Destiny - edition 2 | Page 11

The Cloud

Moving to the cloud, it’s worth keeping in mind that the price of cloud storage is quickly trending to zero, spurred in no small part by the price war underway among Microsoft, Google and Amazon.

Will the price of cloud computing itself follow suit? Nadella said that there is a “broad commoditization” of services of that sort and that players in the market will be “aggressive” in their pricing, perhaps even subsidizing some offerings to grind up market share. Nadella did indicate that there will be an “equilibrium” following the pricing conflicts.

It remains to be seen how much prices can decline before they resemble zero. To understand the market, view storage from the perspective of Amazon‘s recently launched cloud storage product that will provide businesses users 200 gigabytes for $5 per user per month. Apply that to all services vended across the Internet in which the operating costs rest with the provider, and not an external party.

Spotify, for example, can’t decrease its price over time to fend off Xbox Music, because its costs are largely externally fixed by record companies. But with cloud storage and computing, the companies that are selling the product have tens of billions in cash and don’t care about short-term margins for these services.

If lowering your price will get more developers through the door building with your tools and on and for your platform, you do it. To paraphrase the old trend cliché: Prices are down and to the left.ifferentiation will come, in Nadella’s vision, from the players who add the most value on top of the more basic services. This mirrors the argument that the basic service layers — compute and storage and so forth — cannot be viewed as differentiation points in the future, current market dynamics aside.