One of the topic addressed in the Digital Transformation Course developed by EIT Digital and IEEE Future Direction in its Digital Reality Initiative is that of Platforms. In these last few weeks I have been discussing platforms with a number of key people in several industries and now I take advantage of the FDC blog to share some thoughts and solicit further views.
Platforms have been around for quite some time and they make sense independently of the Digital Transformation. However, this latter has created an economic environment where platforms become a fundamental component.
When you apply the Digital Transformation you are basically going to leverage (as much as possible) on bits (data). This, on the one hand, decreases (in most cases slashes) the cost of developing services and products/products functionality but on the other hand requires the availability of an infrastructure to manage those bits. This infrastructure should be reliable, should support huge storage and intensive processing, should be easy to reach and should support authentication, ownership and so on. In other terms, this required infrastructure turns out to be complex and … expensive. Hence the split of the production, delivery and operation into a few players that can create and support such platforms and into ecosystems populated by a myriad of players that take advantage of the low cost of “using” the platform to create value and go to market.
Today there are very few companies that can sustain global horizontal platforms, like the nine addressed in the Amy Webb book, it makes for an interesting reading, usually known as the G-MAFIA (Google-Microsoft, Amazon, Facebook, IBM, Apple) and BAT (Baidu, Alibaba, Tencent) plus a number of others addressing important verticals, like Industry, IoT, Cities and so on.
To support storage processing and massive distributed access all these infrastructures use clouds, distributed clouds actually, thus insuring the required reliability and availability. These clouds are huge, cost a lot of money to create and operate and can only survive (economically) by addressing a very huge market that generates a statistically -almost- uniform use of the resources. This statistical uniformity is achieved through the diverse, scattered, demand of thousands of users and results in very low cost (price) per user. This is what creates the oligopolies we have today and makes it so difficult for new entrants to grab a share of the market.
The exact number of servers in these giant’s nine clouds is not known but for each of them the number is in the millions (WikiLeaks released in October 2018 an Amazon Atlas listing the location of Amazon servers taken from an internal document of 2015, so old stuff; I mention it just to remark how secretive are these companies -understandable- and how difficult it is to have up to date information).
These platforms need to be accessible and that was the starting point for many telecom Operators to step into the horizontal platform market but by far they cannot compete with the big nine since the access infrastructure has become a commodity and the scale factor is completely unbalanced towards the big nine. Telecom Operator have, basically, country wide markets those have world wide (or Chinese) market and in this business volume wins. Yes, there are plenty of small data centres (a few as small as a few clustered servers) but they address niches and cannot compete on price with the big nine.
In the following posts I will look into a number of platforms considering their role in the digital transformation.