Will A Slowing Economy Boost Cloud Computing?

This week’s belt-tightening among venture-backed startups is likely to kick off an important phase in the evolution of utility computing and cloud hosting. It’s too early to know all the answers, but here are some of the key questions:

  • Will startups’ enthusiasm for next-generation hosting services create challenges for cloud computing and utility hosting providers, as their startup customers fail or are acquired?
  • Or will the financial crisis be the event that pushes more companies to ditch their dedicated hosting and colocation services and move to the cloud?
  • Will we return to an era in which the financial stability of hosting providers becomes a key part of the customer decision-making process?

For discussion of various elements of these questions, see posts from InfoWorldTarry SinghFred WilsonAppirio and Hyperic.

Here’s one prediction that seems pretty safe: Amazon’s infrastructure-on-demand business is positioned to reap some of the biggest gains if a slowing  economy drives increased adoption of cloud computing. It’s the name brand in utility computing, financially secure, successfuly navigated the dot-com crash, has been fine-tuning its services for business customers, and may benefit from concerns about vendor lock-in with cloud offerings from Microsoft and Google.     

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About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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  1. I think you've missed a key question. Will the economic situation slow down the build out of infrastructure needed to support widescale cloud adoption. Given that large data centers tend to be debt financed (unless you are Google or Microsoft) building cloud-scale data centers may be a lot harder to finance for the next few years.

  2. Hi Nik, We've previously written about the impact of credit availability on data center supply and the resulting "incumbent advantage". This obviously extends to the cloud as well, but I think many of the cloud startups are still leasing space, rather than building their own facilities. Again, the advantage here goes to Amazon, Microsoft and Google.

  3. SP

    The Appirio link needs to be updated to: http://www.appirio.com/blog/2008/10/chris-barbin-theres-lot-of-talk-today.php

  4. Todd Lipcon

    Seems to me that if there's a cost advantage to "cloud" hosting, then most startups are already using it. The startups that use colocation generally have some circumstances or special requirements that require it (e.g sensitive data, need for specific hardware, or need to physically transfer large amounts of data)

  5. In our opinion, enterprise coloation is one of the best cost containment strategies for companies, allowing them to reallocate scarce resources to core business functions as they move to data centers and cloud computing solutions. The challenging economic conditions will be a boost for cloud providers, specifically BlueLock because they do not require a re-write to take advantage of their solution. In addition, they support Microsoft and Redhat.