I am often asked what principles are driving cloud computing, which is the biggest disruption to the concept of work since the industrial revolution.
There are three laws behind the success of the cloud. Most of you will know Moore’s Law, named after Gordon Moore, founder of Intel. Moore boldly predicted that every 18 months computer power doubles while price stays constant. Consequently, the speed of today’s tablets is faster than most desktops a couple of years old, despite costing much less.
You may also have heard of Bob Metcalfe’s Law which states that the value of a telecommunications network is proportional to the square of the number of connected users. Witness the internet effect when a story goes viral.
But little is known of a law created by Nobel Prize-winning economist Ronald Coase. Coase’s Law states that as transaction costs decrease, the complexity of firms doing business both internally and externally also diminishes.
This law underpins the growth of cloud computing. As new cloud services encourage more business collaboration and supply chain disruption – which lead to lower transactions, margins and costs – doing business becomes simpler, cheaper and a hell of a lot easier. Think internet banking, Amazon, Google and Xero.
One of the definitive books on the subject is Unleashing the Killer App by Chunka Mui and Larry Downes. The book’s concepts are still as breathtaking today as they were some 15 years ago. Little did they realise just how pervasive the word “app” would become.
Here’s a few of their principles for market dominance in a digital world:
- Destroy your value chain
- Cannabilise your market before you get eaten
- Create communities of value
- Hire the children,
- Structure every transaction as a joint venture.
Like a perfect storm, Moore’s, Metcalfe’s and Coase’s Laws are now all aligned.
Tony Chadwick is a workflow analyst and co-founder of Rype Ideas, an Australian cloud broker.
