The Cloud’s Dirty Little Secret

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Image copyright Pakhnyushcha

The cloud has a dirty little secret: It is expensive.

These days, it seems as soon as some new technology begins to gain traction, VCs and journalists herald the arrival of a new technological order. While these predictions often end up being true eventually, many of us are left aggravated that the status quo sticks around for so long. Perhaps no such case is as true as with the cloud. The cloud has, without question, resulted in truly revolutionary benefits to enterprises and consumers, but it always seems to be presented in a very autocratic way: Stop what you are doing, and do things a new way.

Enterprises are obviously the first to accept such requirements. As long as this new solution offers a material benefit to their business, the smart companies will rapidly adopt it and put it to work. Conveniently, they are also quite willing to pay for such benefit, should it be real. This is critical, because consumers hate paying for things, so someone has to underwrite the commoditization of new technology. This is essential to understand because, contrary to what is marketed to consumers, the cloud is expensive.

People are buying and creating unbelievable amounts of content daily, driven by photos, personal videos, music and movie purchases. Movies and personal video have gone from standard definition to high definition — potentially going to ultra-high definition, if CES is any indication — and the trend is clearly moving more toward online purchasing. Music downloads surpassed CD sales two years ago and, even in light of successful streaming services; online music sales continue to grow year over year. Digital photography and videography have also surpassed their physical counterparts. Indeed, photos and videos are no longer things you take only on vacation or on special occasions. Smartphones have enabled us all to shoot photos and video all day long, for even the most mundane reasons. All these devices are continuously increasing resolution, and thus file size.

Gartner estimates that the average household had roughly one terabyte of files by the end of 2012, with that forecast to grow to approximately 3.3TB by 2016. At the same time, it is estimated that people will have, on average, 5.8 Internet-connected devices per person by 2015. There’s no doubt that people will continue to spread more and more data across more and more devices, based on these trends. If these predications are even somewhat accurate, the assumption that the cloud will be able to affordably accommodate all consumer data is difficult to accept.

Cloud storage is not built from hard drives bought off Amazon.com on the cheap. Indeed, whether it is the consumer cloud or the enterprise cloud, cloud storage services are enterprise-grade through and through. “Enterprise-grade” might as well be synonymous with “expensive.” That pricey storage is made up of enterprise-grade hardware, and kept in an enterprise-grade data center. Every step of the way, it is managed by an army of smart people, who are generally well paid. Let’s not forget local and geographic redundancy. The result is that while cloud storage is able to reduce its price slowly over time, consumers are increasing their storage demands on a near-geometric scale. Thus, while consumer cloud services may have a free tier to give consumers a taste of the benefits, virtually none of them offer enough storage to accommodate all the average person’s data. If some company were to cobble together all the necessary Web services to offer this, perhaps built off of Amazon Web Services or Microsoft Azure or something similar, it would cost nearly $1,000 per year in storage alone, and, of course, there is much more to all this than just storage.

The result is “cloud fragmentation” — users are putting subsets of their files into a litany of separate cloud services. Sometimes this is driven by the amount of free storage, and other times this is driven by an optimization of media type (e.g., documents versus videos). This fragmentation, however, increases complexity and becomes a burden to manage. I often have to think about whether a given document is in Dropbox, Google Drive or SkyDrive. My photos are spread across Flickr, Facebook and Instagram. Some videos are on Vimeo and others on YouTube. Of course, these are only a very tiny fraction of my more than 900 gigabytes of files. This complexity is something I refer to as “cloud overload,” where the number of cloud solutions I have has me scratching my head to remember which one I use for what, or to share with whom.

Why would consumers choose to do this? Price. The free tiers of most cloud services are indeed quite alluring. The marketing is great. The benefits are clear. It is the price that’s unacceptable. To mitigate that, consumers do all they can to extract benefit from the free tiers.

This is a clear divergence between consumer demand and technological reality. Cloud storage is too expensive for consumers to purchase for all their data, so they don’t. The result is user data getting spread across an array of primarily free solutions that fragment features by media type or value proposition (e.g., sharing, backup, etc.).

Occasionally, we see enterprises underwriting technological development that does not lead to the technological maturity and commoditization consumers require, at least not very quickly. This is, without exception, the case with the “consumer cloud.” Consumers require simplicity, convenience and affordability. The consumer cloud is built from services, including storage, sharing and device/platform interconnectivity. We’ve seen many companies emerge as tremendous successes; however, the products that define this space are themselves defined by their compromise in regard to consumer demand and expectations. Changes in user behavior (e.g., stop doing what you normally do, and do it a new way) are the friction that slows ubiquitous adoption. Furthermore, high cost ultimately makes such products, even when widely adopted, niche solutions.

Still, cloud services offer such unbelievable benefit that no one would argue that there is not demand. The question is less about what benefit can be derived from the consumer cloud; rather, it is how it should be delivered.

So, what solution have savvy startups begun to offer? It’s what is increasingly known as the “personal cloud”: A way for users to access all their files, on all their devices, all the time. And best of all, it’s affordable.

Personal cloud services for consumers give users the ability to have all their data on all their devices. While not a consumer platform, Amazon Web Services (AWS) provides a good model, since it delivers truly groundbreaking cloud services within a fairly simple service approach. Personal clouds are somewhat analogous to AWS on a consumer level. New personal cloud services have started to build inter-device connectivity into the operating system of your devices, which is conceptually similar to AWS-like services being built into your own computing devices. The result is that instead of users conforming to some new product’s requirements for you to get value, it conforms to the user’s own behavior.

Products like this are technically challenging to build, because they must integrate deeply into some other platform/device; in fact, they often augment it so that the device or operating system itself works in a new way (e.g., as a part of a personal device ecosystem). The result, however, is that consumers are offered a solution that accommodates their demands — one that is simple, convenient and affordable. These services can be cheap or free for any amount of data, whether you have 2GB, 2TB or 2PB, because they are leveraging your own devices to create your cloud and not hardware located in and across multiple data centers.

We all can be overzealous about predicting the future at times, so it is important to take stock of the present. The cloud is producing some of the biggest benefits to enterprises and consumers since the inception of the Internet itself. It is shepherding a variety of services and products that enable content sharing, distribution and access. While enterprises may reap the most advanced benefits of this now, it is obvious that the consumer versions of these technologies are compelling and exciting. The opportunity for companies to innovate is often not measured in features, as much as user experience. This is the unrealized opportunity within the consumer cloud, and the direction so many companies are taking to build the next set of products to affect our lives.


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