Tag Archives: cloud service

6 Things I Think I Think for IaaS in 2011

I love this time of year because it is one of those rare occasions during the corporate and product development process where creative ideas and concepts designed to stimulate future success enter the entrepreneurial blood stream.  It is that rare moment where you have the benefit of an entire year of business fresh in your mind to build upon and an entire new year ahead of you to set new standards and push the envelope of success. 

For our company and for the industry, 2010 was a huge year.   We completed our Series A round of venture financing, relocated the company to the coveted North Carolina State University’s Centennial Campus and tripled the size of our team.  Meanwhile, the industry took meaningful steps toward maturity as mainstream private sector businesses and governments of all shapes and sizes began giving IaaS a very serious look.   If 2010 was the year of formal organization, 2011 will be the year of some serious and meaningful growth.  Not just for our company and our technology, but for the IaaS market as a whole.

In a post I wrote recently I did my best to explain some of the core characteristics that would be central to IaaS achieving mass adoption as the technology revolution marches forward.  While I think it’s very difficult for anyone to offer up accurate predictions for the year ahead of any fledgling market, there are some specific ‘themes’ that I think, as we look back a year from now, will have clearly emerged as bell weather trends in the industry.

To borrow a format from Peter King, one of my favorite sports writers, here are the six things (6 things, 6fusion, get it?) I think I think (for the cloud biz in 2011):

  1. Hybridization Will Prove Critical to Enterprise Adoption.  I’ve been to the edge and back and I have a few words of wisdom to share with my peers about the Enterprise cloud.  Unless what you are doing bridges a gap between what exists inside the four walls of the enterprise data center and what might safely and securely exist outside of those four walls you are just another GUI in the Red Ocean peddling the same wares we’ve seen for years.  Hybridization is something enterprise buyers will use to separate the crème from the crop in 2011.
  2. Regional Clouds Unite.  The arms race among regional managed hosting providers to beef up for cloud services was evident in 2010.  But the silo approach to building up IaaS on a regional basis will prove difficult if not impossible to compete on scale – and it won’t take long to figure this out.  In 2011 expect to see the concept of broad-based IaaS federation become a much more prominent theme as owners of regional facilities and compute partner to create scale and increase market size in the quest to truly monetize their resources and compete with the national players.
  3. The Ecosystem is Bigger Than the Organism.  The IaaS industry is beginning to realize that the creation and quantification of IaaS demand is much more important than the creation of supply.  Its one thing to have the capability to power or enable the creation of IaaS resources, but it is entirely another to drive revenue and margin to the cloud.   The emergence of business ecosystems will be a consistent theme for the coming year because partnering is the key to success in a nascent market.  In 2011 you will see more and more eyebrow-raising deals announced based on ‘synergistic’ partnerships – partnerships that drive mutual revenue and margin between companies that are bound by the common interest of leveraging, distributing and powering IaaS.
  4. It’s All About the Channel.  Building a global business tackling one end-user customer at a time doesn’t scale if your business is supposed to compete with the market pioneers.  In order to generate a serious outbound push to globalize IaaS the cost of business acquisition will be too high for almost every player.  In 2011 IaaS vendors will wake up to the fact that they need help in order to scale revenues and ultimately generate the ROI they are promising shareholders.  Queue the channel gold rush.
  5. Communities Will Emerge.  I subscribe to the notion that one day every business in every vertical will consume a form of public cloud – but we are not anywhere close to this reality.  Large scale IaaS operated by a trusted third party and made available to a select group of common-interested stakeholders is a concept that has legs.  Trust me on this one.  Building out community clouds will emerge in 2011 as one of, if not the most important, concepts to help accelerate IaaS adoption. 
  6. A Course Will Be Charted for an IaaS Futures Market.  If you don’t subscribe to the notion that the final destination for this ride is a commodity exchange for compute, stop and take a look around.  Spot markets emerged in 2010, much to the surprise of many industry pundits.  But spot markets, as novel as they are, do not a true market make.  The real money and the real opportunity are in futures trading.  There are forces at work on this as I type away, and although you won’t actually see compute on a major exchange in 2011, do expect to see this theme to creep it’s way into mainstream IaaS thinking.

Ok, so with the predictions for themes and threads out of the way, I’ll conclude this post with the 6 things I’ll be watching closer than my wallet at a pick-pocket’s convention as 2011 progresses:

  1. Shifting Big Iron:  Companies like HP and IBM have yet to emerge with serious IaaS plays and if you read the tea leaves they won’t any time soon.  I’ll be watching to see if any of the whales in the pool make a splash in the IaaS business.
  2. Processor Plays:  Intel made huge moves in the cloud in 2011 and you don’t need your tarot cards out to see where they are going.  Anyone know what AMD is thinking these days?  I’ll be watching to see if this gentle giant makes any moves that can rival thier kool-aid-drinking-all-in-pot-committed competitor.
  3. Government Clouds:  The GSA announced a major IaaS initiative announcing a schedule of vendors that could be purchased from their schedule.  But will these IaaS vendors truly make any money this way?  I’m not so sure.  My personal opinion is that the money is at a different level of the Public Sector.  Can’t wait to see!
  4. Hypervisor Competition:  KVM is rocketing up the relevance chart.  No doubt.  I’ll be watching to see how VMware plans to keep it’s toe-hold on the hypervisor market as IaaS enablement begins to drive more and more purchasing decisions.
  5. Network Providers:  The accelerated adoption of cloud services will put a big piece of the pie squarely in the hands of the network operators.  I will be watching to see how Network operators jockey to position themselves.  I don’t think it is a foregone conclusion that operators will follow the lead of companies like BT and DT.
  6. Disclosure Watch:  As more and more private sector orgs make the move to the cloud, the greater the potential that something somewhere is going to go wrong.  I will be keeping a watchful eye on key disclosures and cloud failures which could dramatically stunt the industry’s pace of growth.

6fusion’s first webinar of our 2011 series called: “Make your 2011 New Year’s cloud Resolution Now”. I’ll be elaborating on some of these points and drilling down into how service providers can drive new business to kick the session off. Come join the discussion!

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Key Suppliers in the New ‘Cloud’ Order

In the Perezian sense, as the fervor and hype of a technology revolution gives way to a new technological paradigm – a new order, if you will, to the way in which we perceive and do things – there is tremendous disruption among the supply chain participants across entire industries.  Within this disruption there is equally tremendous risk and potential reward.  It is this change process within which we often refer to clichés phrases like ‘survival of the fittest’ and ‘the crème rising to the top’, etc.

Without a doubt, cloud computing – or the idea that I can get all the computing power whenever I need it, wherever I need it,  scale up and down on demand paying only for what is consumed – is going mainstream faster than anyone expected.  And you don’t need to consult Gartner or Forrester to figure it out.  Just tune in to any NFL football game on the weekend and spot the slick new IBM advertisement on TV!  (I felt like calling my Mom in Canada and asking her to tune in, since she’s been asking me for five years exactly what it is I do for a living!).

Mainstream media advertising aside, the real impact of cloud computing is still developing and will be for a while now.

As methodologies and best practices for IT deployment align with fundamental technological changes (such as that represented by the idea of cloud computing), empires built on old-world processes and systems can come crumbling down.  Witness the profound directional changes dumped onto companies like Microsoft in recent years.  The existence of companies like Amazon and Google, purveyors of all things cloud, and Salesforce, the grand poobah of SaaS, have literally forced the largest software maker on the planet to change its direction completely or risk its prestigious 30 year reign of relevance to consumers.  I’m not one of the Chicken Little pundits that think Microsoft’s days are numbered. Far from it. But the changes coming from MSFT these days are arguably like none other in its history.

At 6fusion, we see four critical groups in the supply chain that will live or die with the sea-change of cloud computing.  Those groups include:

  • The Channel (IT Service Providers)
  • The Network Providers (ISP, Telecoms companies)
  • The Hardware Manufacturers (Dell, HP, IBM, etc)
  • ISVs (Independent Software Vendors)

Here is what I find amazing about these four groups:  The pendulum for the next several years will be wild and dramatic.  Embrace change and potentially ride a revenue wave like you never thought possible.  Resist change, and leave your fate to chance.  Maybe I need a bit more excitement in my life, but I personally think a front row seat to this action is the best ticket in town! Here are just a few of the major league questions facing industry stewards:

  • Managed Hosting Providers and purpose-built SaaS companies want to own the end user customer relationship. The cloud represents the biggest disintermediation threat in recent memory. How will the modern IT Service Provider stave off the biggest threat since Dell’s direct model in the 1990’s?
  • The network is the most commoditized resource in cloud delivery. As the role of the modern network provider changes, some of the big telecoms firms have decided to become cloud service providers in order to reach beyond the packet for revenue. What are the risks inherent with Telco’s playing in the cloud space? How can Telco’s and ISPs leverage their position as a key raw material component of the cloud to position themselves for a more profitable future?
  • The days of competing on logos and laurels are dead and buried. In a new world where the purchase and supply of hardware is being driven by ROI, footprint reduction, more support for less money and hyper-efficient supply chain logistics, will the big iron shops be agile enough to compete? What are the implications for the big firms that decide to inter the cloud computing service fray, going head to head with other market entrants, possibly even existing clients?
  • SaaS is clearly the future business model for the delivery and licensing of business-value software. But two facts remain: 1) getting there takes a complete overhaul of legacy systems, the kind that represents massive strategic shift and 2) the world is full of legacy systems, contrary to the hype cycle in the industry. Where is the bridge between the old order and the new order for software companies and how will they cross it?

Most that know us know our technology is beginning to play a key role in the future direction of these supply chain participants.  We develop technology with an eye for making computing simpler, which removes proprietary silos that only serve to slow down the realization of a world where cloud computing methodologies are included in standard deployment best practices for IT.

Over the next several weeks I plan to dedicate some blog space to each of these core groups and unfold a bit of what 6fusion has been up to as we continue our quest to deliver the promise of this new technology to the widest audience in the cloud.

Cleaning Up the Cloud Computing Pricing Mess

Cloud Computing is the next great land rush  and it is happening now.   All the major technology companies have their offerings.  And it seems like everyone is entering the market – even the hosting companies want in on the land rush.

In theory, migration to the Cloud makes business sense; you’re enabling companies to rent computing power that would cost them too much to buy.  I won’t bore you with yet another blog post on the ‘what is it’ topic.  There is a great synopsis of Cloud Computing published by Mache Creeger and I recommend checking it out.  In our model, we’re allowing companies to pool their resources on the supply side of Cloud Computing and leverage a much bigger, better shared infrastructure on the demand side of the equation.

Cloud Computing is about lower costs and greater use of resources.  Greater flexibility, more options and overall, more computing power.  It’s a shared cost.  And it’s based on what you use.  Or is it?

One of the areas of Cloud Computing that still needs to be addressed is the issue of pricing.  Pricing the Cloud has gone beyond complex and confusing and entered the realm of ridiculous on some levels.  We’ve met with countless service providers in the past year and the basic message is clear:  Come back when you can give me something that doesn’t need a PhD from MIT to decipher.  This message was also pretty clear at last month’s Interop Las Vegas event.

The odd thing is that everyone agrees that Cloud Computing pricing needs to be standardized.  Many companies want this to be an industry group that develops standardization. Industry groups and alliances have been throwing this topic around for a long time now – we’ve seen this question come up for more than two years.  But why is it that nothing has happened?  As a company that has what I would call truly transparent pricing, I’ve been confused about this for a while.

I was recently on a conference call with a potential data center partner when I got insight into what I truly believe is the answer.

Standardized pricing and corresponding tools that allow end user customers to peer into the rack and seriously drill down into the granular cost of the Cloud are simply bad for business.

In fact, the parties on the supply side of Cloud Computing – elastic computing providers, managed hosting companies, platform-as-a-service shops, big iron manufacturers, etc. – don’t have much incentive at all to strive toward pricing transparency and standardization.  Why would magic quadrant hosting providers or heavily vested IaaS providers effectively even the playing field by adopting a standard pricing metric when it is their brand that is ultimately buttering their bread today?  Is a company like Amazon or Google really going to adopt the same pricing standard as every other company getting into the race?  Maybe, but don’t hold your breath in hopes to see them at the front of the line.

I think the work of Cloud standards advocates like Reuven Cohen of Enomoly has been really great for cracking the nut of Cloud interoperability.  But it may be a stretch when they dream of Cloud interoperability extending beyond the technical exchange and integration of systems and data.   Here is a reality check:  All the big Cloud Computing providers in the market are profiting from preventing the very process of commoditization they allegedly support.  And even if you aren’t part of that group, pricing is an integral part of the profit picture and thus cannot be decoupled from the discussion.  Just because you get together and document some sort of standard or benchmark doesn’t mean you’ve solved the problem for the stakeholder that matters most (the customer).  In fact, I think these types of standards groups may only serve to muddy the waters further on the subject because they don’t pay enough attention to  the connection with the bottom line for a Cloud operator.

Understanding the profit motivations of the Cloud providers and then dissecting the current modus operandi for pricing exposes a huge gap that I think will shape a big part of cloud development initiatives in the next few years.

Let me give you an example to prove my point:

Cloud Computing service providers seem to believe that they can and should charge for the Cloud on an hourly basis.  On the surface that sounds great, because it’s better than paying for a machine for the whole month, isn’t it?  But underneath there is a lot more to it.  Think about it.  If you use a server for one minute of an hour, you’re charged for the whole hour.  That’s crazy.  One sixtieth of an hour costs you the whole hour?  Sure the pricing is reduced, but what are you really getting?  I think Allan Leinwand captures broader implications of this silliness quite well when analyzing the state of Cloud pricing.  He said, “CPU hours: that’s not something I go buy. I buy a blade server, and the hours are infinite, they’re mine.” Leinwand has a big point and it has a direct impact on the future capability of Cloud Providers to achieve mainstream relevance to the average enterprise.  6fusion’s CEO and co-founder John Cowan analyzes the implications of pricing on the buying community here in a separate post.

And if it were really just as simple as clocking CPU hours and sending out a bill, maybe we could alleviate this pain point in the Cloud and move on.  But it doesn’t end there.  Invariably, Cloud Vendors have to “tack on” all sorts of ancillary charges and fees to make money.  Everything from RAM to storage to bandwidth and even Support get thrown in as separate line items.  The pricing becomes convoluted and difficult to predict.  It’s a huge mess, but there is no incentive to solve the problem, given there is a lot of money to be made from the confusion.

I have no problem with the supply side making money.  After all, that’s what a company is in business to do.  What I have a problem with is the lack of transparency or ability to leverage these systems for anything more than just the technical accomplishment of elastic computing (don’t get me wrong, that is a biggie!).  When Cloud providers don’t give you proper insight into what you are using, and if you can’t make the mental jump between what you do today (ex, buy more blades) and what the Cloud represents, the advancement of the industry suffers.

Herein lies the gap.

Service Providers must deliver more insight and transparency into the Cloud, not fog the pricing just to earn more margins for a brief time.  Customers are far too smart for this to work long term.  Ultimately, we believe that in order for the Cloud to succeed, the industry needs to help customers understand their true usage and the true value they are getting before and after they make the decision to use Cloud Computing to run critical IT systems.  A granular metering and billing technology that transcends the politics of brand and vertical silos, while satisfying the need to be a ‘profitable’ service provider, will go a long way to helping to clean up the mess that is Cloud pricing today.