Cloud Computing Ecosystem - Follow the Money

For those who are studying Cloud Computing as an economic system, a more meaningful stratification is probably through its value chain. In particular, I parse them into four (4) categories: Hardware, Software (Operating Systems), Operations, and Services.

Hardware: Admittedly a major allure of Cloud Computing is to render hardware a secondary consideration as commodities. On the other hand, as its fundamental building block, there is no Cloud Computing without hardware. And, given the relative youth of Cloud Computing as an industry, it is hubris to say that hardware is no longer matters. As a matter of a fact, this is one of the competitive advantages if you know what you are doing.

An example of the hardware player is EMC who provides enterprise-class storage solutions.

Software (Operating Systems): I often get asked what is meant by Cloud OS, is it like Windows or Linux? If you think of a Cloud Computing data center as a macro-computer – a warehouse-size computer with a lot of computing, storage, and network/communication capabilities – the ability to orchestrate this macro-computer is indeed an OS (operating system).

An example of the software player is VMWare who provides virtualization software which is a key aspect of multiplexing using Cloud Computing.

Operation: Tedious it may seem, but feeding and caring of the Cloud Computing data centers is as much of an art as it is science. This is an area of tremendous innovation as different operators are competing on different dimensions to meet Cloud consumers's myriad needs.

Amazon is the undisputed operator today. Also worth watching would be Rackspace who has argued that its focus is to provide on-going operator know-how.

Services: this is probably the most visible manifestation of Cloud Computing. From the early success of Salesforce.com to the many Cloud firms that Oracle is snapping up, these are the end-user facing public-face of this eco-systems.

Beyond Salesforce.com, both Netflix and Dropbox are good example of companies that are "pure" Cloud player where they could not exist without the underlying Cloud operator, software, and hardware.

IaaS, PaaS, SaaS be Gone - Cloud Computing at Cocktail Parties

Given my current focus on Cloud Computing, I often get asked to give a 15 second description of Cloud Computing. This got me thinking, why is Cloud Computing so confusing to many a intelligent persons lay and pros alike?

Are the terms IaaS (Infrastructure as a Service), PaaS (Platform as a Service), and SaaS (Software as a Service) familiar? If you are reading this, I suspect that you have an inkling and may even have a specific take on this Cloud Computing stack. But, how useful are the descriptors IaaS, PaaS, and SaaS if you are not building/selling one of these XaaS?

This is what I say to people over cocktails on Cloud Computing. It is a way to do IT at lower cost with the same or better features. It is sort of like when PC unlocks computing to the mere business analysts or internet unlocks electronic communication to mom and dad. It is a big deal precisely because it "could" be pervasive.

Chin-Chin!

Infrastructure is still Where It is at Today

Amazon's "Other" revenue

The official number is not available. But, as the biggest public Cloud infrastructure
provider, it is a topic of intense speculation. Here is a credible analysis: AWS is worth approximately $1 billion with a 100% compound annual growth rate (CAGR).

Step 1 in Rackspace's OpenStack masterplan: Private Edition

As described by Rackspace's CTO, OpenStack is a way for it to offer its Cloud management services. So, it is not a surprise to see Rackspace Cloud: Private Edition being offers through partners such as Equinix, OpsCode, RightScale, Cisco and Dell.

What would be equally interesting to find out is how would be the revenue and workload be shared.

SME is the game

I often have to remind myself that technology too is its own bubble. As compelling as Cloud Cloud could be, it is important to see if the rest of the world sees the same value.

So, it is a good thing to see that BestBuy is responding to competitive pressure by bulking up on the Cloud front. Its plan, according to the report, is to provide a richer offer to its SME customers because its showroom has become a retail extension for retail buyers looking to buy at Amazon. (Gulp! That really sucks for BestBuy.)

New biz-model through the Cloud

Instead of the time honored perpetual seat license of the package software, Cloud promises on-going recurring revenue through subscription to vendors. That is the good news, potentially larger total revenue over time. What is not obvious to me as claimed by the Wharton analysis is that Cloud would enable a more diverse ecosystem with many more smaller players.

It is true that, at its current stage of development, most of the Cloud players are small relative to its on-premise peer and most of them compete by collaborating with other smaller vendors. But, this feels like a transition than a new state of things. After all, there is nothing particularly anti-monopolistic about a subscription biz-model. If anything, it would probably enhances the winner takes all model.


Related entries:

* An estimates on how much revenue AWS is taking in this year http://cloudscaling.com/blog/cloud-computing/amzn-other-revenue-in-2011

* Rackspace Cloud: Private Edition: http://www.datacenterknowledge.com/archives/2011/11/10/rackspace-launches-openstack-private-cloud/

* BestBuy's $167 million Cloud strategy: http://www.fiercetelecom.com/story/cloud-service-acquisitions-gain-momentum-and-everyones-jumping-board/2011-11-09?utm_medium=nl&utm_source=internal

* Cloud's new pricing model: http://knowledge.wharton.upenn.edu/article.cfm?articleid=2872