Nick Carr is among those who fear that a small number of players may come to dominate the provision of cloud resources. He outlines many of these arguments in his latest book, The Big Switch, and more recently had an interesting discussion with Tim O'Reilly on the topic. Justin Leavesley shares some of Talis' views on the economics behind all of this over on Nodalities, broadly agreeing with Tim O'Reilly:

"It's pretty clear that utility cloud computing is highly capital intensive so it should come as no surprise that there are powerful economies of scale to be had. But the bottom line is that you are talking about plant and power. These are rival goods, scarce resources that are created and consumed. This is not different from many utility industries with one exception: the distribution network has global reach, already exists and is very cheap compared to existing utility distribution networks. It is a lot cheaper to access a computing resource on the other side of the planet than it is to send electricity or gas across the globe... [So] what is to stop economies of scale turning this into a global natural monopoly?

"Actually, unless there are some large network effects, quite a lot stops single companies ruling entire industries. For a start, without network effects, economies of scale tend to run out: the curve is usually U-shaped. Telecoms, gas, rail companies have strong network effects from their infrastructure -- it makes little sense to have duplicate rail networks or gas networks in a country. Utility computing does not have this advantage because the distribution network is not owned by them."

Continuing the conversation, Carr summarizes the usual widely held perception of cloud computing nicely:

"The history of computing has been a history of falling prices (and consequently expanding uses). But the arrival of cloud computing -- which transforms computer processing, data storage, and software applications into utilities served up by central plants -- marks a fundamental change in the economics of computing. It pushes down the price and expands the availability of computing in a way that effectively removes, or at least radically diminishes, capacity constraints on users. A PC suddenly becomes a terminal through which you can access and manipulate a mammoth computer that literally expands to meet your needs. What used to be hard or even impossible suddenly becomes easy."

This is quite true, but it continues and further entrenches the misapprehension that the cloud is little more than an adjunct to the corporate data centre, a misapprehension that we shall get down to challenging in a moment.

First, though, there is a growing recognition that today's market leaders will inevitably need to become more interoperable if this business segment, and they, are to grow. The proprietary nature of their offerings today may allow them to innovate ahead of the standards process (which will be shaped in large part by the lessons they learn), and the relatively high cost of switching to a competitor today may give each the critical mass on which to invest and grow; but the characteristics of the current market are clearly the characteristics of a nascent market: computing's new Wild West. As so often before, standardization, true competition, mainstream adoption, and commoditization will all follow as we move towards phases 2 and 3 of Gartner analyst Thomas Bittman's intriguing analysis of the "evolution of the cloud computing market." Similarly, Erica Naone offered a useful overview of cloud computing's open-source component in Technology Review last month. None of the projects she covers are a significant challenge to Amazon's EC2, Microsoft's Azure, Salesforce's Force.com or Google's App Engine... yet. But together, they help to keep these commercial entrants honest and remind all of us that switching costs can be brought very low indeed if the pain of the status quo becomes too great.

Writing "Welcome to the Data Cloud?" for ZDNet in October, I began to explore the important role that data could and should play in the cloud:

"Just as 'we' used to duplicate and under-utilize computational resources, so we do something very similar with our data. We expensively enter and re-enter the same facts, over and over again. We over-engineer data capture forms and schemas, making collection exorbitantly expensive, whilst often appearing to do all we can to limit opportunities for re-use. Under the all-too-easy banners of 'security' and 'privacy' we secure individual data stores and fail to exploit connections with other sources, whether inside or outside the enterprise.

"In a small way, the efforts of the Linked Data Project's enthusiasts have demonstrated how different things should be. The cloud of contributing data sets grows from month to month, and the number of double-headed arrows denoting a two-way linkage is on the rise. Even the one-way relationships that currently dominate the diagram are a marked improvement on 'business as usual' elsewhere on the data web; even in these cases, data from a third party is being re-used (by means of a link across the web) rather than replicated or re-invented. Costs fall. Opportunities open up. Both resources, potentially, improve. The strands of the web grow stronger."