Cloudbursting, the ability to rent additional servers in the cloud on demand, has been an extremely successful concept in enterprise computing recently. When a researcher has the need to perform complex computations, rather than investing in a supercomputer, she can rent a cluster of Amazon’s idle servers for just the duration of the calculations. She pays for the power when he needs it, and when she doesn’t she avoids having an expensive asset sitting idle and depreciating.
Expansion into the cloud has been made possible in part by improved networking. Analogous to decreased shipping costs, more bandwidth reduces the friction in moving large sets of data from the firm to the cloud. What will enable the Cloudification of Things is the decreased friction in loan logistics.
Take Zipcar, for example. Some people do not need a car 7 days a week. Rather than having a depreciating asset sitting in a car park, Zipcar users can rent a vehicle for only the time which they need. The proliferation of GPS tracking devices has reduced the friction in trusting customers to return a vehicle, allowing this business to be viable.
Another example is fashion site Rent the Runway. Rather than paying for an outfit which is to be worn but a few times, customers can rent these items for a special occasion. Courtesy of improved shipping routes and delivery algorithms, shipping costs have actually decreased while fuel costs increase. Decreased transitional costs combined with large inventory availability has removed the friction that prevented previous clothing rental companies from being successful.
From records, to 8 tracks, to CDs, to iTunes, the music industry has never been complacent with any particular medium. Shifting from iTunes, users begun favoring “rented” music with services like Spotify, Pandora, and iTunes Match.
There are many other examples of users transitioning from ownership to renting, most of which have been enabled by reduced friction in transactional logistics. Going forward, there are many other businesses that have the ability to “cloudify” their business model.
Further, the nature of this model need not be B2C. Consumer-to-consumer rentals can also lead to a more efficient utilization of underutilized assets. Photography equipment, vacation homes, office space, restaurants, energy production equipment, and farming equipment are just a few possibilities.
It’s been estimated that Manhattan was sold by Native Americans to explorers for only $24. The reasoning for the low price was that the Native Americans believe that it was impossible to “own” land. How humanity defines ownership has never been consistent across time and cultures.
“Imagine no possessions,
I wonder if you can.
No need for greed or hunger,
A brotherhood of man.
Imagine all the people, sharing all the world”
– John Lennon, 1971