Blog

The Power of the Sharing Economy: From Uber to multi-tenant SaaS

By Ian Hamilton | Jan 6, 2016

 

Almost all of us were taught the virtues of sharing as young children. But a visionary handful of people carried those lessons into adulthood just as the cloud-era also came of age, and the very lucrative “sharing economy” was born. What have we all learned from it? For one thing, brokering sharing can be more valuable than actual sharing.

Technology that enables collaborative consumption by efficiently matching resource consumers with resource providers and managing payment is undeniably hot. Uber’s last round of funding, which included investors like Microsoft, valued it at over $50 billion with the next round promising closer to $70 billion.

 

When does the sharing economy make the most sense?

With all the excitement surrounding sharing, it’s easy to lose sight of the fact that sharing technology isn’t new. However, finding and exploiting an industry where sharing at massive scale is valuable and executing on a plan to capture that value, isn’t easy. Where and when people share is highly personal. For example, debate surrounding the ethics of last summer’s “Ashley Madison” breach and subsequent public information disclosure has shown that not everyone is keen on facilitating the sharing of spouses.

Sharing theoretically makes sense whenever a single consumer can’t fully utilize a resource. As an example, my car sits unused the majority of the time. Based on the cost and utilization, it would be more effective for me forego owning a car and use a ride sharing service.

I do use Uber for transportation when I’m traveling. I also use the highly efficient shared public transportation systems in cities like New York and London. For some people the economics of ride sharing and public transportation simply don’t work compared to car ownership. Others hold to the opinion that owning a car is an unnecessary waste of resources.

Sharing the cloud’s virtually unlimited resources

Like opinions, virtual or digital assets are practically infinite, and like cars, physical assets are inherently finite. Accordingly, elasticity of supply is an important factor in the sharing equation. For digital assets like software, movies and music that can be duplicated at almost no cost, sharing is viewed as an industry plague rather than a virtue. Strictly speaking, duplicating isn’t sharing, because it produces multiple copies of the asset that can be consumed at the same time. Society has coopted the term “sharing” because it sounds and feels better than “stealing”.

Fortunately most consumers don’t actually want to own copies of media and prefer to simply have access to media on demand. This has lead to dramatic shift in consumer behavior from legal media downloads and illegal sharing to the use of streaming services like NetFlix and Spotify. Whether these services allow the entertainment industry to effectively monetize their assets is still the subject of much debate, but one thing that’s clear is that cloud infrastructure providers are winners in this shift. While media can be reproduced at infinitum, the infrastructure needed to process, store and deliver those streams is finite.

Sharing a pool of finite resources also delivers value, especially when there is variable and offsetting demand amongst consumers. Public cloud providers have mastered the art of margin in offering an elastic supply of compute, storage and network resources on demand through network-based web services. Amazon finally broke out information about their cloud computing service in Q1 2015 and by Q3 reported sales up 23% to 25.4 billion.

Public cloud providers have done this so well that provisioning and managing private cloud infrastructure is only viable at massive scale. Even for services that operate at massive scale like NetFlix — who is highly public about their use of AWS — the value of cloud infrastructure versus private infrastructure holds. The turn key nature of the service solves such a large problem that value goes well beyond the cost of the parts required to build it. .

Multi-tenant SaaS and the personal dimension of sharing

The multi-tenant aspect of public cloud infrastructure and Software as a Service (SaaS) offerings also helps address the personal dimension of sharing. While all the benefits of sharing exist behind the scenes, the value is delivered in a way that protects the user’s privacy and provides a feeling of ownership. Users are isolated from the effects of others on the system and can customize their experience for further personalization. These and other benefits make it clear that SaaS is the best way to deliver software and multi-tenancy is the best way to deliver SaaS.

From ride sharing to public cloud infrastructure to Signiant’s software as a service, sharing is a powerful paradigm that can be applied in many ways to deliver extraordinary value. Maybe we did learn everything we need to know in Kindergarten?