Single-function clouds are unlikely
GigaOm has an interesting post on HP’s cloud vision, which asserts that HP’s view of the future is that service providers will reducing complexity by delivering only one application (scaling up their own infrastructure in a monolithic way), and that generalized infrastructure-as-a-service (IaaS) providers will not be able to scale up in a profitable manner.
Setting the specifics of what HP does or does not believe aside, I think that it’s highly-unlikely that we’ll see super-specialization in the cloud. There are, of course, software vendors today who make highly specialized components, that in turn are incorporated into the software of vendors further up the stack — today, those are ISVs that sell libraries, Web 2.0 companies with mashable components, and so forth. But as software companies get more ambitious, the scope of their software tends to broaden, too. In the future, they may want to become the masher rather than the mashed, so to speak. And then they start wanting to become diversified.
For an example, look at Oracle. Originally a database company, they now have a hugely diversified base of enterprise software. Why should we believe that a cloud-based software company would be any less ambitious?
Certainly, it is more difficult and more expensive to manage general-purpose compute than it is to manage specific-purpose compute. But there’s a great deal more to driving profitability than keeping costs down. Broader integration has a business value, and the increase in value (and the price the customer is willing to pay) can readily outpace the increased infrastructure cost.
To take another example, Google runs incredibly efficient single-purpose compute in the form of their search farms. Yet, they are trying to broaden their business to other services, both for the potential synergies, and because it is incredibly dangerous for a business to be too narrow, since that limits its growth and vastly increases its vulnerability to any shifts in the market.
I don’t think successful software companies will confine themselves to delivering single applications as a service. And I think that IaaS providers will find cost-effective ways to deliver appropriate infrastructure to those SaaS companies.