The Cloud: Battle of the Tech Titans

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Scott Raney, a partner at venture capital firm Redpoint Ventures, which has invested in numerous cloud-powered startups, views the recent acquisitions and outpouring of rhetoric as a signal that the big boys fully appreciate what's at stake. Still, he can foresee their numbers dwindling as great volumes of data are sucked up into the cloud. The disaster scenario for the traditional heavyweights is that Amazon, Google, and Microsoft end up as the corporate information kingpins.

"There is one school of thought that the world is heading toward three really big data centers owned by those three companies," says Raney. "They will be the world's computers, more or less, and all the software will be running there. It's a pretty extreme view, but that's spooking the hell out of all the other companies."

There's a saying in the technology industry: People tend to overestimate what will happen two years from now and underestimate what will happen in 10. Well, the next 10 years have arrived. Silicon Valley veterans have long figured that once technology gets good enough, the world's computing infrastructure will come to resemble the electricity infrastructure—which is exactly what's happening. In his 2008 book The Big Switch, author Nicholas Carr documented how companies that once ran their own power generators eventually bought electricity from a select group of large providers because it was easier and cheaper to do so. The large providers then built enormous generators, aggregated demand, and invested more in fine-tuning their systems. Companies had to adjust to relinquishing control of part of their infrastructure, but once they did they were able to focus on getting better at whatever it was they made. Everybody won.

In the digital version of this shift, the role of utilities is played by the megadata centers. The cloudpeople are saying this technological wave, too, will make everyone a winner. Corporate technology has a chance to shift from a painful, dark art to something that injects new life into businesses. The only losers will be those companies that sit still and suffer grim outcomes at the hands of smaller companies that embrace the cloud.

Carl Ryden has issued this exact message to contemplative types at big companies. He is co-founder of MarginPro, an eight-person outfit in Charlotte that built a service out of Microsoft's Azure to help banks price commercial loans. Each month, MarginPro analyzes $700 million worth of lending. For every $10 million in revenue the company makes off this work, it pays $1,500 in cloud fees to Microsoft. "We sell around the technology guys and straight to the business folks," Ryden says.

MarginPro also analyzes its customer data to get a sense of trends in the loan market and the overall health of the economy. Ryden says he's impressed with the quality of the analysis and might turn it into an additional business. He's also delighted he now has the technological wherewithal that used to be available only to organizations with a lot more money—organizations such as banks, his clientele. "You can find 100 reasons not to move to the cloud," Ryden says. "But you're going to look up one day and all you will be doing is managing the systems that connect all your printers."

Vance is a technology writer for Bloomberg Businessweek.