cloud vs multi-cloud
In the cloud world,
software wants to be free. Cloud providers are incentivized to offer all sorts of free goods to drive more data and compute usage, because that is basically how they make money. They are high volume / low margin infrastructural businesses.
hardware wants to be virtualized. Just like sequencing centers aggregate, centralize and virtualize sequencers and offer sequencing as a service, cloud providers do the same for PCs and offer data storage and computing as a service. Users do not directly interact with the machines themselves.
In other words, cloud providers commoditize the stack above them via free-ization and the stack below them via virtualization, and thereby increase the percentage of the value they capture in the value chain.
Thinking pictorially we have the following situation:
Cloud World
Meat Strategy
Here, the stacks composed of small squares represent commoditized competitive markets with many players, and the monolithic stack represents a monopolistic market.
Thinking of the whole figure as a hamburger, we can say that the cloud world is “pro-meat”.
Notice that all stacks’ incentives are aligned horizontally, in the sense that they all want the entire industry to grow and the bottlenecks (wherever in the value chain they may arise) to be eliminated. (i.e. Think of industry growth as the horizontal expansion of all stacks) But stacks’ incentives are not necessarily aligned vertically, in the sense that one stack capturing more of the surplus generated by the entire value chain often implies another stack capturing less. (i.e. Dynamics among the stacks is often governed by zero-sum games rather than non-zero-sum games.) Hence each stack wants to democratize (i.e. commoditize) the neighboring stacks that it interacts with. (Read this older post for a deeper look at such stack dynamics.)
Now, a multi-cloud software strategy weakens the cloud layer (middle stack) by commoditizing cloud providers and thereby releases the tension on the hardware layer (bottom stack). Thinking pictorially we have the following situation:
Multi-Cloud World
Bread Strategy
This is essentially why IBM (after missing the cloud wave due to short-sightedness) ended up recently buying Red Hat for 34 billion USD:
This acquisition brings together the best-in-class hybrid cloud providers and will enable companies to securely move all business applications to the cloud. Companies today are already using multiple clouds. However, research shows that 80 percent of business workloads have yet to move to the cloud, held back by the proprietary nature of today’s cloud market. This prevents portability of data and applications across multiple clouds, data security in a multi-cloud environment and consistent cloud management.
IBM and Red Hat will be strongly positioned to address this issue and accelerate hybrid multi-cloud adoption. Together, they will help clients create cloud-native business applications faster, drive greater portability and security of data and applications across multiple public and private clouds, all with consistent cloud management. In doing so, they will draw on their shared leadership in key technologies, such as Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation.
- IBM Newsroom - IBM to Acquire Red Hat, Completely Changing the Cloud Landscape
