s Townsend Street in 1999 where just about every company referred to themselves as “pre-IPO.”
- Cloud computing is about changing the economics of service delivery to enable new applications and democratize technology (i.e. level the playing field). The dot com era was about making billions selling dog food, as if every dog in America was going to get infinitely hungrier with the proliferation of the Internet.
- The movement that preceded the current cloud computing trend was referred to as “Web 2.0.” One can infer that the second generation of technologies and businesses was built upon the successes and the lessons learned from the first generation (i.e. “Web 1.0″). With cloud computing, while I won’t disagree we’re struggling with finding highly effective commercialization / monetization strategies in the early stages, we will quickly refine the models and make them work because we’re building on both business models and technologies that have been fleshed out for over 10 years now. To make the case that cloud computing will suffer from the same naivety and overblown expectations is to make the case that that we learned nothing from the dot com era. Yes, history does tend to repeat itself over a long enough time horizon, but most of us are smart enough to not make the same mistakes more than once.
Key thoughts / takeaways from the research:
- “The markets around cloud computing are just starting their growth phases, with
significant growth ahead.” (Page 1) - “A cloud service provider can use
somebody else’s infrastructure to run its business.” (Page 2) - “Most Web 2.0 companies did not make heavy investments in infrastructures. They were
able to benefit from the commoditization of infrastructures and extensive open-source
offerings.” (Page 3)
