Who Broke Moore’s Law? And how?

Moore’s law of halving of cost per performance unit every couple of years is grinding to a halt – not because we no longer improve on technology, but because the gains from Moore’s law are no longer passed on to you as a consumer of technology services.
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Yesterday, I was listening to Kevin Kelly (founder of Wired magazine and other accomplishments) talk about the future of Moore’s law, and how a slowing Moore’s law would indeed be an extremely bad thing for how we use technology. You can see the full talk here.

Moore’s Law a Key Driver in Digitalization

As Kelly states, a key driver in digitalization and the rapid adoption of technology has been the relentless progress summarized by Moore’s law – every couple of years, you get twice the computing power for the same price.

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What is Moore's Law?

The observation that every two years, compute power doubles – and importantly, the cost is cut roughly in half of each compute unit.

Digital technology has followed this curve, and sometimes even exceeded it as better algorithms have led to even higher increases in performance.

Another key component is that pricing nearly unanimously has been cost+, that is, the cost of production plus an acceptable margin. In this way, customers have always benefitted directly from advances in technology, and as a result, we have ”smart” everything, and digital technology saturates nearly all industries. The role of relative affordability in this digitalization cannot be overstated.

Cloud Subscription Services Changes Who Benefits from Moore’s Law

As a result, it is with some concern I am witnessing the shift to cloud subscription services in the cloud, and the pricing strategies that go along with them.

As customers no longer buy the component parts, but rather a sliced-up portion of hardware or even managed service, they no longer automatically benefit from Moore’s law. They are relying on cloud providers to pass on the savings that Moore’s law gives.

But cloud services are increasingly priced via Value Based Pricing – not cost+. The result? You no longer get twice the technology for the same price every two years. In some instances, price reductions have slowed compared to classic models, in other instances they have stopped, and in some instances, prices increase every year.

As services replace hardware and customizable software, we need to reestablish a competitive landscape that means prices actually drop in accordance with Moore’s law, which has so far driven technology adoption. Otherwise, we run a very real risk of cost becoming a prohibiting factor in further digitizing our companies. This is an outcome that no one other than shareholders of large cloud providers would find attractive.

What Can You Do to Benefit (as Much as Possible) from Moore’s Law?

The first thing you can do is to manage the purchase of your cloud services with higher frequency to ensure that you actually reap the portion of price reductions the cloud providers are passing on to you. You can do this in a quarterly (or monthly) cloud cost tune-up.

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What is a Quarterly Cloud Cost Tune-Up?

Every quarter you a) Review the overall growth of the environment, b) Check if there are newer versions of services that offer better performance and lower costs, c) Buy missing reservations and rebalance existing ones, and d) See if there are things that can be combined – decisions that cannot be made when deploying services individually

The other options to reestablish a competitive landscape are a lot trickier. Creating your IT infrastructure to accommodate a true Multi-Cloud setup is where you ensure that you can provision services where they are cheapest. It frequently involves the use of co-connection centres, managed infrastructure services, and building with components like containers, which can run on multiple platforms

Where should I start?

Where to start? The Quarterly Tune-Up is where you can rely on external assistance. Start with that and take the first level of savings here. This can be done in just a few hours per quarter if you choose the right service provider. This will free up resources, budget and time, for you to focus on the other tasks.

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Who should be responsible for the Quarterly Tune-Up

A quarterly cloud cost tune-up is the way to balance the demand for speed and agility with cost efficiency. Delay or cancel the tune-up and you leave money on the table. But who should be responsible and how to get it done is not so straight forward

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