BUSINESS SYSTEMS IP IN A CLOUD-BASED WORLD

If you can run almost everything in the cloud, do you still have intellectual property in your business systems?

After all, you don’t own the cloud platforms, nor the databases that run on them, nor the apps that plug into them. You own the data and the text of what’s presented to an end user. But if anyone can subscribe to the astoundingly powerful infrastructures built on Salesforce or Amazon and survive entirely on that (and it’s increasingly possible to do so), why isn’t all competitive advantage wiped away?

This is like asking why it isn’t impossible to make profits in an efficient stock market. In theory, if everyone has access to the same information, then the playing field is so radically leveled that no one has a real advantage for long, and profits at the margin get competed away. Sounds straightforward. But the simplest theory isn’t always the most correct. For example:

  • Doesn’t the efficient-market theory presume that all players in the market process information and act on it in similar ways?
  • What if some players are faster, or smarter, or cheat, or invest in infrastructures that allow them to know more from the same information?
  • Then the market for raw information may be efficient, but the actual market for outcomes won’t be.

It’s the same with business systems.

We would wager that if you take a sample of non-programmer teams from different businesses and give them each a credit card and a laptop, and tell them to build an infrastructure for a given business using only what they can subscribe to online, they would come up with very different answers depending on how they’ve been trained and how they think.

And that’s where the real competitive advantage is. It’s in how you’ve been trained, and how you think.