As our firm is currently working on many contracts for client cloud projects, I listened to this long video and recommend it: The Future of Cloud Computing.

It’s a panel presentation held at The Commonwealth Club in California. Some very interesting points are made by the first two speakers.

At 52:00 minutes Timothy Chou sees the present and the future. Chou is a pioneer in software on demand and former CEO, Oracle On-Demand. In the three minutes from 52:00 minutes, Chou links these concepts:

  • America’s predominantly service economy (Australia is the same in terms of where people are employed) and his notion that service is about provision of information;
  • website personalisation, especially with social media elements on websites and in apps on smartphones (referred to in the video as “the cloud in your pocket”); and
  • his opinion that we are merely in “Year 2 in a 20 year cycle” of change in computing infrastructures into cloud computing, much like the legacy 20 year client/server computing architecture.

Using Amazon as an example, Chou gives a compelling illustration of this change. Let’s note it, before mentioning the role of contracts.

"cloud-computing-business-model"As a technology expert, Chou notes that the shopping cart on the Amazon site is what IT services used to be a lot about. It was about removing bugs and friction from transaction processing by hardware and software. He then makes his social media/design/engagement point. It is that now IT is more about the need for personalisation of data. It is this that delivers information relevant to you, it is what you are more likely to want. So you look at a book in Amazon and the site points out that others also like a selection of related books. You can read what readers have said about the book before you buy. You can put the book into a wishlist to buy or review later.

As a contrast, now walk into a brick and mortar book or music shop. Unless you prompt the staff you are unlikely to be informed by shop attendants that people like you also like books like this, or music like this and so forth. Brick and mortar service business that don’t engage with their customers are less able to compete. They are also less able if they do not collect, analyse, network and leverage information as part of their competitive tool or bait.

Chou emphasises his view that cloud computing is a business model. This is played out in the video by noting a lot about Amazon as a cloud services innovator. From about 2006 it offered its cloud service at $0.12 an hour. Pricing based on rent made computation and storage economical for business. Both Amazon and its customers benefited from cloud server renting services.

The rent pricing approach meant hardware and software were charged on what was consumed, not what was feasible as capital expenditure. Predicting future computation and storage needs also became easier.

"cloud-contracts"The next generation of IT entrepreneurs will be “building business models that we’ve never seen”, says Chou. Consider here for example, Wikileaks which was of course using the Amazon service until that was terminated.

What’s driving cloud adoption is largely consumerisation says the second speaker, Simon Crosby, Founder and CTO, Bromium Inc., Former CTO, Citrix Systems.

Some measures for the rate of change are also provided for enterprises.

Crosby says it is the rate at which legacy skill sets can be retired in an enterprise (eg IT maintenance staff retired) is the speed at which the cloud will be adopted in that enterprise.

Chou’s measure is to ask this question: What is the ratio of servers to employees in your company? He notes it is 30 to 1 at Facebook.

Contracts help effect change driven by cloud computing. The more we understand change in the emerging IT landscape, the better we become at helping clients negotiate and document their IT contracts to effect change.

Think of change for a moment as being like a transaction. Now think of contracts are a change transaction processing mechanism. Got it?


Christopher Mims has published an article on 26 April 2013 in which he derives a figure for Amazon Web Services’s annual revenue: $2.4 billion. Below is a quote from the short piece:

“That leaves Amazon Web Services (AWS), which is used by web companies ranging from Netflix to Ticketmaster to Scribd to serve much of the data that makes those services work. The remainder of revenue from that chart is $600 million in revenue for AWS last quarter, on track for $2.4 billion this year. I’ve reached out to Amazon for comment on this figure, and will update if they get back to me.

How does that compare to Amazon’s competitors in this space? Surprisingly, it’s within spitting distance. Cloud services provider VMWare, for example, threw off $1.19 billion in total revenue in its most recent quarter, a dip of 9.3% from a year ago. That’s twice what Amazon’s cloud is apparently generating, but Amazon is charging much lower rates for its wares, so by some other measures, this division of Amazon might be comparable in size to the whole of VMWare.”

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Noric Dilanchian