2012: The Year of Cloud Consumption?
January 3, 2012
Many years ago, Sun Microsystems coined the phrase “the network is the computer.” Sun was way ahead of its time in making this call, and despite being right in its vision didn’t survive to be a part of what we now know as cloud computing. Increasingly, it appears that we’re transitioning to a world where, to use a somewhat clumsy analogy, the network is the consumer.
A couple of pieces served as inspiration for this. First, Leigh Drogen had a post a year ago titled Social Capital and Collaborative Consumption with which I generally agree. But it was this New Year’s resolution from Leah Culver to “live in the cloud” that made the connection for me. Because while cloud computing companies like Salesforce.com (CRM), VMware (VMW), and Citrix Systems (CTXS) are changing the lives of IT professionals and systems administrators everywhere, cloud consumption has the potential to change the lives of everyone…
A Google search for “cloud computing” returns over 21 million results while a search for “cloud consumption” returns just 28,000, so while people are aware of the rise of some aspects of cloud consumption as it pertains to digital files or car-sharing services like Zipcar (ZIP), it doesn’t have an all-encompassing label yet that people can attack or embrace.
One of the things I’ve been thinking about over the Christmas/New Year’s break is if US growth is as strong as I think it will be in 2012, what type of consumption stands to benefit the most? Sure, we’ll see a modest pickup in housing starts and auto sales, but we all know the economy of 2005-06 with its focus on exurban housing developments and big box stores isn’t coming back. That type of economy is what got us into this mess, and besides, the Millennial generation – the ones getting whatever jobs are being created and who represent the growth demographic of the consumer sector – doesn’t want to live that way.
Instead, our generation, and likely everyone in the future who fits into the young, single, urban, transient demographic, battle-scarred from the fallout of the tech bust a decade ago and the 2008 financial crisis, wants a lifestyle that’s as flexible and mobile as possible. Kevin Depew wrote about this a year ago, talking about a “new era of productive consumption.” (See Five Things You Need to Know: The New Malaise.)
What types of consumer goods does that entail? A nice bed and a few choice furniture pieces. A smartphone and laptop or tablet, maybe an e-reader. A television, perhaps (I don’t have one). Musical equipment. Some essential clothes and shoes. Kitchenware for the cooks. Sporting goods for the athletes. A bicycle for urban dwellers. Everything else, if possible, lives in the cloud.
As an investor, these are the themes I’m watching in a US consumer recovery. “Technomad” essentials (the list above). Cloud consumption services like the ones Leah talks about, which unfortunately are mostly private (Dropbox, Spotify Uber, Airbnb – only OpenTable (OPEN) and Zipcar are public pure plays). Data and media services – while we may consume fewer physical goods, our consumption of information and media continues to grow. And then “cloud assets” – the things we own that live in the cloud like our Facebook, Twitter, and LinkedIn (LNKD) profiles. Maybe big box stores like Best Buy (BBY) and Staples (SPLS) stand to benefit as well, but as Borders showed, there’s no guarantee a dominant retail vertical can survive the move to the cloud.
It’s ironic to consider this trend as it becomes more defined. I remember worrying in 2007 and 2008 as pundits proclaimed a coming era dubbed “the frugal future,” “the new normal,” or how my generation would have a lower standard of living than my parents’ did. It all seemed so inevitable, this forced austerity. But as a 30-year-old who’s lived in 10 apartments in five cities in my eight years since college, I now envy the thought of a newly minted college graduate who will find the “cloud years” of his 20s and early 30s much easier to navigate than I did. It’s funny how our biggest worries, even when they come to pass, can turn out to be liberating.