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There are some excellent points above. But as a software designer/engineer I'd ask this: where will competitive advantage come from for cloud companies? It's easy to see where and why the cloud will have advantages over the current enterprise model, but I think it's too early to say who will have a critical advantage in the cloud - and that is going to determine which of the cloud players will be a storm coming in as opposed to a faint drizzle.

One of the most obvious candidates for victory is Google but a lot will depend on whether the US and EEC - and China - allow their strategy legally. It is does seem to be a hell of a good strategy, though -

- Create a new operating system which will run phones, Netbooks, and a new generation of office desktops (paperback booked sized machines that burn only 9W of electricity, compared to the current 300-500W)

- Let other people manufacture the hardware

- Take advantage of the special opportunities an OS owner has to create dominant applications just as Microsoft did before it.

The problem is, of course, that this is a strategy of unfair competition. Which isn't to say that it won't be allowed - MSoft got away with it - but there is room for difficulties.

It's also possible that a good-enough open source solution will commoditize the cloud business the way that ISP hosting business has been commoditized. We see Windows on desktops everywhere, so it's easy to forget that the servers crunching out the Internet are usually running Linux and that even "smart" application-like websites are ctive usually implemented with open source coding packages like Perl, Apache, and most lately Ruby On Rails. Googling the last one will show just how effective a open source technology can be and how quickly it can spread - ROR has cut the cost of coding many types of website by an order of magnitude compared. In doing so it has greatly reduced the benefit to Microsoft of having created a better Java in its (damn good and very expensive) .NET technology.

So I'd counsel would-be cloud investors:

- Watch google

- Watch the people regulating google and see who google is hiring to lobby for them

- Look out for open source technology coming in from left field. India and China - and continental Europe - have strong political reasons for preferring open source while the alternative is handing over control of their information infrastructure to US based companies.

- Remember that we're not in the 80s: Europe, China and India may be the markets that settle which technologies and providers become dominant. Each has more people than the US and they're psychologically and economically more inclined towards networking and "light" solutions, as they showed by adopting Netbooks much faster than the US.
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