Is Private Cloud the Next Frontier

Business Models

Looking at the state of Cloud Computing from 2006 to 2012, it is interesting to see how different companies modified their postures in the ecosystem.

Amazon has leveraged its data center operational know-how and turned it into a new line of business that is expected to generate north of $1.5 billion in revenue. This is one of the few instances where a big-bang approach for a brand new market that had worked.

Take Salesforce.com, on the other hand, it has focused on creating user stickiness by creating platforms where other vendors can participate in its ecosystem. Instead of jumping into an unrelated business, like Amazon, it has stayed closed with what it knows. And, I can only speculate that the fact that Oracle is breathing down its neck is helping them focus.

For those more "conventional" players, Rackspace had probably done the most in reinventing itself. It not only cobbled together a Cloud OS that is meant to offer Amazon like capabilities, gave it up as an open source project, then wanted to turn its business into managing other companies' data centers (running OpenStack). This is interesting in two respects. One is that it seems to acknowledge Amazon's dominance in public cloud. At the same time, by offering operational management services, Rackspace seems to be betting on its ability to offer differentiated solution that cannot be easily copied by Amazon (who by definition will focus on standardizing their offerings to maximize operational efficiency.)

As for the VCE crowd, with the large data center operators - Amazon, Google, Facebook, etc. - all opting to buy directly from the component makers given their massive scale, the combined VMWare, Cisco, and EMC offer is impressive. With a single stroke, it allows these companies to tap into each other's install base while minimize the complexity and overhead of creating customized solution for each deployment.

Private Cloud

Taking a step back, however. The industry dynamics also seem to be shifting. Amazon has effectively dominated the Public Cloud arena. Amazon will continue to improve its service and coverage along with the bevy of new companies that rely on its infrastructure, like DropBox. Similar to utility, it is unlikely that anyone can take on Amazon at this point.

At the same time, the implicit strategies for companies like Rackspace and VCE is to shift their focus to private cloud. Private Cloud has two advantage from those offered by Amazon. One is that it is (somewhat) customized to each deployment which increases its switching cost. The other is that private cloud users, by the fact that they wanted their own cloud and can pay for it, are less price sensitive and are willing to pay for value-added services.

Cloud Computing circa 2012

Fast forward five (5) years

At the beginning of 2012, things have changed in the Cloud land. Amazon's strategy of offering Cloud Computing for a rental fee turns into a viable business. More importantly, being offered as an utility, it has become the dominant and de facto public Cloud of today.

MSP Players (Newbies)

Of the Cloud MSP companies, Google and Salesforce.com are worth noting.

For Google, it is interesting to note that while it attempted to offer an alternate solution to Amazon through Google Engine, it never quite caught on. Some have cited Google's insistence on using Python and other tools that are already supported by its infrastructure whereas Amazon let's install whatever you want for a fee. I do think there is also the fear that Google being seen as an engineering house as oppose to Amazon as a retail outfit is likely to be "inspired" and offer a similar product when a Cloud solution has turned out to be successful on the Google platform.

Salesforce.com, on the other hand, stayed focused on what they do. And, in the spirit of MSP, open up a set of API and created platforms for other vendors to participate in their eco-system.

Incumbents

I can only assume that Rackspace was shocked to find one of the biggest online retailer has decided to invade its business. On the other hand, one also has to give Rackspace credit for coming up with its OpenStack solution that has garnered quite a bit of marketing momentum.

For VMware, Cisco, and EMC, the answer is VCE where an integrated solution with VM, servers, switches, and storage from these companies are ready for the users.

Cloud Computing circa 2006

The newbies

In the beginning, there are data centers run by Amazon who need the capacity to handle the rush of Cyber Monday. Google, Salesforce.com, Netflix, and Facebook too are busy tuning their data centers to their own needs.

Dropbox, who will build on Amazon's Cloud infrastructure, is but a glimmer in the founder's eye and won't get started until 2007

The incumbents

VMWare, Cisco, and EMC are busy minding their enterprise business. Rackspace too focuses on providing fanatical support to enterprise users.

Blame it on EC2

Then, somebody at Amazon come to the idea that maybe it would be nice to monetize the "excess" data center capacity for most of the year outside of the Cyber Monday rush. So, the experiment, aka beta, of renting out computing resources from existing data center through services like EC2 and S3 were born.

The mad scramble for Cloud Computing thus have begun.