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The Road to Cloud Futures Gets Paved

The commoditization of cloud infrastructure is inevitable and an organized market will dramatically reshape the foundation of the entire IT supply chain. 6fusion exists to accelerate this reality for the betterment of both buyers and sellers in the market for cloud infrastructure services.  On April 14th, 6fusion and the CME Group announced an exclusive multi-year strategic and tactical collaboration to materialize the ultimate vision of 6fusion, nearly one year after 6fusion sparked an industry wide debate at the Cloud 2020 Summit  in Las Vegas.  Over the next three parts of this blog series, 6fusion’s co-founder & CEO John Cowan bridges the pivotal academic argument for the inevitability and possibility of a futures market for IaaS (Part I, Part II) by explaining the details of 6fusion’s deal with the CME Group, the journey to get to this point and what comes next for 6fusion and the cloud infrastructure market.


While Delano Seymour and I were working on 6fusion’s strategic plan under the radar in 2009, I published this statement on our blog:

“If computing is to follow the commodity path of electricity, achieving a similar level of ubiquity and pervasiveness, it must then have a single unit of measurement that transcends politics, production, language and proprietary invention.”

6fusion was founded five years ago on the thesis that economic innovation was going to be just as important, if not more so, than technical innovation in the development of IT as a true utility.   We didn’t foresee a business problem to solve.  We foresaw a market problem to solve.

Allow me to illustrate.

Picture a bucket.  Then imagine pouring some water into that bucket.  Now, if I asked you whether you would like to pay for the bucket or how much water you have in the bucket, what would you say?  Everyone would rather pay for how much water you have in the bucket and it’s the right answer.  Why?  Because we understand implicitly the value of consumption economics and risk.

Paying for what we consume is the fundamental economic principle in the procurement of EVERY utility service in the world. We don’t pay for gas by the size of our gas tank; we pay for gas according to how much we pump. We don’t pay for electricity by the appliance; we pay for electricity according to how much electricity the appliances use.  I think you get the picture.

IT has never worked this way in the modern era, which is why cloud computing, while important, is not a true utility.

Since the advent of the Client/Server model, we’ve been to trained to accept the “box” as the logical billing unit of IT infrastructure.  We buy a box and it has a defined amount of processing power, memory and disk storage. Virtualization emerged in the industry about 10 years ago to make more efficient use of the box, but the logical billing unit was still a box.  Only we called it a virtual machine.

Then, cloud computing came along,  and in particular the concept of Infrastructure-as-a-Service (IaaS). IaaS solved for important technical hurdles like resource elasticity and self-service access to giant clusters of infrastructure. But, low and behold, cloud computing has not solved the logical billing unit issue. We are still buying a “box” with a defined set of infrastructure resources – only now the accepted nomenclature is an “instance”.

But why is all of this problematic?  Why can’t we just continue to do what we know.  Why can’t we stick with “boxes?”

The answer is simple.

Boxes are proprietary definitions of resource allocation that are neither pervasive or ubiquitous in nature.  They lack the fundamental qualities that define a utility. They are constrained to vendor specificity and thus represent one of the single biggest barriers to the massive, tectonic shift to the cloud everyone is waiting for in the industry: No economic interchangeability.

There are two ways you can solve the economic interchangeability problem.  You can try to force everyone to pick one type of box – a strategy rife with political obstacles, vendor pissing contests and endless arguing among standards bodies (something I’ve academically blogged about in the past).  Or, you can eliminate the box all together.

6fusion is going to eliminate the boxes. Enter the Workload Allocation Cube.

Affectionately referred by it’s 3 letter acronym of WAC, the Workload Allocation Cube is a mathematical algorithm that Delano Seymour (6fusion CTO and Co-Founder) and I created for an entirely different purpose than what eventually became the objective of 6fusion.

Like most good ideas, the WAC was an accidental side effect of another process.  Exactly 10 years ago Delano and I were busy building a boutique early adopter consulting practice around VMware’s game changing ESX server product.  We were among the early experts in the enterprise use case of x86 virtualization.  Virtualization, we contended, could do to the server what modern networking protocols did for telecom – we could achieve true multi-tenancy and thus true economic advantages.

As we created the first multi-tenant solutions powered by ESX we quickly discovered a major flaw in the concept of a one-to-many equation for compute services. There was no universal measurement and without one, the model fell apart at scale.

I would characterize the research question we pursued this way: How do you ensure the user of the multi-tenant host paid only for what it used while simultaneously ensuring the multi-tenant host achieved a sufficient financial return for the actual load borne by the user’s workload?

The answer to the equation was to compare real-time utilization (workload) against a fixed baseline (allocation) covering six vectors (cube) – CPU, Memory, Storage, Disk I/O, LAN I/O, and WAN I/O.  By establishing a statistical relationship between each of the vectors, weighted by the cost of production as constrained by physical capacity, we could establish a remarkably precise representation of workload consumption as an output reflected as a singular unit value (a WAC Unit).

For better or worse, the algorithm worked.  As early purveyors of x86 multi-tenant solutions, we had an efficient tool to ensure customers paid an appropriate amount of money for the load they represented on a set of virtual infrastructure.  And conversely, that the owner/operator of the virtual infrastructure achieved optimal return on their hardware investment regardless of customer workload behavior.

It didn’t take us very long to realize that what we had invented could be the basis of a commodity market to exist.  And with the announcement on April 14th, we are on the path to that vision becoming reality.  We have set sail toward the first truly open market for IT infrastructure.  This is bigger than cloud computing.  And the ramifications will transcend the supply chain.

I would best describe 6fusion’s relationship with the CME Group as strategic collaborators.  A true dichotomy of style and approach – the young brash software start up and the hundred year old exchange that plays only to win and win big – the two companies have forged an agreement rooted in our mutual disrespect for the status quo.

To accomplish this goal a new entity will be created whose job is to foster and develop the Spot Exchange.  This new entity will license 6fusion’s patented technology for the WAC and the CME Group’s industry leading trading platform and begin to facilitate the trading of contracts between buyers and sellers later this year.  We plan to launch this new entity with industry support and backing that will raise eyebrows. When the lid comes off this thing there will be zero doubt about just how ready the market is for this and just how disruptive the new economics of IT will be.

But the job of the CME Group and 6fusion won’t stop there.  Operationally, each company will serve two very important purposes.  We expect the next phase our journey to be an arduous one.  And over the course of the journey we see the CME Group as the ultimate mentor.   You see, as crazy as this sounds, we fully intend to see WAC financial products traded and financially settled like any other derivatives product.  And for that, I couldn’t think of a more capable collaborator than the most diverse, experience exchange operator in the history of markets to help us navigate these early stage waters.

6fusion, on the other hand, will provide the critical service of physical contract settlement (delivery).  Our flagship software platform, UC6, will be wired into the trading platform so that contracts created can be metered and settled between the contracting parties as an extension to the functional Marketplace 6fusion has operated for the past three years.  The development of the spot exchange could not succeed without physical settlement and the ability to accomplish that transparently, and without prejudice across any underlying hardware or software stack, is what our software does.

The disruption to the economics of IT represented by 6fusion and the CME Group is rooted in the unprecedented value we can create for both suppliers and buyers in the market.  But before I dig in to that it is important to appreciate just how much has gone into the ten year odyssey to get us to this point.  In part II of this post I will elaborate on how 6fusion has evolved, the role and influence Chicago has had on our thinking, and the timing and readiness of the cloud market.

6fusion, CME Group Sign Definitive Agreement to Develop IaaS Commodity Exchange

 

Companies agree to develop a spot exchange for Infrastructure as a Service (IaaS); expected to be available in beta by the second half of 2014

6fusion’s Workload Allocation Cube will be the standard unit of measure for contracts in the exchange

Monday April 14, 2014 – CHICAGO and Raleigh, NC – 6fusion, the company standardizing economic measurement of IT infrastructure and enabling a global marketplace for buyers and sellers, and CME Group, the world’s leading and most diverse derivatives marketplace, have signed a definitive agreement to develop and market an Infrastructure as a Service (IaaS) spot exchange that will list financial products based upon 6fusion’s Workload Allocation Cube (WAC).

The spot exchange will feature contracts using the WAC as the standard unit of measurement and be available for trading on an electronic platform using technology licensed from CME Group. 6fusion’s UC6 software platform will be used to track fulfillment of physically delivered contracts traded on the spot exchange. The spot exchange beta is expected to launch later this year featuring a host of infrastructure buyers, sellers and partners.

The WAC is the industry’s first patented benchmark to universally measure consumption and capacity of compute, network and storage resources. The WAC makes it possible for buyers to standardize the quantification of IaaS requirements, making it simpler to determine the infrastructure type, quantities, and pricing that best match requirements across heterogeneous suppliers in the marketplace.

Comments on the news:

  • John Cowan, 6fusion CEO and Co-Founder: “6fusion was founded on philosophy that on-demand IT infrastructure will not reach it’s true potential until it can be consumed like a true utility and traded on an open exchange. An open exchange is good for both buyers and suppliers of cloud infrastructure. For buyers, it unlocks unprecedented visibility and control over the enterprise cloud transformation process.  For suppliers, it dramatically reduces the cost of business acquisition and drives increased transaction velocity.”
  • Bryan Durkin, CME Group Chief Operating Officer: “CME Group wants to provide customers the opportunity to hedge risk in the growing cloud computing industry. CME Group’s experience with new products and technological expertise makes the company an ideal candidate to innovate in this space and we’re happy to work with 6fusion to go to market.”
  • Owen Rogers, Senior Analyst, Digital Economics at 451 Research: “The combination of CME Group’s wide ranging experience in commodity exchanges together with 6fusion’s unique metering capability puts the collaboration in a strong position to deliver the economic benefits of real utility computing.”

About CME Group

As the world’s leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk.  CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate.  CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago.  CME Group also operates CME Clearing, one of the world’s leading central counterparty clearing providers, which offers clearing and settlement services across asset classes for exchange-traded contracts and over-the-counter derivatives transactions. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk.

CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc.  CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc.  NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc.  COMEX is a trademark of Commodity Exchange, Inc.  KCBOT, KCBT and Kansas City Board of Trade are trademarks of The Board of Trade of Kansas City, Missouri, Inc.  All other trademarks are the property of their respective owners. Further information about CME Group (NASDAQ: CME) and its products can be found at www.cmegroup.com.

About 6fusion

6fusion standardizes the economic measurement of IT infrastructure, enabling a single global marketplace for buyers and sellers. 6fusion is able to quantify supply and demand for compute resources across heterogeneous public and private environments with the world’s only patented metering algorithm, the Workload Allocation Cube (WAC), and an open platform to measure any IT infrastructure environment.

Whether an enterprise optimizing its infrastructure footprint, an infrastructure supplier maximizing a cloud offering, or an IT influencer advising clients on infrastructure transformation, 6fusion enables organizations to deliver topline and bottom-line visibility and value to drive meaningful business outcomes.

 

Twitter: http://twitter.com/6fusion

Facebook: http://www.facebook.com/6fusion

LinkedIn: http://www.linkedin.com/company/6fusion-usa

Blog: http://www.6fusion.com/blog/

RSS feed:http://www.6fusion.com/feed/

 

6fusion media contact:

Ryan Kraudel

rkraudel@6fusion.com

919-706-4783

 

The Tipping Point for IaaS

By Rob Bissett, 6fusion SVP of Product Strategy

There has been plenty written about the flurry of cloud pricing moves started by the Google Compute Engine price drop last week.  Most of this comes down to analysis of the facts themselves, and the impacts on current competitors and the market as a whole.  However, when you sift out the signal from the noise, a much bigger story emerges than just the cascade of a few price changes.

What are we talking about?  We are likely on the verge of something the industry has been talking about for a long time, but that seems to be coming much faster than most people anticipated. I am calling it now – I believe what you saw last week was the tipping point for the commoditization of web scale IaaS.  The rationale for my thinking is outlined below, but the TL;DR version is this: the IaaS market hit an inflection point last week and is forever changed.

Here’s why:

First – why do I think we have started “the next phase” of this market development?

  • Reason #1 – We now actually have a commodity.  With the movement of GCE to general availability and continuing moves by Joyent, HP Cloud, and now Microsoft to beat the drum for web scale IaaS services, we finally have a category that can meet the true definition of a commodity – a good or service with no qualitative differentiation. We now have a critical mass of major, brand-name recognizable, stable (er, well mostly), and global firms that are all touting infrastructure services that look, smell, taste, and feel about the same.

  • Reason #2 – With continuing advancements in APIs, and the use of deployment and management tools like, Chef, Puppet, Rightscale, ServiceMesh (and about a million others), a firm or a developer can use one or more IaaS suppliers, in one or more regions, and actually not notice or care who the supplier is. That’s big.

  • Reason #3 – The flurry of recent announcements of new value added services provided by the big IaaS vendors has really shifted the argument about where the value lies from these large IaaS services. Now that virtually all of these companies are providing DNS, load balancing, database, and other services on top of the IaaS stack, the competitive value add has moved to ever better and more advanced services. The large IaaS providers will continue to innovate on the back end, but in the future will drive their external competitive differentiation on the value added services.  Using the underlying IaaS services to drive consistent margin and to act as a gateway drug for the more profitable and differentiated value added services – exactly as happens in virtually all commodity markets.

  • Reason #4 – For a long time Rackspace has doggedly chased Amazon as the #2 vendor.  With the entrance of Google, and the continuing growth of Microsoft and HP in this market, the market power dynamic has started to shift.  Though market share numbers are still strongly in Amazon’s favor, we finally have a viable race for a #2 that can exert market pressure on #1.  The proof?  The recent Google price cut.  With that move, Google was able to do something that no one else had yet accomplished – force a counter move by Amazon.  While Amazon has a long history of driving pricing down, to date they have done it “largely without any competitive pressure” to quote Andy Jassy at a recent AWS Summit. To me, this represents a significant market signal that Google is for real and Amazon is taking them much more seriously than other competitors.  Remember, Google doesn’t have to have as much market share as Amazon to impact the market, they just have to have enough to be a threat. Google, HP, and Microsoft collectively now appear to have that power and we will see market dynamics start to accelerate as a result.

Any of these factors taken on their own are really just a signal of a maturing market.  Taken together, in such short order, signals something much more important – that the emergence of the IaaS commodity is near.

Look – commodity isn’t a bad word. Virtually all of the products and services that make our economy run can be classed a commodity.  Gasoline, electricity, fruit, meat, and many, many others.  These types of commodities make it very simple for buyers to determine how much they need, how much it costs, and lowers (dramatically) the friction involved in purchasing the good or service.

To support this, for each type of commodity a framework (or market) is developed with standard units of measure, standardized contract terms and the like.  Why?  Well its simple – it makes purchasing these services and goods simple and cheap.  Retail markets for these goods still exist, and there are many specialist services that surround and support them to help users consume them, and to enable users with specific requirements or tastes to purchase particular services, and these retail services never go away.

Why is this good?  Pricing.  By creating standardized services with multiple providers all able to deliver these services, the cost and risk of acquiring services for users drops dramatically, resulting in a massive increase in the adoption of these services.

For suppliers, the cost of service delivery and business acquisition will drop dramatically, as scale continues to grow.  Suppliers will create enormous economies of scale, drive internal costs as low as possible, and innovate on value add services to drive increased profit margins (sound familiar?).  All of this is the end result of the maturation process for the market, and only happens with those services that are critical to our economy, and I would suggest that cloud clearly meets these requirements.

So what happens next?  Clearly we aren’t there yet, but I would argue that we are well on our way, and that the progression is both valuable to the market as a whole, as well as inevitable.  That being said, there are some things we (the market) need to do to get there.  I believe that the race to provide abstraction and management will continue, and is critical to reducing the technical risk and friction involved in cloud adoption. The continuing work on fungibility, while helpful, won’t decide the future of this market.  Finally, the biggest thing we will need to develop is the actual market around IaaS services.  To date, we have seen the emergence of many “brokers”, “retail marketplaces”, and the like.  I will refer to all of these as “disorganized markets” in that they are ad-hoc, not standards based, and operate without a regulatory or industry standards. We will see a huge shift in how this works over the short term, with the emergence of organized markets marking the next step in the evolution of the IaaS market.  How will this happen?  Stay tuned for the next episode…

 

ITFMA World of IT Conference

6fusion will be presenting at the upcoming IT Financial Management Association (ITFMA) World of Information Technology conference April 14-18, 2014. CEO and Co-Founder John Cowan will be presenting a session on Exchange Traded Compute: What it Means for Your Organization. Both the Chicago Mercantile Exchange and the Deutsche Borse have recently announced plans to build exchanges for infrastructure-as-a-service (IaaS). This is representative of far more that just a next phase of the cloud; it’s about a new application of financial and economic principles and methodologies to IT. Think about being able to hedge risk on IT infrastructure in the same way airlines hedge jet fuel for competitive advantage. This session will be a thought-provoking, interactive discussion on the current status of the CME’s IaaS exchange, the technical foundations involved, and the business implications that will impact your organization.

The ITFMA conference is one of the premiere gatherings of IT financial management leaders in the world. You can get more information on the conference here: http://www.itfma.com/events/event_details.asp?id=387512

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6fusion Adds Cloud Innovator to Board of Directors

Adam Wray, former TIer 3 President & CEO, brings extensive IT industry expertise and market leadership to 6fusion Board  

March 5, 2014 – Raleigh, NC – 6fusion, the company standardizing economic measurement of IT infrastructure and enabling a global marketplace for buyers and sellers, today announced the addition of Adam Wray, former Tier 3 President & CEO, as non-executive director to its Board of Directors effective immediately. Mr. Wray brings 20 years of cloud industry and entrepreneurial experience to advise 6fusion as it accelerates market development and industry adoption.

“6fusion’s mission is to standardize the economic measurement of IT infrastructure. Adam’s breadth experience and accomplishments in our market produce tremendous insight,” said John Cowan, CEO and Co-Founder, 6fusion. “These are exciting times for 6fusion and we are very happy to have Adam on the team.”

Mr. Wray is currently a board member and advisor to numerous cloud services and IT industry companies. He has built and advised companies through accelerated growth to acquisition, most recently with Tier 3, which was acquired by CenturyLink in November 2013 for several hundred million dollars and a significant investor return. He has lead businesses across many different stages including startups, turnarounds & public company divisions. Mr. Wray brings significant experience across enterprise cloud platforms, software, and consulting, specializing in orchestration, distributed workloads & API’s as it applies to enterprise agility & efficiency.

“6fusion is tackling one of the biggest challenges in this market – creating a standard for the economic measure of infrastructure usage,” said Adam Wray. “Their ability to normalize infrastructure data across heterogeneous environments and build enormous economic value on that data has created the foundation for meaningful disruption in the IT infrastructure market.”

About 6fusion

6fusion standardizes the economic measurement of IT infrastructure, enabling a single global marketplace for buyers and sellers. 6fusion quantifies supply and demand for compute resources across heterogeneous public and private environments with the world’s only patented metering algorithm, the Workload Allocation Cube (WAC), and an open platform for access to global IT infrastructure markets.

Whether an enterprise optimizing internal infrastructure, a data center provider transforming a cloud offering, or an IT service provider differentiating their business in the cloud, 6fusion enables organizations to deliver topline and bottom-line visibility and value to drive meaningful business outcomes.

Twitter: http://twitter.com/6fusion

Facebook: http://www.facebook.com/6fusion

LinkedIn:  http://www.linkedin.com/company/6fusion-usa

Blog:  http://www.6fusion.com/blog/

RSS feed: http://www.6fusion.com/feed/

6fusion media contact:

Ryan Kraudel

rkraudel@6fusion.com

919-706-4783

 

The Two Sides of Workload Interchangeability in Cloud Services

This post originally appeared on Sandhill.com

John Cowan, Co-Founder and CEO, 6fusion

author imageCloud services won’t necessarily change in 2014, but we will notice a distinct evolution in the direction of workload interchangeability. Workload interchangeability forms the necessary foundation for not only a healthy and vibrant cloud services market, but it is also a critical element missing in the trust equation between buyers and suppliers of services.

Most people think of workload interchangeability as a technical problem, but it’s actually a two-sided issue in the cloud services market. On one hand, buyers and sellers face the difficult challenge of establishing what I refer to as “economic interchangeability” — the ability for a buyer to equate his or her requirements with available supply in the market in real time. It captures the notion of an “apples-to-apples” comparison between buyers’ needs and suppliers’ capacity. Economic interchangeability will significantly reduce transaction friction and support increased business velocity in 2014.

Forces at work like 6fusion’s quest to bring the world of financial trading to cloud services and the open source community’s realization that we must meter and measure differently will underpin this evolution in 2014.

On the other hand, everyone in the industry fully realizes that “technical interchangeability” remains a pressing need among buyers. Technical interchangeability refers to the idea that a user may seamlessly move a workload between IT infrastructures regardless of underlying technology platforms, formats or ownership (private and public). In addition to better supporting the idea of hybrid cloud, such capability will de-risk the adoption of cloud services for the buyer because it eliminates the trap of technology silos (what some people call “lock in”) while minimizing possible financial exposure to a “here today, gone tomorrow” cloud service — even from reputable vendors (see IBM’s SmartCloud closure).

Companies like Dell and CSC have recently snatched up established software companies like Enstratiusand ServiceMesh because they went a long way to solving the problem of technical interchangeability in a proprietary fashion. But those companies represent merely the starting point for the movement toward true technical interchangeability.

There is a much more profound track that started in 2013 and will intensify in the year ahead.  I am referring to the IEEE Intercloud Testbed. This is a working group formed among industry leaders with a common goal of establishing the open source foundation for technical interchangeability of workloads.  Meanwhile, open source projects like Docker.io are quickly emerging threats to the established notion of an “instance” or a “vm” as the logical resource constraint — a fundamental building block to establish commonality between platforms and thus a future interchangeability.

Consider these developments against the reality that economic interchangeability, in the form of exchange-traded cloud services contracts, is making significant advancements and you have a much clearer picture of how this industry will dramatically change in the coming years. Will all this happen in 2014? Not entirely, but the dramatic signs of our evolution as an industry will be unmistakable.

John Cowan is co-founder and CEO of 6fusion and co-inventor of 6fusion’s WAC algorithm. He is regarded as the company’s business model visionary. In addition to 6fusion’s day-to-day management responsibilities, John is responsible for the overall strategic vision and commercial direction of 6fusion. A 12-year veteran of business and product development within IT and Telecommunications, he successfully created new business during the period of telecommunications deregulation and developed and launched new technology products and services globally. Follow John on Twitter @cownet or @6fusion.

 

 

 

IBM SmartCloud Illustrates Need for Open IaaS Marketplace

So the other day IBM finally waved the white flag on SmartCloud Enterprise – a move expected since the day they announced the acquisition of SoftLayer. As is typical once the champagne has dried up after the M&A party, attention is turned to how to actually make this work for customers. Well, IBM had a curious answer to that question: IBM stated in it’s recent announcement that all SmartCloud Enterprise customers have until January 31st to hit the bricks or migrate to SoftLayer.

This is a critical announcement that should not be underplayed. Customers who seemingly made a business decision to entrust the operation of some volume of workloads with IBM have simply been told that the SmartCloud Enterprise platform is being retired and they must migrate off the platform in 90 days. Make no mistake about it, this is a massive disruption for any enterprise IT organization.  IBM has graciously offered to make free services available to assist with the migration to SoftLayer, but the damage is done. Nothing IBM can do will compensate the customer for the impact created by this turbulence – and it’s not just the inconvenience of moving workloads to another infrastructure; the bigger impact is on the confidence levels of customers to invest in platforms like this moving forward.

My biggest fear about this announcement is the damage it and other recent announcements (see Nirvanix) will do to the fragile embryo of trust being developed between Enterprise IT and purveyors of IaaS cloud services.  How are we supposed to give customers peace of mind when entering the brave new world of IaaS if they have no way to self-manage the turbulence created in the wake of these recent announcements?

Turbulence? What turbulence, says IBM.  IBM has published a “simple” 10-step guide to get you from SmartCloud to Softlayer.  Has anyone actually stopped to take a look at this?  You can read the full post here, but I’ve capture the most important  snippet for you:

“You are responsible for migrating your workloads and data before 31 January 2014.”

My first reaction?  Wow – this is complicated, risky, and IBM is essentially saying “we will do everything to try to help you that our lawyers will allow.”

And I can almost feel the stress mounting for the customer.  What if I don’t want to use SoftLayer?  Is this my only choice?  How will I know the future of my costs after I migrate?  Who’s footing the bill to manage this whole migration project?  Who the hell is Racemi?  Do I have to use that tool?  What kind of training do my people need?  What are the implications for my internal cost allocation strategy?

My second reaction?  This is precisely why the industry MUST gravitate toward a truly open market.

I’ll use this current situation as an example of how this could have gone if there was an open market for IaaS. If an IBM SmartCloud customer had come to 6fusion, this is what we would have advised them:

1) Normalize the metering of your SmartCloud usage using 6fusion’s free metering platform to understand your true cost-per-unit of IaaS consumption.

2) Log in to the 6fusion Open Marketplace and instantly gain an apples-to-apples comparison (because suppliers are measuring capacity the same way as you!) of IaaS supplier spot prices to get a sense of how close the market is to your requirements.

3) Review the supplier options and pick a few that will meet your SLA, performance, and compute type requirements.

4) Negotiate, directly or via a broker like Cloud Options, a bid with suppliers who will take ownership of the workload migration and associated costs.

There are only two ways for IBM SmartCloud customers to curb the heartburn associated with the 90-day eviction notice.  You can either work to ensure that M&A never happens again or you can take steps to ensure you control your own destiny and choices for the future. The latter is the role 6fusion plays by equipping customers with the power to create a true apples-to-apples comparison between the market’s supply and their relative demand and providing an electronic execution venue to buy or sell contracts.

Quantifying the Value of a Cloud Market

Joe Weinman, SVP at Telx and author of Cloudonomics, recently wrote a great article about a unique way to quantify the value of the cloud market using order statistics. The post highlights the importance of normalizing pricing across cloud providers, exactly what 6fusion is doing with the WAC:

“For a cloud computing market intended to offer quantifiable financial value to customers, there are a few lessons to be drawn from this analysis. First, there must be some similarity between offers, or at least the ability to normalize for price comparison. Second, the workload must be conducive to provider switching. Either it must not have a large quantity of data, or, the data needs to be located in a cloud-neutral location such as a colocation facility offering services from multiple cloud service providers.  Third, prices must exhibit some volatility. Also, provider prices must be independent; they can’t all rise and fall in unison.  Interestingly, such a market need not be very large. Four providers will deliver 60% of the theoretical maximum cost reduction, and nine providers would deliver 80% of the expected cost reduction of an infinitely large market.”

I encourage you to check out the whole article. It’s a short article and well worth the read.

 

 

IaaS – a commodity CME seeking to trade with 6fusion’s help

451 Research published a report on the CME Group’s plans for building a commodity exchange to trade cloud IaaS computing resources. 451 provides a good summary through a SWOT analysis in the report:

SWOT Analysis

Strengths

Weaknesses

6fusion’s metering capability and existing retail marketplace together with CME’s experience is a strong combination. The ability to use any technology to manage workloads between providers abstracts the virtual machine from the contract, thereby reaching a greater addressable market. A simple spot-market focus has limited experience for broker-dealers; most intermediaries would prefer access to a range of instruments with which they can find novel ways to generate profits. If this particular exchange doesn’t work, we don’t expect it to end CME’s quest to trade IaaS.

Opportunities

Threats

As enterprise adoption grows, consumers are looking for new ways of saving money; broker-dealers interacting with a market provide such an opportunity. Service providers are also increasingly looking to use third-party services to deliver value-added capabilities. Cloud brokers and integrators will use exchanges as another sourcing channel. Reliance on resellers – for success, the exchange requires many participants. Are buyers ready to use a third party to purchase cloud resources, and are sellers ready to risk margin (and their product differentiation) to an exchange? Broker-dealers are in a chicken-and-egg situation – do they get involved from day one and bring the liquidity to implement a derivatives market, or do they wait until the derivatives market has arrived before taking the opportunity seriously.

 

If you would like access to the full report, please fill the form below and you’ll get the report via email:

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