Pumping billions into data centres won't guarantee you an empire

Please take note Facebook, Microsoft, Amazon

Deliver us from dominance

Assume that someone does achieve dominance in this space.

Will they coin it, just as Microsoft did with the browser in Windows, or continue to lower prices as Standard Oil did (yes, Rockefeller's Standard Oil very definitely had market dominance. It also continually lowered consumer prices for oil products)?

We don't actually know which of these effects is likely to win out.

My own best guess, and it is very much a guess, is going to be that it will depend upon the balance between two very different things. Those large companies have the engineering competence and capability to refine the code running over those servers in a manner that the small companies just don't.

I think of the rewrites of Facebook's basic code for example, a large and complex project that they could throw resources at. Yet we also know that large companies with large resources suffer from dis-economics of scale: to be polite about it, not all of Microsoft's code reflects the abilities of the firm's engineers. That's the sort of thing that provides the opportunity for the start up.

It's entirely possible that the capital requirements of this business mean we end up with an oligopoly.

Similarly, it's possible that it will end up as a commodity business where the suppliers are simply price takers and myriads of small players get to gambol happily upon that infrastructure and platform. ®

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