The rise of cloud computing: adapt or fail
February 8, 2012
Innovation is, by definition, disruptive. Disruption, by definition, has a destabilising effect that challenges industry incumbents more than new entrants and challengers.
The information and communication technology (ICT) industries have propelled new entrants that have turned entire industries upside down, such as Amazon’s ongoing reshaping of publishing. But within the ICT industries themselves the idea of innovation has swept companies in and out of favour, from the displacement of IBM and the mainframe by the personal computer, to the subsequent challenges brought by the internet and the rise of new giants in Google and Facebook.
The latest force for revolution, the rise of cloud computing, has so far been seemingly embraced by all, even those who might have been expected to be in histories cross hairs. Phone companies, IT equipment builders and software developers from the copper era have had to respond to a world where cheap and reliable broadband means companies can "rent" software, applications and storage space, rather than owning it on their own servers. Australian operators like Macquarie Telecom, Fujitsu and Infoplex have thrown themselves at the cloud opportunities and are leading advocates…
The decision by the Federal Court this month in the Optus TV Now case, however, is a sign that the cloud is not all positive, and some very powerful companies are likely to get very unhappy indeed.
The Optus service that caused Telstra so much grief allows consumers to record and play back mobile television broadcasts. It allows some of them, depending on the device, to play back recorded material minutes after it has been first transmitted.
These features are not unknown. In fact, TiVo, which was launched in the US more than a decade ago, and dozens of other digital recording devices now available, let people "pause live television" –which means record and play back almost immediately.
The difference with the Optus service is that the recording device is not in your home. You use a phone to press record and play, and an Optus server somewhere in the "the cloud" records and then sends the data to your phone. The Federal Court decided that the legal rights of the user are the same even if the location of the recording is different.
Telstra, having apparently not foreseen this when valuing the mobile rights for AFL games, fears it will not to make as much money as it thought it would, and the sporting codes who benefitted from Telstra’s largesse fear they might in turn see their expectations about future revenue fall flat.
Together, they have elevated this fear into a threat to the future of sport as we know it, unless future courts or the Government overturn the decision.
But the Government needs to ask itself two questions before it goes jumping in with new regulation.
Firstly, what are the risks to Australia for being one of the first in the world to set rules discriminating against cloud services? The migration of computing from the desktop to the cloud is acknowledged as one of the most important platforms of innovation in the world, and the opportunities for Australia to be at the centre of that activity are very real.
Secondly, apart from the immediate risk to the revenues implied in the Telstra/AFL rights deal, do we really have to be so afraid for the future of sport?
It is worth perhaps recalling that in 1982 Jack Valenti, representing Hollywood studios, said the following of the first generation personal video recording device (the VCR), "I say to you that the VCR is to the American film producer what the Boston Strangler is to the woman home alone."
Recording, storing and retrieving data in the cloud is the next iteration of digital disruption and like any change, it presents both risk and reward. Australian business must adapt to succeed.