The Dark Lining of Cloud Computing: A Response to Jonathan Zittrain

In his New York Times Op-Ed today, Jonathan Zittrain raises valid concerns about the risks to users of cloud-based computing services, including betrayal, lock-in and limited privacy protections. And his recommendations for addressing those weaknesses are sound. “But,” he writes, “the most difficult challenge–both to grasp and to solve–of the cloud is its effect on our freedom to innovate.”

Are Facebook and the iPhone platforms that will cripple innovation with the restrictions they impose on developers? To a degree the limits to innovation Zittrain cites are real; but innovation is but one value offered by those companies, which are as much marketing channels as they are platforms. Low-cost marketing is another. And what Apple and Facebook may limit in the former dimension, they may compensate for–at least in the minds of some developers–in the other.

Zittrain’s idea that the “legacy of the personal computer is that anyone can write code for it and give or sell that code to you” is true, but it doesn’t reckon that today many businesses see marketing challenges at least as compelling as technological ones. With consumer technology prices on a relentlessly downward march, business models depend on mass distribution. Low-cost marketing is essential and many are willing to trade away some freedom to innovate for cheaper marketing.

A company that seeks to play a leadership role as a platform provider will need to innovate and foster innovation among its partners and developers, or else it will become irrelevant over time. As Annabelle Gawer and Michael Cusumano wrote in “Platform Leadership,” their study of the platform phenomenon at companies such as Intel, Microsoft and Cisco in the technology industry, “Platform leaders and complementary innovators have great incentives to cooperate … because their combined efforts can increase the potential size of the pie for everyone.” (P.6)

In technology, too, there can be declining returns to innovation. At the dawn of the era of microprocessors, the focus of competition and innovation was on hardware architecture. The fact that in the PC world competition narrowed to a small handful of hardware players may have slowed innovation (this is debatable) but it allowed those players to achieve economies of scale and allowed the rest of the ecosystem to enjoy the benefits of a near-commodity platform. Competition-driven innovation moved up the stack to software.

Competition was fierce on the lower level of the software stack–the operating system–until things settled down, competitors largely fell away and the market consolidated to a handful of players. Competition and innovation once again moved up the stack to applications.

Google’s announcement that it intends to release a general-purpose operating system isn’t so much an attempt to compete in the operating system market but rather to seal the fate of operating systems as a commodity, and shift the focus of innovation to the cloud, where it hopes to become a platform leader. It and the others will only succeed, however, if they foster enough innovation to grow the markets they are playing in.

Should the market leaders act as a drag on innovation, new arrivals will surely emerge with innovations that will lead the market forward.