The danger of the coming 'big cloud' monopolies

With the increased success of cloud computing, we're bound to create a few monsters will bedevil a dependent IT

Fast-forward five years: The Senate convenes a meeting to discuss recent price hikes by the three largest cloud computing providers. Businesses are up in arms because cloud computing subscription prices are tied directly to their IT spending and, thus, their bottom line. Also, we've grown so dependent on these large cloud computing providers that moving to other clouds or to internal data centers is just not practical. In other words, we work in a functional monopoly where a few providers control the public cloud market. We all know Big Oil and Big Tobacco. How about Big Cloud?

We've been here before with commodity markets such as energy and food, but never with IT technology. In light of the cloud's rising trajectory as an efficient and cheap way of doing computing, cloud monopolies are nearly guaranteed to pop up at some point.

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The logic behind this is clear. Cloud computing providers need many points of presence (local data centers) to deliver the reliability, compliance, and performance that most businesses will demand and governments will mandate. The ultimate spending on infrastructure to support this will easily creep past $1 billion. 

To get there, cloud providers will have to combine assets, merging and merging again until they rival GM, BP, Acher Daniels Midland, Monsanto, DuPont, AT&T, Koch Industries, Apple, and Microsoft in terms of size and revenue. In many cases, the existing big technology and/or cloud providers will combine, or groups of cloud providers will merge just to survive -- all of this to live up to the infrastructure needs required by the market. 

The trouble with this scenario, as with any other functional monopoly that has come along over the years, is too much control is the hands of a few. Thus, businesses are left vulnerable to shifting priorities and costs.

Of course, we have our government to check in on these matters, but as we've seen many times before, the numbers of Senate hearings with our elected representatives jumping uglies on some CEO typically does not lead to productive outcomes. Instead, we're left hoping the market will eventually right the wrongs. In fact, U.S. businesses -- and Silicon Valley in particular -- usually discourage the government from getting involved in market activities until disaster strikes, as in the cases of Enron and the recent banking scandals. The market almost always rules.