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Will Cloud Services One Day Be Traded Just Like Stocks and Bonds?

Posted by timothy on from the too-compute-intensive-to-fail dept.

Brandon Butler writes "Today, cloud computing resources are bought and sold in a fairly straightforward process: A company needs extra compute capacity, for example, so they contract with a provider who spins up virtual machines for a certain amount of time. But what will that process look like in, say, 2020? If efforts by a handful of companies come to fruition, there could be a lot more wheeling and dealing that goes on behind the scenes. An idea is being floated to package cloud computing resources into blocks that can be bought and sold on a commodity futures trading market. It would be similar to how financial instruments like stocks, bonds and agricultural products like corn and wheat are traded on exchanges by investors. Blocks of cloud computing resources — for example a month's worth of virtual machines, or a year's worth of cloud storage — would be packaged by service providers and sold on a market. In the exchange, investors and traders could buy up these blocks and resell them to end users, or other investors, potentially turning a profit if the value of the resource increases."

22 of 168 comments (clear)

  1. In other words... by sconeu · · Score: 5, Insightful

    Let's take something useful, and let the parasites make money off of our work...

    Just like the stock market.

    --
    General Relativity: Space-time tells matter where to go; Matter tells space-time what shape to be.
    1. Re:In other words... by gstoddart · · Score: 3, Informative

      Pretty much what I was thinking.

      Then we'll have an entire market of speculators who define the price for us because they bought it six months ago.

      Stupid idea.

      --
      Lost at C:>. Found at C.
    2. Re:In other words... by Anrego · · Score: 2

      At the IPO level it makes sense to me, because you are essentially providing them funding.

      After that, you are buying from another investor. And some day, another investor is buying from you. The money at this point is just bouncing around from investor to investor.

    3. Re:In other words... by lgw · · Score: 2

      As long as these futures are traded in real markets, with real market rules, no one will be cornering the market. All the really dirty tricks in markets are 100+ years old, and real commodities markets have structural protections against them.

      OTOH, the scenario you describe can be a good one, if no one's cornering the market. A few years back, oil futures were so much higher than spot (immediate delivery) prices that speculators were buying oil, storing in in tankers that just sailed around, for delivery in the future. This drove up oil prices at the time, but significantly increased future supply.

      Many people who don't understand markets cried foul "look at the evil speculators!" but that's bullshit. The best minds devoted to predicting future supply of oil had been warning of a serious oil shortage in a couple of years. The market responded by diverting some portion of current oil supply and delivering it to market when the shortage was expected. This is exactly what you want to happen.

      --
      Socialism: a lie told by totalitarians and believed by fools.
    4. Re:In other words... by Solandri · · Score: 2

      Actually, I think this is what's going to make cloud services viable. The problem with data storage on the cloud right now boils down to two major things: Someone else has all your data. And that someone else might not be online at a crucial moment when you need your data. (If you're not online and access to your data is that important, you shouldn't have been storing it in the cloud or you should've had redundant network trunks installed.)

      If cloud services became a commodity, you wouldn't need to be beholden to a single cloud service provider. You could buy storage space from several services, and link them together in something like a SAS RAID array. No one service would have all your data, and if you put an encryption layer on top of it the fragmented nature of what they did have would make it virtually impossible for them (or NSA) to extract anything meaningful from what you're storing remotely at a single or even two or three sites (depending on the number of virtual drives in your array). And because the data is stored with parity redundancy, one or even two services could go down and your data would still be accessible.

      The problems with having virtual drives in different geographic locations are bandwidth and latency. Bandwidth is constantly improving, and in many places already exceeds the 10-20 MB/s of local SCSI drives 15 years ago. Latency will always be there, but the 20-100 ms ping times across a continent are within an order of magnitude of the latency of mechanical hard drives. Obviously if you're running some high speed service which needs instant responsiveness this isn't going to work. But for simple data storage on the cloud, it should be fine.

      I actually came up with this idea a decade ago when Napster was shut down by the RIAA and decentralized services like Grokster sprang up. I started thinking of how binaries distributed on USENET were split into (say) 20 packets with 5 parity packets, and you could reconstruct the original binary as long as you got at least 20 of the 25 packets. Then I realized the atomic size of the decentralization didn't have an individual user - it could be a fraction of a user. The entire song could be hosted and downloadable from the cloud, but any one particular person could onnly be hosting 5% of the song and thus couldn't be accused of making the entire song available for download. (Hey if they can play semantics with the law to fine individuals downloading a single song hundreds of thousands of dollars as if they were commercial copyright infringers, so can I.) And parity redundancy means even if lots of people stop hosting, the song still remains available. Alas my career moved away from software so I haven't really been able to do anything with this.

    5. Re:In other words... by JesseMcDonald · · Score: 4, Insightful

      In my model of ownership, the stock itself has no actual value (because you can't sell it).

      In your model of ownership, buying into a company, even a successful one, would be significant risk—you wouldn't be able to break even for decades, much less make a profit. Moreover, you would have to buy in when the company is formed, at which point the ownership is set in stone. We would be reduced to companies privately owned by a small number of partners; changing the set of partners or the division of ownership would require dissolving the company and starting anew. To raise money the partners would have to take out loans rather than selling shares. I really don't see any of that as an improvement over the current system.

      It's more of a really high level view of how I wished it worked, that is, the money going directly to someone who is going to be doing something with it, rather than just bouncing around between other investors.

      That's what happens when you buy shares at an IPO or (dilutive) follow-on offering. The money goes directly to the company, and you get a small measure of ownership in exchange. That only works if the shares are worth something after they're sold, though. No one would hand over money to the company without expecting to get something of value in return, which pretty much depends on being able to sell the shares eventually (even if all the actual profits come from dividends).

      --
      "The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
    6. Re:In other words... by umghhh · · Score: 2

      it is not really the liquidity that is important in this but arbitrage. That is one thing for which trading in short period of time is important. The fact is also that the chunk of trade that is done by HFT fell of late. The reason being an aspect of market economy that is really interesting and seemingly fixed: if there is a imbalance somewhere like (I am making this up as I write it) oranges have lowest price on second Tue of Nov this imbalance will disappear as soon as somebody notices and starts taking advantage of it. The same seems to have happend to HFT and their profits decreased. This does not mean they will go away but that there will be only few companies left. Still the volumes of trade and the way it is done (if volume is big enough some exchanges give the traders insight into the 'future' in that they can see upcoming orders) are just silly - I suppose there could just as well be a limit on the speed transactions are done allowing trading say every second or so. That is enough for any reasonable market to provide arbitrage. I think HFT was a smaller of evils - big banks doing funny things with debt and amount of it - almost all western economies are so much in debt that it is hardly possibly to get out of that other than run printing press on high speed.

    7. Re:In other words... by NonSequor · · Score: 2

      Unless someone commits fraud, I don't see how connecting buyers with sellers is parasitism. It's a useful service, and like other useful services it is worth paying for.

      There is no need for middlemen, therefore it is not a useful service. Investment markets are like politically connected men putting up a tollbooth at the end of your driveway and saying that connecting you to the road is a useful service, and like other useful services it is worth paying for.

      Let's say I have a computing job I want to complete some time in the next couple of years. I'm not especially concerned about when it's done but I want it done for below a certain price. With a futures market, I could look for a good time of year when prices are low and lock that in now, establishing a contract that the counterparty will either provide the service at that time or pay whatever it costs to find a provider that can.

      The benefit to providers is that they can sell anticipated capacity in advance and lock in their budget numbers.

      --
      My only political goal is to see to it that no political party achieves its goals.
    8. Re:In other words... by rk · · Score: 3, Insightful

      If you have no right to sell what's yours, you don't own it at all.

  2. Blech by Anonymous Coward · · Score: 4, Informative

    What the hell would be the point of... any of that.

    I have a hard enough time understanding why anything below the 1st sale market works, but what practical purpose does this serve.

    Just sounds like yet another way for people to skim money off something without actually providing anything valuable. The benefits to the consumer given in the article seem pretty damn thin.

    Also does the cost of computing really go up that often? When was the last time your VPS provider increased the cost of what you were paying for?

    And finally, this all assumes providers are all interchangeable. I don’t see any motivation for that to happen. Providers want to build lock-in (or brand loyalty) like any other industry, which they do by offering provider specific tools and features.

    I don’t consider myself a hippy, or a communist, but the more I see stuff like this, the more I think we really need to re-think the whole money concept. It seems to have outgrown it’s use as an abstract bartering tool and driven a massive amount of human potential into pointless and non-beneficial activities.

    1. Re:Blech by WillAdams · · Score: 2, Insightful

      The same point of allowing Goldman Sachs to ``invest'' in wheat futures:

      http://www.foreignpolicy.com/node/775651

      It's obscene that the laws limiting participation in futures commodities were lifted --- that status quo needs to be restored ASAP.

      --
      Sphinx of black quartz, judge my vow.
    2. Re:Blech by Ryanrule · · Score: 3, Informative

      Rich douchebag kids of rich douchebags NEED JOBS!

  3. Fail by girlintraining · · Score: 4, Insightful

    In the exchange, investors and traders could buy up these blocks

    Step 1. Get most of the major internet websites and businesses onto cloud architecture.
    Step 2. Add middlemen between cloud providers and users who can arbitrarily increase the price of computational resources once they're locked in.
    Step 3. Profit!

    --
    #fuckbeta #iamslashdot #dicemustdie
  4. A taxpayer funded government Cloud Bailout . . . by PolygamousRanchKid+ · · Score: 2

    . . . just what life is missing right now . . .

    --
    Schroedinger's Brexit: The UK is both in and out of the EU at the same time!
  5. "if the value of the resource increases" by VernonNemitz · · Score: 3, Insightful

    That's the crucial "if". Unlike most other commodities that businesses seek to control and restrict the supply thereof (such as stocks), processing power is expected to keep going up per Moore's Law for several years yet. Anyone investing now is not going to make money. After Moore's Law runs out, however, then it will depend on the total supply of processors that are built and connected as "cloud power". People would have to stop adding more to the Cloud for the Law of Supply and Demand to start increasing the value of that resource. And the only way that could happen is if brand-new businesses have no way of adding servers to the Internet --the design of the Internet itself would have to be changed. Therefore what average folks need to be on the lookout for is attempts by anyone to do just that --redesign the Internet to become a limited resource, rather than a resource to which just about anyone could add more processing power.

    1. Re:"if the value of the resource increases" by girlintraining · · Score: 2

      Unlike most other commodities that businesses seek to control and restrict the supply thereof (such as stocks), processing power is expected to keep going up per Moore's Law for several years yet. Anyone investing now is not going to make money.

      You know, they said the same thing about IPv4. Who'd ever pay to have an address? And they said the same thing about DNS. Well, here's the thing you don't get: Artificial scarcity. Why would you want to add more product to the market, crashing your margins, when you can keep it high and rake in the dough? It's not like just anyone can go and cloud it up. And you're forgetting the lessons of OPEC -- If you control production, you control the price. And demand naturally tends upwards because so does the population. There will always be more people tomorrow to buy your product than yesterday.

      So don't kid yourself, man. People have made trillions by market manipulation. Where there are middlemen, there is manipulation.

      --
      #fuckbeta #iamslashdot #dicemustdie
  6. cloud services are not a commodity by alen · · Score: 4, Insightful

    wheat, corn and other commodities are called commodities because corn is mostly corn no matter which farm you buy it from. food processors buy from lots of suppliers and mix it all together.

    and commodities are mostly traded for price protection and risk reasons. if you invest say $1000 per acre to grow corn you want to be fairly sure that you can sell it for more than that when its ready to sell. that's what the commodity markets do, they match buyers and sellers who want to lock in their prices before the commodity is delivered to reduce risk. the speculators are a tiny percentage of the market

    cloud services are not a commodity. amazon's cloud is different from salesforce which is different from google's cloud which is different from ADP

    1. Re:cloud services are not a commodity by NoImNotNineVolt · · Score: 2

      What you're saying is that cloud services are not fungible.

      That's the first thing that came to mind when I RTFS. This is just stupid.

      --
      Chuuch. Preach. Tabernacle.
    2. Re:cloud services are not a commodity by mlts · · Score: 2

      I can't see how cloud services ever could be made fungible on a large scale unless providers shared data centers.

      A terabyte of storage on a data center close to me network-wise can be far more valuable than a chunk sitting on the wrong end of a 28.8 in Elbonia.

      Then there are SLA models. A terabyte of storage stored on a spanned array on a bunch of USB drives is less valuable to one on a multi-path EMC VNX with a tier 1 (SSD) backend, replicating to another site in real time.

      Of course, there is security. A terabyte of storage on someone's anonymous FTP server is a lot less valuable than a terabyte of encrypted storage via secure links and protocols.

      If one takes a look at the building blocks of storage, not even they are fungible. A terabyte of space on an EMC VNX is different from one on a NetApp SAN. A terabyte of space on a FCoE LUN is different from one being sent via iSCSI, or a terabyte of storage plugged in via a USB port.

      Then there are ways storage is accessed. For example, iCloud is not meant for tossing files on and sharing them. Instead, MediaFire would be a better candidate for that. For syncing between boxes, Dropbox is a solid candidate.

      Storage has come a long way, but there are still way too many tiers before it becomes standardized to the point where one can say "one terabyte of storage" without any qualifications such as location, access, interface type, etc.

  7. Memories... by Shoten · · Score: 5, Informative

    I remember a bunch of douchebags who managed to convince non-technical business leaders that bandwidth could be traded like this. They set up a whole trading market, pumped a bunch of money through it...I even worked for someone who managed to get us in to do a vulnerability assessment of their whole operation.

    After we were done, the upper management of this company (the douchebags with the trading capability) came in, and shut down the meeting where we presented our findings...after which, they sacked the IT people who brought us in. Why, you ask? Because the whole thing was a sham, and the upper management was afraid it would get found out. The douchebags were Enron.

    This sounds very similar to me.

    --

    For your security, this post has been encrypted with ROT-13, twice.
  8. If so, don't use them. or the grocery store, gas.. by raymorris · · Score: 4, Insightful

    If aggregators, dealers, and other "middle men" don't offer you anything you want, don't use them. Simple.

    Note that the grocery store, gas station, and just about every other business you use is a middle man. If the grocery store doesn't offer you any advantage over ordering items shipped directly from manufacturers and producers, you can make that choice. Sometimes, I order things direct. Most of the time, it's more convenient and cheaper to go through an aggregator / retailer like Walmart.

    If you want some of the services of a middle man but not all, you have that choice too. Sam's Club and other warehouse stores sell cases at low prices, just like buying direct. Internet distributors are another in-between option. Yet, most of the time we prefer the services of a middle man, a retailer.

    More on topic, I have bought, and continue to buy data services through a middle man. The backbone providers sell 10Gb connections. They aren't interested in the 50Mbps I want to buy. My retailer IS very interested in my 50Mbps account and they work hard to keep me happy. If there's a problem with one of the backbones, they have the expertise and the pull to get it fixed.

  9. many forms are available, your choice by raymorris · · Score: 2

    What do you mean "of you don't want to participate in culture in it's exact form as it exists right now"?
    Right now, you can buy from a boutique retailer who buys from a distributor, you can buy direct from the manufacturer, or many choices in between.

    I bought my last pair of glasses from 39dollarglasses.com. They are the same glasses the retailer in the mall will sell me for $160. The differences include - the retailer will measure the distance between my eyes for me, help me find a pair that looks nice, adjust them for me, and charge more. Both choices are "culture as it exists right now". Right now you can buy direct from the manufacturer who is 1,000 miles away, buy from a discount store, or a boutique shop. You can have it any way you want. Why do you insist that I also have to have it your way, that I'm not allowed to getvalue added by a dealer? What posesses you to need to take away the last bit if freedom I have left?