How can you use technology and infrastructure to make money? Cloud pioneer Jason Hoffman, currently Ericsson’s Head of Product Area, Cloud Infrastructure, talks about how data giants like Facebook, Google and Amazon are following the same path as car manufacturers in the early 20th century, moving from efficiency to customized services.
Combining datacenter efficiency and customer centricity
The development of datacenter efficiency is following a path similar to the one trod by the automobile industry. Back in 1905, Henry Ford said that his customers could have any color car they liked, as long as it was black.
In other words, Ford was focused on efficiency, and in the interest of efficiency, it was he, not the consumers, who was making the decisions. But over time, that changed. Auto manufacturers got better at making cars efficiently. Which meant that it was possible to start giving consumers more choices, without significantly sacrificing speed or increasing production cost.
Hyperscale datacenters allow for customized services
The data giants (Facebook, Google, and Amazon), have essentially traversed that same cycle. They started in a world in which datacenters were built with siloed resources and focused on the performance of pre-defined tasks. With that kind of setup, there wasn’t a lot of room for users to customize the type of service they wanted.
But now, with efficient, state-of-the-art hyperscale datacenters using software-defined infrastructure (SDI), those data giants can offer customized service on demand. The most obvious example of this would be the provisioning of AWS and EC2 instances.
Setting aside the giants, most datacenters aren’t much more efficient than Ford’s original factory. Resources are in silos. Services are not designed for scale and flexibility.
Making the digital transformation
Companies can be divided into two groups: those who are undergoing a digital transformation, and those who aren’t.
Some companies will never undergo a digital transformation, and have no reason to. Donut shops. Whiskey distillers. Artisanal sword makers.
But for companies that already use digital technology to make their business go, it’s becoming worthwhile to ask themselves how they can interact more efficiently with their customers and partners. In other words, how they can use technology and infrastructure to make money.
Using a technical infrastructure to make money
You can read a transcript of this video below.
For more insight from Jason Hoffman on the future of cloud, please download his article from Ericsson Business Review: The wisdom of clouds
Jason Hoffman (Head of Product Area Cloud Infrastructure, Ericsson):
When we think about 20 years ago, larger infrastructure in general was only being used by scientists, accountants and telecoms to actually make money. Those were the only people using larger collections of computers as a means of generating top line revenue or as the way of solving a problem. And then what we have seen happen starting twenty years ago was the emergence of a technology sector but when we think of – and this is why we call it the internet or Web 2.0 or whatever phrase you want to apply to it – you saw the Yahoo’s and Google’s and Facebook’s and everything else emerge as companies that were using infrastructure to make money. And, oddly enough, that’s different.
I don’t think any large enterprise before that was using infrastructure to make money – they were using it really as cost centres – I don’t think keeping a payroll on a mainframe or keeping your ledger on a mainframe and doing your basic accounting on there or doing email – these things are cost centres; these are just the cost of doing business and you are transitioning from paper to more efficient paper from that point of view. You were not sitting there with your infrastructure thinking “How am I going to drive new revenue for the company? How are we going to go into new lines of business? How are we going to build a platform that is going to disrupt an existing industry?”
That’s what’s changed a bit. You effectively had these two platform business show up. When I say “a platform business” I mean one where you are usually giving away something for free; there’s somebody paying you and you are getting some other people paid. In the telecoms space we were giving away a free phone. People were paying for plans and all the operators were getting each other paid through roaming.
In the internet space you had free search show up; you had free email, free social networking. You had all these types of things and then they were using the “Who’s going to pay us and how are we going to get people paid and what industry are we going to disrupt?” and it all ended up being focused around advertising.
The other big change is that a number of these players had some offering that was fundamentally free and it was being delivered from a datacentre. So there was an intense focus on the efficiency of the datacentre; the unit economics of the datacentre and, really, on what the cost of doing that is [end]