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Grid Utility Technology Drivers - Enabling New Business Models, Siggraph06

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Paul Kamp
Paul Kamp

The document discusses how technology trends like Moore's Law, Gilder's Law, and Metcalfe's Law are enabling new business models by decreasing costs and increasing performance over time. It provides examples of how the music and film industries have transitioned to digital distribution models online. The author argues that utilities should explore new delivery mechanisms and business models made possible by distributed computing technologies and the transition to digital content and services.

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Grid Utility Technology Drivers Enabling New Business Models July 30, 2006 Paul Kamp GridInstitute Fellow [email_address]
Technology Context The Net Effect 10,000X 1,000X 100X 10X 1X 1,000,000X 100,000X 1980 1990 2000 Moores Law Gilders Law Metcalfes Law Net Effect For a given cost, performance improves over time Performance Time
Business Context The Net Effect 10,000X 1,000X 100X 10X 1X 1,000,000X 100,000X 1980 1990 2000 For a given performance level the cost to deliver a solution decreases over time Performance Time Cost $/Unit of Performance 1/100$ 1/1,000$ 1/10,000$ 1/100,000$ 1/1,000,000$ 1$ 1/10$ Cost to Deliver a 'Solution'
Example solution iTunes Music Store (iTMS) Bricks and Mortar distribution - Vinyl 45 RPM record Artist Record Label Point of Sale Promotion Local Record Store Inventory Distribution Content Creation Manufacturing Performing Artist Songwriter
Example solution iTunes Music Store (iTMS) Bits and bandwidth distribution iTunes Music Store Artist Record Label Point of Sale Promotion Online Music Store Inventory Distribution Content Creation Manufacturing Performing Artist Songwriter
Business Model Increasing GM's Over Time Cost to deliver service decreases faster than price $10,000 $1,000 $100 $10 $1 $1,000,000 $100,000 1980 1990 2000 Price Time Cost $/Unit of Performance 1/100$ 1/1,000$ 1/10,000$ 1/100,000$ 1/1,000,000$ 1$ 1/10$ G R O S S M A R G I N S Cost to Deliver the Service Price for Service that Technology is Delivering
Utility and Application Delivery Chain Enabling the digital economy Utility Computing Grid Distribution Applications Utility Metering Online Record Store Direct Marketing Delivery mechanism Engine Computer Center Monitoring Provisioning Application Metering
The Transition from Atoms to Bits The change from atoms to bits is irrevocable and unstoppable. Why now? Because the change is also exponential - small differences of yesterday can have suddenly shocking consequences tomorrow. Nicholas Negroponte Being Digital
A Few Additional Examples Tivo Service wrapped technology Constant Contact Direct Mail marketing Shutterfly, Kodak Digital film development and prints Starbucks Internet Access as a utility . . . Reseller of T-Mobile bandwidth
A Few Proposed Media Examples Digital Distribution of Film In 2003 the film industry spent $631M on physical reels of film for US distribution Internet based distribution of radio Save on Satellite time Digital Rendering of Film Why buy the hardware when you can rent it Virtual Medicine Telepresence Medical Imaging
Summary Recommendation Next steps Rethink your business model to take advantage of the new modes of distribution and product development Define Partners, customers, delivery mechanism, that change the industry dynamics Application pricing must be in customer and solution terms Particpate in industry forums to enable the new business model Join the Quality of Service Technology Group (QOSTG) Identifier: grid.qos Web site: http://mediagrid.org/groups/technology/grid.qos Email list: grid.qos@lists.mediagrid.org Join the Grid Gateway Technology Group (GGTG) Identifier: grid.gateway Web site: http://mediagrid.org/groups/technology/grid.gateway Email list: grid.gateway@lists.mediagrid.org

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Grid Utility Technology Drivers - Enabling New Business Models, Siggraph06

  • 1. Grid Utility Technology Drivers Enabling New Business Models July 30, 2006 Paul Kamp GridInstitute Fellow [email_address]
  • 2. Technology Context The Net Effect 10,000X 1,000X 100X 10X 1X 1,000,000X 100,000X 1980 1990 2000 Moores Law Gilders Law Metcalfes Law Net Effect For a given cost, performance improves over time Performance Time
  • 3. Business Context The Net Effect 10,000X 1,000X 100X 10X 1X 1,000,000X 100,000X 1980 1990 2000 For a given performance level the cost to deliver a solution decreases over time Performance Time Cost $/Unit of Performance 1/100$ 1/1,000$ 1/10,000$ 1/100,000$ 1/1,000,000$ 1$ 1/10$ Cost to Deliver a 'Solution'
  • 4. Example solution iTunes Music Store (iTMS) Bricks and Mortar distribution - Vinyl 45 RPM record Artist Record Label Point of Sale Promotion Local Record Store Inventory Distribution Content Creation Manufacturing Performing Artist Songwriter
  • 5. Example solution iTunes Music Store (iTMS) Bits and bandwidth distribution iTunes Music Store Artist Record Label Point of Sale Promotion Online Music Store Inventory Distribution Content Creation Manufacturing Performing Artist Songwriter
  • 6. Business Model Increasing GM's Over Time Cost to deliver service decreases faster than price $10,000 $1,000 $100 $10 $1 $1,000,000 $100,000 1980 1990 2000 Price Time Cost $/Unit of Performance 1/100$ 1/1,000$ 1/10,000$ 1/100,000$ 1/1,000,000$ 1$ 1/10$ G R O S S M A R G I N S Cost to Deliver the Service Price for Service that Technology is Delivering
  • 7. Utility and Application Delivery Chain Enabling the digital economy Utility Computing Grid Distribution Applications Utility Metering Online Record Store Direct Marketing Delivery mechanism Engine Computer Center Monitoring Provisioning Application Metering
  • 8. The Transition from Atoms to Bits The change from atoms to bits is irrevocable and unstoppable. Why now? Because the change is also exponential - small differences of yesterday can have suddenly shocking consequences tomorrow. Nicholas Negroponte Being Digital
  • 9. A Few Additional Examples Tivo Service wrapped technology Constant Contact Direct Mail marketing Shutterfly, Kodak Digital film development and prints Starbucks Internet Access as a utility . . . Reseller of T-Mobile bandwidth
  • 10. A Few Proposed Media Examples Digital Distribution of Film In 2003 the film industry spent $631M on physical reels of film for US distribution Internet based distribution of radio Save on Satellite time Digital Rendering of Film Why buy the hardware when you can rent it Virtual Medicine Telepresence Medical Imaging
  • 11. Summary Recommendation Next steps Rethink your business model to take advantage of the new modes of distribution and product development Define Partners, customers, delivery mechanism, that change the industry dynamics Application pricing must be in customer and solution terms Particpate in industry forums to enable the new business model Join the Quality of Service Technology Group (QOSTG) Identifier: grid.qos Web site: http://mediagrid.org/groups/technology/grid.qos Email list: grid.qos@lists.mediagrid.org Join the Grid Gateway Technology Group (GGTG) Identifier: grid.gateway Web site: http://mediagrid.org/groups/technology/grid.gateway Email list: grid.gateway@lists.mediagrid.org