From the Computer Utility to Cloud Computing - To the Cloud: Big Data in a Turbulent World - page 56

Amazon, Microsoft, and, to a lesser degree, Google, demonstrate their
market dominance to cloud customers through ongoing price cuts that
beneit the general user and drive smaller competitors out of business.
It is certainly a problem for older companies like Oracle, HP, and IBM,
which have signiicant costs associated with legacy systems that are not
as scalable as the latest technology. As a result, these irms are starting
to change, either by joining in partnerships with cloud companies or by
acquiring promising smaller irms, as all three did in mid-2013 (Hardy
2013b, 2013e, 2013h; Kolakowski 2013). Moreover, IBM, which operates
twenty-six data centers around the world, has begun to transform itself
into a company that resembles marketing giants like WPP, Omnicom,
and Publicis (Waters 2013c). All of this is taking place even as these same
advertising irms are transforming themselves into ones driven by the use
of big data in the cloud. The merger of Omnicom and Publicis to form
the largest advertising business in the world is grounded in the need to
take on the new competition from integrated cloud-based information-
technology companies (Vega 2013).
Price cuts would appear to be an unqualiied beneit to the cloud
computing industry and especially to its users, who are increasingly
dependent on the service. However, when carried out by industry lead-
ers like Amazon or Google, they are also classic strategies to concentrate
power over a market. This has been demonstrated throughout economic
history, including in the communication industry from Western Union in
telegraphy to AT&T in telephony. For years, AT&T initiated price cuts in
telecommunications at the mere whiff of a competitive threat, only to raise
them again when the competition was erased. That the company was able
to accomplish this even under the regulatory nose of the Federal Com-
munications Commission is evidence of its power and of the continuing
failure of government to carry out regulatory responsibilities. It was not
until the largest corporate users of telecommunication services organized
collectively to ight back that AT&T's grip on the market was broken.
Today, analysts wonder if cloud computing will go down that same path.
According to one analyst, “There is a race to the bottom when it comes to
cloud pricing, as the larger providers try to capture as much share as they
can of this exploding market. The downside is that the smaller provid-
ers without huge war chests of cash, but with impatient investors, won't
be able to make money at the prices that the larger names charge. Many