Cloud Vendors and why Amazon should buy Sun Micro

I added one more slide to the my Walk in the Clouds presentation .



What this slide try's to do is provide a heatmap of the the possible strategy of different vendors in the cloud computing space.

Let me start with Google and Microsoft- Clearly they have a 100% overlap in their desires and they are going for the end consumers of IT - Create a platform , Provide Software Apps and Make your devices work all in the cloud. There approach might be different(i.e Google trying to enter the market via Consumers --> Small Business --> Enterprise and Microsoft going the other way round - Move their Enterprise Customers first --> Then go small business ) but they are essentially targeting top part of the IT Supply Chain.

Sun : Like always wants to be everywhere- Dont know if they really can be though. They have a software and platform strategy while also having a Baremetal and HaaS strategy. I would really question their J2ME Strategy considering that Android is probably going to kill J2ME.

HP - To me is a still the traditional big iron vendor. Focussing on Hardware and leaving it to Google , Microsoft and Amazon to fill the PaaS , SaaS stacks. Their view of the world - Be an arms supplier to the Enterprise IT Armies of the world.

Salesforce.com : Started off in the SaaS space for the Enterprise and will continue on that route. There is a strong case for Google to buy Salesforce.com when it really gets on the Enterprise IT bandwagon.

IBM : a pure play Enterprise play. They have three businesses - Big Iron(like HP) , Enterprise Software (Websphere , Db2) and Services. I think they will really focus towards the "Private cloud" model because it fits in quite well with where they want to be. An interesting thing about "Enterprise Software" Vendors like IBM and Oracle is that they not have a lock-in (from a technical standpoint) .i.e they generally adhere to standards and interoperability(which at this time is really a must to be playing in the Enterprise Software space) - their Lock-in is really in their notion of "On Stop Shop" - "Sales Process" - "Relationship Management". Dont be surprised if you start seeing a move from IBM talking about interoperability of Clouds.


Now Finally - Amazon. This has been the greatest success in this space. A wildcard entry they really realized the notion of cloud computing. But now that the market is established - what do they do next? My guess is that they either need to go up the ladder(ie compete with Google and MSFT) or go down the ladder(Compete with Sun , IBM and HP).Sticking in the middle limits their opportunity for innovation. The next set of Innovations in cloud will now either come from the orchestration of consumer facing technologies (Cell phone , PC , applications) as a continuum or it will come from basic innovation in hardware. As the economics of hardware moves from being distributed(commodity PC's) to centralized (server based ) who says that x86 and multicore will continue on its run. Also as the business model for going for the low end of the market with Ec2 is proven - It is only logical to assume that the next real innovation in data center technology will come from the big-iron vendors.

So at a Market Cap of 3 Billion Sun is dirt cheap and hence a good opprtunity for Amazon to downstream in the supplychain of Cloud computing

Insurance 2.0 : Googlelization of the Insurance Industry

When I got to know that there was a suggestion at the Gartner symposium that google is the next big entrant insurance carriers should be scared off, the first though that came to my mind was - Balooney - why would google enter a totally unrelated business which has no leverage from its existing business - at best I though they could come out with insurance products for the cloud computing space - i.e data security insurance , open source indemnification(which is really an insurance business).

It was not until I was relaxing for about half an hour in my hot water tub that I realized - Why not?.

What is Google's greatest asset? I would argue that it is - They know their customer too well. By knowing there customer I do not mean the traditional meaning implied by having a CRM some excellent relationship managers etc. What I really mean is having the ability the drill down to each individual customer and knowing what is going on in customers life- what is on his mind(google search) , what kind of news is he reading(google news) , what does the customer watch(youtube), where does he generally travel and at what speeds does he travel (google Android) , What kind of friends he has (open social) etc.

Next question. If you ask an Insurance executive what is the key differentiator for an insurance company? You will probably hear - Underwriting and Rating. And what makes better underwriting and rating - Knowing your customer very well. How many miles does he travels to work everyday. DMV records , Credit history , Claim history ,Demographic information and a whole bunch of other factors- most of it available as Pay for use data by data vendors like DNB, Choicepoint etc.

So needless to say that there is a clear leverage google has from its existing business to the insurance space. and getting into this space will further strengthen its dataset on each customer as it will get a different aspect of data on the customer.

What has been missing in the underwriting equation in today's insurance companies is knowing about an individual more than the bucket (category) he belongs to. i.e Per Customer underwriting and more predictive modeling based capability as compared to historical statistical analysis of categories. i.e would you be more willing to underwrite a type-a profile (no-accidents , no-claims in the past) but who has recently been searching on - "How to get a gun" and has been generally out of house between 11.00 PM and 4.00 AM (known via Google android) to someone with maybe one accident in the past one year. In todays model of underwriting the second example will be deemed as riskier which is probably not right.

Irrespective of whether google enters insurance or not I do feel that the next generation insurance company (Insurance 2.0) will have to be a Web2.0 company - that harnesses every interaction of an individual in the digital world (Searches , Movement - via android like technology , Relationships-via social networking ) to better its underwriting and rating capability and choose a better risk.

Google = Microsoft and Amazon = IBM

Wow - how did I come up with the equation.

Here goes the story.
Google's strategy is what Microsoft's strategy was in the PC era.
- Start with bottom of the market (Consumers --> Small Business and then Enterprises)
- Create Lock in in some form or fashion. Google creates lock in with non-standard based technologies
a) Google App Engine(a totally google technology that no one else supports or has).
b) Android - intelligent way of creating proprietary technology while also leveraging the user base of Java without using J2ME.
On Android: The key customer for Android IMHO is small business. When all small business's try to sell their stuff via google(adsense , Location based advertising) - that is when google will make money. Android is really a play of getting more and more small business's rely on google for sales.

c) Google Apps - Hosted on the cloud with Google API's - once a small business gets hooked into this - the switching costs to something like office live is not going to make it worthwhile to move.

Google is clearly going after the small business now. Their aim - make it as simple as possible for getting small business onboard and don't bother of open standards , interoperability etc which generally come into an Enterprise Sale discussion.

Amazon IMHO is now really targeting the Enterprise. Although Amazon has also come to the market from bottom up(Startup's were their first customers) but now it is clearly going for the Enterprise

It is not a tightly integrated stack. i.e you can pick an choose EC2 , S3 , SDB or SQS independently and hence no lock in. There are some non-standard technologies like SDB and SQS but they are really at the edges of the offering.

Amazon in reality has an open offering. Use EC2 and if you do not like it you can quite easily switch elsewhere.

The key to Amazon's success is going to be Cost of operations which will be achieved by getting scale and being efficient while key to Google's success is going to be Customer Lock which will be achieved by releasing compelling technology to build a developer ecosystem.

So what happens to the Hp's IBM's and Sun's of the world. Lets See... I dont have an answer yet.

Let the real test of open source business models begin

After reading about the dooms day in venture cap , I could not help thinking about the impact this might have to the open source world.

With things like zero-based budgeting and re-looking at the base fundamentals of your financial models – it is going to be very hard to justify investments with no direct link to revenue – i.e open source is going to come under a lot of scrutiny.

Besides, when every company is financially stressed out, there will be a lot of pressure on improving the productivity levels in the corporation and as a result the supply of free developers/testers that the open source world gets at the cost of the corporate world will now be constrained.

People do open source for several reason but from a business model standpoint – You do it essentially for two reasons

1. As a Market Capture strategy – Achieve ubiquity, trade revenue for market share. The strategy here is that make pennies on a large number of transaction as compared to dollars on a small number of transactions. The issue in the current financial environment is that if you have a product that has not yet reached ubiquity you will have a negative cash flow because you probably do not have year maintenance contracts.

Sun Microsystems is right into this category of open source players and I think has a mix of successful and un-successful open source products. Sun seems to think that it will benefit from the downturn , but I would be hard pressed to believe that some of its products like openoffice will not be questioned for further investments.

2. As a sales influencer to some other product or a service. A case in point is google - Google does a whole bunch of stuff that is free hoping that you would ultimately end up clicking its advertisements if you are somewhere in the google world. With the pressure on Google Stock and lets say a decreased add spending – what happens to projects like GWT would be worth observing.

Comparing AppEngine , EC2 and Caroline

I gave a talk to the Los Angeles Java User group on the topic of "Comparing Google App Engine , Amazon Webservices and Project Caroline".

A lot of what I presented was really distribution of existing content and discussions. The only unique perspective that I think I added was the slide below.

The way I look at any player in the Cloud Computing space is one of the four buckets

1. Bare Metal - People and Process driven , essentially traditional style with some Hypervisor - the only service opportunity here is the traditional EDS type outsourcing that utilizes skilled labor and pooled labor.

2. HaaS - Hardware as a Service. My Definition: Programmatic Interface for Hardware Provisioning . EC2 fits in perfectly here. Moves up from BareMetal as it minimizes on "People Services" and focuses on Pooled hardware capacity and real-time provisioning of hardware. Typically billed by Clock time - offers a lot of flexibility in terms of choice of language runtimes.

3. PaaS : Platform as a Service . The issue of scaling has been abstracted out by the Platform and you have flexible services that automatically provision computing. Also refered to as Fabric . App Engine is an excellent example here. Another interesting point here is that you billing will typically move from Clock time to CPU cycle time - because there is no longer some instance you need launch.

4. SaaS : software as a service. Gmail , salesforce.com , ebay etc. You basically do not care what is happening beneath the stuff. You are the consumer of the software and expect the application to run





Here is the full Presentation.

Cloud Computing

View SlideShare presentation or Upload your own. (tags: ec2 appengine)

The coolest feature of chrome

So - What do I like about Chrome . "Create Application Shortcut" - This is probably the reason Google created Chrome. Isnt it all about the platform.

You can create shortcut , put it on your desktop and open it directly as an application.
Now there is nothing new about this.

The cool part is that for Javascript heavy applications like gmail , Google Reader - it zooms. and atleast for google apps It seems like I do not sign in again.

I also like the application like look for chrome when opened through the shortcut.

Considering that Chrome's starts a new process for every tab - this use-case seems like the most used case for me , as pure HTML browsing is not cool in chrome , firefox is probably better .

So what does Google open source ?

In light of the announcement by google to develop a new Open Source browser Chrome , I could'nt help notice that all open source products from google (GWT , Android and now Chrome) are client facing and essentially fuel for making Cloud Computing a reality.

Very eloquently said by Nick - that "the weakest link in the Cloud is the browser" and taking it to the next level of serving applications only brings them closer to making Google as THE platform for SaaS development.

Note that google has not open sourced any of its server side technologies like BigTable, MapReduce etc. and I dont think they would open source them unless these become commodities (with Hadoop etc) and there is cost leverage by open sourcing them.

This also make me think - why is Sun Microsystem (NASDAQ: JAVA) open sourcing its core revenue streams(software products). If their vision is really to make money from hardware and they view software as an enabler to hardware sales - I can understand. But they are not doing a great job at hardware also.

SOA adoption down from 2006 - Are you surprised?

Not me. Having read the story and a very valid perspective from Joe McKendrick . I think a point that got missed is that : wasn't this expected?

To me it was. The reason at a macro level is that time and again we have seen that "Information Technology Industry " is the definition of a cyclical industry. Just when you thought that Rational Unified Process was the silver bullet for software development , Agile methodologies came about and challenged RUP. Just when you thought that the only way to build high performance websites was by purchasing high-end Unix servers , Horizontal scalability avatar was realized via google and showed that you can put together a ton of small PC's and run a web-scale application like that of google's(note that this might change again with red-shift).

The problem in IT and business is that just about the time when you can solve a problem , it actually moves elsewhere. SOA came into existence when the mantra for doing business shifted from "Think Globally and Act Locally" to "Think Globally and execute globally" . So executing globally required lot of governance , control and to some - excessive redtape. It lead to the creation of a new position in the IT organization - VP shared services , responsible for managing all shared assets by the organization.

Now the Mantra for business seems to be "Think Globally , execute globally and Collaborate Globally" - By collaborate globally I am referring to Crowd sourcing and open source techniques. The collaborate aspect changes the IT organization structure yet again. Instead of having a business head for "shared services" whose aim in life was to own everything common used in the Enterprise , The Lines of businesses now have the option to use crowd sourcing techniques and leverage SaaS type solutions to achieve their goals. When they do that there obviously will not be any synergies between the styles of consumption of services but clearly there will be a lot of JBOWS (Just a bunch of services) . As a result in my opinion the SOA concept of coming up with a master API that will be used by everyone is failing.

Why the Cloud Computing paradigm will enter Enterprise faster than you think?

The discussion of adoption of the cloud computing paradigm in the Enterprise generally shifts towards outsourcing of infrastructure and the associated security concerns for an Enterprise. While the outsourcing part is an important part of the story that will have significant effects on the low end of the market (Small to medium business), my take is that it will not have a big impact on the Fortune 200 Enterprise clients.

What will probably happen to the Enterprise Clients is that they will end up building their own grids for internal consumption. You will start seeing vendor offerings like Sun sell -Project Caroline, that will probably be the key differentiators for the big iron vendors. (although Project caroline will potentially be the Sun Grid offering to the Small and midsize business’s - I can very easily see a situation where Sun Sales force goes to a client like Morgan Stanley and makes a sales pitch for Solaris and its hardware based on its Project Caroline based capabilities)

So going back to my original point about why do I think a case like above will come to the Enterprise faster than you think.

Most of the Large Enterprises typically have an infrastructure group that manages its data centers. This is how the provisioning of new hardware typically works in an enterprise

Applications VP - I need to unarchive some 300 GB of data and then use it for some analytics that I need to perform at least once every month.

Infrastructure Guy - 1GB costs about X $ and 1 LPAR with 2 CPUS is about Y$ per year. You need to multiply this by 5 years to get the ROI calculation for your project.

Applications VP - Wow ! Why is the cost 1.7 times Frys.

Infrastructure Guy- Well it is all the overheads; The Company needs to pay guys like us who ensure that additional storage is installed correctly and that your group adheres to all the norms we have established

Applications VP- OK (whatever! Since I do not have any options!) , when can I get it.

Infrastructure Guy- it will take 2-4 weeks after the purchase order is approved and quote submitted.

This is how it will work when you have a Computing Cloud running internally in a large Enterprise.

Applications VP - I need to unarchive some 300 GB of data and then use it for some analytics that I need to perform at least once every month.

Infrastructure Guy - Here you go , call this API for Adding Storage and launching an instance. You will be charged by the hour

Applications VP- Cool , I am charged ½ of what you guys charged me earlier and I have the ability to turn off my meter when I do not need to computing power.

Infrastructure Guy - Yes , They have cut down on group and all my buddies who did not have scripting skills and just PowerPoint skills have been asked to go. I guess our overhead is now 1.1 X as compared to 1.7X .Besides if you consider the savings you get by switching your computing off when not needing it , we are probably cheaper than frys.

So to sum it up- the fine grained transactions between the apps group and the infrastructure group will become coarse grained via development of API's and when that happens the labour costs will go down like anything.

Cloud computing : Its not just about the infrastructure

So what is the value of Cloud Computing to me(someone who is not an infrastructure guy) ?

The important shift in my opinion is the change that will take place in the programming model for Enterprise Apps as a result of this new paradigm. The SDLC is going through a major change from Develop - Test - Deploy - Release as time/people sliced functions to Develop-Test-Deploy-Beta-develop-test-deploy-Beta2 to functions within the scope of developer responsiblities.

Imagine having your dev/test/prod environments in the cloud all driven through eclipse/netbeans and the movement between the environment's driven through course gained services like AWS webservices API that interact with your hardware to provision the application.

Imagine a library of widgets/services that will make into the Enterprise just has open source made its way in.It is really the re-birth of the Component Based Software taken to the next level.

Imagine treating things like -webscale computing , massive parallel processing- hadoop , specialized analytic capabilities , etc as commodities that can be purchased at any point of time for an application.

Imagine having a large number of small software vendors that thrive on delivering small specialized services/widgets to whom infrastructure is an operating expense and not a capital expenditure.

The above to me is the big switch. Besides the aspects of driving efficiency in infrastructure as a result of scale , the could computing paradigm will enable the building of a large number of software services players that will ultimately compete with the Application development department in the Enterprise.

Note: the link to Eric Schmidt's Bear sterns conference as an interesting observation of -"there will be small number of big players and a large numbers of small players in the cloud computing space"