I have previously brought up the subject of the commoditization of the Cloud. Despite the common preconception that commoditization is unidirectional from hardware to software and eventually to the cloud, the reality is that commoditization can happen at any stage in the value chain and that the order is not defined.
Recently, we are witnessing signs that the cloud is starting to be commoditized. I have brought up the commoditization of DropBox-like services in this blog (1, 2), but other services are also likely to follow.
The recent earnings call for Amazon shows evidence that commoditization has also come to AWS. During the years, AWS has drawn competition from Microsoft Azure, Google Cloud Platform and also from internal servers. This is forcing AWS into a price war which is negatively impacting Amazon’s financials.
In fact, if a price war was the end game, that would be a fortunate result. The more worrying scenario is the game that Apple is playing with CloudKit. Apple is trying to make the cloud effectively free, and they can easily do this because they make obscene profits from hardware sales.
It is likely that infrastructure-like cloud services will soon be commoditized and that attractive profits will shift to adjacent layers. Companies like Amazon which do not have a business in these layers will lose profits. Companies like Microsoft and Apple which have a strong business in an adjacent layer are likely to make a net profit.
Naofumi Kagami 