Apple’s huge monetary commitment to iCloud creates barrier of entry for would-be rivals

“When Apple committed to the North Carolina data center in mid-2009 the iPhone was two years old. Only 26 million iPhones had been sold to date (about as many as Apple now sells every quarter),” Horace Dediu reports for Asymco.

“Clearly if the commitment was on such a scale there must have been a plan,” Dediu writes. “A big plan.”

“We don’t know for sure if NC was used last week or whether it was handling only part of the load, but let’s assume it was. What I want to think about is how much iCloud would thus cost and hence what would be the cost for alternative providers of such a service,” Dediu reports. “That analysis might let us determine if ‘cloud’ forms a substantial barrier to entry for competitors.”

“Apple spent $0.75 billion in one year. On the building alone. This is why I consider this a down payment. It does not include any of the equipment in the plant. It does not include the cost of operation (incl. labor) or any development costs (R&D),” Dediu writes. “What this level of spending implies is that iCloud (and Siri and iTunes) are expensive. They may seem ephemeral and even trivial as services, but they require a staggering commitment few can make. Apple made that commitment and they made it early on, before the first quarter billion users were even on the horizon.”

Much more in the full article, with the usual excellent charts, here.

[Thanks to MacDailyNews Reader “Dow C.” for the heads up.]


  1. I’m not going to be setting up a DC to host iCloud in my backyard if that’s what the article is implying. But to Google, Microsoft & Amazon, the cost is not so much of a deterrent.

  2. good. i’m glad it that costly.

    now to all naysayers/competitors of Apple/Steve:
    1. let’s see who laughs last now, with all your bitchin’
    do it better, then open your big mouths!
    2. if you can walk the talk, you can’t afford it!
    you will never compete if you don’t start with $760M
    for iCloud/iTunes data centers, haha!
    don’t forget to add another $1B in equipment + another in R&D + more in operations etc.

    you see, you think it’s so easy to do what Apple does?!
    even if you copy, you fail

    the only thing you can do is shut up

    1. Check to make sure that your iCal is actually getting its data from iCloud. I noticed the same thing and went looking. In iCal, make sure that you click on iCloud in the “Calendars” menu at top left of the window. ONe click for me and everything came up.

  3. Makes Microsoft seem cheap, quaint and so simple-minded doesn’t it? (Duh, Windows & Office, Windows & Office, Developers, Developers, Developers… Double Duh…) Steve Ballmer doesn’t know what’s hitting him.

    1. @breeze

      Microsoft actually spends much, much more on R&D and innovation than Apple, but gets poorer results. What they really need to do is invest in imagination and originality.

      1. It’s about the people involved in R&D that matter. Apple hires a gold standard. Microsoft hires on your diploma with no care for imagination. I have a friend who used to work for MS, got canned, and went to Apple. His statement: “the interview process alone let me know that Apple is a different kind of company…. They hire people that happen to be nerds… MS hires nerds and could care less who they are as a person”…

        Says it all. Gold standard.

  4. 10.7.2 and iCloud installed fine on my MacBook Pro, but my iMac was nearly unusable. it turned out that the download had been corrupt somehow. I used Lion’s reinstall feature. There was one step: start the process. It was done within an hour. It didn’t need babysitting, it preserved all my programs, data, and settings, and it was already at 10.7.2.

    If I had had a DVD or flash drive, the reinstall would have taken me to 10.7 and I’d have to update to 10.7.2. This was much better. (One note: If you use File Vault 2, you have to decrypt the disk first.)

    Apparently there was a huge spike in internet traffic yesterday for some reason. That probably caused my problem. Hm. What could have caused all that traffic?

  5. I think the insight provided by this story (article) is that within two years of the iPhone’s introduction, Apple had a long-range iCloud plan that’s taken this long to come to fruition.

    Apple has plenty of cash today, but had far less in 2009 — so this was a far larger commitment than it seems in retrospect.

    If I’m not mistaken, Apple has already broken ground on a new iCloud facility next door to the one described in the article. That will double the company’s investment/commitment to iCloud.

  6. Does anyone really think that Apple just created all of this *stuff* and then accidentally realized that it could all work together to dominate the entertainment and telecommunications industries?

    The reason that all of Apple’s competitors are scrambling around, producing inferior products and trying to sue Apple into oblivion is because they haven’t made the HUGE investments that Apple has made, and they have NO chance to catch up or compete now that Apple’s plan is coming clear.

    HDTV manufacturers, cable and satellite companies, and video game console makers had better pay attention. They are doomed and don’t even know it yet.

  7. Sorry but the data center is a big fat #fail. The first fail was earlier this week when servers melted down dishing out updates. And then two fails today. People having problems activating iPhones and then Siri melting down. Who woulda thought millions of new shiny iPhone 4S owners would pound Siri with questions – apparently everyone but Apple.

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