One of the more overlooked aspects of the cloud computing market is the imminent threat to the Virtual Private Server (VPS) market.  Many look to the stardom success of Web 2.0 startups like Animoto and SmugMug, who clearly derive tremendous value from Amazon Web Services (AWS), as a measure of cloud computing adoption.  Others point to the imminent embrace of ‘the Enterprise’ although uptake is still slow.

Unaccounted for in all of this is where the real dollars in today’s market are.  The reality is that they are largely provided by VPS customers.  Possibly as much as 50% of today’s cloud computing market is a single customer buying a single server and leaving it on indefinitely.

One has to wonder what might happen if large ‘hosters’ became aware of this (they are) and how current cloud providers might capitalize on it in the short term (they will).

Read more…

 

Cloud Computing

If you’re into cloud and Internet/web operations this past few weeks saw several very important conferences, including Open Source Bridge, Velocity Conference, and Structure ‘09.  I’m not going to review either of these since I wasn’t at Structure and only spent a day at Velocity, but suffice it to say that some very smart people attend these events.  In particular, the Velocity Conference is more of a technology conference for people who are developers or operators and want to build highly scalable infrastructure.

There were a few particular presentations I wanted to point you to however.  There are some very important tectonic shifts at play now highlighted in these presentations.  One in particular, the notion of highly automated infrastructure and being able to describe infrastructure as code, is a particular hobby horse of mine.  My startup, CloudScale Networks, was one of the first to talk about ‘programmable infrastructure’, ‘infrastructure as code’, and ’self-aware infrastructure.’[1]

Check these out when you can!  Most of the presenters and participants are friends of mine and I can vouch that they are very clued on this subject matter.

• Infrastructure as Code
• Configuration Management Panel
• 10+ Deploys Per Day: Dev and Ops Cooperation

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[1] Pretty cool that Ezra picked the name ‘Control Tower’ to describe the command & control management system.  This was the same as for CloudScale.  You can see it at the top of one of the pics here.

 

Internet Operations Automation, cloud, conferences, infrastructure, open, presentations

What conversation about cloud computing is complete without a mention of big data, distributing processing, and distributed databases?  There is a recent trend away from relying exclusively on the traditional relational database for everything.  Newer technologies like BigTable and Hadoop provide an alternative mechanism for storing and processing large sets of data that don’t necessarily have extensive relationships needing modeling.  These technologies allow for a much more scalable solution.

In fact, they help in two ways: one by allowing an application to process more data using horizontal scalability (aka ‘elasticity’) and two by reducing load on the primary relational database and hence allowing you to go longer before ‘sharding‘.

Chris Wensel is the man when it comes to understanding Hadoop and he recently gave a couple of talks introducing Hadoop.  Here is one of them:

 

Big Data cloud, databases, hadoop, scaling, sharding

If you can’t be ‘best‘ or ‘cheapest‘, that only leaves being ‘first’ (see Pt. 1: Service Clouds and Pt. 2: Commodity Clouds).  Since Amazon Web Services (AWS) clinched the ‘first’ and ‘best’ titles for the general marketplace, your best bet is to pick a subset of the market to focus on.  Focused clouds find a sweet spot and exploit it.  This is really Business 101 for Startups.  A diagram I saw recently by Ben Caddell brought this into focus and provides a very simple to understand reminder for those of us who may have forgotten (see right).

Let’s look at some of today’s focused clouds.  I’ll mostly talk to Infrastructure-as-a-Service (IaaS), but also touch on Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) briefly.

Horizontally-Focused Clouds
By ‘horizontal’, people usually mean a longitudinal slice of the general market focusing on either a stakeholder (e.g. QA, IT, business management) or a business size (e.g. large enterprise, small/medium enterprise (SME), small/medium business (SMB), startups, or individuals).  A horizontal focus, by definition crosses multiple verticals  (e.g. financial services, health, etc. — see below).

We have some interesting examples of these available to us today.  I’ve picked just three to highlight my point: SkyTap, Terremark, and EngineYard.

SkyTap
Perhaps my personal favorite is SkyTap.  SkyTap focuses tightly on providing a unique experience for those in Quality Assurance (QA).  They allow a rich workflow experience that greatly facilitates deploying and saving the state of multi-server applications.  A QA person can find a bug that affects multiple servers in a complex application and literally save the entire system for reuse or re-play by the affected developer at any time.  Combined with easy replication of multi-server environments and other great features designed for this segment only, SkyTap, even though technically an Infrastructure-as-a-Service (IaaS) play is generally under the radar when folks talk about infrastructure clouds.

Terremark
A relatively new entrant into IaaS, Terremark is making it’s mark by focusing on the enterprise.  In fact, their offering is called simply The Enterprise Cloud, showing where they plan to focus.  Terremark uses VMware, which hasn’t had a lot of traction in the public clouds to date.  Presumably this is because they plan to offer some of the more advanced enterprise-class VMware features like HA and DRS.  From my sources at VMware I’ve heard that the Terremark cloud product is quite good and they have developed quite a bit of secret sauce on top of VMware. [1]

Regardless, by picking an area of the market that has been under-served by the heavyweights I think they have a good opportunity.

EngineYard
It’s quite a bit easier, as you move from Infrastructure to Platforms and Software to differentiate and focus on a particular target market.  EngineYard (and their close cousin Heroku who I have mentioned before) focuses on providing a fully managed and automated Ruby-on-Rails (RoR) stack to web startups.  This has already distinguished them amongst the platform crowd and allowed them to ramp up a very respectable business in less than 2 years time.

Vertically-Focused Clouds
If you can’t go horizontal, go vertical.  A vertical focus is an industry focus, be it financial services, health, construction, high-tech, life sciences, energy, or other.  A vertical focus tends to be more solutions-oriented.  When you put together a package that focuses on a single industry it is rarely transferrable, without major changes, to another industry.  However, this kind of focus can be very beneficial for a smaller cloud trying to make a mark early.  This also means it can be rather hard to build a vertical infrastructure cloud.  An example might be someone building a cloud that was highly secure and HIPAA compliant for the medical industry.  Or one that focused on PCI compliance for financial services companies.

Outside of infrastructure, many Software-as-a-Service (SaaS) businesses focus tightly on a given industry.  I don’t know of any current IaaS clouds who are vertically focused and the list of SaaS providers who are vertically focused is too long to list.  A couple of brief examples:

athenahealth
athenahealth provides doctor and patient management services online.

BankServ
BankServ provides online payment processing specifically for financial institutions.

Focus, Focus, Focus

As you can see, if the general market already has dominant players who are ‘first’, ‘best’, and ‘cheapest’, then picking a subset of the market that is not currently served and being ‘first’ there is a great strategy for any new cloud.  In the final part of this series I’ll talk about the particular importance of focus for those players currently in the general market who need to compete on value, not price to survive.  Ultimately, the best way to make money is to help your customers.  Don’t help them on price.  Provide value instead.

[1] If Terremark wants a full review, perhaps they could give me a trial account? <hint>

 

Cloud Computing cloud, enterprise, iaas, infrastructure, paas, predictions, saas

Ever wonder where the other big guys are in the cloud computing space?  If Google, Amazon, and Microsoft are general purpose service clouds set to dominate as ecosystem plays, then what about those big companies that can’t deliver an ecosystem, but have the size to play ball?  (See Pt. 1: Service Clouds).  The answer is they play to win on price.

Enter … commodity clouds.

Infrastructure Commodity Clouds
Recently large providers like AT&T announced their entry into the Infrastructure-as-a-Service (IaaS) cloud computing market and some bigcos with a vision, like British Telecom  (BT), even tried to move early building upon 3tera’s technology to deliver on-demand hosting services.  Even Sun started to get in on the act with their Sun Cloud.  One could argue they led the whole charge with their early on-demand grid service, but by all accounts it wasn’t very successful.[1]

What’s common about these new entrants to the cloud computing space is that generally they are not technology & innovation businesses themselves with the obvious exception of Sun.  In particular, they don’t have track records in innovating in the large scale on-demand infrastructure and datacenter space.  But … they have name brand recognition, buying power, and the ability to price themselves competitively against large incumbents like Amazon and Google.

Without the ability to innovate their clouds the primary tool of differentiation for these entrants is pricing.  While I’m sure they would argue with me about this, the fact remains that we’re unlikely to see the next AppEngine, SimpleDB, or similar from most commodity clouds.[2]

An ecosystem play is just not in the cards.

Platform Commodity Clouds
We haven’t seen a Platform-as-a-Service (PaaS) commodity cloud and it’s unlikely we will in the short term given the relative technological complexity of building a scalable shared multi-tenant infrastructure that can host arbitrary code.  If it were easy, then AppEngine and Salesforce/Force.com would have a whole lot of competitors right now.

Bottom line is that PaaS doesn’t play as a commodity cloud.

Bringing it Back
Again, just a reminder that there are three ways to be a market leader: first, best, and cheapest.  Commodity clouds are focused on being cheapest or, at least, that’s primarily where they can play in terms of value.  This doesn’t necessarily mean that the list pricing will necessarily be cheapest.  Companies like AT&T and BT, at least, will deliver cloud computing as part of their product portfolio which means that businesses that pick them likely will do it because their overall costs or ROI are lower.  They will see cost savings either through discounted pricing when combined with other services or through non-obvious areas like avoiding bandwidth charges.  If you’re in an AT&T datacenter, have AT&T connectivity, then data transfer between ‘the cloud’ and your office will be ‘free’.

What do you want to be?  Best, first, or cheapest?  If service clouds are best, commodity clouds are cheapest, that only leaves being first.  If you can’t be first to the general market (Amazon wrapped that one up) then you need to be first to a smaller focused market.  More on that in Pt. 3.

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[1] Sun doesn’t have a reputation for delivering on-demand services as I’m sure even they would admit.

[2] You’ll notice I haven’t mentioned RackSpace.  The jury is still out there.  It seems clear that RackSpace has service cloud ambitions, but it’s unknown whether they can execute.  I’m going to lump them in the commodity cloud bucket for now until more time elapses.  Also their current pricing for the Cloud Servers product seems to reinforce the notion that they are largely a commodity play.

 

Cloud Computing cloud, iaas, infrastructure, paas, predictions, scaling