The Economists Cloud Debate: Microsoft

The rise of cloud computing is not just shifting Microsoft’s centre of gravity. It is changing the nature of competition within the computer industry.

Technological developments have hitherto pushed computing power away from central hubs: first from mainframes to minicomputers, and then to PCs.

Now a combination of ever cheaper and more powerful processors, and ever faster and more ubiquitous networks, is pushing power back to the centre in some respects, and even further away in others.

The cloud’s data centres are, in effect, outsize public mainframes. At the same time, the PC is being pushed aside by a host of smaller, often wireless devices, such as smart-phones, netbooks (small laptops) and, perhaps soon, tablets (touch-screen computers the size of books).

Although Windows still runs 90% of PCs, the fading importance of the PC means that Microsoft is no longer an all-powerful monopolist. Others are also building big clouds, including Google, a giant of the internet, and Apple, renowned as a maker of hardware, with a market capitalisation that now exceeds those of both Google and IBM, its original arch-rival (see chart above).

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