Grid Utility Technology DriversEnabling New Business Models

July 30, 2006Paul KampGridInstitute Fellowpaul.kamp@gridinstitute.com

Sun Proprietary/Confidential: Internal Use OnlyPage 2 MediaGrid Summit July 30, 2006

Technology Context – The Net Effect

10,000X

1,000X

100X

10X

1X

1,000,000X

100,000X

1980 1990 2000

Moore’sLaw

Gilder’sLaw

Metcalfe’sLaw

Net Effect

For a given cost, performance improves over timePerformance

Time

Sun Proprietary/Confidential: Internal Use OnlyPage 3 MediaGrid Summit July 30, 2006

Business Context – The Net Effect

10,000X

1,000X

100X

10X

1X

1,000,000X

100,000X

1980 1990 2000

For a given performance levelthe 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'

Sun Proprietary/Confidential: Internal Use OnlyPage 4 MediaGrid Summit July 30, 2006

Example solution – iTunes Music Store (iTMS)Bricks and Mortar distribution - Vinyl 45 RPM record

Artist Record Label Point of SalePromotion

Local Record Store

Inventory

Distribution

Content Creation

Manufacturing

Performing Artist

Songwriter

Sun Proprietary/Confidential: Internal Use OnlyPage 5 MediaGrid Summit July 30, 2006

Example solution – iTunes Music Store (iTMS)Bits and bandwidth distribution – iTunes Music Store

Artist Record Label Point of SalePromotion Online Music Store

InventoryDistribution

Content Creation

Manufacturing

Performing Artist

Songwriter

Sun Proprietary/Confidential: Internal Use OnlyPage 6 MediaGrid Summit July 30, 2006

Business Model – Increasing GM's Over TimeCost 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$GROSS MARGINS

Cost to Deliver the Service

Price for Service that Technology is Delivering

Sun Proprietary/Confidential: Internal Use OnlyPage 7 MediaGrid Summit July 30, 2006

Utility and Application Delivery ChainEnabling the digital economy

Utility Computing Grid Distribution Applications

Utility Metering

Online Record Store

Direct Marketing

Delivery mechanism

Engine – Computer Center

Monitoring

Provisioning

Application Metering

Sun Proprietary/Confidential: Internal Use OnlyPage 8 MediaGrid Summit July 30, 2006

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 NegroponteBeing Digital

Sun Proprietary/Confidential: Internal Use OnlyPage 9 MediaGrid Summit July 30, 2006

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

Sun Proprietary/Confidential: Internal Use OnlyPage 10 MediaGrid Summit July 30, 2006

A Few Proposed Media Examples● Digital Distribution of Film

– In 2003 the film industry spent $631M onphysical 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

Sun Proprietary/Confidential: Internal Use OnlyPage 11 MediaGrid Summit July 30, 2006

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