Friday, January 07, 2011

Part 2. Getting out of the Trough of Disillusion Will cloud computing be adopted massively in 2011?

Dilbert strip licensed by United Feature Syndicate, Inc.

We have seen  in Part 1 of this post  that Cloud Computing is the least  considered (15%) and most rejected (46%) new  emerging technology in Data Center space

This statement is  based on research from the largest organization of Data Center professionals - AFCOM.  Their survey has 436 respondents members from 27 Countries worldwide. 83.3%  in the U.S., 16.7% Overseas. representing: Private Industry 84.5%,  Government Agencies 8.1%, Colleges or Universities 7.4%,  Respondent’s Personal Budget Responsibility: $3M+ 41.9%, $5M+ 29.3%  and for  $10M+ 19.4%.  

For 2011 there must be a real osmosis between the Data Center professionals and the cloud computing community. I discovered a total disconnect between  Cloud Computing providers- who talk in terms like PaaS, IaaS and SaaS, which is the focus of the technology creation, -  and Data Center owners - who are traditional consumers of the Data Center enterprise technologies and  who own the most significant  budgets that cloud computing must leverage to gain widespread adoption.

We are , using Gartner Hype Cycle, in the  the  Trough of Disillusion and we need to reach the Plateau of Productivity . You can follow the answers on Quora to the question Has Cloud Computing reached its peak in terms of hype? According to J. Herman - artist, writer, producer -   "Cloud computing is still PO, meaning Pre -Oprah. The moment Oprah declares cloud computing cool... then the hype will peak"


In the eyes of the Data Center folks we are just the philosophers, technologists and artists of the cloud computing.  We get just as much credibility as tiniest middle character from Dilbert strip at the top of this page. The size hints we are little blah-blah  dwarfs for now. Our rhetoric - which we call "messages"- did not reach our target audience. 

Cloud Computing  hopes for 2011

Here are the important companies for cloud computing, according to Gartner's  Magic Quadrant for Cloud Infrastructure as a Service last updated on December, 2010This  paper is one of the best analyst documents I have come across. The distinct groups in  the Magic Quadrant are

  • Self-managed IaaS, for cost-effective agile replacement of traditional data center infrastructure.
  • Lightly managed IaaS, for customers who wish to primarily self-manage but want the provider to be responsible for routine operations tasks.
  • Complex managed hosting, for customers who want to outsource operational responsibility for the infrastructure underlying Web content and applications.

For a vendor to be included above, here are Gartner's criteria
  • They must sell on-demand hosting as a stand-alone service, without the requirement to bundle it with application development, application maintenance or other outsourcing.
  • Their services must be enterprise-class, offering 24/7 customer support (including phone support), SLAs, and the ability to scale an application beyond the capacity of a single server.
  • They must have significant market presence, as indicated by Web-hosting-related revenue of at least $50 million in 2009, or an on-demand hosting revenue run rate of at least $25 million in 2010.
  • They must have demonstrable global presence. They must have reference customers in North America, Western Europe and Asia. They must have data centers in North America as well as either Western Europe or Asia, or they must derive at least 20% of their hosting revenue from customers outside the region in which they have their headquarters.
The third bullet eliminated many  promising  companies who are no-where near $25M in annual revenues.

If you look at the 10 best financed companies in Cloud Computing out of 10 companies, only one is listed: Joyent . This is one of the most hopeful Palo Alto cloud companies. They host what they preach and are nice people to do business with.

Companies like Rightscale, Cloudera, Eucalyptus are not listed on the Magic Quadrant.  One may argue they are not in the infrastructure business, But this is a fuzzy distinction as we will see later on. What it matters here that these companies attracted top investment funds and that the VC community believes they will deliver the expected revenues.





Ability to Execute and  Completeness of Vision

These are two axes of the Magic Quadrant. This is in a nut shell how the companies are evaluated
  •  Market Understanding and Product Strategy are the highest ratings possible in Completeness of Vision
  • Product/Service and Customer Experience are the highest ratings for Ability to Execute
To get into the Data Centers, we need to understand this market, the way it is now, setting aside our belief-in-Nirvana that cloud computing will bring. In fact, we need to completely forget any solutions we have in our mind when interviewing for product management purposes a significant customer. We need to be humble   and respect for the all data center classic practitioners.Then, as follow up, we need to test the Data Center Customer experience, when compared  to the one that have today.

As vision of infrastructure providers, one of the better companies having this approach is RackSpace, whose philosophy is  expressed in the graphic below.

They seem to offer pure hosting, managed hybrid clouds and clouds as fluent transition among the products.

Making IaaS revenues in 2011

John Considine from CloudSwich writes on his blog on January 4, 2011
From IAAS providers, we’re seeing a trend to offer more PAAS services. This is apparent in Amazon’s offerings
These tendencies of adding PaaS creates a complexity that hinders adoption. Amazon, by far the market leader is, according to Gartner  "Amazon is a thought leader; it is extraordinarily innovative, exceptionally agile and very responsive to the market. It has the richest cloud IaaS product portfolio, and is constantly expanding its service offerings and reducing its prices"

However Gartner has some reservations on the Amazon business model:
  • Amazon does not offer any managed services.
  • Amazon is the only evaluated vendor that does not also offer the standard options of colocation, dedicated nonvirtualized servers (often used for databases), and private non-Internet connectivity (although Amazon will negotiate peering). These components are critical for many customers, who need hybrid, not pure cloud, environments.
  • Amazon has the weakest cloud compute SLA of any of the evaluated competing public cloud compute services, even though its uptime is actually very good.
  • Amazon is a price leader, but it charges separately for optional items that are often bundled with competitive offerings. Prospective customers should be careful to model the costs accurately, especially network-related charges. Support is not included — it is a 10% to 20% uplift to the price, and it is geared primarily toward technically knowledgeable, expert users.
  • Amazon's offering is developer-centric, rather than enterprise-oriented, although it has significant traction in large enterprises...Amazon will negotiate and sign contracts known as Enterprise Agreements, but customers often report that the negotiation process is frustrating.
  • In other words, the Amazon model is not Data Center friendly. To port a Data Center center on Amazon, is an extraordinary feat of complex engineering, requiring top experts. Netflix port was breakthrough but it gives headaches even a year later . See 5 lessons a we have learned using AWS
Talking about Amazon AMI (Amazon Machine Interface), most people pretend they understand them and that are simple to write. My experience is 99% of mainstream cloud users have not a clue on how to write an AMI. So we are ashamed to admit it, and we praise the new clothing of the emperor, ever if we can not see it.




 How much is it worth to enlarge the market share for IaaS?

 The Economist's article Tanks in the  Cloud tries to figure outhow much money IaaS makes. Why IaaS? Because "the most interesting layer—the only one that really deserves to be called “cloud computing”, say purists—is “infrastructure as a service” (IaaS)."

Economist, quoting among others the well known cloud expert Randy Bias estimate AWS revenues for 2011 at $750 millions per year. Taking a total estimate for all companies from Gartner Magic Quadrant, maybe we get $1.5 billion per year (being generous). So we have a long to go up and up and up.

The most recent and conservative estimates from 451 Group  is 16.7 billions for 2013. Other Analysts including IDC estimated 50 billion per year plus. There are at least $10 billions per year to be made. The study includes SaaS revenues The entire companies from the Magic quadrant can not have a combined growth to reach the 50% of the 16.7 billions, unless significant new players will appear in the next year or two.
The time is ripe for a Google-like or Facebook-like player on IaaS space,  Economist says
"Computing clouds—essentially digital-service factories—are the first truly global utility"
We are close to the Plateau of Productivity or - as Quora's contributors call  it - the Oprah-ready Cloud Computing
David, Regina  and  Miha
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