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Google’s Public Cloud Platform : The Macroeconomics of IoT

The Web Summit 2014 hosted from 4-6 Nov 2014 in Dublin, Ireland was a grand success and proved to be the largest Technology Conference in Europe. Internet of Things (IoT) was the theme of this conference. I am very glad to be officially invited by The Web Summit team to Dublin, Ireland to blog about this event. It reassures me the popularity of my blogs on macroeconomics of High Tech industry ( Read more blogs at www.ApekMulay.com )This blog is about the future of IoT based on the success of Google Inc. and its rapid growth from a company of just 2 employees in 1998 to over 50,000 employees today.

Urs Holzie, the SVP of technical infrastructure and software platform team at Google talked about “From 2 to 50,000: Google, the Story of Growth“. When Google Inc. started as a company in 1998, it was a small company with great ideas. The visionary founders realized at very early stage the importance of a great infrastructure to offer its search engine services. From its infancy, Google Inc. worked hard to set-up its state-of-the-art infrastructure involving huge costs and long working hours for infrastructure set-up.

Today, Google is about to transform the IoT industry very similar to how semiconductor industry has been transformed from Integrated Device Model (IDM) to fabless-foundry business model. The Cloud Platform under Google Now offers an opportunity for new start-ups to focus on innovations and invest fraction of costs for owning a state-of-the-art infra-structure. This is very similar to how the fabless-foundry model of semiconductor industry led to democratization of innovation by ushering growth of several small fabless semiconductor businesses which focus on innovative circuit designs and transferring the manufacturing costs to their foundry partners. The fabless-foundry business turned out to be a win-win for both fabless semiconductor companies and their foundry partners and hence led to a transformation of the global semiconductor industry. This has been presented well by author Daniel Nenni in his book “Fabless: The Transformation of the Semiconductor Industry

Through a Public Cloud Platform, new software startups can make use of the state-of-the-art infrastructure of Google Now, Amazon Web Services, etc. and offer high quality networking services, computational services, Big Data services and other software services. The state-of-the-art infrastructure of Google Now also needs to be constantly upgraded with the progress of Moore’s law. Through Google Now platform, the developers can gain access to a superior technology at fraction of the costs of owning a state-of-the-art infra-structure. Google Now is indeed a well-thought move by Google Inc., which benefits the new start-ups in IoT industry to benefit from falling prices of state-of-the-art infrastructure due to mass production in compliance with the progress of Moore’s law as shown in the Figure below.

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As a macroeconomist of High-Tech industry and author of first book on macroeconomics of microelectronics industry “Mass Capitalism: A Blueprint for Economic Revival“, I plan to educate the High Tech industry professionals about macroeconomics behind a sustainable growth of the High Tech industry. These path breaking ideas would revolutionize the economic thinking of High Tech industry professionals to overcome the present economic barriers to the progress of Moore’s law. Today, Cloud service providers like Google Now, Amazon Web Services, etc. should be aware about the importance of sustainable macroeconomic progress for a sustainable progress of Moore’s law and robust growth of IoT industry. At Semicon West 2014, the big semiconductor industry players like Intel, TSMC, etc. have demonstrated a reluctance to invest in the transition to 450 mm diameter silicon wafers due to expected poor return on their investments (ROI). The ever increasing manufacturing costs for continued technological progress of Moore’s law is also an important reason because of which most High Tech industry experts believe that it will be Economics that would lead to demise of Moore’s law before Physics leads to the eventual demise of Moore’s law.

As explained in my book “Mass Capitalism: A Blueprint for Economic Revival“, the transformation of free market Capitalism into Monopoly Capitalism is one of the fundamental roadblocks to a sustainable economic progress of Moore’s law. Additionally, My book also explains how the absence of a free market economy because of government approved growth of internet monopolies is threatening the very existence of free market economy due to “net neutrality” which would present roadblocks for a sustainable progress of the Internet of Things (IoT) industry. “Mass Capitalism” offers a new business model based on Progress Utilization Theory for ensuring a sustainable progress of Moore’s law in the global semiconductor industry and global economy.

A balanced economy would also benefit the Public Cloud Service providers like Google, Amazon, etc. by ensuring a good ROI because of high costs involved in upgrading their hardware infrastructure to provide a state-of-the-art infrastructure to their customers which are the small and medium size software service providers. These software service providers can in turn focus on providing innovative services leading to rapid innovation and growth of Internet of Things (IoT) industry. This would not only benefit the end user of services but would also save the costs of huge investments in state-of-the-art infrastructure for the service providers . By benefitting both producers and consumers in the industry it would usher in an economic democracy in High Tech industry. A Decentralized Supply Chain between the providers of these variety of software services would also prevent any Mergers & Acquisitions (M&As) which result into growth of internet monopolies thereby hurting overall macroeconomic growth due to loss of free markets.

The Cloud Platform Service providers like Google Now, Amazon Web Services, etc. should follow a balanced economic approach with a three tier business model for a robust macroeconomic growth in order to democratize innovations and sustain the progress of Moore’s law for success of IoT industry. Without a balanced economic approach, a good consumer purchasing power cannot be ensured in any economy. Poor consumer purchasing power would translate into a poor economic demand resulting in poor ROI (for the providers of Public Cloud Platform services like Google, Amazon, etc.) because of high costs of upgrading their state-of-the-art infrastructure with the progress of Moore’s law. In this way, Internet of Things (IoT) can ensure a true democratization of innovation across the board leading to a superior macroeconomic growth thereby unleashing the socio-technological and business-economic impact of the progress of Moore’s law.

Taking into consideration the great recession since 2007 and looking back into the history of macroeconomics, it can be observed that an economic depression might occur when money that is in the possession of individuals stops rolling. Some of major players in global semiconductor business are concerned that their investments for transitioning to 450mm diameter wafers would not give any significant returns. This could turn out to be one of the causes for money to remain inert or unutilized in this capital intensive business. Lack of consumer demand due to present macroeconomic policies in High Tech industry would also result into a poor demand for electronic products and variety of services in IoT industry.

As a result of above policies, money in the economy would become immobile or inert; consequently, there would be no investment, no production, no income and hence further reduction in consumer purchasing power. The situation could become so dangerous that there would be very few buyers to buy new electronic goods and pay for the services in IoT industry. This macroeconomic analysis explains why macroeconomic reforms have become critical in the IoT industry to ensure that money does not remain inert and it keeps circulating in the economy in order to keep increasing the consumer demand for the Internet of Things (IoT) services. Without above proposed macroeconomic reforms, progress of Moore’s law and robust growth of IoT industry seems impossible and chances of the U.S. economy transitioning from this great recession to an economic depression seems inevitable. It is time for High Tech industry to focus on broader macroeconomic growth of global economy by ushering in a true free market economy. This would benefit not only the end consumers of these services but also benefit the producers when consumers generate more demand for IoT services.

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