When I think of commodity I think of oil, or grains, or pork bellies. A good that is generic and interchangeable, 'fungible'. You're not locked in to a source, you can get it from several sources in a competitive marketplace.

Also, and again I apologize for not understanding
your language here, but what do you mean by a
"vertically integrated solution"? Could you give an
example to illustrate what it would mean for a
competitor to do this?

Definitely!

Let's start with an example of vertical integration: Apple has a strategy that involves heavy vertical integration. They sell the hardware and the software and the services. If you want OSX, you have to buy the hardware. More so in the phone space: if you want IOS, you need to buy an iphone. Once you've bought an iphone, you have to buy apps for it through the appstore. Even if you hate one part of the Apple solution, you may be forced to take the good with the bad. Even if you only want one thing, you generally have to get everything. If you want to run something that's not in the app store, too bad.

A scenario where this could happen with cloud services: imagine Amazon came up with a really good payment services platform, and then said that in order to use it, you had to live in their cloud. The market would have to interact with their cloud to get access to the payment services. Rackspace would lose access to the segment of the target market that needed this functionality.

By building a capability on the software side of cloud services, Rackspace will have better options in a situation like the one above:

* They will have a platform that they can build a competing payment services platform.

* It's possible that other groups who want the same outcome will contribute to their platform, strengthening it in lots of small ways to compete against other offerings.

* There may be other developers out there who are skilling up for their own ends, that Rackspace can hire at short notice if it needs to skill up quickly.

* They can start building a library of prior art and patents to use in defence against sniping from one proprietary operators in the cloud space.

In the mid-90s, IBM found themselves in an odd situation. They were offering a desktop and corporate operating system platform, but weren't very good at it because it wasn't their focus. Microsoft were good at OS strategy. So IBM found itself in a situation where it needed to invest heavily in Windows NT to avoid losing ground, and this meant that another company was setting its direction to a large extent.

Since then, IBM has got behind linux in a big way. There's far less risk of agenda-setting coming at them from the linux community. It's a stronger proposition for them to offer their customers, because potential customers don't have to fear IBM trying to lock them in to IBM products because in the way that customers might have been wary about this with AIX or OS/2 (or mainframes).

Imagine if Apple move into cloud services, and then get a patent on something ridiculous, and then use that to hound opponents. That's what they're doing in the phone space.

I think the guys at Rackspace have their heads screwed on. I'm looking forward to seeing a free and open cloud platform emerge.