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Will Cloud Services One Day Be Traded Just Like Stocks and Bonds? 168

Posted by timothy
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."
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Will Cloud Services One Day Be Traded Just Like Stocks and Bonds?

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  • In other words... (Score:5, Insightful)

    by sconeu (64226) on Thursday October 10, 2013 @01:36PM (#45093865) Homepage Journal

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

    Just like the stock market.

    • by Qzukk (229616)

      Yeah, someone said "There aren't enough middle men!" and is trying hard to figure out how they can keep us from just getting the services directly like we can now.

      • Yeah, someone said "There aren't enough middle men!" and is trying hard to figure out how they can keep us from just getting the services directly like we can now.

        If what's going on with Tesla Motors is any indicator... they'll just make it functionally, or actually, illegal, while screaming as loud as they can it's in the consumer's best interests. Heh. Like a company has ever said that in the history of all of humanity and it turned out it that they didn't have ulterior motives. :3

        • by Aighearach (97333)

          It is not at all clear what the heck you're going on about Tesla Motors. Do you mean the dealers who are complaining that some of their advertising is misleading? If you look at the complaint, you'll notice 2 things: that the advertising is actually misleading in the way accused, and that it is a rather small complaint.

          Tesla has a waiting list, and are making money. They're neither being obstructed by regulation, or given an advantage by it. The reason that they haven't ramped up production yet is that they

      • by cshark (673578)

        It would work, too, if the value of these services was not in a perpetual downward spiral. In order to make this happen, you would need some compelling reason this was a sensible investment. Honestly, while I think the idea is pretty cool... I'm just not seeing how it could possibly work. Maybe if you had a whole bevy of similar or inter-related services offered by commodity providers?

    • by Anrego (830717) *

      I'm a believer in eliminating the buying and selling of "stock" amongst investors. It's gotten so abstract and convoluted that it serves only to take money off the top of others work as you said.

      I'll admit I haven't really thought this through, but I envision a system where buy into a company in the hopes that they do well, and make your profit when they do (or take the loss when they don't).

      All this second sale stuff is artificial and I think needs to go, people are buying things whos only purpose (barring

      • by alen (225700)

        a lot of funds have rules where they are only allowed to hold stocks of certain company. it could be size, or sector or growth rate or whatever. if a company grows or does something to violate the fund's rules then the stock has to be sold. same with buying.

      • I envision a system where buy into a company in the hopes that they do well, and make your profit when they do (or take the loss when they don't).

        This pretty well describes the stock market. I buy a piece of the company, and if they make profits they give dividends (or the price increases and I can sell some or all of my stock to make money as well).

        people are buying things whos only purpose (barring dividends) is resale for the same purpose.

        I'm unsure how this is different from the system you envisioned in the previous quote?

        • by Anrego (830717) *

          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.

          • by dkf (304284)

            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.

            Most normal stocks pay dividends regularly.

            Tech stocks mostly aren't normal, for various reasons that come down to "lawful tax fiddle"; as a holder of a tech stock you're having to hope that the withholding of the dividend leads to a greater increase in value than you'd get from having the dividend payed out. Sometimes that works.

          • But if IPO investors aren't able to easily sell their shares later on, they are going to be less likely to buy the shares of the company in the first place. Why do you think IPOs raise so much money?
          • Just because you lack the imagination to see why there is benefit to that doesn't meab there isn't any.
        • by gstoddart (321705)

          This pretty well describes the stock market. I buy a piece of the company, and if they make profits they give dividends (or the price increases and I can sell some or all of my stock to make money as well).

          No, that's how the stock market used to work.

          Now people expect to buy a stock, and have it grow linearly so they can sell it.

          The stock market has become so horrible separated from fundamentals as to make it unrelated to the performance of the company. A company can have a good quarter but the stock goes

          • It used to be you bought a stock, and held onto it. If they were profitable they might pay dividends. Over time, the stock could go up.

            Um, this is still how it works. I have several stocks that I have held for a long time, I have no plans to sell them, and they pay me a steady stream of dividends from their profits. The stocks have slowly risen over the years.

            Now you could buy and sell your stocks every few minutes/hours/days hoping to make a buck, but the 'market' itself doesn't require you to do this. It is an individual investor's choice...

          • Nope, fundamentals are still hugely important. What makes you think otherwise?
    • Re:In other words... (Score:4, Informative)

      by gstoddart (321705) on Thursday October 10, 2013 @01:52PM (#45094049) Homepage

      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.

      • by lgw (121541)

        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

        • Are you f*** daft? Markets don't magically fix shortages, whatever your misconceptions tell you. The predicted shortages _will_ happen, as the available oil on Earth is finite, and taking huge quantities out of the ground just to burn it is becoming harder and harder. Those are physical facts. When physics meets economic fantasy, physics wins. Every time.

          The only thing markets did in this case was destroy demand, as people who would otherwise have been able to afford to buy their share of oil were unable

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

        More like 6 microseconds ago.

      • Why do you think people by the future rather than the underlying? If the speculators are pulling money out of the market, why would someone pay the extra to buy the future? They do so because there is value there, and they're willing to pay for it.
      • Speculators don't define prices. They may have an effect on the price, but that's information that informs the price. E.g. some speculators think the price will rise, some think it will fall. The first group buy the second group sell. So it's the balance that moves the price - and in that is the wisdom of the crowd. This is how markets incorporate all kinds of information into pricing. It's a good thing. It improves efficiency.
    • by Entropius (188861)

      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.

      • Buyers are already connected with sellers. The only benefit this could possibly bring is allowing the cloud services providers to sell longer term contracts to the investors who would then take the risk of parceling them out to smaller time operators who don't want to finance a long term contract on their own. This sector is already quite well serviced by Amazon and other operators, so there is really no need for this "exchange" to ever realise.

      • by jxander (2605655)

        It becomes parasitism when you disallow the direct buying and selling of these services. (either through legal or practical means)

        The model works perfectly fine as is. These people are proposing we add more layers to the equation, so they can find a spot to hide and take their 5% off the top for the service of adding more layers.

    • by dnaumov (453672)

      Except you've got things completely backwards, this would ELIMINATE a lot of the middle-men.

    • by Solandri (704621)
      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 b
      • I absolutely *love* this idea. The basic idea of distibuting your data among many legal entities in itself is brilliant. Especially when combined with the notion of cryptography, meaning multiple entities must be compromised to get at a single piece of data. You can build on this... n of m blocks needed for decryption for robustness against a failure. Temporary key pairs for transferring the data so that mitm attacks can't store the cyphertext for later decryption when the keys are found. Let's do it!
    • by Aighearach (97333)

      The stock market, regardless of if you like it or not, at least does have some usefulness in valuing and trading in uncertainty. The same as commodities.

      Cloud services, OTOH, have a 100% predictable supply, that can be increased or decreased for very predictable costs/savings. So there is none of the value added by a middleman in commodities. It seems obvious that adding middlemen where there is neither uncertainty nor even delivery logistics, is just going to make those offerings cost more for the same thi

    • by slick7 (1703596)

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

      Just like the stock market.

      Just like a federal reserve note, something for nothing, until you try to pay for it.

  • Blech (Score:4, Informative)

    by Anonymous Coward on Thursday October 10, 2013 @01:36PM (#45093867)

    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.

    • Re: (Score:2, Insightful)

      by WillAdams (45638)

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

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

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

    • Given that I have a fair idea of how the money process works, I can see without RTFA how this could work.

      Say you are in charge of a large enterprise project that will need a large amount of computing horsepower. You don't know when you will have these resources available to complete the project - but you know you need to hold the Virtual cycles in reserve because of budget and other reasons that occur with Layer 8 issues. So, you buy a large block of time - but you can't use that virtual processing time yet

    • Re:Blech (Score:4, Informative)

      by Ryanrule (1657199) on Thursday October 10, 2013 @04:02PM (#45095549)

      Rich douchebag kids of rich douchebags NEED JOBS!

    • Initially, the commodities market emerged from the farmer's need to secure part of their income against calamities. They would sell their future crop at a relatively low price to an investor, but who would pay them up front for it. They would thus share some of the risk involved, but they would also give up some of the profits. So, things like bad quality produce due to bad weather or low market prices due to overproduction and low demand are no longer destroying the lives of farmers. This system also incre

      • What you are saying implies that futures prices always rise. Which isn't true. In fact, arbitrage prevents your scenario. Increased demand causes prices to rise, and this causes people to try to increase supply, which reduces prices.
        • I'm no expert, but the futures price will always be higher than the amount paid to the farmer. Otherwise, there would be no reason to trade the contract in the futures exchange in the first place. The "increased demand" is a falsehood created in the trading pit (and nowadays in the computer network). There will be some price fluctuations as contracts change hands, some will make money, some will lose money, but the ultimate looser is the farmer (that gets nothing) and the end-consumer (that pays everything)

          • Nope, the price of a future can drop below the original price the farmer offered it at, prior to expiry. Demand comes from the actual consumer, e.g. Kraft Foods and the like. Speculators don't increase demand: firstly, because they are as likely to sell as to buy, secondly because if they did increase demand, they would end up having to accept delivery of actual product. You're simply trying to justify your dislike of speculation.
  • Fail (Score:5, Insightful)

    by girlintraining (1395911) on Thursday October 10, 2013 @01:38PM (#45093883)

    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!

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

  • by VernonNemitz (581327) on Thursday October 10, 2013 @01:53PM (#45094071) Journal
    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.
    • 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 popul

      • I know exactly what you are talking about, and was quite careful in my phrasing. To artificially restrict processing power on the Internet, one needs to be able to prevent people from arbitrarily adding servers; it really is that simple. However, there is another way for such a restriction to be done, besides what I already mentioned. The existing Internet has certain overall bandwidth limits, and once that is "full", adding more servers won't effectively add useful processing power. So, one also needs
  • by alen (225700) on Thursday October 10, 2013 @01:53PM (#45094075)

    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

    • What you're saying is that cloud services are not fungible [wikipedia.org].

      That's the first thing that came to mind when I RTFS. This is just stupid.
      • by mlts (1038732) *

        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

        • by slim (1652)

          "Just" get an API and some SLAs standardised, and it's fungible.

          You don't care whether it's hosted in Elbonia or next door. You don't care how it's stored. You care about measurable things like transfer speed and disaster recovery performance.

      • by slim (1652)

        I find it pretty easy to imagine fungible cloud services. Define some standard APIs. Define some standard measurements of quality/quantity. Done.

        For corn it's more complicated than "corn is mostly corn no matter which farm you buy it from" - there are standards for grades.

  • Memories... (Score:5, Informative)

    by Shoten (260439) on Thursday October 10, 2013 @01:55PM (#45094109)

    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.

    • The douchebags were Enron.

      Sadly, the douchbags end up making money in the deal . . . and everyone else has to pay to clean up the mess that they have created.

  • There are tons of companies reselling Amazon and other webservices, and they make good money by adding value like preconfigured images and other services like backup software that backs up to S3. I don't see why this is news now.

    Oh wait, I get it, this guy wants to make good money without adding any value at all. Good luck with that, if he tries to corner the market in AMZN.S3 "stock" (capacity), Amazon's shareholders would happily vote for issuing more "stock" by buying additional capacity, and profiting

    • Unlike stock, [which have intrinsic value,] there's no intrinsic value [in storage capacity] to be cheapened by issuing more capacity.

      Is this really what you were trying to say?

  • Cloud computing is a commodity, not a stock or bond. And the answer is yes.

    The main obstacle is the lack of a common standard for cloud resources. It's only a commodity if it's interchangeable: wheat is wheat no matter where it's grown, but AWS and App Engine are very different things.

    • It's only a commodity if it's interchangeable: wheat is wheat no matter where it's grown, but AWS and App Engine are very different things.

      Thus it's not a commodity, and your first paragraph is false.

      • by goodmanj (234846)

        Fine. Cloud computing *will be* a commodity. *eyeroll*

        • Well, maybe once we discover some application independent way to measure it. But that's a deep (if possible at all) mathematical breakthrough separating us from the comoditization of computing.

          It's a fine concept to put on sci-fy works, just like faster than light travel, or inverting the second law of thermodynamics. It's not something you put in a business plan.

    • by PPH (736903)

      So its more like a collateralized debt obligation in an unregulated market. Like what we had before 2007. Nobody knows what they are buying, because everything is unique. And yet someone creates a market (because financial institutions have to 'mark to market') which sets a phony price on a cloud service contract.

      And when some fly-by-night provider goes tits up or gets hacked, the market will collapse, because nobody knows who is holding the risk. And the banks will scream. Because cloud service contracts

  • Why would I go to a market to buy a service (with a middleman markup) when I could just buy it directly from a provider? Do we really expect to have shortages of computing power that would benefit from a secondary market redistributing computation around?
  • Enron (remember Enron?) tried to do this for network bandwidth. Didn't work.

    A futures market requires a standardized, fungible product, like oil or electric power. This is hard when the manufacturer or service provider controls the product definition. Rarely has there been a successful futures market in a manufactured good or service.

    It's been tried. There's a futures market in cold-rolled steel sheet. But there's no futures market in cars or office space or air travel. Some airlines have sold options

  • Are they? I mean, if the price today to run my workloads on Service A is $25 and on Service B $20, is there enough compatibility and flexibility to simply "vmotion" my workloads to whoever has the best deal that day? The same thing could apply to storage.

    My basic understanding is "no" -- an Amazon VM instance isn't directly portable to Rackspace or some other service and the connectivity isn't necessarily fast enough to move the associated storage around that easily, either.

    But will it get that way in the

  • Isn't all cloud storage pretty much equal and isn't there pretty much unlimited space by definition? These people are acting like they're selling real estate.
  • The first half of Greg Egan's Permutation City [wikipedia.org] is set in a future where computation is a commodity. Storage and bandwidth, the more important parts of today's cloud services, are ignored in the novel.
  • One of the problems that has to be solved is the version-combo problem.

    For example, a given project may require version 1 of the database, version 1.5 of the language, version 2 of the OS, version 3 of the middle-ware, version 3.5 of Apache, etc etc etc.

    Most cloud services don't support enough versions to handle specific matches, making swapping vendors difficult. You have to change versions to move your project, which often creates bugs and reprogramming effort when you move.

    Also, there is no incentive for

  • One if Enron's hare-brained schemes was to develop a market in bandwidth [internetnews.com]. It was one of the things that steered me away from investing in what was then the hottest stock in the market

  • Computing resource isn't like money.

    You can't use it when ever you please. If everyone wanted to use all their "compute blocks" at the same time, a provider could grind to a halt. They have finite resources. If they never allocated more than they could provide at once, they would never be fully utilised since the "cloud traders" would be holding on to some to trade.

    • by slim (1652)

      But it is like coal -- or it can be made to be like coal.

      You can't buy as much coal as you like at an arbitrary point in time - because there's only so much coal already mined, and it takes time and money to mine more.

      If lots of people want coal at the same time, the price goes up. If you buy coal at a time when few other people want it, it will be cheaper.

      Make computing resource fungible enough - by standardising the API and the measurements of quality/quantity, and you can certainly treat computing resour

      • It's the opposite of coal though. Coal has limits on how much you can buy, because it is a physical thing that requires mining and processing. You can burn as much of it as you like, when ever you like once you've bought and transported it.

        Computing resource is the opposite, the bottle neck comes when you want to use it. If everyone used theirs at the same time, everyone would suffer, things would take longer and the value would decrease. So higher demand = lower price. Or pay for "premium" compute blocks a

  • So, you have a FHT server farm, right in the exchange, because if you are across the street someone will take your lunch money (well technically your chance to steal someone else's lunch money). But because of the antiquated nature of the markets, they close down for two thirds of the day... Can't use those same servers to game the Nikkei - you have to be right on top of that too. So now you have a world wide set of servers which are 60% idle... Maybe you could sell that time.

    But you're someone who th

  • Anyone owning a computer with enough ram can download linux and create their on cloud full of VMmachines. A commodity by definition implies rarity and value The ability of anyone - with the right skill set - to do this 'decommodifies' the end product. . Isn't that were most applications start? Some programmer is fed up with some companies extortion prices or it just misses the mark functionally, so it's developed in house. Every application starts as the need to 'scratch an itch'.
  • Two questions: Are we going to wind up developing the equivalent of a "USDA Certified Grade A Cycles" sticker? And what is the cloud computing equivalent of Taco Bell "meat"?

    I feel like commoditization might provide a level of anonymity to allow both a low grade of service (faking processing with either less accurate processing or known-faulty equipment) and a security risk (While a collection of cloud services are mining your customer data for you, how many are copying it off for later perusal?)

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