Cloud AI

Artificial Intelligence Cloud

In this section we continue our predictive journey through the thirty-five year era of cognitive things by focusing on the next big wave in modern computing: cloud-based artificial intelligence, or simply cloud AI.

In previous essays written and published over the past three years, we discussed two long-cycle technology waves that drove computing innovation and investment returns: the PC cycle and the post-PC cycle. In review, the PC cycle began its rapid ascent in 1985 with the IBM personal computer and the Lotus 123 spreadsheet, accelerated in 1990 with the Microsoft Windows operating system and the Microsoft Excel graphical spreadsheet, and climaxed in 2000 with the Microsoft Office suite of productivity applications. The post-PC cycle started more slowly in late 2001 with the introduction of the Apple iPod music player, accelerated in 2005 and 2006 with the Apple iPod nano, and then went literally off the charts from 2007 through 2012 with the Apple iPhone family of smartphones, and reached a peak in mid-2015 with the Apple mobile suite of smart devices, including the Apple Watch, Apple iPhone, Apple iPhone Plus, Apple iPad, and Apple iPad Pro.

Microsoft Dominates the PC Wave

As shown in the innovation evolution diagram below, the clear winner of the PC cycle was Microsoft. The firm participated in or dominated all three key phases within the cycle: innovation phase, platform phase, and suite phase.

Microsoft participated in the early-stage innovation phase of the PC cycle by writing the disk operating system, DOS, for the IBM personal computer. The firm dominated the mid-stage platform phase with Microsoft Windows, its graphical operating system for the PC, as well as the late-stage suite phase with Microsoft Office, its application software productivity suite featuring Microsoft Excel, Word, and PowerPoint. The innovation, platform, and suite phases of the PC cycle are represented, respectively, by the lower left-hand, lower right-hand, and upper right-hand quadrants in the blue-path innovation evolution diagram above.

The blue-path innovation evolution diagram is a modified version of the intragame strategy matrix, page 159, Figure 5.1, Section 5.3 Generic Intragame Strategies, Chapter 5 Results from the Intragame Model, The Strategic Games Model: An Entrepreneurial Approach to Competitive Strategy, Dr. Mark Cummings, Stanford University, June 1997.

As shown in the equity evolution diagram below, the stock returns for Microsoft during this period were simply staggering. The firm's market capitalization appreciated over 59,800% (598 times) from its initial public offering price in early 1986 to its cycle climax price in early 2000 (source: Historical Prices page of finance.yahoo.com).

Microsoft's approximate market capitalization values in March of 1986, May of 1990, and January of 2000 are shown, respectively, within the yellow, green, and red circles in the equity innovation evolution diagram above. These dates represent the date of the firm's initial public offering (IPO), the release of its third version of Windows (version 3.0), and its peak market value just prior to the bursting of the tech bubble. These dates also correspond to the innovation, platform, and suite phases of the PC cycle in the innovation evolution diagram presented previously.

Apple Dominates the Post-PC Wave

As shown in the innovation evolution diagram below, the clear winner of the post-PC cycle was Apple. The firm dominated all three key phases within the cycle: innovation phase, platform phase, and suite phase.

Apple dominated the early-stage innovation phase of the post-PC cycle with the Apple iPod, its revolutionary portable music player featuring a unique thumb-driven click-wheel navigation experience. The firm also dominated the mid-stage platform phase with Apple iOS, its touch-oriented mobile operating system for the iPhone and other Apple post-PC devices, as well as the late-stage suite phase with the Apple mobile suite of cloud-connected smart devices featuring the Apple Watch, iPhone, and iPad. The innovation, platform, and suite phases of the post-PC cycle are represented, respectively, by the lower left-hand, lower right-hand, and upper right-hand quadrants in the blue-path innovation evolution diagram above.

As shown in the equity evolution diagram below, equity returns for Apple stock during this period were astonishing. The firm's market capitalization appreciated over 10,700% (107 times) from the launch of the Apple iPod in late 2001 to the summer of 2015 (source: Historical Prices page of finance.yahoo.com).

Apple's approximate market capitalization values in October of 2001, June of 2007, and July of 2015 are shown, respectively, within the yellow, green, and red circles in the equity innovation evolution diagram above. These dates represent the release date of the original Apple iPod, the release date of the original Apple iPhone, and its recent peak market value in 2015. These dates also span the innovation, platform, and suite phases of the post-PC cycle in the innovation evolution diagram presented previously.

In summary, over the past thirty years from 1985 to 2015, the technology industry has experienced two massive waves, the PC wave and the post-PC wave. The clear winner of the first fifteen-year wave was Microsoft, which dominated the PC era with its Windows platform and Office suite of productivity applications. The clear winner of the second fifteen-year wave was Apple, which dominated the post-PC era with its iOS platform and mobile suite of cloud-connected smart devices. Microsoft and Apple were both handsomely rewarded for their unique roles in introducing, shaping, and ultimately dominating the innovations, platforms, and suites that defined their respective eras.

Cloud AI Questions & Answers

While the post-PC wave may still have additional room to grow as emerging and developing countries, such as China, India, and Indonesia, rapidly adopt modern smart devices powered by the cloud, the key question now is not when will the post-PC era run out of steam? Rather, it is a different set of key questions:

1. What is the next major technology wave in modern computing?
2. Who will shape and potentially dominate this new cycle?
3. When will the cycle begin?
4. How big will it be?

Before we delve into the details, we will state concise answers to the four key questions above as follows:

1. The next big tech cycle in modern computing is cloud AI.
2. The cloud AI cycle will be shaped and dominated by IBM in the vertically-oriented enterprise market and by Google in the horizontally-oriented consumer market.
3. The cloud AI cycle has already started.
4. The cloud AI cycle will be larger than both the PC and post-PC cycles combined.

While the success of the PC cycle relied on the vision of Bill Gates to put a PC on every desktop in every home and the success of the post-PC cycle relied on the vision of Steve Jobs to put the Internet on every phone in every pocket, the success or failure of the cloud-AI cycle will, in our opinion, rely on the vision of Dr. John Kelly to pair an intelligent agent with every knowledge worker in every company. With this simple vision for the future of cloud AI clearly understood, we are now ready to address the four key questions in greater detail.

IBM Bets the Company on the Cloud-AI Wave

As shown in the innovation evolution diagram below, the likely winner of the cloud-AI cycle is IBM. The firm is well positioned to shape all three key phases within the cycle: innovation phase, platform phase, and suite phase.

IBM has dominated the early-stage innovation phase of the cloud-AI cycle with IBM Watson, its groundbreaking cognitive assistant possessing the ability to learn new things, reason with clarity, and interact socially. It is also well positioned to lead the mid-stage platform phase with IBM Bluemix, its cloud platform for developing cognitive services, apps, and experiences. Lastly, the firm is ideally positioned to capitalize on the the late-stage suite phase with its cognitive suite of cloud-based intelligent solutions spanning critical knowledge domains and industries including health, finance, commerce, energy, transportation, and materials. The innovation, platform, and suite phases of the cloud-AI cycle are represented, respectively, by the lower left-hand, lower right-hand, and upper right-hand quadrants in the blue-path innovation evolution diagram above.

To foresee why IBM is in a unique competitive position to shape and perhaps ultimately dominate the cloud-AI wave within the cognitive things era, we must understand the fundamental structure of the network of cloud services driving the majority of technology innovation and investment returns in today's market. This conceptual cloud network can be segmented into three groups:

1. Cloud Service Group
2. Enterprise Cloud Service Group
3. Artificial Intelligence (AI) Cloud Service Group, or Cognitive Cloud Service Group

In the following sections, we define the structure and top categories of each group and then cite current examples of firms or strategic business units holding leading or dominant competitive positions within each top category.

Top Seven Cloud Services for the Cognitive Things Era

The top seven game-changing cloud services that define the cloud service group are the things cloud service, commerce cloud service, streaming cloud service, search cloud service, productivity cloud service, communication cloud service, and platform cloud service, as shown in the cloud network diagram below.

The diagram is called the Top 7 Cloud Service Categories Defining the Cloud Service Group within the Cloud AI Cycle of the Cognitive Things Era. It is structured as a network of seven interconnected cloud service categories, with the search cloud service category as the central node in the cloud network and the remaining six cloud service categories arranged in a concentric ring of peripheral nodes.

Current examples of leading firms and business units in each of these cloud service categories include Nest (things), Amazon (commerce), YouTube (streaming), Google (search), Microsoft Office (productivity), WhatsApp (communication), and Salesforce.com (platform), as visually depicted in the following diagram.

The diagram is referred to as the Top Seven Cloud Service Brands within the Cloud Service Group of the Cloud AI Cycle within the Cognitive Things Era. It is also more simply referred to as the Consumer Cloud.

Top Seven Enterprise Cloud Services for the Cognitive Things Era

The top seven game-changing enterprise cloud services that define the enterprise cloud service group are the customer cloud service, health cloud service, finance cloud service, middleware cloud service, employee cloud service, manufacturing cloud service, and infrastructure cloud service, as shown in the enterprise cloud network diagram below.

The diagram is called the Top 7 Enterprise Cloud Service Categories Defining the Enterprise Cloud Service Group within the Cloud AI Cycle of the Cognitive Things Era. It is structured as a network of seven interconnected enterprise cloud service categories, with the middleware cloud service category as the central node in the enterprise cloud network and the remaining six enterprise cloud service categories arranged in a concentric ring of peripheral nodes.

Current examples of leading firms and business units in each of these cloud service categories include Salesforce.com (customer), Cerner (health), SAP (finance), Oracle (middleware), Workday (employee), Netsuite (manufacturing), and Microsoft (infrastructure), as visually depicted in the following diagram.

The diagram is referred to as the Top Seven Enterprise Cloud Service Brands within the Enterprise Cloud Service Group of the Cloud AI Cycle within the Cognitive Things Era. It is also more simply referred to as the Enterprise Cloud.

Top Ten Cognitive Cloud Services for the Cognitive Things Era

The top ten game-changing cognitive cloud services that define the cognitive cloud service group are the health cloud service, commerce cloud service, finance cloud service, intelligence cloud service, security cloud service, energy cloud service, hybrid cloud service, private cloud service, public cloud service, and the things cloud service, as shown in the cognitive cloud network diagram below.

The diagram is called the Top 10 Cognitive Cloud Service Categories Defining the Cognitive Cloud Service Group within the Cloud AI Cycle of the Cognitive Things Era. It is structured as a network of ten interconnected cognitive cloud service categories, with the intelligence cloud service and the hybrid cloud service categories forming the backbone of the network and the remaining eight cognitive cloud service categories arranged as peripheral nodes.

Current examples of cognitive cloud services from IBM in each of the top 10 cloud service categories include IBM cognitive health, cognitive commerce, cognitive finance, cognitive security, and cognitive energy services, as well as IBM cognitive intelligence, cognitive platform, cognitive compute, cognitive hosting, and cognitive things services, as visually depicted in the following diagram.

The diagram is referred to as the Top Ten Cognitive Cloud Service Solutions from IBM within the Cognitive Cloud Service Group of the Cloud AI Cycle within the Cognitive Things Era. It is also more simply referred to as the Cognitive Cloud.

Defining the Things Cloud

Within the cognitive cloud service group presented above, the things cloud service category is unique for is size, breadth, depth, and potential. It is so unique in scale and impact that it requires its own visual definition. Therefore, we define the things cloud service category, or things cloud for short, as a super node within the cognitive cloud service group comprising four unique groups:

1. Wearable Things Group
2. Mobile Things Group
3. Home Things Group
4. Industrial Things Group

Within the things cloud, the wearable things group contains fitness bands, identification bands, audio earbuds and headphones, extreme action cameras, smart watches, intelligent eyewear or inocles, and virtual reality headsets, as visually depicted in the wearable things diagram below.

The diagram is called Examples of Wearable Things in the Cognitive Things Era. Leading companies providing cloud-connected wearable things include Fitbit, Xiaomi, Beats, GoPro, Apple, Samsung, Huawei, Google, Microsoft, and Oculus.

The mobile things group contains contains portable media players, portable LED lights, portable cooling fans, portable battery chargers, small smartphones (3.5 inch) through large smartphones (6 inch), and small tablets (7 inch) through large tablets (13 inch), as visually depicted in the mobile things diagram below.

The diagram is called Examples of Mobile Things in the Cognitive Things Era. Leading companies providing cloud-connected mobile things include Apple, Xiaomi, Nokia, ZTE, Huawei, LG, Samsung, Amazon, Dell, HP, Lenovo, Microsoft, DJI, and Sphero.

The home things group contains power strips, smart wall sockets, home Internet routers, smart LED lights, smart video cameras, robotic vacuums, personal health monitors, personal cloud storage, smart thermostats, smart multi-color LED lights, smart baby monitors, cloud-connected HD and UHD televisions, smart TV bars, gaming and entertainment consoles and controllers, wireless audio speakers and subwoofers, smart scales, desktop and laptop computers, smart refrigerators, smart home air purifiers, smart home water purifiers, cloud-connected streaming media sticks and players, smart smoke detectors, smart bedside lamps, and smart outdoor and indoor security cameras. All of these smart home devices are visually depicted in the home things diagram below.

The diagram is called Examples of Home Things in the Cognitive Things Era. Leading companies providing cloud-connected home things include Xiaomi, XiaoYi, Samsung, Nest, Dropcam, LG, Sony, Microsoft, Sonos, Apple, Dell, HP, and Lenovo, GE, Google, and Amazon.

The industrial things group contains space satellites, smart wind turbines, smart medical equipment, cloud-connected civilian aircraft, smart manned and unmanned military aircraft, smart industrial robots, smart humanoid and non-humanoid robots, cloud-connected cars and trucks, smart locomotives, and smart energy exploration and production equipment, as visually depicted in the industrial things diagram below.

The diagram is called Examples of Industrial Things in the Cognitive Things Era. Leading companies providing cloud-connected industrial things include Lockheed Martin, Boeing, General Electric, Siemens, Northrop Grumman, Raytheon, Sony, Rethink Robotics, Boston Dynamics, Tesla, BMW, Daimler, Paccar, Keppel, and Hyundai Heavy.

With the wearable, mobile, home, and industrial things groups of the things cloud now well defined, all four things groups can be combined, or mashed together, to create a thing mashie, which visually defines the entire things cloud. That is, the visual definition of the things cloud can be represented by an animated mashie as shown for the first time below.

The diagram is referred to as the Animated Things Mashie for the Cloud AI Cycle of the Cognitive Things Era. The diagram is also more simply referred to as the Things Cloud. To see the animation, simply click the diagram above.

Defining the Cognitive Things Cloud

With the cognitive cloud and things cloud both visually defined, they can be joined together to form a unified visual image that illustrates how services within the cognitive cloud access the wealth of information provided by the wearable, mobile, home, and industrial things within the things cloud, as depicted in the following diagram.

The diagram is formally referred to as the Cognitive Things Cloud for the Cloud AI Cycle of the Cognitive Things Era. It is also more simply referred to as the Cognitive Things Cloud. The services presented within the cognitive cloud portion of the cognitive things cloud are IBM cognitive service examples; however, intelligence-driven services from other competing vendors in this space over time can be easily substituted.

The fusion of Internet of things (IoT), cloud services (cloud), and artificial intelligence (AI) is central to the future of cognitive computing systems because the ultimate success or failure of these intelligent systems will be driven by their ability to perform three core functions:

1. Learn Broadly
2. Reason with Intent
3. Interact Naturally at Scale

By leveraging IoT, cloud, and AI technologies, cognitive systems are now able to perform these three central functions.

IoT technologies provide unprecedentedly large data sets to train cognitive systems across a wide variety of industry-specific knowledge domains. Cloud technologies provide elastically scaleable, high-I/O (input/output), high-performance infrastructure and platform services that power the learning, reasoning, and social interaction algorithms of cognitive systems. AI technologies provide image recognition, graphical visualization, and speech-based natural language processing that bring cognitive systems to life and enable them to interact naturally with human users and decision makers using both verbal and visual means of expression. Lastly, human users and decision makers provide domain or industry-specific reasoning objectives and guidance to direct the reasoning paths and algorithmic refinement strategies of cognitive systems.

Deep Cognitive Insights Too Valuable to be Ignored

In the very near future, we fully expect to see human decision makers across numerous domains within a wide variety of global industries visually and verbally interacting with and directing the reasoning strategies of thoroughly trained, high-O/I, high-performance, cloud-based cognitive assistants. This powerful and intimate partnership between human decision makers and intelligent assistants will forever reshape the way in which businesses and ultimately consumers, educators, and governments think. As a result, we will soon enter a new age where deep reasoning by intelligent machines over vast streams of information generated by cloud-connected things, consumer services, and enterprise services leads to intelligent insights simply too compelling to be ignored, by man or machine.

Defining the Cognitive Consumer Cloud

With the cognitive cloud and the consumer cloud both visually defined, they can be joined together to form a unified visual image that illustrates how services within the cognitive cloud access the wealth of information provided by things, commerce, streaming, search, productivity, communication, and platform services within the consumer cloud, as depicted in the following diagram.

The diagram is called the Cognitive Consumer Cloud for the Cloud AI Cycle of the Cognitive Things Era. It is also more simply referred to as the Cognitive Consumer Cloud. Leading companies providing cognitive consumer cloud services include IBM, Xiaomi, Amazon, Google, Baidu, Microsoft, Facebook, and Salesforce.com.

Defining the Cognitive Enterprise Cloud

With the cognitive cloud and the enterprise cloud both visually defined, they can be joined together to form a unified visual image that illustrates how services within the cognitive cloud access the wealth of information provided by customer, health, finance, middleware, employee, manufacturing, and platform services in the enterprise cloud, as depicted in the following diagram.

The diagram is called the Cognitive Enterprise Cloud in the Cloud AI Cycle of the Cognitive Things Era. It is also more simply referred to as the Cognitive Enterprise Cloud. Leading companies providing cognitive enterprise cloud services include IBM, Salesforce.com, Cerner, SAP, Oracle, Workday, Netsuite, and Microsoft.

Defining the Cognitive Cloud Stack

With the cognitive cloud, the consumer cloud, and the enterprise cloud all visually defined, these three clouds can be merged to form a unified visual definition of the cognitive cloud stack, a composite cloud network that shows how cognitive cloud services access the wealth of information provided by both consumer cloud services and enterprise cloud services, as shown for the first time in the cognitive cloud stack diagram below.

The diagram is called Visual Definition of the Cognitive Cloud Stack in the Cloud AI Cycle of the Cognitive Things Era. It is also more simply referred to as the Cognitive CloudStack. Leading companies providing cognitive cloud stack services include IBM, Xiaomi, Amazon, Google, Baidu, Microsoft, Facebook, Salesforce.com, Cerner, SAP, Oracle, Workday, and Netsuite.

Top 22 Cloud Services in the Cognitive Cloud Stack

In addition to the visual definition of the cognitive cloud stack presented in the previous section, the following twenty-two game-changing cloud service categories listed below represent the written definition of the cognitive cloud stack:

1. Cognitive Health
2. Cognitive Commerce
3. Cognitive Finance
4. Cognitive Intelligence
5. Cognitive Security
6. Cognitive Energy
7. Cognitive Hybrid Cloud
8. Cognitive Private Cloud
9. Cognitive Public Cloud
10. Cognitive Things
11. Consumer Commerce
12. Consumer Streaming
13. Consumer Search
14. Consumer Productivity
15. Consumer Communication
16. Enterprise Customer
17. Enterprise Health
18. Enterprise Finance
19. Enterprise Middleware
20. Enterprise Employee
21. Enterprise Manufacturing
22. Enterprise Infrastructure

By combining the visual and written definitions of the cognitive cloud stack, the top 22 categories can be presented structurally we arrive as shown in the cloud network diagram below.

The diagram is called the Top 22 Cloud Service Categories Defining the Cognitive Cloud Stack within the Cloud AI Cycle of the Cognitive Things Era. It is also more simply referred to as the Top Categories of the Cognitive Cloud Stack. The diagram is structured as a network of twenty-two interconnected cognitive, consumer, and enterprise cloud service categories. The backbone of the network is defined by the infrastructure, middleware, customer, search, things, hybrid, and intelligence cloud service categories, with the remaining fourteen cloud service categories arranged as a set of peripheral nodes surrounding the core backbone.