Wednesday, March 15, 2006

Data tone.

Coté at Redmonk led me to news of the latest product innovation at Amazon: Cheap storage.

This is just another development in an accelerating trend: Data tone. People have come to expect that electricity and dial tone are just present in the walls of their homes. When they move in, they expect to plug their blenders and phones in, and to have them work. That's led to all sorts of opportunity for innovation, and all sorts of value to consumers. Standard interfaces and reliable service have allowed companies to build useful devices and offer valuable services on top of existing infrastrcture. Home alarms, voice mail and call waiting, DSL broadband access and more are built on these services.

Amazon's announcement means that you're now able to get storage services in much the same way that you get telephone and electrical service today: It's provided by a capable and reliable utility (Amazon), so you don't have to worry about installing your own data storage devices and keeping them running. This first generation is aimed at innovators and entrepreneurs who build storage-based products on top of Amazon's standards-based service, but those innovators and entrepreneurs will develop the devices and services you'll buy for your home.

Want your computer backed up automatically? No problem, just get the client software product, with strong encryption built in, that moves your files automatically to the Amazon-provided storage service. Not happy with the price you're paying your ISP for email storage? Use the email client plug-in to copy all your important messages to the Amazon store, where you can keep them more cheaply.

Next step in this progression will be computing cycles: You'll be able to use a computer remotely and just pay for the time that you consume. It'll be cheaper and much easier than buying, installing and maintaining a system of your own, especially when you can stop worrying about Microsoft system viruses and all the updates and upgrades that your home system requires. Already companies like Sun are offering on-demand computing to businesses; that'll penetrate to the broader consumer market soon.

For now, Amazon's storage service is metered -- you pay based on space you consume and data you transfer. Over time, I expect that this will move to flat-rate service, just as the mobile and wireline telephone market has for most ordinary consumer uses. Remote computing will follow that same progression as infrastructure is built out, and as competition drives prices down in the market.

There's an important business trend that goes along with the technical trend. You used to have to spend a lot of money to start a company -- you needed people, buildings, IT systems and expensive software packages. Increasingly, the physical plant isn't required. You can buy the IT services you need (as in Amazon's storage offering). You still need people, but the start-up costs are dramatically lower because the equipment is no longer needed. You can pay (very little, in general) for what you need, as you need it.

This trend, toward lower capital requirements by new companies, is happening at exactly the same time that venture capital firms are looking to place investments from very large funds. It'll be harder for investors to find places to put substantial amounts of money, which means that it's a good time to shop for funding.

Disclaimer: Amazon's a big Oracle customer and uses a lot of Berkeley DB. I'm a regular Amazon customer and a big fan of the company. Mostly, though, I'm just enough of a geek to think that this is really, really cool.


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