The Rise of the Cloud Corporation

We live at a unique time in human history at the end of the Industrial Age and the beginning of the Information Age. With this change in the times has come a dramatic shift in the balance of power—information, a commodity once guarded by and empowering the few, is now readily accessible to all, enabling the flattening of the world as Thomas Friedman has described. But what we have witnessed so far is only the beginning. While information has empowered the masses, only recently have the masses begun to realize their power. We’ve seen how technologies such as Facebook and Twitter have enabled the liberation of Egypt and Tunisia, with possibly more successful revolutions to follow.

But the balance of power is not only shifting in the political arena—it is shifting in the business world as well. Industries once dominated by the few are now the domain of many. Take how blogs have emerged as a powerful force rivaling conventional media. I believe we will see similar transformations across industries. As more and more people begin to realize their power, what I ultimately envision is a world of entrepreneurs. A world where everyone believes in their ability to provide for themselves and to add value to society, without the corporation as their steward.

This transformation does not need to take place at the expense of the corporation, but certainly of the corporation as we know it today. As we have seen software gradually transition to the “Cloud,” where applications are hosted over the internet rather than maintained by individual users, I believe we will see the emergence of the Cloud Corporation, where corporations do not necessarily control all of the assets creating value, but they instead organize and manage resources from disparate sources. Like Cloud technologies, the Cloud Corporation would not have to maintain its people in a traditional sense of a salary and benefits, but would utilize the services that they provide as individual entrepreneurs. In such a world, everyone is a free agent, a freelancer, a subcontractor, an entrepreneur.

Such a system would provide immense value both to individuals and to corporations. Individuals gain the freedom and economic benefit of running their own business, while corporations gain the freedom of not having to maintain employees over the long term in order to utilize their services. This also creates an incentive system where individuals must create value for their businesses to survive, and where the work they do is more directly tied to their economic prosperity. In such a system, individuals are likely to produce greater value, which benefits the individual, benefits the company that utilizes their services, and benefits society as a whole as the combined effect of many individuals performing at a higher level will result in greater macroeconomic prosperity.

The key to making this new world a reality is to empower the masses and make people realize the great things they are capable of. And the key to that is Education.

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4 Responses to “The Rise of the Cloud Corporation”

  1. Chelsea Roebuck Says:
    March 6th, 2011 at 12:19 pm

    Where to start?

    Let me begin with your analogy of “cloud computing” versus the “cloud corporation”. The very essence of “cloud computing” is that resources are presented to the end user without any knowledge of the underlying components, configuration and set-up. This virtualization of resources so that a product can be commoditized to an end user, without them needing to understand (or have expertise in) what went into producing this product is EXACTLY what a firm or corporation provides.

    “Cloud computing” is in fact the total opposite of what your so called “cloud corporation” would be. In a world where all contracting occurs between free agents you actually require a far more fine-grained understanding of individuals and the market.

    What you’ve done is taken the word “cloud” and appended it to your idea since you think it makes you sound in touch and visionary. I wonder if you’d been writing this blog a few years back you would have called it “iCorporation”? In fact “cloud” itself is really just marketing hype by the IT community. It’s premised on many of the things that have been going on for years around virtualization and grid computing – but that’s not really the point of this post.

    I suggest you do some research into the Theory of the Firm, Ronald Coase, and transaction costs. Then you might understand why entrepreneurs will always favor creating firms as opposed to sub-contracting to multiple individuals.

    With regards to your last point – education is important.

    My education taught me this:

    (1) Never start a sentence with “And”.
    (2) Education is not a proper noun, so really no need to capitalize the E mid-sentence.

    Regards

    Chelsea

    P.S. You’re quite handsome.

  2. Adam Mayer Says:
    March 10th, 2011 at 11:09 am

    Hi Chelsea,

    Cloud Computing is another way of referring to Software as a Service. Rather than individual users maintaining their own servers, IT departments, and software, they simply pay another company in the “Cloud” to supply application services over the Internet. This is exactly how the Cloud Corporation would work: rather than the “User,” i.e. the corporation, maintaining their own employees by providing salary, benefits, training, etc., the corporation would instead pay individual entrepreneurs (or the firms they create) for the use of their products and services. This does not require any knowledge of how these services and products are produced. When Dell builds a computer, they don’t need to know how Intel manufactures its microprocessors. When a company subcontracts out mainframe services, they don’t need to know how to maintain a mainframe system, they just need to know how to query the database. Companies frequently outsource non-core business functions to other corporations without needing to understand all the intricacies of how those functions are realized. Working for Accenture, I witnessed this first hand.

    The vision of the Cloud Corporation is not that far out there, but rather is an extension of what is already happening today. It is a combination of more and more people going off to start their own companies due to the increased ease of accessing information, and major corporations outsourcing more and more non-core business functions to reduce overhead, increase flexibility, and focus on the key area that they add value. This represents a major shift in the balance of power from being concentrated in major corporations to being more evenly spread among the masses, resulting in further democratization of the US and of the world.

    I’m also a bit of a grammar fanatic and appreciate your attention to detail. Those were both stylistic choices I made.

    Thanks,
    Adam

  3. Chelsea Roebuck Says:
    April 3rd, 2011 at 8:14 am

    Adam – thanks for making my exact point “when Dell builds a computer, they don’t need to know how Intel manufactures its microprocessors” and “Companies frequently outsource non-core business functions to other corporations without needing to understand all the intricacies of how those functions are realized”. Correct on both fronts, and the very point I was making about why firms exist.

    You seem to have entirely reversed your position though.
    What you described (initially) was “a world, everyone is a free agent, a freelancer, a subcontractor, an entrepreneur”. This was your “cloud” as I understood it.

    Take your outsourcing example – you can’t subcontract your whole IT operations to a group of contractors. Well you can, but it won’t turn out very well for you. By the same token you can’t create a “virtual” outsourcing firm as an entrepreneur that’s just made up of a group of contractors. Maybe this is what you meant, but you’ll face just as many problems for the reasons I explained earlier.

    So either (a) you just used a lot of words to describe how firms work with each other – how they’ve worked for a long while, and will continue to work. You just threw the word “cloud” in to sound catchy.

    Or option (b) you were describing a non-workable example where your “cloud” was a group of non-cohesive individuals who can’t be usefully engaged by anyone to get anything done.

    Pretentious or wrong – which was it? Maybe in fact both!

    Chelsea

  4. Adam Mayer Says:
    April 3rd, 2011 at 10:44 am

    Chelsea, it looks like you’re willfully misunderstanding my arguments and taking things out of context to satisfy your own agenda. Also there’s no need to be rude to make your point. I enjoy hearing other points of view and testing my own thoughts against them, but only when those opinions are voiced in a respectful way.

    The Dell example was in response to your point that a company outsourcing a business function requires the company to have an even better understanding of that business function than if they performed it in-house, which is not the case.

    I’ll try a couple more examples. I just talked to a friend yesterday who quit his consulting job to do freelance web development. He has a network of peers and mentors who advise him and share work with him. So if he comes across a client who needs an iPhone app developed, and he doesn’t know how to develop an iPhone app, he passes that work along and collects a referral fee. The net work that can be completed by this network of entrepreneurs is much greater than the sum of what any one could complete on his/her own, yet each of the individuals is self-employed.

    A little closer to home, my family is starting an oil company in Texas, and we have already taken the Cloud Corporation concept to heart. We are maintaining a small core team of several people, yet have a network of geologists, consultants, engineers, and other advisors that we can call on to analyze projects for us. This structure gives us capabilities way beyond the means of our tiny core team, yet keeps our overhead low because we don’t have to maintain all these individuals in-house with a salary and benefits.

    All new ideas are formed of old, repackaged ideas combined in new ways. You can certainly continue to point at any of the components of the Cloud Corporation, say that it’s nothing new, and be right. Outsourcing is not new, entrepreneurship is not new, networks of people are not new. My point is that with the ever-increasing access to information, it’s easier and easier for people to start their own businesses that can compete with major corporations, not across the board, but within specific business functions. Instead of seeing many business functions combined under one roof, those functions business may become divided across a number of small businesses, subcontractors, entrepreneurs, and freelancers. I think we will move away from 20th century industrial “factories” toward 21st century networks of individuals, and in this way power will be gradually redistributed back from the few to the masses.

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