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

Comments

Excellent post!.
Unknown said…
This comment has been removed by a blog administrator.
Thanks Ignacio. An interesting detail I just discovered, RackSpace apparently reached annual revenues higher than AWS. According to this reference , they will make $1.15B in 2012. One of the reasons is they offer hosting, colocation and cloud solutions, covering more completely the Data Center needs. Source see http://bit.ly/fsanrO "Will Rackspace Hosting Outperform in 2011?"
Unknown said…
@ Randy Bias if you think IaaS is the meaning of cloud you need to go back to the drawing board and see that infrastructure is nothing without the application layer. Think rails, noSQL, distributed file systems with hooks (away from posix), transparent load balancers, modern kernels. The cloud would live without the IaaS vendors. As the web world moves into the HPC world you will see that IaaS will become less and less important. Google App Engine is more the direction of cloud. Developers will commit code to the cloud without worry of adding or subtracting servers. The application code will become data center and rack aware and scale to any limits only with a price tag. Its all about the API. Developers are less concerned with the server or the ability to add or subtract a node. The industry is at a breaking point of understanding how to build distributed applications. When the developer community is exposed to such services they will change ship and dump all the complicated SSH tools and worry more about user experience.

The true cloud is the sum total of > Web Framework with hooks to the distributed file system that is rack aware and data center aware = The end and start of what cloud will be and become. The companies that see this vision will be the winners at the end.

Gary Brooks
http://www.cloudaccess.net
Gary, thanks. Nice contribution. Probably you are right if a company with big clout on the market will adopt the "true cloud" as you describe in the last paragraph and all applications will be compatible. The challenge we face is that many players have their own ideas of what a "true cloud" should look like. We need to accommodate them all. Hence the proposal of IaaS + TC 1, IaaS + TC 2, etc coexisting on one IaaS is perhaps not ideal, but practical for now....
Unknown said…
Dear Gary,

Just to add an IaaS vendor perspective, in reality the world of computing will remain heterogeneous. Whilst some areas of computing are standardising at the same time many are fragmenting and fracturing into different approaches. It is the standard process of creative destruction. At some point people might feel that the truly scalable database for example has been solved as a problem but by that time you can be sure other areas of computing will be changing and developing rapidly.

The reality is that the more managed and involved an offering, the more specific it becomes. In a dynamic world, companies change technologies all the time to fit their needs. Can we say that Google Apps platform will develop in the same general direction as the needs of any specific company? I'd say it is unlikely.

What IaaS should offer is a flexible open (meaning generalised) solution in a utility fashion. We all use utility companies every day for other resources, the cloud adds computing resources into the sphere of the utility.

By the way, I think that PaaS adds a great deal of value for many uses but I don't believe in a 'new world order' when it comes to computing :-)

Kind regards,

Robert
CTO
CloudSigma
http://www.cloudsigma.com
Here are the top 8 Cloud companies to watch according to New Times and GigaOM
http://nyti.ms/ffGnt8


1. Calxeda
2. Cisco
3. CouchOne
4. Joyent
5. OpenStack
6. Red Hat
7. Salesforce.com
8. Twitter

No AWS on the list? Does it means in NYT opinion, AWS reached the top?

My favorite is Joyent. Only Joyent offers Hosting IaaS in Addition to IaaS + PaaS-Joyent. The company know-how can create basically IaaS and PaaS offering for all other companies in the list, If they choose to select Joyent.

The IaaS component is so important, that very large companies like Facebook, Amazon, Apple, IBM makes their own mega-IaaS-Data Center to places the de-facto their PaaS offerings
Unknown said…
@IaaS you all will be wanting to build stock programming languages into your platforms so developers can build. Drag and drop servers will be old school technology. You all someday will go away from launching VP machines to making sure your platform runs a cloud distributed programming languages out of the box. Amazon has already started and the Amazon S3 is proof of concept with the API angle. (note: basecamp runs Amazon S3) Take away the hurdles and the developers will come. Its the old school Lustre "like" mentality. Throw equipment at the job to solve the problem.

@Robert I just wanted to clarify that IaaS is not cloud its only a a piece of the puzzle.


Defining cloud can be hard. I don’t see one definition for cloud. It has been
defined by many companies and individuals and is usually specific to the case in
study. I see the extreme of cloud as the convergence of software becoming data
center and rack aware. It’s much like Google Apps and how it’s provided as a
service and can be delivered to you from many data centers.
Some people think of cloud as software service or a utility you purchase online.
The cloud typically offers you flexibility in resources. Resources can come in the
form of hardware, software, capacity, and even API services. The cloud comes in
all shapes and flavors. The term might sound cloudy, but it’s how it works in this
industry.

My definition of cloud is the extreme and it comes down a small team coders that could build a facebook "like" infrastructure with web-framework and no worries about the scalability or availability of the servers.

Lets wait and see what happens.

Cross reference:
Salesforce.com has just announced that it is acquiring Heroku, which provides a Ruby application platform-as-a-service, for approximately $212 million in cash

http://techcrunch.com/2010/12/08/breaking-salesforce-buys-heroku-for-212-million-in-cash/

Gary Brooks
@garyjaybrooks
http://www.cloudaccess.net
Unknown said…
I don't know how these different models will evolve or be adopted, but I do think that the days of IT Operations and owning data centers must be limited. Not only are the economics horrid (7x the unit cost of a computer compared to Amazon's internal costs, according to James Hamilton) - and he doesn't even consider how stupendously inefficient approaches like ITIL are, and must be; but also, emerging development approaches take on responsibility for more of the lifetime of applications, in part because Amazon has encouraged the developers to work with their cheap, unreliable computers.

As the business and development move more apps into the cloud, the enormous capital expenditure in technology and data centers (>50% for commercial firms) will look increasingly foolish.

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