How to Win in Cloud Computing

And the winner is... 

OK, we're not there yet. But, it's becoming obvious that the cloud computing market is heating up: there's been some downward pressure on IaaS pricing because of the number of competitors and, more importantly, because of the competition between Amazon and Google. Of course, this is to be expected because Google is trying to steal market share and AWS is trying to protect its share. Can we expect the same in the SaaS market? Probably, given that there has been a proliferation of SaaS companies (cloudwashing aside, see my previous post) in the last couple of years,. But then, there doesn't seem to be an enormous amount of overlap in the types services offered (yet?) because of the variety of solutions that are available for conversion to SaaS so we may not see the same price pressure as in the IaaS market.

That said, I don't think that the winner will be decided by its implementation of IaaS: the winner will be decided by PaaS. The reason for this is that every successful business model has had a strong developer community. Consider that the same thing happened with browsers and operating systems, and is currently happening with smartphones: smartphone leaders have stronger developer communities while weaker/less popular smartphones have fewer; such is the difference between iPhone and Blackberry. Granted, the gap between iOS devices and BB devices has other reasons as well, the point is that if BB had a stronger developer community than the iPhone, it would have won out earlier and not have to jump through hoops like it's doing right now.

Mobile providers should really take the hint here. Telcos are fighting for mobile market share but haven't really clued in that what attracts customers is not the phones themselves because every carrier has roughly the same phones for sale. What's really attracting them is the cool factor of what they can do with those phones. If the carriers really wanted to attract customers, they'd open up development platforms/PaaS environments for developers to create apps for free and then, when the app goes live, charge the developers to host their apps or collect ad revenue in exchange for free hosting. Like AT&T has done. Instead, most telcos and mobile carriers, are ignoring the PaaS possibility and looking to commoditized services with slowly eroding margins, like cabled connectivity, or to be me-toos in an almost saturated IaaS market to help grow their business.

There is no doubt that AWS is leading the way with $3.8B revenues projected for 2013. This definitely defines a leader in the market and AWS is certainly running away with the IaaS market. But Amazon did not stop at IaaS. It created a constellation of products built around EC2 to facilitate developer adoption. And that is why AWS is way ahead in the market.

It remains to be seen whether competitors in the PaaS market can steal away market share from AWS:

• Will Microsoft's Azure software development kit for Windows Phone attract developers to Azure?
• Will ActiveState's deal with HP will help it gain traction?
• Will SalesForce's Force.com ever face any real competition?
• Will mobile providers ever wake up and smell the coffee?
• Or will the PaaS winner be the platform that integrates with AWS?

There are many more questions that we can list here, and certainly more than there are answers. Give it a year or two. Then we'll start to see some clear(er) patterns in the PaaS market.

TDWI Cloud BI Solution Summit Roundup

Last week, I attended the TDWI Cloud BI Solution Summit as a speaker. I was fortunate enough to sit through some of the other presentations and I learned something interesting about the market place for Big Data and Cloud: not everyone is ready for it. This may sound like a given; American organisations are way ahead of Canadian organisations, but I found that there are still some fairly big fish out there that are still grappling with these concepts in the US.

Initially, I figured that the audience, composed mainly of senior IT people, middle managers, and executives, was up to speed with cloud computing and that its use was a forgone conclusion. This was clearly not the case.

There were questions from attendees such as:

"What is cloud BI?"
"Where is the data?"

And, a response to informal polls showed that:

• The majority of organisations represented did not have a "cloud BI solution".
• Few were considering moving their BI to the cloud.
• Licensing is still a concern.
• Performance is a concern.
• Data lifecycle management in the cloud is a concern.

So, it would seem that, while Cloud Computing (well, at least IaaS and SaaS; PaaS is coming into its own) has entered the vernacular of IT departments and some executive level suites, Big Data is still not there. Gartner has Big Data *just* entering the phase they call the "Peak of Inflated Expectations" which means that we are now looking to Big Data as a means of increasing our competitiveness without necessarily having the skills and knowledge of how to do so.

This leaves us in an interesting situation: if we can't do it ourselves, we have to subcontract to those who can. What are the costs? How is this agreement governed? If there are no stellar insights, whose fault is it? Is it even someone's fault? The fact that these questions exist is interesting because we're at the same stage we were at when the web came to prominence, when e-commerce was new, when the concept of outsourcing caught on, and more recently, as Cloud Computing became a new IT service delivery model.

The evolution of Big Data and its adoption will be interesting to follow. But one thing is for sure: look for Big Data to leverage public, low cost, commodity compute resources, and for more and more public cloud service providers to offer such services. After all, AWS has already launched such a service...

The Great Cloud Divide

It has been interesting to watch the evolution of cloud computing over the past few years. It has morphed from the X-as-a-service model to include "cloud based services", those services that are offered in a hosted model; it has been extended, to cloudwash those services that don't even remotely qualify; and now it is showing signs of speciation in that major players are aligning to one flavour or another.

We are speaking, of course, about alignment on open source vs. proprietary software, one vendor vs. another and the alliances that interconnect or separate them.

Open sourcing one's software suite has been a proven method to increase the use of software and generate revenue through services. Typically, this has been done by offering a pared down version of the software and holding back some features for a paid premium version. Red Hat showed that this is a feasible business model and has come a long way since its early days to offer a free version and a supported version.

Interestingly, Citrix open sourced CloudStack and committed to continue development of CloudStack with the community on the open source version. The only supposed difference between CloudStack and CloudPlatform? The logo.

Citrix also partnered with AWS to "...seamlessly connect corporate data centres to Amazon Web Services..." and, given the fact that AWS also partnered with Eucalyptus, this is a safe bet that AWS is building a community around hybrid cloud deployments.

Now VMware has acquired Nicira, a virtual network infrastructure software vendor, who has strong ties to OpenStack. Is this VMware's response to Citrix's moves in cloud computing? VMware certainly does not appear to be making moves to open source vCloud Director so it would stand to reason that they would lean towards an open source competitor of CloudStack's to counter Citrix. It certainly seem that lines have been drawn in the sand.

In all of this kerfuffle, there have been questions about what AWS plans to do. As mentioned, AWS is banking on growing its business by reaching out to private cloud customers and integration of their provider's products. This much is obvious from the Eucalyptus and Citrix partnerships. Therefore the likely outcome is the status quo, one that would be favored by most. The other possible outcome is that AWS open sources its products. I don't pretend to know what outcome could possible look like but I suspect that the likelihood is fairly low given the revenue streams AWS has built over the years.

So, it appears we have serious competition between VMware and Citrix for all things cloud. At first blush, it appears that Citrix may have the upper hand by aligning itself with AWS "early on". It is probably only a matter of time before VMware makes similar moves.

Adding to this complexity, Microsoft and Cisco are in the wings looking to make a mark with their own products. Of the two Microsoft may be better positioned to gain market share against all comers due to the fact that it has a full suite of market leading products that are already offered in a SaaS model and that may be deliverable in a SaaS model in a private environment in the near future as well.

Carriers, Performance, and Connections

There are three things that I've been thinking about lately:

1. Performance management for cloud computing,
2. Cloud computing and carriers (i.e., telecom companies such as telephony and cable), and
3. The connection between the two.

The level of interest in what carriers are doing has been sufficient to warrant the attention of industry analysts and entire conference tracks devoted to discussion of the impact carriers are having on cloud computing. Depending on your perspective, you're probably in one of two camps: those who think carriers are too large, slow, and generally old school to offer cloud computing solutions, and those who think carriers are well placed to run them. For simplicity, let's call them cloud carriers. I know, a bit cheesy.

Carriers are typically thought of as large organizations that are not as agile as smaller organizations. The common analogy is that of trying to turn the Titanic on a dime: not so easy. Yet, here are organizations that have a wide ranging clientele that includes the likes of governments (federal, state, provincial, municipal), educational institutions and large enterprise, as well customers in the the mid and mass market segments. Not to mention that they have the scale available to fund and staff product development projects of the scale required to develop and launch cloud based services. This puts them in a unique situation with respect to offering end-to-end services ranging from customer premise equipment, connectivity, data centre, hosted servers, and all manner of cloud based services. Cloud computing, is not a huge stretch when taking this into consideration.

For many organizations, performance management forms a core part of their service delivery strategy. However, these same organizations don't typically control much of the infrastructure that is used to deliver their services beyond the edge of their network; non-core services are offered by various vendors such as ISPs, data centre providers, etc., which makes resolving problems more challenging because there are more intermediaries that affect the service. Throw in the various SLAs that are contracted, and the effective SLA drops to below the lowest contracted SLA.

Since carriers are able to offer a range of services, they are in the unique position of being able to address performance problems globally making it easier for customers to obtain assistance and becoming the proverbial "one throat to choke". Several carriers have already made bets that their customers will buy cloud based services from them and have either acquired smaller service providers or invested in the technologies and infrastructure required to deliver those services.

Despite the fact that AWS has clearly claimed the lead in the cloud service provider market, it is too early to count out carriers: they have the hallmarks of an integrated service provider as well as the means to deploy services and support them. Look to carriers to make an even bigger push into cloud services in the next few years.

Takeaway #4 from Cloud Connect 2011 - eBay and Cost Savings

By now, everyone has looked at Neal Sample's presentation from Cloud Connect 2011 (arguably the most important keynote as far as I am concerned) of how eBay makes use of the public cloud. I dare say, that they have shown significant and very real cost savings.

Up until early March, the best we could do was theorize and sort of guesstimate at how much could be saved on costs by making use of a cloud based architecture; how much were servers costing, what was their utilization, how many person hours were spent managing them, etc. vs. spinning up AWS instances and shunting excess or unplanned workload into the public cloud. Many vendors offer their own version of cost/benefit calculators and "financial checklists" but they mostly miss the point: consumers of cloud based services need to be honest with themselves about how they consume IT assets and services before they can really estimate their cost savings. eBay did that. They looked at the whole enchilada, discovered where their efficiencies or inefficiencies lie and showed huge cost savings.

I have no doubt that eBay's model has inspired at least a few organizations to look at their utilization. The trick is for them to decide what is right for the organization. eBay's model certainly isn't a one-size-fits-all. It is up to individual organizations to understand their asset utilization profile, their tolerance to risk, and to see how cloud based services fit into their governance model before making such a leap, however compelling it may be.

GRC/security in cloud computing

Jinesh just echoed some thoughts I've been incubating regarding security and risk: GRC/security boils down to risk tolerance. If you have a high tolerance to risk, then there is no problem using AWS; if you have low tolerance to risk, involve your security team early and often and make them a part of the decision making process.

Comment from the audience: "My legal wants to redline the AWS contract but I don't think Amazon would go for that." According to Jinesh, Amazon has a legal team that is available to address legal concerns. I will have to look into this given the work that the team at QMUL did on cloud based services contracts.

Basic strategy for moving to the cloud

Flexibility is key. Spinning up instances, regardless of whether they are with AWS or not, needs to be easy, scalable, and allow for various operating systems, development environments/programming languages, and databases.

There are 2 basic strategies that are common to Startups, SMBs, and Enterprises: create new services/apps; migrate existing services/apps.

Justification for the business depends on TCO and must balance the cost of capital to acquire infrastructure vs. the expense of leasing temporary infrastructure.

Going to take a closer look at the AWS "economics" later.

Breakdown of Amazon's cloud based services

Good basic overview of Amazon's cloud based services and how they interrelate. Graphical representation of:

1. Infrastructure (compute, storage, network, database); includes global physical infrastructure
2. Platform (parallel processing, payments, content delivery, workforce, messaing, email)
3. Cross service features (authetication and autorization, monitoring, deployment and automation)

Jinesh also explained how ISPs can resell AWS instances with margin using DevPay. Wondering what the developer/channel/spot market dynamics will be.

Wonder how many of the services are home grown vs. COTS white labeled. Anyone know?

$25 credits for everyone!

Starting off well. Jinesh gave out $25 credits to AWS to all participants.

Goals:

1. What to move to the cloud?
2. What services to use, when, and how?
3. How to build applications to leverage AWS

Morning session is a  lab portion to help participants learn how to set up AWS. Afternoon is devoted to more conceptual topics such as architecture and migration.