Posted by: Greg Ness | April 16, 2014

Cloud DR Works Best with a Pilot Light

Earlier this month I had the chance to talk directly with organizations leveraging AWS for cloud DR.  It is a very interesting and powerful use case.  Calling it transformative is an understatement.

These forward-thinking teams are using AWS as a kind of pilot light for a multi-tier app environment (including a cloned database stack) in AWS storage being kept up to date with incremental changes in the local database.

A Powerful New DR Operating Model

A Powerful New DR Operating Model

Amazon is paid during tests and outages, in addition to a very low ongoing storage cost.  When compared to the fixed costs of maintaining duplicate racks and data centers, it is a substantial savings.  See the red line shown in the diagram.  With a private cloud those costs are likely lower (than the fixed costs shown) yet they would still much higher on an ongoing basis.

This operating model opens up business continuity and disaster recovery options for apps that otherwise might not be protected.  For one municipality, a $200k proposal for DR for two critical apps was turned down, leaving the apps unprotected.  The municipality explored options and looked to leverage “pilot light DR” on AWS.  You can find out more at: Advanced Strategies for Leveraging AWS for Disaster Recovery.

There is yet another payoff with “pilot light DR” on AWS: agility.  Notice the small spikes from tests. These tests can be conducted on demand with a high degree of automation and without having to request permission from a service provider.

Pilot Light Dr has Two Operating Modes

Pilot Light Dr has Two Operating Modes

The notion of pilot light DR seems intuitively obvious, yet it requires a hybrid cloud automation platform that supports the unique demands of production environments in the cloud.

If you’re interested, check out these interesting blogs by my partner in crime CloudVelocity CTO Anand Iyengar:

Container Limitations for Production Workloads

Cloud Migration is Bigger than Image Portability

The Hybrid Cloud is Ideal for Disaster Recovery

PS… While traveling to meet customers, I also had the chance to eat some incredible BBQ at 12 Bones in Asheville, NC.  That’s me on only 4 hours of sleep, not realizing that I’m about to eat some of the most incredible BBQ.  I assure you that I will be smiling before the meal next time.

Incredible BBQ

Incredible BBQ

Posted by: Greg Ness | March 28, 2014

The New Microsoft and the New Cloud

When it comes to the emerging multi-billion dollar hybrid cloud market, Microsoft is becoming more than a force to be reckoned with; it is articulating a powerful vision, one that is increasingly well-grounded in the Redmond giant’s core expertise and global data center footprint.  Some call Microsoft’s advantage “enterprise DNA” but I think that may prove to be an understatement.

As we enter 2014 Microsoft and VMware are both promising to give Amazon’s AWS public cloud service a formidable challenge, along with OpenStack adoption at service providers and large enterprises.  Microsoft, however, is in a remarkable position that gets more interesting by the month.

Earlier this month I was able to talk to Microsoft’s Brad Anderson and Mark Russinovich, whom are among key execs leading the charge for Azure. We spoke on a cold, windy morning on a Pioneer Square rooftop about Azure’s rapid growth and maturation, in front of a few cameras for an upcoming video project on hybrid cloud.

Rooftops and Clouds in Seattle

Rooftops and Clouds in Seattle

We talked about Microsoft’s focus on delivering agility to the enterprise, through the development of tools that reduced the amount of effort required to leverage cloud infrastructure for storage, development and infrastructure.  I asked Brad and Mark about what has led to the evolution of cloud from a purely public model to the hybrid model and what that will mean for the enterprise adoption as well as what they see as the top priorities or considerations for hybrid cloud deployment.

The video will be shown at the upcoming (and sold out) Build Conference.  Later that day I spent a few hours with Microsoft execs responsible for SQL server marketing and mobile device management.

A very clear and articulate picture emerged of a company on a bold new path, looking to the future versus simply extending and monetizing the past.  The new Microsoft looked like a company focused on the development of an unprecedented cloud platform across form factors (and multiple clouds) that would enable new levels of IT agility: the cloud as a seamless extension of the device and the data center.

Several companies have articulated a similar vision, yet Microsoft seems intent on really pulling it off.  I didn’t come to this conclusion based on a single visit, but rather on a series of public moves and a growing pool of conversations.

Putting Things in Perspective

Almost a year ago I had the opportunity to meet with some of the Azure senior technical team as a part of a partnership program, and it felt like a hot startup percolating within the core of a massive campus.  See, for example Azure and the Hybrid Cloud Race (June 2013). From my perspective this was followed by briefings with other Microsoft and industry execs and ultimately the appointment of Satya Nadella as the new CEO, replacing Steve Ballmer.  While Ballmer has faced more than his share of critics for missteps (albeit across decades of massive disruptions in multiple tech categories where Microsoft had a presence), the tempo and drive of the Azure team was no doubt established on his watch and under his tutelage.  And the appointment of Satya may also be part of his enduring legacy as a hard-driving competitor.

Satya comes from the services side of the business and area of strategic interest as Microsoft looks forward to the next three decades and what changes are in store.  The return of Bill Gates as a philanthropist tackling global issues like poverty, education and health care is also a stark contrast to the “monopolist” persona of the desktop and server-centric era.

I think we are seeing the emergence of a nimbler, service-centric Microsoft with more emphasis on passion than power, solutions over products and agility over lock-in. If they can pull it off, they could craft a different kind of dominance in IT, one driven by empowering versus containing their customers’ visions.  According to Microsoft, Azure is now adding more than 1,000 customers per day (no revenue data offered), and Azure is doubling capacity every six to nine months. The Company also advised that Azure has penetrated (in one form or another) more than 55% of the Fortune 500.

Clearly Microsoft has its work cut out for it, with Amazon’s AWS driving the public cloud to new heights and with VMware’s high profile entry building on its strength in private (virtualized data center) clouds. Google recently announced sizable price cuts for its own cloud service. Certainly the Microsoft of the cloud era is a much different company, articulating and delivering upon a new vision rooted as much today in agility as it was once rooted in control.

(Disclosure: CloudVelocity is an Amazon AWS and Microsoft Azure partner. Microsoft paid most of my Seattle travel expenses. I am also a Microsoft shareholder.)

I’m very excited about moderating the upcoming Future in Review panel entitled “Cloud: New Operating Models for Business Transformation”.  It will be held on May 21 at 2PM at the Montage Laguna Beach. Panelists so far include:

  • David Nelson, Chief Cloud Architect at Boeing;
  • Dave Campbell, CTO for Cloud and Enterprise Business Group at Microsoft;
  • Mathew Lodge,  VP of Cloud Services at VMware; and
  • Joe Tobolski, Managing Director of Emerging Technology Innovation at Accenture.
FiRe 2013

Last year’s hybrid cloud panel with execs from Microsoft, Savvis, Virtustream and Boeing.

If you are a journalist and would like to attend the conference contact me. You can watch a short about FiRe video for more background.

Posted by: Greg Ness | March 2, 2014

Cloud Agility Could be a $60B Market

Last fall I wrote a piece for VentureBeat on the contrasts between two key cloud operating models.  My intention was simply to contrast cloud lock-in with cloud agility, and what that contrast means for IT teams, especially those who might be unsettled by the cloud.  I also wrote at Seeking Alpha that the cloud agility market could be $60B.  Yet today even the “cloud as taxi” metaphor is broken, when one considers the two distinct and dominant flavors of lock-in, intentional and incidental.

Cloud lock-in is essentially the extension of the tired hardware-bound lock-in into the cloud. The cloud service provider “owns” the customer in the same way that the hardware vendor used to exert control over customer environments.  Training, expertise and complexity created effective barriers to competitors and enterprise development.  Innovation was limited to the confines of vendor capabilities. Intentional lock-in is the creation of specialized services and APIs that limit agility, while unintentional lock-in is the high cost of deploying an app environment into any cloud.

Today OpenStack has particularly high entrance costs.  While that is changing rapidly thanks to development efforts by many companies, earlier versions, especially those which have been modified, have unintentional lock-in.  OpenStack certainly offers opportunities for enterprises with large IT budgets and dedicated developer teams; yet the price of entry and exit is not a strength.

Cloud agility is an emerging operating model; the cloud supplements existing assets in the data center and other clouds to enable higher levels of agility and synergy.  Agility and synergy then enable higher performance through operating efficiency.  Yet the challenge for achieving cloud agility is clearly in getting there and few service providers will offer ease of mobility between their environments and competitors. Today the dominant model is lock-in, whether intentional or unintentional.

I watched Bob Green (CTO at Dizzion) speak at a TechTarget Modern Infrastructure event in Boston last week and one of his slides showed a breakdown in operating costs in traditional versus private and public cloud environments for a particular application.  There was a spike in the front of the public cloud (the cloud migration or integration expense) that he cited as an area of disproportionate influence on ROI.

That is why I’m pretty excited about what CloudVelocity (my employer) recently accomplished with an enterprise Oracle ecommerce stack (about 6TB in size), which was deployed into an AWS hybrid cloud in 7 days.  After the proof of concept was deployed and tested it was left on per the request of the (Fortune 1000) company.  The new environment turned out to be faster and easier for Dev/Test than the existing private cloud Dev/Test lab, without re-architecting or significantly modifying the app and stack. The stark contrast seen by company officials: a slow, vendor-driven environment with fixed costs versus an agile, on-demand environment with costs driven by usage.

It is very common to hear the “cloud as taxi” metaphor when talking about comparative costs, but that undersells the agility and synergy aspect, which might prove to be even more important. Think of the cab being available faster than your own car versus the car in the garage.   

That takes us to another problem with the cloud as taxi metaphor: the upfront costs of getting into the cab today with existing cloud management tools and processes.  The slide Green presented showed the spike in initial costs, perhaps the equivalent of paying $150 in advance for the rights to take a $50 cab ride. So what if another cloud provider charges only $40 or even $20 for the same ride? The $150 required in advance erodes the ROI for any change.

This is part of the OpenStack dilemma as well. As OpenStack matures and offers APIs similar to other offerings it reduces the upfront cost of entry.  Fewer expenses and developers upfront combined with a more robust offering could tip the scales away from incumbent cloud providers. But this clearly has not yet happened and incumbents are investing heavily in new infrastructure (and innovation) at a hearty $50B annual clip.

That is why I think that hybrid cloud automation is perhaps the most strategic opportunity for growth and profitability.  Make it easier to get multi-tier production apps into the cloud (without lock-in, including pre-cloud virtualization) and you accelerate cloud adoption.  That makes the monetization of agility (versus control) perhaps the most significant opportunity in the cloud space; more so than slugging it out as an IaaS provider and competing with specialty APIs. Yet that would require a revolutionary shift in thinking, from control to agility. 

See Will VMware or Microsoft Cash in…? for how I determined that the hybrid cloud automation (or agility) market could be $60B.

Posted by: Greg Ness | February 12, 2014

The Cloud is a New Operating Model

Most of the early uses of cloud IaaS were for small and medium–sized businesses and tactical Dev/Test environments. For enterprises the cloud as a critical environment for production apps was a pipe dream.  The hybrid cloud will change all of that this year as Microsoft (MSFT) and VMware (VMW) enter the IaaS scene and Amazon (AMZN) completes its injection of enterprise DNA into its sales and marketing ranks. By the end of 2014 real hybrid cloud deployments will deliver new, unprecedented IT operating models, starting with the rise of hybrid cloud DR and DevTest.

Hybrid cloud DR will allow enterprises to slash their spending on third party data centers, those used only occasionally during outages or maintenance windows.  These costly facilities are the artifacts of hardware-bound thinking, and can increase IT costs by more than 50%.  They have been a necessary expenditure, because in many cases the cost of downtime can be even higher than the cost of buying and operating expensive, duplicate infrastructure.

The hybrid cloud promises to change all of that.

New IaaS operating models are emerging that allow enterprises to “pay as they consume” IaaS, versus being locked into massive 24/7 investments.  Imagine paying a cloud provider only for use, say 5% of the time versus having to pay a third party for keeping a data center running 365 days a year.  IaaS could be triple the cost of a dedicated environment, but with fractional use it becomes much cheaper.  For those running primary and secondary data centers “hot” the cloud may not be as attractive an option, but the cost savings may compel them to at least consider them for the massive reductions in operating and capital expenses.

The gating factor until recently has been agility, enabled by automation.  With hybrid cloud agility, apps and services can be deployed into a cloud as needed, which promises to decouple the enterprise IT team from costly, long term fixed commitments to third parties in favor of contracts based on usage.  This marks a revolutionary shift in IT as we know it today.

Yet there is more.

Hybrid cloud agility would also allow for DevTest and production environments to be treated similarly (with cloned infrastructure and network services and the app stack), reducing the speed and deployment time of traditional app development.  The silos today separating the labs from production environments could be transformed into mere logical boundaries that could be crossed with fewer errors and delays; software would be developed and tested in environments virtually identical to production.

Under these new (hybrid cloud) DR and Dev/Test scenarios the cloud becomes more than just another data center, but rather the core of a new web-scale IT operating model. See this hybrid cloud deployment blog at CloudVelocity (my employer). The futures of Amazon, Microsoft and VMware cloud efforts are thus closely tied to their ability to transform IT, versus simply offering a new flavor of infrastructure.  That brings the notion of hybrid cloud agility front and center, just as VMware added agility between servers and Cisco added agility between PCs and servers even earlier.  Cloud service providers and third party data center operators without hybrid cloud agility will be rendered obsolete because the economic power of agility and efficiency for the enterprise is overwhelming.

When it comes to agility both Microsoft and VMware have an advantage over Amazon due to their legacy footprints and familiarity with existing software and private cloud infrastructures.  Amazon has the most seasoned IaaS.  Between these two camps the power to easily move entire app and service stacks between the data center and the cloud may become the most critical determinant of share gains.  Cloud success is then driven by the power of new operating models versus simply direct operating costs.

Posted by: Greg Ness | January 31, 2014

The Hybrid Cloud Will Enhance Agility and Control

It is very easy to see the cloud revolution as a loss of agility and control for the enterprise, especially for the IT department. The argument goes like this: I’ll be locked in to the service provider just like I am to other vendors and third party data center operators – because the cost of change is too high and/or the effort too difficult.

Yet it is very likely that control with agility will actually be enhanced by the cloud, especially for large enterprises already investing heavily in 3rd party data centers. Note: Third parties already house more than 10% of all data center space, per a January 2012 report.

The following are two scenarios where the hybrid cloud (equipped with automation) could significantly increase control.

1) The Legacy Complexity Tax

For many enterprises the soft costs of adding a server into an environment is higher than the actual cost of the server and software.  One large company exec, for example, showed me a 30+ step process chart outlining every step required for simply adding more server capacity to the data center.  Even worse, an external auditor had determined that even moving an existing server was more expensive than buying a new one. Complexity added a very high tax on agility and growth, even at this leading tech company.

Complexity makes every change more expensive, undermining the business case for innovation and growth. Traditional IT environments are by nature very complex, especially compared to the web-scale IT practices of Google, Facebook and others.

Virtualization succeeded in reducing complexity, especially around hardware, but it often came with a price; agility was often limited to increasingly expensive x86 stacks (requiring vendor lock-in and aggressive price increases).  Vendor licensing costs ended up replacing the cumbersome management costs which were building before the rise of VMware.  Complexity in traditional data centers combined with the rising costs of virtualization takes us to the second scenario which will drive demand for hybrid cloud adoption.

2) Third Party Data Centers

While data center operators offered more agility and efficiency for enterprises struggling with complexity, many required service contracts that added new costs (and even new processes and procedures) for IT management and maintenance. The third party data center was a step forward for those burdened with rising complexity and entropy, but there were cumbersome strings attached. Many 3rd party disaster recovery providers, for example, charge for tests and/or dry runs and require onerous procedures that ultimately reduce agility.

Some eased the pain by deploying more agile private clouds with virtualization, yet still add external processes and procedures (and costs) A DR dry run that an internal team could once conduct on its own with minimal budget impact can cost $20,000 and higher.

Even with virtualization and the rise of third party specialists, agility came at higher costs and in some cases with procedures that eroded the benefits.

A Cloud Perspective

As public cloud IaaS (led by Amazon AWS) emerged, enterprises were slow to respond.  The public cloud had a control and security problem. Even worse, the effort to enter and exit a public cloud threatened just another form of lock-in.  Enterprises had been there, done that.  IaaS replaces hardware yet risked maintaining the complexity game that sets the stage for price increases and complexity taxes.  Yet enterprises want agility which is speed with control.

That is where hybrid cloud automation enters the cloud picture.  As hybrid cloud migration processes (and hybrid clouds) are automated the enterprise can control cloud environments as extensions of their own data centers and use each as needed or when optimum. The cloud reduces complexity and delivers potentials for new operating models.

I just started Hunter Muller’s On Top of the Cloud, which was distributed at a recent CIO Summit held at the Harvard Club in NYC.  Here is an excerpt on the cloud from IBM’s Jim Comfort:

“Users get a range of choice that helps them become more productive and IT gets lower costs and less complexity.”

Soon after the HMG Summit I got to spend some time with Gartner’s Cameron Haight, and we talked about his recent Web-Scale IT preso delivered at the recent Gartner Data Center Conference. He clarified that web-scale was as much about agility and the reduction of complexity than the creation of massive data centers.

As long as a moat of complexity stands between the cloud and the data center, the cloud will not enable the agility of web-scale It requirements, but rather the ability to merely spin up stovepipes faster.

Hybrid cloud integration and automation will enable strategic agility and availability along with increased operating efficiency. The cloud would offer enterprises the option of “leapfrogging” investments in 3rd party racks and stacks by leveraging APIs and services for existing apps with limited complexity. Enterprises could emulate web-scale IT practices without having to make the massive investments today required for re-architecting and developing new apps for the cloud, which increase lock-in risks.

The “pay as you go model” for existing physical and virtual apps is revolutionary, as hybrid clouds would allow enterprises to use and pay for clouds only when they need them.  Rather than paying a monthly fixed fee for traditional disaster recovery, with hybrid cloud enterprises could pay a cloud provider only during an outage or when testing.  That could reduce disaster recovery costs by more than 50% while giving internal IT teams the ability to initiate tests without onerous 3rd party charges and processes.

Developers similarly could spin up additional workloads quickly and easily and duplicate apps and services for testing and training purposes as needed, without waiting for servers to be added. The cloud becomes an on demand pay as you go environment, enhancing agility and control, versus today’s stereotype of the cloud as just another stovepipe.

This vision of a hybrid cloud isn’t just strategic to the future of enterprise IT, but also to the future of about a dozen new and existing service providers, starting with Amazon, Microsoft and VMware.  Hybrid cloud automation is the critical step between traditional IT and private clouds and web-scale IT.

Related Blogs

The Next Hybrid Cloud Battle (Automation)

The Hybrid Cloud is an Integrated Cloud

The Top Three Benefits of Hybrid Cloud Deployment

Posted by: Greg Ness | January 21, 2014

The Next Hybrid Cloud Battle: Automation

As Amazon, Microsoft and VMware engage in the first battles of the multi-billion dollar hybrid cloud war, you can expect to see a fundamental shift in strategy as the public cloud matures and becomes more enterprise-centric. This should drive at least two major developments over the next 24-36 months, corresponding to rapidly evolving enterprise IT operating practices.

1) Amazon, Microsoft and VMware will drive the Hybrid Cloud

As predicted last year (see VMBlog 2014 Predictions) I expect AWS to enter the hybrid cloud market in 2014, and battle directly with traditional IT.  Those who get on the hybrid cloud bandwagon will become tomorrow’s leaders by delivering unprecedented levels of agility, uptime/protection and operating efficiency. They will likely leverage a hybrid cloud from one or more of perhaps a dozen emerging IaaS (infrastructure as a service) service providers. Amazon, Microsoft and VMware should be the primary beneficiaries of the shift, followed by progressive service providers who leverage one of their platforms or adopt OpenStack or even CloudStack.

These platforms are powerful because they change the game.  They allow enterprises to deliver apps and services faster and more efficiently than the vast majority of traditional rack and stack infrastructures operating today.  They are the bridge between traditional IT in the enterprise and the web scale IT being deployed at leading internet companies like Facebook and Google.

At stake in the short term is a potential $60B market based on a 3 year server refresh rate, for hybrid cloud software that would run on servers and allow apps to scale into one or more public clouds.  Then there is the $1T+ spending on traditional IT, that could eventually shift to the cloud when one looks out 10+ years.  That takes us to the second major development: the rise of hybrid cloud automation in the increasingly critical middle ground between the data center and each IaaS offering.

2) The Rise of Hybrid Cloud Automation

When you compare statistics between who wants to have a hybrid cloud and who has one, you see a stark contrast. There are very few haves relative to have nots; there are very few actual hybrid cloud deployments. The problem is that hybrid clouds today are highly dependent upon extensive manual processes to build, just like traditional IT.  The space between the data center (and the physical and virtual apps within) and the cloud is a swamp of uncertainty, body shops and a couple dozen cloud migration tools that typically support DevTest agility for small apps or require lock-in to a single virtualization platform.

Amazon has produced perhaps the most robust sets of APIs and services for delivering hybrid clouds for production apps, but the cost and risk moat is still there for multi-tier production apps. Microsoft and VMware are catching up quickly and have enterprise IT DNA and established relationships.

Today’s irony is that traditional IT is required to deploy next gen hybrid cloud-enabled IT. Yet automation (in the form of increasingly robust and powerful software) will change the pace of hybrid cloud growth and shift power from the complexity experts to the agility experts.

Automation will be key to the shift from IT complexity to agility. It will have a disproportionate influence over the adoption of hybrid cloud.

Private clouds are not enough, despite their tactical advantage over traditional racks.  Eventually they run out of steam and often require lock-in to a particular vendor’s platform.

It is very likely that the hybrid cloud gap will not be tamed by body shops and massive customization projects, but by software that automates most if not all key hybrid cloud processes, from application and storage to networking, hence the growing interest in virtualized networks or SDN (software-defined networks).  Some apps will need to be modified for the new cloud environments, but many may not have to be. The question is simply getting them in the cloud to find out.

Many IT “experts” still see the cloud as an extension of IT complexity rather than apps and services spun up on demand versus API calls and services. With Amazon, Microsoft, VMware and others investing more than $50B in cloud infrastructure, it is very likely that we will see the triumph of automation over extensive manual processes, especially for apps that can operate efficiently (with minor tuning, for example) in the new cloud environments.

Enterprises want to deploy hybrid clouds today but most cannot without massive investments and risks.  That is because the traditional ecosystem has mixed incentives, very similar to the traditional IT vendors who prefer to maintain the status quo for as long as possible. Check out this hybrid cloud architecture showing the data center and cloud connected by a secure tunnel of services, allowing the IT team to manage the cloud as an extension of the data center. This is likely the future of IT.

Winners and Losers

When the hybrid cloud takes hold -and many think that 2014 will be the year of hybrid cloud- the market power will shift from hardware providers monetizing complexity to software and service providers monetizing agility. You will see more “white box” hardware deployments running increasingly agile and available software and services. This will put Amazon, Microsoft and VMware at the core of a new era in IT, and will saddle the increasingly complex, costly and tired status quo with fewer growth opportunities.  Some analysts suggest that the power shift is already underway.

Posted by: Greg Ness | January 2, 2014

Thinking beyond the Rack in 2014

Most remember the medieval torture device called the rack, where increasing pressures would generate increasing pain and the threat of dismemberment in order to extract knowledge or confessions or wealth from the subject. Perhaps the medieval rack is also the origination of the term racketeer.

The Rack

In a few years the premise-bound hardware rack may acquire a similar reputation as enterprise IT shifts from maintaining increasingly outdated, complex and painful processes (internally and at third party sites) tied to traditional IT to more agile, more available and more efficient cloud-based apps and services.

The hybrid cloud is the second enterprise-friendly step to this new world of IT, after the evolution of private cloud gave enterprises a tactical taste of the power of agility.  The hybrid cloud will introduce strategic and transformative agility, beyond the tactical agility introduced by virtualized workloads moving within a virtualized environment like hockey pucks sliding easily between the confines of ice rinks.

The cloud as infrastructure is the next great backplane for levels of agility rarely (if ever) seen in any data center or even cobbled network of data centers.  It will destroy the rack-think present today and will make IT less technical and yet more strategic to the bottom line and will usher in a new IT revolution that will make the dotcom era look like the mainframe era.

As a point of reference for 2014 and beyond I offer this glimpse of hybrid cloud deployment.  In addition to the app stack in the cloud it shows an SSH tunnel back to the data center. That model supports the disruptive cloud DR use case, in addition to the strategic use of cloud for DevTest and DevOps.

When you think about the cloud for the first time it is hard to consider its ability to increase agility, protection, efficiency and control.  You see it as IT as usual on a rack someone else owns and operates.  Yet as soon as you think past the outworn “manual process swamp” stereotype of hybrid cloud deployment, the business case becomes clear.  That is why 2014 will be so pivotal, along with the hybrid cloud entrees by Azure and vCloud.  Enterprises will begin embracing hybrid cloud automation for production apps. As they share their experiences publicly it will generate the shift that everyone has been talking about but few have actually deployed. Stay tuned.

Posted by: Greg Ness | December 31, 2013

2013 in review

The stats helper monkeys prepared a 2013 annual report for this blog.

Here’s an excerpt:

The concert hall at the Sydney Opera House holds 2,700 people. This blog was viewed about 13,000 times in 2013. If it were a concert at Sydney Opera House, it would take about 5 sold-out performances for that many people to see it.

Click here to see the complete report.

Posted by: Greg Ness | December 11, 2013

Amazon, Microsoft and the Data Center Colocation Challenge

The Amazon AWS public cloud offering has set the stage for a massive transformation of enterprise IT from being premise-driven (servers, switches, data centers, etc.) to being services driven (APIs, services, consoles, etc.).  This transformation promises to produce a new crop of winners and losers.

2014 should be a pivotal year in the emergence of hybrid cloud, as Microsoft and VMware enter the cloud space with their own offerings, and compete directly with Amazon for the $1 trillion+ enterprise IT market once protected by moats of complexity, specializations and proprietary hardware.  Those moats once protected and sustained dozens of large cap technology companies from legions of emerging companies who simply couldn’t achieve critical mass with available resources.  Amazon is in the process of destroying those moats.

The next trigger should be the evolution of hybrid cloud automation, or the ability for apps and services to easily move from facilities into clouds and ultimately between them.  Leveraging the cloud for “pay as you go” disaster recovery and agile DevTest can be faster and more efficient than most comparable legacy approaches locked into a vendor or a facility or even a cobbled collection of legacy facilities. It would accelerate the shift to cloud for enterprise production apps.

It is all about agility, protection and efficiency, at levels practically impossible in virtually every firm that has made substantial IT investments over the last few decades.  Dedicated, specialized hardware has become the problem rather than the solution, especially when it comes to agility and ongoing operating costs in increasingly complex environments.

Kepes: Agility and Mobility is becoming the New Normal

For reference see this recent Forbes article by Ben Kepes: Do Containers Mark the Death Knell for Virtualization? Ben, a leading cloud blogger and expert, discusses the tradeoffs between bare metal  and virtualized servers for enterprise agility and flexibility, a debate that might have been unthinkable as recent as five years ago.  His summary nails the core sentiment.

We’re in both a macro paradigm shift and a micro one. The macro one takes us to a world where agility, flexibility, mobility and the cloud are the norms. - Ben Kepes, Forbes, Dec 10, 2013

Indeed, the monetization of complexity that drove the massive creation of market caps in the networking, server and software industries is being replaced by increasingly service-centric products that deliver APIs (application program interfaces) from the cloud. The result of the emergence of services versus racks is heightened agility, protection and efficiency, not to mention the ability of IT teams to focus on new product and service development versus routine maintenance.

IT becomes even more strategic to the business, and more closely aligned with product development and marketing as cloud providers build powerful services that simplify tasks and increase efficiencies.  This is not a subtle shift for an industry once dominated by the massive pools of technical expertise and the manual steps required to simply add a server into a large network.  Colocation vendors thrived because they could enable growth and change faster and cheaper than many organizations.  Yet that world is changing.

Colocation and the Cloud Transformation

Thus far, Amazon has dominated the IaaS cloud market, per this (and other) recent Seeking Alpha cloud infrastructure market report, based on a Synergy Research report cited in GigaOm.

“By Synergy’s measure, total IaaS/PaaS revenues for the quarter passed $2.5 billion with IaaS making up 64 percent of the total. Within IaaS alone, AWS accounted for 35 percent of the market; IBM 7 percent; and “everyone else” less than 3 percent each. In PaaS,–with its and Heroku soon to be joined by Heroku1–had an 18 percent share; AWS 17 percent; Microsoft 14 percent; Google 13 percent; and everyone else less than 5 percent each.”

Beneath the surface of the Amazon-led IT transformation is the murkier story: that is, what happens to all of the business models that came of age in the hardware specialization era, which tied their growth and profits to the once accelerating demands for increasingly powerful and robust hardware and the services required to support increasingly complex and costly data centers?

The Colo Challenge

That takes us to a host of colocation companies that acted as safety valves for the once accelerating gap between operating demands and internal resources.  Compare these two observations from the report:

1) “Synergy thinks the traditional Web hosting market, which Rackspace remains well-exposed to, and which has been pressured by the IaaS market’s rise, only grew 3% Y/Y in Q3.”

2) “Altogether, Synergy thinks Amazon grew its IaaS/PaaS revenue by 55% Y/Y, outpacing the 46% growth seen by the overall market. Moreover, AWS’ IaaS/PaaS revenue is believed to have eclipsed that of Microsoft, Google, IBM, and Salesforce combined.”

Amazon could be impacting a sector which has had impressive growth in recent years (as reported in Data Center Knowledge), and was looking at expansion as late as 2011 based on solid research tracking the need for enterprises to outsource operations to third parties:

Roughly 8.75% of total enterprise data center space is currently in colocation. That total will increase to 14.11% by 2015.

Nemertes nailed the trend and naturally thought of the colocation providers as the beneficiaries, as the industry as a whole did. Yet the cloud providers may be capturing a market once owned by the colo players.  IaaS revenues in 2011 were hardly measurable in proportion to colocation revenues, and are still perhaps a small portion.  Yet the contrast in growth rates has to give pause to the third party data center industry and the ecosystem of vendors who support them. After all, the cloud is the ultimate third party data center.

Two years later, it appears that Amazon and IaaS has impacted the growth in the colo market, starting with small and new apps and now expending to traditional production workloads.  I too have been a public cloud protagonist, equally surprised by what has been accomplished in a very short time.

It could get even worse for the colocation industry: along come Microsoft with Azure and VMware with vCloud in 2014 with a new surge of competitive offerings. That means more APIs and services; and fewer hardware-driven headaches for enterprises seeking agility over ownership.

The Two Stage Predicament

Data center development isn’t like software where copies are easily made and distributed on demand.  Data centers can take years to develop, from start to finish.  Could it be possible that, based on 2011 assumptions, colo providers have made investments in data centers based on 2011 sentiments and that some of those facilities have yet to come online?  That would mean sizable capital investments made in advance of declining growth rates.

That could set up a two-stage problem, whereby: 1)AWS, Azure and vCloud drive prices lower based on $50B/year in competitive data center infrastructure as a service investments; then 2) excess data center capacity among the traditional players drives them even lower.  The data center colo industry could become like the airline industry, with massive capital investments chasing margins and growth, mostly via consolidation.

Those who simply chased REIT status by focusing on real estate versus services and software and APIs could be rendered irrelevant.  What happens to a CAPEX-driven industry when growth rates go from 20% to 3%?  We may soon find out.

Consolidation Pressures

I suspect that we will see massive consolidation down to perhaps two dozen players who will earn their positions through superior service, customization, specialization (compliance, security, software, big pipes, etc.), customer loyalty or perhaps scalability and energy efficiency.  The generic colocation player without competitive differentiation then becomes a commercial real estate play with assets valued more like climate-controlled warehouses versus information-age factories.

Looking to 2014-2016 it looks like we are gazing at a massive IT transformation and a cyclical rotation of winners and losers on perhaps a scale we haven’t seen, yet was predicted in Nick Carr’s classic The Big Switch in 2008.  Stay tuned.

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