Cloud Computing for Competitive Advantage

It was an interesting discussion today on whether Cloud Computing can actually provide competitive advantage, or is it just a parity game. Well, in order to answer this, we probably have to tap into the Demand vs. Supply side of Cloud Computing capabilities. We discussed mainly the Supply side today, while speaking of companies like Amazon, Google, Apple, Salesforce, and the like.

I would like to look at the same question from the demand side. There are CIOs of companies out there who feel that its going to be difficult for Cloud Computing to be able to provide differentiated solutions to companies, given its current technical architecture, hence it is most probably a parity game, and not a differentiation strategy. I kind of agree to this thought process. Here's the reason why.

In a Cloud setup, we could talk about Infrastructure-as-a-Service Clouds, Platform-as-a-Service Clouds or Software-as-a-Service Clouds. When we talk about Infrastructure, it is mostly a Parity game, the reasons being obvious. When we talk about Platforms or Software as a service, we could argue that differentiated solutions could be provided at these layers. But, Software as a Service solution is mostly provided through a multitenant architecture, and in a multitenant architecture, you have very little scope for differentiation. Hence, you would still need customized, specialized applications (different from, and on top of the core SaaS applications) that would be able to provide differentiated value. Hence, SaaS by itself, probably would not be able to provide competitive advantage.

One way in which cloud computing would help, at least in the near future, is by helping outsource all the mundane, routine or "parity" activities, helping the CIOs/CXOs to concentrate their resources on more differentiated activities. But Cloud Computing in itself, I believe, would provide little differentiation capabilities, at least in the near term, to the demand side of companies.

Please feel free to critique this thought process ...