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"

Realtime Analytics for the rest of us

My two cents added to the discussions here and here.

John's points about the DW purchase decision being pushed to the SaaS vendor and being less relevant to the enterprise (analytic application mid-market customer) is the key to the big switch. A similar analogy would be that when an Enterprise gets its electricity from the electrical company (the GRID ). All that it cares about is the SLA – Can the supplier meet my XXX Megawatt per hour demands at peak loads of YY, 24/7 and after that the pricing is the decision point. What kind of generators the electrical company uses (Hydro , coal , windmills) is an important decision for the electrical company but certainly not relevant to the Enterprise using the electricity.

So this analogy leads to a bit of soul-searching for DW appliance vendors like Terradata , Greenplum etc. “Who is their customer?” are they taking up the role of GE (who manufactures turbines , windmills etc) to serve the SaaS vendors OR do they want to be offering solutions at a level higher to the end consumer that ultimately end up using their appliances. I think a little bit of both and mixture of a lot more partnerships is probably what is going to happen.

It is also interesting to note two other trends that will shape the BI world.

1. Fragmenting of DB market to specialized Database
   
2. Availability of webscale level specialized Databases like BigTable , Hadoop/Hbase at very low entry points.

These trends will lead to a development of a longtail-type market for real-time analytics in an SaaS model (example – Recommendation service based on collaborative filtering, using Predictive modeling results during the underwriting workflow for approving a quote).The reason this will happen is because

a) These kinds of applications are more focused and can be performed in silos’. The whole concept widgets moving at the next layer of functionality and reuse.

b) They are also better served by vendors whose livelyhood depends on bettering the algorithms that power the analytics engines.

c) With things like Bigtable , Hadoop/Hbase exposed to the world at a very low entry point , all it takes is one guy to improve an algorithm and expose to the world as a service.

Update: May 22 ,2008 : I ran into one more Cloud computing Data analytics solutions which is another Column oriented database check it out at Vertica

Cloud computing and Datawarehousing

Following my last blog entry , my brain continued elaborating on the thought of Cloud Computing Adoption in the Enterprise.

Having worked in the Enterprise Space for So long , I am hard pressed to come to terms with the notion that Enterprises will be willing to completely outsource their Information Management and IT infrastructure and more so in a constrained environment like that of Google AppEngine.

Amazon AWS with its ala carte is still a better option to Enterprises as compared to Google App Engine. As you can pick an choose what you want. I think the key is that any Cloud computing vendor needs to "FIT IN" into the Enterprise's Architecture . This basically imply's that more entry points you have to the cloud infrastructure the more use-cases you will have for Enterprise Adoption. So , it seems like Amazon has a better strategy for Enterprise Adoption. Another use-case for Enterprise Adoption is via an SaaS vendor case in point - Vertica . Vertica is a user of cloud infrastructure from Amazon. But the way the cloud is coming into the Enterprise Architecture is via an SaaS vendor.


Another use-case that came to my mind is the impact to the EDW world. With things like BigTable and simpleDB exposed , why would an Enterprise invest in highend Databases like TerrrData - why not use a proven scalable platform like BigTable to run your analytics. In any case you need to do your EDW work in house on separate machines from your core systems - So using an on-demand infrastructure for such needs makes sense.

Shame on you if you cannot start a .com now !

Life could not have been better for developers. I thought that what Amazon had done with AWS was the best developers could have had , But now we have one more entry into the space-- Google App Engine

It is interesting to see how the SaaS/HaaS space is shaping up. Googles App Engine seems like a layer above AWS. i.e a hosted development platform - the toolset for developing an application on App Engine will be focussed and consequently also limiting. App engine provides excellent integration to google's services(like single signon etc) but it is also limiting , i.e I cannot use Java (at least right now).

AWS on the other hand gives you more power (build your own machine the way you want it) but it has a higher learning curve and if you are running a shop on EC2 you will require a System Administrator to manage your website.

While at this nascent stage of Cloud Computing it seems obvious to compare AWS and Google's App Engine but I think that as the market evolves both the offerings will really address separate markets. Google will get its pie from transitioning the traditional Rapid Application development tool (RAD) customers and Amazon from the traditional IT Infrastructure shops. They certainly converge at some level but it will be years before that happens.

It is also interesting to see that traditional IT Majors like IBM , SUN and HP are missing in action from this revolution. One reason could be that at this point AWS and AppEngine seem like a mom-pop shop offerings(Small business and non mission critical) , how do these offerings translate to Enterprise customers and what are the SLA's that will mature these offerings to Enterprises is something I look forward to understanding in 2008.

Maybe Google and AWS needs someone like Capgemini or Accenture to do this.

If you have the time check out the video on google app engine

Google Energy and Vertical Integration

Google’s(NASDAQ:GOOG) announcement to enter the Energy space kinda surprised me but when you look under the hood there seems to be very good business justification for this.

Google is doing what Henry Ford did in the auto industry and Rockefeller did in the Oil industry – Vertical Integration.

Vertical Integration is defined as - The ownership by the same company of different functions in a supply chain relating to the provision of a particular good or service. Vertical Integration is generally done to lower the transaction costs in the supply chain and synchronize the supply and demand across the chain. Vertical Integration was pioneered by business leaders like Rockefeller and Henry Ford , where after reaching a certain size in their business they expanded into owning the supply chain so as to minimize the risk , control quality and lower transaction costs. Rockefeller after owning oil refinery branched out into oil distribution, oil retail and oil production.

Electricity costs for any SaaS vendor ( Google included) Electricity costs are significant and it is only going to get worse with Oil at $100 and the Global warming problems with coal. So it makes sense to manage the risk on the supply side and try to solve the problem. Google with its core competency of managing and monetizing innovation is also well placed to take up the challenge.Besides in my opinion Energy is going to be next frontier of innovation and to keep on sustaining at PE multiples of 50's long term GOOG needs to be looking at the next growth industries.

What got me thinking on reading about the Google Energy post is the approach Enteprise2.0 companies(like Amazon and Google) are taking towards Vertical integration. Thought leaders like Don Tapscott have argued that in the 2.0 world the transaction costs (the costs for collaboration) that justified vertical integration have evaporated to almost nothing now and vertical integration potentially does not make sense now as the integration costs internally in the Enterprise could be more than taking the route of ideagoras or Crowdsourcing

Google’s Energy entry and Amazon’s Webservices business in my opinion are Aspirational Core Competency based Vertical Integration transactions.

For Google:

Aspirational –Energy is the next thing
Core Competency - Managing and monetizing innovation
Vertical Integration – improve downstream supply chain.

For Amazon:

Aspirational - Become an HaaS Vendor
Core Competency - Software Engg and Systems Management
Vertical Integration - improve downstream supply chain.

Update : dec 29th: Here is another example for Googles vertical integration strategy. Also interesting to note that Google has been integrating downstream and not a lot upstream ( Android) , it did not not end up launching a GPhone as people had predicted.

Collective Business Intelligence and Enterprise 2.0

Web 2.0 as defined by Tim O Reilly is "the design of systems that harness network effects to get better the more people use them" . In his blog piece he describes very eloquently how Google's Page Rank mechanism is good case of harnessing user generated content.

Now take this to the Enterprise context. Up till now most of the discussion of Enterprise 2.0 I have seen revolves around two things
1. Harnessing Collective Intelligence of workforce to collaborate and share via tools like Wiki's , blogs . Product sets include Lotus Connections , Suite Two
2. Conversion of traditional office tools to Office 2.0 style platforms. Google Docs , HP Adaptive Enterprise Solution are excellent examples that basically focus on the ability to conduct normal business in a collaborative environment without being co-located.

A third part perspective of Enterprise 2.0 that should probably be included in the mix is the Business Intelligence gathered as a result of the network effect taking place with the continuous accumulation of Employee and Customer generated data and having an even broader data set as a result of SaaS applications serving more than one Customer.

So consider Salesforce.com - with several organizations using salesforce.com , they pretty much know the business benchmarks of processes in an industry (example :If they have 15 customers in the consulting space who use salesforce from sale to staffing cycle , salesforce will have the data to understand what it takes to improve the cycle by comparing various customers).

Frankly , If I was an SaaS player , I would pay to get users to use my software so that I can get their data and further master the business processes based on Data Analysis. As Tim pointed out , that in Web2.0 world Data is King and for Enterprises in 2.0 world , knowing what data is your core asset (and hence not shareable) and what data is something that you can share is going to be key.

So now you know - why did SAP buy Business Objects ? To enable Collective Business Intelligence on their Business By Design platform stupid.

Google and SaaS Stack Vendor

Following my earlier blog about Google as an SaaS stack vendor , I started thinking about what is next for google to complete its stack.

Prediction : Google will come out with a Hosting Service in an years time

This hosting service will probably be very different from Yahoo or Go Daddy . It will be something that will have a built in IDE option (like MashupEditor ) and will have native support for things like GWT . It will be an environment where you can pick and choose the Google out of box services , can create your Services and will be integrated with Google Apps. It could be based on Java Runtime Environment (because of GWT) but I would be surprised if Google would expose the J2EE directory structure to the consumer.

The big question I do not have an answer to is what would be the Database option. Giving a plain old mySql connection does not seem to be the style for Google. Mybe they will come up with their own DB ?

UPDATE: It is 4/7/08 - less than an year from the prediction. My prediction has come true . check out. http://appengine.google.com/

They have exposed BigTable , GFS and made python to be their development platform. I am waiting to see GWT and Java getting exposed as well.

Software as a Service and IT Consulting Firms

IT Consulting firms in the history of their existence have shown their value to the Enterprise in several ways. In the early days their value was two folds -

1) A Solution to the IT staffing needs of an Enterprise to handle Peaks and valleys in their staffing requirements based on the projects. (companies like EDS excelled at this and were really the delivery arms for the CIO's)

2) A Consulting based approach that added value to the client organzations by helping them making informed strategic decisions (Capgemini , Accenture (NASDAQ: ACN) are good examples of companies that did great here)

Over the last decade with the advent of offshore Consulting firms , The labor arbitrage angle was the big focus area and getting the distributed development model working was the big value add of these firms. The growth of companies like Wipro and Infosys are excellent examples here.

At this point of time all the above are a given for an major IT Consulting firm , but the next phase in the evolution of IT Consulting faces a threat that challanges the very existence of IT Consuting firms in their current forms.

I am talking about -- Software as a Service firms (eg: Salesforce.com)

The Bread and butter for IT Consulting has been implementing complex software withing the Enterprise Context. With the advent of Saas firms , the need for an IT Consulting Firm is eliminated . The value of SaaS to an enterprise is cutting on the complexity of maintaining inhouse software and it is in direct conflict with the Business model for a consulting firm. Yes , their is some need for IT Consulting but it is very minimal.

So , what will happen to the IT Consulting firms ---> In my best guess they will evolve into ITBPO firms . (BPO + ITO). ITBPO firms takes the outsourcing concept to the next level. ITBPO takes the Software aspect out of the relationship and focusses on the business function.
There will be convergence in the business model for traditional outsourcing firms like ADP and Traditional IT Consulting firms like Wipro , CGEY , etc. A Similar convergence is happening in the media industry with players like Viacom , News Corp trying to be tech savvy and players like yahoo , google and MSFT trying to be media savvy.

Software as a Service OR is it Community as a service

I was recently talking to a large online brokerage and they were making a business case around launching a website on the lines of SocialPics

the discussion was - should the website be exclusive to the customers of the brokerage house or should it be open to all. The general thought in the group was that a service like that should really be exclusive to the customers as it would be the "Value Add" on their current web site , a diffrentiator from their competitors , one of the reasons for propects to become their customers and hence a justification to charge more premium per trade.

The discussion was near completion when a 20's something executive (who has a blog on blogger.com) raised the question - "So how are you going to build your community with all these barriers to entry" . The whole point of having a community like Social Pics is to leverage the knowledge of wisdom of crowds. If you are making this crowd as an exclusive club what is the value of such a community.

The world of software has changed in the last 5 years. 5 years ago putting the software like that of SocialPics on the website would be viewed as a value add. Things like Financial charts was a differentiator. Today Everyone gives a good Financial charting capability free , what people are interested in is the community like this or this or this(for a specific Stock)

Let me make a bold statement and say that "Software in itself as no value in a Web2.0 world ". It is the community , the volume of usage , the masses that you bring along with a successful software that has the value.Once you have the volume (as a measure of usage OR as a measure of community involvement) you will probably have the best software - because you have the best usage data collection , best feedback mechanism (Concept of continuous and never ending Beta )and maximum user community to improve your software.