There is a lot of passion around defining cloud computing, and frankly a lot of traditional enterprise vendors are playing defense. In chess they would call it a quiet defense, moving pieces into positions where they can defend dynamically if called upon. The reason is simple: Amazon web services, as delivered today, represent a massive, seminal, and watershed moment in the commodification of infrastructure—IF—the comparison is to enterprise infrastructure today. If AWS cloud infrastructure as a service is going to replace their customer’s current spend they want to position their architecture as what a cloud ‘is’ to soften the blow.

But thinking about cloud computing as a ‘replacement’ trend is a bit daft.

The other big distraction is comparing it in cost to building and running your own data-center on a fulltime basis.Costs should favor as a service offerings over time as the market expands; its hit or miss today. 

But comparing the costs of something you can access for a moment to the cost of committing to it for four years is a bit daft.

These quagmires started making a lot more sense to me when I asked myself: “What percentage of AWS revenue is from projects that otherwise wouldn’t have happened?” I believe more than a third, and that third is where the really interesting things are happening.

Cloud infrastructures are the ultimate friend of the unproven idea. The impulsive act of computational creativity not worth pushing through a heavy-weight process. The application idea no Tesla driving MBA on Sand Hill wanted to fund. The quick run you need right now before your presentation submission—a whole array of processing and storage acts not worth the social burden of scheduling metaphorical camera crew for, but very worth pulling a Flip out of your pocket. It quite literally, grew, the addressable market for computing in the same way the Flip grew video.

This ‘Big Think’ video from Robert Cialdini

http://bigthink.com/robertcialdini/robert-cialdini-explores-the-neuroscience-of-influence

offers us a great clue as to why. Being out of step with a group causes us literal physical pain on a small scale. The bigger the social burden in explaining our creative ideas, the less likely we are to pursue them. What’s that mr MBA? You didn’t have that as a project cost on your spread-sheet? Exactly.

So What:

• Opportunity costs, are the greatest cost savings generated by cloud computing.
• Use cloud computing to unleash your organizational creativity. Any software developer you are willing to pay a handsome salary too should also have an unlimited @Rackcloud account at her disposal.
• Computing power over time will come to resemble our attitudes towards bandwidth.  Use whatever you want within some generous limit without asking.
• Vendors need to wake up to the dynamics of more impulsive projects. It won’t be easy, much of enterprise IT is focused on availability.

This just in—Larry doesn’t get the cloud and doesn’t want to.  Instead he is pushing Oracle to plow money into new features amidst a process innovation era.

He does get invited to headline Churchhill club events with the likes of Ed Zander as the conversational curator. But this is exactly why he doesn’t get it, success can be the ultimate misinformation.

Some may wonder why I spend years of my life geeking out on innovation studies and industrial history—but Larry’s speech last night was a perfect of the predictive value of some of those models and studies. Here is why.

The Theory Behind His Mistake

He tried to frame cloud computing as lacking any product innovation saying:

“Ellison re cloud: Cloud’s water vapor. It’s not new. Everything’s cloud. It’s nonsense. … It’s computers, w memory, on nets running DBMS.”  He then clarified that unlike the hype-swamp of cloud computing, Oracle had real product innovation and engineering chops to create innovate features:

“Ellison: we’re mischaracterized as a sales & mrktng co. Per capital, spend less on mrktng, sales. We’re an engineering company, engineering reports to me.” From @rhm2k who was providing great updates from the event. Elision further espoused a big interest in solid state storage as a disruptive innovation, again clinging to any sign of a feature/performance driven market.

This is rock solid and factual tough talk from a venerable valley CEO who has been at the helm longer than I’ve been alive. But is he wrong?

He is investing in the wrong innovation curve

In my last post I took a pretty simple position. Cloud computing is part of a groundswell of process innovation in the way we deliver computing, as opposed to the traditional IT history of feature innovation. (See somewhat vague Chart 1)

Ellison’s cloud rhetoric is powerful because its factual. There are very few new technical features in cloud computing. Its computers, memory, DBMS all running on standard networks. A few days ago I said as much myself: “There is nothing amazing about the over the network part of cloud,” by this I meant that the architecture of web delivered applications is now over a decade old. IE, its not a net new feature.

Instead what is really interesting about SaaS is the way it incorporates features such as multi-tenancy which at first blush diminish control and customization. This is possible because generally what people are capturing in CRM systems now tends to be similar enough that multi-tenancy and operational/delivery standardization have a higher ROI than custom coding features over a 2 year systems integration project.

Simply expand that logic and you can see why I think Ellison is wrong about cloud computing being.. vapor.

His rhetoric aligns him squarely with curve #1, but the value of feature innovations in this market is lower than the value of process and delivery innovations. His frustration with the state of a familiar feature innovation based market was visible, when the forth richest man in the world suggested his industry was a bad place for entrepreneurs’ to try to make a difference.  If that’s the case why is Oracle spending so much on engineering and R&D? 

He no doubt understands all of this in elegant detail. He was a founding investor after all of the Netsuite SaaS platform for SMBs.  By targeting IBM he is staking out what looks to be a $100B market in highly custom, delivery process inefficient, IT technologies. He lives and breathes those customers and is still watching the massive PO’s come in. He is making a selling segment driven bet against the cloud.

A single Oracle project may be larger in scope than the estimated whole of Amazon’s cloud web services. Ad in an integrated Sun systems stack and mind blowing numbers like 3M DB writes a second and you have a provocative product innovation value proposition. But betting that enterprise IT buyers won’t be influenced by the increasing genius and efficiency of the public web is a yet risky call. Everyday we get more and more of our IT value from public compute resources, be they cloud based or otherwise, and less from silo’ed private and narrowly custom constructs.

More than anything it comes down to a question of growth, and the cloud will grow more in the next 10 years than Oracle will organically. It may be overhyped—but so was the internet in the first place and it hasn’t shrunk from relevance or impact.

Is this stock chart a preview of what’s to come? Ellison made references to being the next IBM, but if I’m looking to invest do I find IBM’s 10 year stock performance chart that compelling?

I’m betting on the yet to be found nexus of scale, process innovation and developer mindshare to drive the next ten years of growth. I’d like to hear more from the venerable Mr. Ellison about why I’m wrong.

Why? Why is it that suddenly the companies doing the most with computing are often doing it with the most common types of hardware? Shouldn’t the enormous spending of Google, Yahoo and Amazon alone create a market for high end hardware catering exclusively to their needs? Wouldn’t it be much more fun if there was a a huge Hadoop ASIC market, and if Amazon’s virtual instances were really really virtual and used an exotic virtual memory architecture over Infiniband?

There is a theory to explain why the computing market is behaving as it is, and Cloud computing is following its playbook to such a fascinating extent I’m tempted to go get a business PHD on the topic. The idea is simple: once a certain set of design elements have enormous popularity the industry will use them in almost everything it attempts from there on out. Henceforth around that technology the battle for market dominance will shift in phase from a product innovation basis, to a process innovation one.

Who would have thought the industry would catch fire talking about the equivalent of an Opteron 1.2ghz server? But its exactly what happened, and a process and fulfillment driven company was exactly the right player for this phase of the market. I’m here to discuss why a process driven company like Amazon is the disruptive innovator in computing at the moment.

The Dominant Design Crossover:

The QWERTY typewriter design is the most famous dominant design in the world. It was originally designed to slow the speed of typing to reduce physical mechanisms from jamming. This makes its persistence to this day an obvious example of design inertia and the overwhelming power of an ecosystem over would be improvements.

The reason dominant designs are sticky is that competition fundamentally shifts from designing a technically differentiated product to the efficiency of process around how that (defined format) product can be delivered. Once this massive push for process and efficiency optimization hits, its almost impossible for a feature differentiated product to beat out the whole ecosystem of the dominant product with its economies of scale and delivery refinements.

Amazon didn’t create a better server. Instead they made the process of procuring and using one several orders of magnitude faster than any alternative approach. In their own way Google and Facebook did the same—putting instantaneous access to incredible computing power within the reach of the average user. This isn’t the end of innovation, but rather a shift to a focus on of delivering it to end users. Cloud computing is a process revolution—plain, simple, and by the book.

What are the dominant designs built into cloud computing

So a topic I’d like to open-source the discussion of is this. What are the dominant designs at the heart of cloud computing? This is just a starting list, if you see others please ad them in comments and I will eventually update this post and credit the new additions to their author.

My suggested starting list:

x86 Micro architecture:  Important to note that the in-depth business strategy theory here doesn’t preclude other technologies from being launched or used, but they will not overtake the market and ecosystem share of the leader. Its hard to imagine a scenario in the near future where Intel’s design is not inside the cloud.

HTTP: I hear lots of technologist begrudgingly accept the dominance of REST based APIs. They won for a simple reason, HTTP is the dominant design for all web interfaces. Think you can out feature a dominant design? Sorry, unless you are targeting a specialized niche, you cannot.

Ethernet: With Doug Gourlay telling us that he see’s 90% of traffic load coming from server to server communications it might get tempting to think about specialized lower latency meshing networks in the cloud—I know I like to day dream about it–but sorry it won’t happen, next question, ethernet is how every node in the cloud will communicate.

Servers as targets: If hypervisors proved anything its that people just love writing to ‘servers’ as an abstraction. By creating virtual servers they tapped into the full ecosystem around servers and created virtual resources without forcing the world to rethink their development logic. This has even taken hold in the world of the mainframe, where one of the hot workloads is virtual Linux servers. There are lots and lots of ways of developing code in a less server centric way—but they don’t make a lot of sense now that the 1-2cpu server is a standard abstraction. True to theory almost every other server is niche by comparison.

Process Innovations of the Cloud:

So if we’ve crossed the Dominant Design threshold we should expect to see a burst of process focused innovations begin to take shape–and they have. Almost all of the core features of cloud computing in fact are rooted in process improvements in delivering standardized resources more efficiently.

My list:

Multi-tenancy: On a differentiated featured level multi-tenancy is a loser! It does very little to empower advanced feature sets, and instead requires users to exist in a much tigher behavioral pattern with each other. Its a winner for a simple reason–with the world standardizing on some of the above technologies a growing portion of IT applications can gain more from the efficiencies of multi-tenancy than from customization of infrastructure. The last great stand of differentated enterprise IT will make its fight here in this world, and it may take a long time before the effincies of multi-tenent environments win out. What no one can argue is that all things being equal multi-tenant environments are a process innovation over the old single tenant ASP and dedicated hosting playbooks.

Most SaaS applications: This week www.mint.com was bought by Intuit for $175M. I doubt there are many features of the free online money management SaaS provider had up its sleeve that Intuit couldn’t have copied. Instead what they had was a cheaper and more frictionless way of distributing that software value. Yes, there are exceptions, but in general SaaS is a distribution process innovation for largely standardized procedures from existing market leading products. Sometimes people struggle to connect the infrastructure cloud revolution with the SaaS one. Process and distribution revolution is their strongest connective tissue.

S3 Storage: There isn’t a ton of new technology behind the covers in Amazon’s storage service–but how many cloud vendors have launched offerings without being able to duplicate it. It delivers the power of standardized commodity disks efficiently. You’ll probably accept some small performance hit to use it–but your overall simplicity of storage management will increase.

Eucalyptus: My favorite technology in the cloud space is deeply rooted in process simplification. It was built to turn a heterogeneous mess into a AWS API controllable orchestrated mechanism. Where previous generations of managment software (BMC/CA) brought forward an ever increasing set of features and functions Eualyptus will catch fire in the enterprise precisely because of the simplicity of its upstream output, and its  use of an emerging standard interface in the form of EC2.

Appliance driven deployments: Pretty simple. They incorporate the DD of servers as targets into a more industrialized deployment model. A great example is Websphere on AWS AMI’s. How long does it take to fire up on EC2 vs download.

None of these improvements are shocking news to anyone following the cloud computing industry, what I hope is helpful, is thinking of their mode of innovation as part of a larger highly patterned, predictable,  trend.

@wattersjames

lugging laptops in long hallways between

endless explanations–

to gain support from people

who taste power when they deny.

The dirty hum of the old dreams,

applications lumbering in inefficient isolation,

the room to grow but not the means;

a fan cycles down, no load to spin for,

old iron.

Until alone one night, laptop out back

hacking in silence under the stars, an EC2 API

opened its arms without hesitation,

cascading yes.

@krishnan has a detailed post out today outlining Rackspace’s roll-out of a new Rack API centric tools community. For me the killer quote out of the news came from Rightscale CEO, Michael Crandell

Rackspace’s commitment to helping drive success for their partners by leveraging their substantial customer base makes them a smart choice for cloud developers

As one of the largest hosting providers in the world, and one of the few publicly traded pure plays in the space Rackspace’s biggest appeal is an  installed base of proven buyers. But new markets make for interesting transitions; their brand seems strongest with service quality centric customers–their primary business is in fully managed hosting where they are regarded as the elite brand. Countless times over the years I’ve corrected friends who mis-understood them as a PPP or collocation player. They are the Zappos of managed hosting, perhaps more expensive, but focused on outstanding customer experience, reliability and an overall commitment to long term quality relationships. It is a winning strategy and they are hot stock to prove it.

Their choice not to follow the EC2/AWS API was an interesting one. At first blush I’d imagine them doing a like-like on features and interfaces to Amazon and winning hearts and minds on enterprise quality service (Amazon has 0 brand there). This would allow them to instantaneously siphon off anyone built on top of the Amazon API with some minimal tweaks.  I thought of their situation in terms of dominant design theory and one of my favorite technology strategy read highlights:

(From James Utterback’s: Mastering the Dynamics of Innovation)

Over the next few posts I’ll be exploring the implications of dominant design theory on the cloud computing market…..the above quote is a tease, look for much more on this topic. 

It was great to see so many partners line up only a month after the API launched to join Rack’s growing tools community. It speaks to the very real pent up demand in this young and growing market—but I also saw a few ISV’s wondering about compatibility.

@RFFlores At newScale we work with the Amazon EC2 API’s.  If Rackspace supported those, they’d have my business. #cloudcomputing

Followed by:

It’d be a no brainer since the newScale service catalog tool is fully set up for EC2. Just point to a different URL, presto.

My Take: Its early enough to grow their own ecosystem, but it will require sincere focus and value-ad to justify the differentiation

Rackspace’s API is different for a reason. There are certain features (like static/unique IPs) they wanted to support that EC2 did not.

All the same that puts the onus on them to continue to create value ad differentiation for their cloud until there are ISV’s building natively on the Rackcloud instead of porting over to it—that is until they have a unique market footprint, and their own cluster of long tail users who prefer their cloud for those architectural features. This is a partial departure from their service and quality branding—its compute quality and feature centric.

I hope to learn more from them soon—these are my warm up notes. Feedback and question ideas appreciated.

@wattersjames

My my little debate with Gartner was utterly unintentional, and I blame it entirely on Google reader. Late at night it brought me this gem of a quote about ‘cloud computing’

With failure and lack of interest [in cloud computing] the fall from Inflated Expectations [will soon] begin its decent to the Trough of Disillusionment. It is at this low point that interest wanes as experiments and implementations fail to deliver. Producers of the technology shake out or fail. The only thing that will save the technology at this point is for those who have been successful to improve their products.

Remembering the last two months of their headlines I got upset. They’d been cloud washing magic quadrants, and market sizings and making a big splash in the news each time. Now they were going to sabotage the same phenomena, grabbing headlines again, by pronouncing pilots ripe to begin failing en-mass? At this point my life-long addiction to playing ice hockey got the best of me…

But as any hockey player knows dropping the gloves is transitory—you get the frustration out, see who is tougher in front of the crowd, then get back to the business at hand in an orderly fashion. I had a little scuffle with the NY Times earlier, but now I’m very friendly on Twitter with Jonathan Zittrain reading his book, and planning podcast here on the angle with him.

As I think about my Gartner frustration with a little more perspective and fewer # signs I’m more concerned with the systematic reasons for the problem.

Above all the #1 (shoot used a #) cause of the dissonance that rung my ears is jamming data into models not built with it in mind. Comparing API driven Amazon and custom contract driven IBM hosting as ‘managed hosting providers’ makes almost no sense –to anyone. Primarily because Amazon is in no way a managed hosting provider, and IBM is in no way (yet) a cloud hosting provider.

Then to muddy the rankings by having five additional underlying attributes to the conjoint:

In brief, Amazon scores moderately because this is a Web hosting MQ, not a pure cloud MQ. They can’t address the full needs of the market’s five major use cases. Gartner’s clients weight their selection heavily towards managed hosting, and the MQ’s weights reflect that; Amazon doesn’t do managed hosting, and although they score extremely highly on the self-managed hosting, that’s just one of the five use cases.  –Lydia Leong, Gartner

Oh, I see now…..so what I’m really looking at is not just apples and oranges rated by which tastes better—but five dimensions where they have almost no overlap. This whole thing seems like it was designed by a committee over months and months—oh wait it was:

The [Cloud] title was debated broadly and passionately within Gartner, and the final title was the result of a lot of input and a lot of compromises.—Lydia Leong, Gartner

Do I need to get into why committee and design by group compromise don’t create breakthrough products or ideas? No, no I don’t—and if you need help go read everything by Seth Godin.

I’m very thankful to Lydia for joining the conversation, and I’d encourage you to check out her blog where you can always get her latest thoughts in links.

The Biggest Model Force Feed: Cloud Computing as a Technology

One thing the obviously Gartner insider guests kept hammering me on in the comments yesterday was that every technology follows their hype-cycle so gosh darn it its just cloud computing’s turn.

All technologies, whether ultimately successful or not, follow the Hype Cycle[!]

Dude, hold the phone. What hard-core cloud guy is calling it a technology?  The big dog on the cloud computing blogging block, @jamesurquhart, cleared this issue up for us months and months ago. He wrote:

Cloud computing is an operations model, not a technology.

When you run an application in a public or private cloud, there is no "cloud layer" that your software must pass through in order to leverage the physical infrastructure available to it. In the vast majority of cases, there is probably some virtualization involved, but the existence of hypervisors clearly does not make your data center resources into a cloud. Nor is the fact that Amazon EC2 uses Xen hypervisors the reason that they are a cloud.

What makes a cloud a cloud is the fact that the physical resources involved are operated to deliver abstracted IT resources on-demand, at scale, and (almost always) in a multi-tenant environment. It is how you use the technologies involved. For the most part, cloud computing uses the same management tools, operating systems, middleware, databases, server platforms, network cabling, storage arrays, and so on, that we have come to know and love over the last several decades.

He’s also recently come around to the idea that its also an application development model—but notice, again, not a technology. Cloud computing is a mindset. Its the same technologies as ever, but with a zealots focus on scale, speed, elasticity, flexibly and connectivity.

What I don’t like is that they’ve got a yearly (yes that’s how precise they are being) report hammer and every trend they see is a nail to be mapped to it.  Everything broadly discussed has a hype-cycle, no doubt, I’ll never argue that point its factually true—but there is a pretty high standard of contribution I see within the cloud blogging community and calling as important as the peak in cloud interest with a precision of only give or take a year isn’t up to par.

Why analyst firms focus on graphics and surveys

Jeremiah Owyang departing Forrester yesterday,

presaged by Ray Wang’s departure

brings quotes like these

He is generous with content (and blogs and Tweets) when analysts are told to hide behind their firewalls. He says it as he sees it when most analysts have turned mealy-mouthed.

And this:

We’re also seeing the emergence of the personal brand – Ray and Jeremiah have that in spades. It’s something they work ridiculously long hours at, taking huge risks along the way. Why would they give all of that up to the larger firm when there is so much more they could do in the wider world? It’s a non sequitor.

Graphics, surveys, headlines are the staple of large impersonal research shops for a simple reason: they are more durable than trying to retain top 1% human talent. They perform a vital function in the enterprise buying cycle—someone to blame if things go wrong. “Well we went with the magic quadrant leader,” and then Gartner can point to their committee driven 5 factor mechanism for scoring and say “we were thorough.” 

But in the age of Twitter and brilliant real time blogs why should we get our key, fundamental, and attitude changing insights from a mechanistic modalities?

As I want to make clear this isn’t an intellectual superiority jab at the top people at Gartner, its a swipe at their SOPs inflexibility and hype jet-wash. No doubt they have ‘bozo’s’ there like any organization, but there are smart people too, and the good ones are blogging more and more, just ask @mjasay 

Redmonk has always provided great blog content. But I’m surprised by how great Gartner’s blogs can be

Exactly Matt. Its not the people its the process—like working at SGI in 2005 no matter how smart you may be you are shackled by the game plan. Everything possible is funneled into existing branded images and maps—period—don’t ask questions. (Disclosure. Matt’s company is ranked in an MQ here)

What happens when things are forced into a model

Lots of people wrote me about the X:Y observation regarding the Magic Quadrants. It was an aside I threw in just from the personal experience of studying hundreds of them over the years. They responded in comments on that issue:

The one thing I agree with is how low-quality Gartner magic quadrants tend to have X=Y. Some of them are very good, and very useful. But some of them were probably defined where the attributes of X overlap with the attributes of Y – and I’d call that a FAIL….. X will tend toward Y. But I agree with you – if a Gartner MQ shows X and Y totally intertwined with all the vendors, it ain’t useful and something’s wrong.

I personally detest the X=Y regression trend because it tells me the MQ is really just a top 10 list in the disguise of a conjoint. Without some radical deviation why put it into a conjoint analysis? All the conjoint does it make it look BCG sexy, like you have done a lot of thinking. Its superb branding.

Let’s not be sheep. Let’s demand these models really show us something interesting.

I’ll leave you with a few MQ’s with a hap-hazard regression line drawn in red. You decide if it resembles something like a linear relationship between X & Y.

Here’s why:

In the last two months they have:

1. Claimed ‘cloud computing’ is a $46B addressable market, on track to grow to $146B by 2013 (four years).
2. Defined ‘cloud computing’ for the first time officially.
3. Announced cloud hype had hit its hype peak and would be downhill for the foreseeable future.
4. Ranked IBM in the ‘leaders’ quadrant for cloud computing despite their lack of an offering, as they themselves detailed — meanwhile ranking Amazon equal on ‘vision’ for the category and lacking in ability to execute.

The critique here writes itself?

Defining something after you have sized the market #FAIL.

Saying something has peaked in hype when you expect it to triple over the next three years to the tune of an additional $100B #FAIL.

Equating deep pocketed research and consulting buyer IBM nearly equal on vision in on-demand and cloud infrastructure as Amazon AWS. #FAIL

Its a great quote.

Too bad IBM doesn’t have an available cloud infrastructure offering at all and has been so thoroughly out-envisioned by AWS it’s hardly funny. Amazon’s vision in shaping the cloud market has been nearly historic—and yet because they don’t spend as much money with Gartner, they’re somehow considered equal in vision and inferior in their execution.

Amazon, need I remind you, is the company that had enough vision to fund companies like RightScale to expand their ecosystem is equal in vision to IBM, who had the vision to send out a press release three days ago about their future plans for their as of yet un-released cloud offering.

What exactly is the value of this chart without showing the amazing difference in foresight between Amazon’s approach and IBM’s traditional custom hosted one? #FAIL

Incidentally, almost all Gartner puff the Magic Quadrants resemble X=Y in their layout. Don’t believe me just look at this Google images search yourself and look at 100 of them.

When was the last time you saw an analyst leave Gartner to found a killer technology start-up or be a CIO? #FAIL

But let’s be honest—that is a philosophical and revolutionary argument—its epistemologically weak. Even though cloud computing is clearly in a transitional phase (Tiktaalik computing)

it doesn’t excuse all of the data from the conversation.

Two Big Private Cloud Data Points: Google and Facebook

Any ‘it will all be public’ cloud fan-boy must confront a simple fact. The world’s highest demand computing architectures are run by their respective companies private IT departments. Even web giant Amazon was only able to offer cloud resources because of the success of its internal IT efforts. Yes, demands from the public now outpace their internal requirements—Tiktaallik era and all—but is there a top 10 web company built on a public cloud? No.  Amazon and Microsoft heavily consume Akamai (so much that Akamai has to declare them material in their SEC filings) and other CDN’s but are both building massive data-centers of their own as well.

If I’m JP Morgan Chase I examine this scenario and conclude that private cloud may be the way to go for core high value ad applications specific to my own industry value. If I want to be the computational workload king of the hill in my industry perhaps it pays to go private and roll my own. Simplistic perhaps, but where is the large company counterpoint so far? The real success of the cloud like compute services so far has been in bringing small and midsize companies to market incredibly fast. Here I’m thinking Youtube and CDNs.

Hardware is cheap. If you want to buy ten thousand two socket quad core servers you can get top of the line stuff installed for less than three thousand dollars a server.  So for thirty million bucks you can buy an eighty thousand core cloud. Spread over an aggressive three year refresh and you are looking at only $10M a year in server charges for a sick sick compute farm—or precisely mouse nuts to JPMC. (The average enterprise hardware sales guy carries a $25M++ quota.)

Throw the evolving Ubutu/Eucalyptus stack on those servers for free, use the AWS API internally and externally if you need to and wallah—no big deal private-public hybrid of Amazon.

In today’s tight environment, with data-centers maxed out from growth its much harder than just buying the hardware—no doubt. But in the long term companies that want their own hardware in their own data-centers will always have decent economics behind that call. Even if the hardware build were 2x the charge from a public cloud $10M is nothing to highly scaled enterprises. They call it a commodity now for a reason–owning it alone is easy.

The real threat is not a disadvantage in hardware or data-center economics—but in organizational alacrity, human costs, and software. More on the massive human costs another day.

Its not about the hardware

Public clouds need to ad more data-handling, and ease of use value before they have a killer, impossible to replicate value proposition.

If you are unfortunate enough to follow my @wattersjames cloud chatter on Twitter you know I took a little heat from @samj and others for saying Google and Facebook were private clouds. Some argued they were just a giant grid and a LAMP cluster. My answer back is, Google isn’t all that batchy so I don’t love the grid distinction—and if a massive LAMP cluster creates a very on-demand, responsive and massively scalable cloud platform like Facebook then I welcome it to the cloud tent. Not to mention FB does have its own internal Hadoop cloud they often discuss.

Once you write your own massively user/data scalable software IP, deployable on a highly elastic basis across a huge quantity of servers, you’ve created cloud magic. Google and FB have both done this and deployed it on private hardware.

The highest value work is writing the software and scaling it. Because this work is hard and high value companies need to get very selective about where they spend their development minds and dollars. That is my real concern long term with public vs. private. Unlike buying hardware creating unique, cloud native, software IP and value is risky, and heavy in human talent costs. Buy as many servers as you like, but run standards based (we’ll get there both from proprietary as well as open-source platforms) cloud infrastructure on them.  Kick the wasteful addiction of doing custom hardware integration, and attempting to create software outside of your core.

With over $200B a year (spent with outside vendors alone)customizing IT I’d say we are doing a pretty horrible job of it. We were such addicts we went on a body count bender and tried to train every able mind in India to customize code for us…like a junkie breaking into his neighbor’s house for cash.

Cloud computing is enterprise and government ITs intervention moment their last chance to go clean. It is the architectural adrenaline injection that will either save their life or kill them off.

Yes, I’m afraid of sending enterprise IT back to their old bad influence friends of internal process architecture and customization and private clouds, but maybe there is a chance for them all to go clean together?

For very large companies, with 1/3 developers claiming to be writing private cloud native applications, the answer seems to be yes.

VMware now owns the open-source king of light-weight web-facing Java development. So what? My top five.

First: They didn’t give their graphics people much warning apparently. Notice the harsh layer transitions between the Spring Source Build Run Manage pie and the softer vCloud. Lets hope they invest more in product integration. Sorry for the nit but after spending $420M you think they could create an integrated graphic instead of quickie cut and paste surgery. Ok back to my list..

1)This is all about making the leap from being relevant to IT Operations, to relevant to IT Developers. End of story. Real software companies have developers. See Oracle buying Java, sorry, uh I mean Sun Microsystems. Right now VMware owns the enterprise standard for hardware virtulization, a niche devoid of software developers.

2) VMware is going to be doing more than hardware virtualization and management for the cloud. Simple point but a radical one a year ago. Cloud does not equal hardware virtulization and with the Spring Source buy VMware just publically agreed. VMware was best buddies with Cisco because of their mutual desire to ad virtualization value close to the hardware and networking layer. Now VMware just saved the next dance for a much higher layer of abstraction. This won’t end that relationship but its an important milestone in it.

3) VMware signaled its desire to grow. Lots of VMware fans have been defending their stalling growth to me for month’s with “oh but they have 95% market share what do you want from them!” The plan is not to defend their technical lead in hardware virtulization. Instead they are going to use the operational advantages of hardware virtualization and extend that leverage up further into the stack—potentially knitting together a unified operational and development model for enterprise clouds. (wow!)

4) This won’t be a point acquisition and marks the first step in a bold strategy. If they do it right they will create commercial software primitives for enterprise cloud computing. Google, Facebook, etc already build their whole architecture around these development primitives and thus enjoy immensely better utilization performance and scalability. If VMware can become an enterprise cloud primitive company watch out. If they are serious about this market look for lots more development model focused products and acquisitions.

5)-The crew at siliconANGLE called this one. We have been hammering on the importance of the changing development models and APIs of cloud vs. point cloud washed infrastructure technologies and offerings:

So expect cloud to be in most sales pitches for legacy infrastructure, somehow, someway. This in turn gives rise to lots of noise in the press–and you can see the challenge. Keep your eye on changing development models and you’ll be at the center of the change instead of on the noisy marketing driven periphery.

The migration of hundreds of billions of dollars in existing IT spend value up-stack to higher levels of abstraction is what makes this market worth being one of three big topics here on the ANGLE. More fun is ahead, and it won’t all be pretty.

In my time as a corporate development monkey  at an infrastructure vendor, one of my best ‘ah ha!’ slide decks asked the audience to stack rank the major categories of IT spending, with this slide as the revealed answer next:

Yes customizing integrating and maintaining IT costs tremendously more than the hardware and packaged software. These numbers reflect only outside firm spend, so double or triple this to see the full impact when including internal headcount. You quickly arrive at an obvious fact: I.T. is far more a human process than a technology one.

This perspective has stuck with me since I created the deck in 2007.  Its why I call much of the code automated cloud computing phenomena a collision with traditional vendors and IT. If a more automated and standardized approach is really going to sweep IT in the next two years it would disrupt hundreds of billions of dollars in spending and purchasing habits—and the incumbents, both from a human and vendor perspective aren’t going quietly.

The real debate: how much of the customization is wasteful?

The best argument for private cloud development is a quick glance at the status quo. A market willing to spend 400B++ a year customizing, won’t suddenly conclude a bare bones public cloud is a cheap and cheerful alternative.  So yes, to all of the private cloud proponents, you are right, they will have a huge role in the future of IT spending. The overall net cost of applications today is simply too massive to make the potential risks of simultaneously migrating to a new architecture and an outside provider worth it.

But, although the change may occur over geologic time with the status quo being favored–new application development and consolidation are the wind/water/tectonic metronome of geologic time in IT. So to accurately articulate the coming impact and segmentation of the cloud we should carefully study both new apps and consolidation trends.

My Angle: Its really a debate of consolidation vs. scaling

Last week @roidude detailed a 100% vitualization project ROI study this week in a blog. It makes a very compelling argument for consolidating non resource intensive applications to virtual servers, in fact his project promises a savings of $2.1M out of $2.3M or an ROI (dude!) of over 500%.

Whoever is in charge of this IT consolidation project would have a lot to brag about—but whoever is managing their application portfolio will get a LOT of questions from me. The only reason its possible to consolidate this many applications onto so few servers and get such a galaxy beating ROI% is because the demand on the applications is not growing.

The era of “hey lets build an app for that” vs. the era of “there is an app for that”

With the emergence of meaningful SaaS portfolios the ROI of investing in creating a custom application and supporting it vs. using a world-scaled public cloud based SaaS application is dwindling. This is a big change from the old days when many of today’s process applications were created.

In the first week of my move from engineering to marketing in 2001 I requested a server to host a news search application I wanted to write to help our research as a side project. They trotted me down the hall to their marketing—IT liaison who said they would get me some time with our Oracle consulting team the next week to put together what I needed. Yes, they were going to write a custom Oracle based application with consultants to host categorized links. While not all IT application development has been so frivolous, there are an astounding number of enterprise applications out there, many with little unique value ad, not growing in terms of user adoption and demand. The standing costs of these applications vis-a-vis their minimal demand on modern CPU resources are the reason @ayewill from Mckinsey was dead on picking virtualiztion-vs-cloud  for the biggest near term ROI.

The quantity and demand profile of these legacy applications create a huge consolidation opportunity—but I’m not ready to declare a cloud consolidation architecture corresponds to the right environment for unique and high growth applications. They are different animals and I don’t hear this discussed nearly enough.

So the first thing we should ask when someone begins the private vs. public, open-source vs. vCloud can of worms is:

Q:How fast is your application growing? What is its potential scale?

@randybias expertly detailed a bifurcation of public vs private clouds in terms of feature sets, but I didn’t see any color in terms of application scale requirements:

There will be two paths for clouds: premium & commodity.  Premium clouds will focus on the enterprise and delivering value they are concerned about.  Commodity clouds will largely be forced to compete on pricing and features irrelevant to the enterprise.  VMware’s vCloud will be the dominant player behind the firewall because there is no credible contender.

My cloud Rorschachtest is different. I see a bifurcation between fast growing, world scaling, applications and  proprietary lower & scale/growth internal applications. Google, Facebook, WordPress all teach the religion of building solid parallel programming primitives right into the applications. They spend their customization dollars making the applications cloud natives.   Greg Papadopoulos called this trend years ago:

The aha! moment came when Papadopoulos realized that there are really two different application sets driving computing demand: one consisting mostly of newer Web-facing applications driving exponential growth in both user demand and computing requirements; the other comprising back-end systems that are growing at more historical rates. "All this is really about which side of Moore’s Law you’re on," Papadopoulos says. "If your applications are growing faster than Moore’s Law, you’ve got a fundamental set of issues about scale and power. If they’re growing slower than Moore’s Law, you’ve got all kinds of opportunities around consolidation."

If you are building a cloud to consolidate your slower growing core then the ‘feature’ you need most from a cloud is application portability and the ability to virtualize without any change in the application. Its likely you spent eight figures getting some of those applications ‘right’ and vCloud is probably exactly the technology you need to float them downstream towards the cloud.

I challenge the industry to dream bigger than consolidation. As @lewmoorman wrote this week, all companies are becoming software companies as the consumer cloud explodes. This brings to mind the second geologic force, new application development. This is the area where private clouds and the vCloud product are most vulnerable. Being dominant in consolidation doesn’t simultaneously win new application development—and here is where massive ‘commodity’ clouds can really shine. When the application is built with a cloud in mind and can automatically load balance and spin up resources programmatically (ex:Hadoop) it removes much of the feature burden on the virtual machine. These world scale, cloud native apps are the interesting part of the market.

If you aren’t busy writing the world scaling app for your industry somebody else soon will be. Ask restaurant owners who now pay the commissions funding Open Table’s IPO. Somebody in the next two years will bring commodity cloud economics to your industry. (Why not you?)

Private public Red Herrings

If you want to build a massive volume standards based cloud in your own data-center that’s great—I don’t think location is really worth arguing over—but standards and ecosystem are. Its the participation in a larger ecosystem of interfaces, tools, best practices, and software that matters. But do you really have the process and governance discipline to maintain standards and avoid someone trying to prompt a promotion for their uniquely better way of rolling out your cloud? Do you have the organizational discipline to hold back the #meatcloud at the gates? Are these risks greater than those inherent in a public cloud?

Instead of debating location debate ecosystem.

Takeaways

While I can’t refute or answer every potential public cloud concern raised in the discussion, I can point to the $200 billion dollar application customization force in the industry as a potential solution. If customization/integration is the primary spend in IT, why not use it to help industrialize what is still largely a hand crafted process? So we have a data portability problem? Security and trust issues? Trust and regulation?

Why? Because I don’t believe the old way of doing things is designed to power the next generation of world-scale application processes. The alternative is a series of sustaining innovations around consolidation—and while these are economically vital—I don’t believe they can drive the next wave of growth in IT. Tom Siebel had an interesting quote in the NYT:

No new technological advances, he believes, would impel I.T. customers to replace the computer technology they already had: “I would suggest to you that most of what’s going on today is not very exciting.”

I find the ability to build an application with world-scale built in pretty exciting—but he is right. Replacing what we have isn’t the exciting part, using the virtues and open communities building up around public clouds and their architectures to build what’s next is.

@wattersjames