Cloud computing timeline, 1996–2002

A word doesn't need a product to exist. “Cloud computing,” it turns out, spent most of a decade as a phrase looking for a business model.

Before “the cloud” meant anything you'd trust with a credit card number, it meant renting access to somebody else's server over a dial-up-era internet connection, run by a company that was very likely losing money on every customer it signed. Here's how that went.

The timeline

1. 1996

   The earliest known written use of “cloud computing”

   Appears in an internal Compaq strategy document, describing internet-delivered computing as a coming shift in the industry. It was a prediction, not a product announcement.

2. 1997

   The term gets an academic definition

   Emory University professor Ramnath Chellappa uses “cloud computing” in a lecture on demand-based computing economics, describing a model where computing power is consumed the way a utility is — without the user owning or managing the underlying machine.

3. 1998

   VMware is founded

   Stanford researchers, including Mendel Rosenblum and Diane Greene, reinvent virtualization for standard x86 hardware — letting one physical server pretend to be several. Nobody calls this “cloud” yet. It quietly becomes the plumbing that makes multi-tenant cloud computing possible a decade later.

4. 1999

   Salesforce launches — and picks a fight with software itself

   Marc Benioff, a former Oracle executive, launches Salesforce as a hosted customer-relationship-management tool delivered entirely through a browser. Its marketing campaign, literally called “No Software,” included hiring protesters to picket outside a rival's software conference.

   The anti-software company would, of course, spend the next 25 years selling software.

5. 1999

   The Application Service Provider boom

   The ASP Industry Consortium is founded in May 1999 by 25 technology companies, including Cisco, to standardize the idea of “renting” business software over the internet rather than installing it. By 2000, more than 500 ASPs had launched worldwide, pitching outsourced access to ERP and CRM software so companies could avoid owning it — which is, functionally, the SaaS pitch of today, minus about twenty-five years of broadband improvement.

6. 1999

   Loudcloud is founded — September 9th, appropriately

   Marc Andreessen, Ben Horowitz, and Tim Howes start Loudcloud to manage internet infrastructure for other companies. It raises $21 million in equity within two months, plus $45 million in debt from Morgan Stanley shortly after. Investors reportedly encouraged the founders to operate “as though capital were free.” Within six months, Loudcloud has almost 200 employees, $10 million in booked contracts — and a new $5 million office to put them in.

7. 2000

   The dot-com crash arrives, on schedule, in March

   The NASDAQ falls roughly 72% within a year of its peak. Loudcloud, which had forecast $100 million in booked contracts for the third quarter of 2000, closes the quarter at $37 million instead. It raises a $120 million Series C that June anyway, at a $700 million valuation — a fairly accurate snapshot of the market's priorities at the time.

8. 2001–2002

   The ASP category is largely wiped out

   USinternetworking, an early ASP that had gone public in 1999, files for bankruptcy in 2002. Loudcloud sells its entire managed-hosting business to EDS in 2002 for $63.5 million — a fraction of what it had raised — and rebrands as Opsware, pivoting from renting infrastructure to selling the software that manages it.

   A company co-founded by people credited with popularizing “cloud computing” exited the business of providing cloud computing before most people had heard the phrase.