Microsoft and Amazon face challengers on edge of cloud
Distance between intelligent devices and giant platforms gives start-ups a chance
By hard Waters
Financial Times
February 1, 2018
When faced with the reality that their industry is increasingly dominated by a handful of giants, the general insouciance of Silicon Valley’s venture capitalists is hard to fathom. How can they be so sanguine about the prospects for the next generation of start-ups when today’s industry leaders seem intent on colonising all parts of the tech landscape?
One answer often heard from the start-up investors is that a new form of computing is emerging beyond the reach of the dominant cloud platforms. Companies riding this new trend are springing up like weeds through the cracks in a sidewalk, filling in new parts of the computing landscape that are not easy for the behemoths to address.
Like all tech trends, it has its own buzzword: the rise of the “edge”. It reflects the falling costs and increasing capabilities that are pushing intelligence into more and more devices. That, in turn, is making it easier to collect and process more data locally, far from the centralised cloud data centres. This is not happening in opposition to the cloud, but in parallel with it: devices working on the edge still operate in concert with centralised data centres, which co-ordinate and handle the most intensive data storage and processing needs.
The shifting paradigm of cloud computing was thrown into sharp relief this week as Microsoft disclosed a surge in business in its centralised cloud data centres. Revenues registered an unexpected acceleration, nearly doubling from a year before.
Satya Nadella, Microsoft’s chief executive, gave a counter-intuitive reason for this: that the growing interest in edge computing was behind the jump. More customers were turning to the company to help deal with their edge needs, in turn feeding the company’s centralised cloud business as well. The Microsoft boss pointed in particular to Germany, where manufacturers are learning how to gather and process more data on the ground to enhance their operations. Mr Nadella’s explanation: “There are new workloads being born that require both the cloud and the edge.”
Certainly, the centralising forces that have been pulling more computing workloads into the cloud are showing no signs of lessening. Lower costs and access to much more flexible computing resources have led many companies to turn to the cloud for their new computing workloads. Inevitably, many of the legacy applications running in their own data centres will migrate to the cloud as well, though, given the sunk costs involved, the process will take years.
But a countervailing force is also feeding a re-emergence of local computing. None of the factors behind this are new, though they have been gaining strength thanks to some familiar political and technology trends. They include concerns about privacy and control of personal data. Apple, for one, has taken up the banner for this idea, devising ways for its users to keep control of more of their personal data on their own devices. If cloud-first companies such as Google and Facebook face tough questions about centralisation of data, Apple is busy positioning itself as the opposite.
Machine learning — the tool that holds the greatest promise in bringing value to data — is also perfectly suited to the new cloud-plus-edge paradigm. Algorithms trained on large data sets in giant cloud factories can be deployed on to edge devices, where they can draw inferences from locally gathered data. And even though the new 5G telecoms networks promise to bring a jump in capacity for machine-to-machine communications, the cost of shifting masses of data to and from centralised servers will always favour local data handling where possible.
In this emerging computing world, the risk is that the intelligent devices will be treated as vassals in the computing empires run by the tech giants. They may exhibit a mind of their own, but they will still rely on the clouds to set the rules, allocate work and decide where the boundaries lie. That leaves an open question about where most of the value will be captured — and how much control companies such as Amazon Web Services and Microsoft will exert.
The venture capital world’s enduring optimism reflects a familiar faith in Silicon Valley: there is always a new computing paradigm waiting to be born, and today’s tech empires will inevitably crumble. It is not clear yet whether the re-emergence of edge computing will be a powerful enough force to justify those hopes. But it does suggest that the rise of the giant computing clouds will not be the end of tech history.
richard.waters@ft.com
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