The result will be a rip tearing across the models for development, marketing, and sale of cloud computing services which will, for all practical purposes, establish two new markets: a provider market for IT infrastructure and a universal software market. The two markets – referred to in the following as infrastructure utility and software universe, respectively – can be characterized according to their dynamics (see Figure 1).

The infrastructure utility market will undergo a major industrialization of system technology and standard middleware. The provision of services, administration, pricing, and billing on this market will be completely automated. Advantages of scale as competitive instruments will lead to a decline in prices and margins, precipitating a consolidation of the provider landscape. Providing service to small and midsize customers with special requirements, in contrast, will open wide the door to resellers without their own infrastructure.

The infrastructure utility market is comparable with other utility markets such as energy or telecommunications, where the development described above has already taken place.

The software universe market is subject to exactly the opposite laws. Applications and frameworks will diverge from one other, in the direction of industries and in the direction of technologies. As the modularization and combination of software components into new platform and application architectures proceeds apace, the number of alternative solutions for an IT system will grow. The consequence will be the establishment of integration and orchestration services as an independent business model analogous to the “mashup” concepts found in Web 2.0. This decoupling of value generation in combination with the trend to open interfaces will offer providers ranging from one-man companies to large corporations access to a global software market.

Debundling of business models

As if the splitting into two markets were not enough change, the cloud computing business models are evolving ­orthogonally. IT manufacturers and service providers on the still young cloud computing market have so far developed all of the links in the value chain themselves, but technical abstraction and falling interaction costs are now fueling segmentation. As providers concentrate more and more on core competencies and processes, they will compensate for the reduced performance depth by concluding partnerships and cooperation agreements. The result will be that more and more market participants will work with debundled business models which can be classified in three layers: assets, services, and sales. In accordance with this classification, providers will be characterized in the following as asset companies, service companies, and sales companies.