John Cowan was featured on the Digital Nibbles podcast today and the discussion centered on exchange traded IaaS. It was a very interesting discussion because it’s a hot topic these days, but also because it was a discussion between two of the earliest pioneers in the concept of exchange traded compute – John Cowan, co-founder of 6fusion, and Reuven Cohen, a co-founder of Spot Cloud, one of the earliest attempts at creating a spot market for cloud computing.
Check out the episode here: http://www.blogtalkradio.com/digitalnibbles/2013/05/15/digital-nibbles
Oh and some guy named Adrian Cockroft was also on the show talking about Google Glass.
I had a great conversation recently with a 6fusion customer Leo Soto from SotoNets, a cloud service provider, about his decision-making process in selecting an IaaS solution for their cloud backup service. Here are a few notes from that discussion:
What were the primary business problems or opportunities that caused you to look for an IaaS solution?
When we were ready to enter the cloud backup service space, we needed an infrastructure-as-a-service (IaaS) offering that would offer security, easy deployment of workloads and a true utility model for resource usage. Cloud backup is resource intensive activity that requires a safe and secure data center environment.
Who did you evaluate for this solution?
What business problems are you solving?
What has been the impact to your business solving those business problems?
By John Cowan, Co-Founder and CEO
When considering the tectonic shift we are seeing toward IT in the cloud, it’s important to remember a few points:
- Fact 1: Salesforce.com created a disruptive technology movement by delivering enterprise software-as-a-service (SaaS), changing forever the dynamics of new entrants competing against entrenched incumbents. Recall Salesforce.com’s premise was NOT about better salesforce automation software. Instead, their approach was all about “No Software”.
- Fact 2: SaaS oriented companies generate more than a 75% higher exit valuation on average than traditional on-premise software solutions. Valuations are indicative of where an industry is going, not where it has been.
It was 2006 when Delano Seymour and I began crafting the prototype behind UC6, 6fusion’s centralized and universally metered platform to access the cloud for infrastructure-as-a-service (IaaS) buyers to fully leverage suppliers IT infrastructure resources in the cloud. Around the same time an entire raft of other software companies were springing up to say “hey, buy my software and you too can have a cloud!”
We couldn’t for the life of us figure out why anyone in their right mind would architect cloud enablement software in the classic enterprise stack framework — known as ‘on-premise software’.
Fast forward five years and I am thankful for the important decisions we made to carefully architect the IaaS version of Salesforce.com.
Selling greenfield technology is a hard thing to do. There simply are not many enterprise IT buyers without the risk aversion associated with doing big project with little-to-no historical baseline for success. And cloud has been as greenfield as it gets. As a buyer of on-premise cloud software, why would I want to take the risk of buying, racking and stacking more hardware and provisioning and maintaining more software, when everyone from my CIO to every IT analyst in the world is telling me that IT in the cloud is the future of IT service? Buying cloud enablement as a SaaS is a risk mitigation strategy for even the most conservative of enterprise IT buyers.
FUD sellers in the on-premise world often point to the IT security concerns arising from the idea of multi-tenant software. Customers need to do their due diligence and not sacrifice things like security on the altar of general IT cost savings. However, I think the generation of enterprise SaaS companies that followed in the wake of the Salesforce.com movement have proven beyond a shadow of a doubt that any potential IT security concerns are but a fleeting obstacle to selling.
The rash of acquisitions in the cloud enablement software field is very telling.
All great examples of how building on-premise software in the cloud era failed to generate large enterprise value. All three companies were acquired for less than $150M. DynamicOps, for instance, sold out to VMware for what most believe to be something in range of $125M to $150M. DynamicOps raised $16.3M from investors over the course of its four plus years in existence. Even at the top end of that exit price it represents less than a 10x return to investors.
The valuations and prices paid for SaaS companies focused on IT in the cloud are considerably higher than its on-premise counterparts, as evidenced by Salesforce.com, Box, and many more. Acquirers highly value subscription revenue models. Moreover, the cost to support and scale SaaS delivery is exponentially more efficient than building software the way our parents did.
So, if you are thinking about building the next great cloud app, take the time to figure out how your business model will work in a SaaS architecture. Your investors will thank you later.
By John Cowan, CEO and Co-Founder
Another year, another dollar… or something like that. It’s time for an update on the 6 things I think I think for Infrastructure-as-a-Service (IaaS) in the coming year!
1. Hybrid Cloud Computing
2012 Perspective: Hybridization WAS key in 2011 and I’m doubling down in 2012. If you’ve paid attention to the consolidation in the industry, you’d best do the same. The big boys are snapping up anything that smells like bridging the enterprise to the multi-tenant host. Look for this trend to intensify.
2013 Perspective: VMware buys DynamicOps. Red Hat buys ManageIQ. Cisco buys Cloupia. Consider the consolidation trend intensified. The big question for 2013 is what the big boys have in mind for the cool technologies they’ve acquired in 2012. Whatever they might have in mind, the signal from the customer is clear. Hybrid cloud computing is considered critically important to wide-scale adoption of cloud computing in general. As I highlighted earlier this year, as big as the cloud computing market is becoming it still pales in comparison to private IT operations. Hybrid cloud computing is correctly viewed as a technology tap to this underlying market.
2. Cloud Federation & Interoperability
2012 Perspective: I’ve spoken with some pretty big names in the business and scale is an issue with their regional plays in the market. The challenge in 2011 for cloud federation was the degree of difficulty associated with interoperability. There was much progress on this front in 2011 but I think before broad based federation goes from concept to reality there needs to be more plumbing. 2012 will be the year real interoperability tracks are laid as a foundation for scalable cloud federation.
2013 Perspective: We as an industry had the opportunity to lay down tracks for real cloud federation and interoperability at this time last year. What happened was rather disappointing. Basically, industry titans from OpenStack, Amazon, Citrix, and others all postured. I remember sitting in the crowd at GigaOm Structure when the first official shots were fired on the subject of API standardization. What could have been a wonderful opportunity to seize the moment and end vendor lock-in before it ever started in cloud computing, big vendors did what they do best. They opened up their respective Kimonos and bragged about the size of their case studies. What a (albeit entertaining) waste of time and opportunity.
Because we all anticipate the cloud market, particularly IaaS, growing at a serious CAGR in 2013 there will be growing customer pressure to allow the movement and billing transfer of workloads between independent cloud operators. The opportunity for a new or existing company to emerge with a solution to this problem will become significant in the coming year.
3. Cloud Ecosystem Enablement
2012 Perspective: VMware unveiled its plans to stitch together Vcloud operators at its big VMworld shindig, but this wasn’t the only giant making big bets on the cloud ecosystem concept. Equinix, one of the world’s largest data center operators, hatched is master plan for a ‘Marketplace’ of Platform Equinix Partners and Synnex, one of the most powerful IT Distributors in North America took a huge step with its Cloudsolv application and services portal. Watch what these three companies do in 2012 to drive ecosystem growth.
2013 Perspective: Dell, HP, Cisco, Arrow, Avnet, Telefonica, Singtel…just to name a few. Billions in unstructured cloud business potential spanning distribution, hardware and telecoms just waiting to be harnessed. The lure of these types of captive markets will push the envelope on cloud ecosystem enablement despite a big challenge encountered in 2012. That big challenge was the relative learning curve incurred when you cross-pollinate large singularly focused business units.
4. Emerging Cloud Communities
2012 Update: By the middle of the 2nd quarter I was beginning to worry about this prediction. Was I going a bit too far out on a limb? Then, bang! VMware announces the big deal with the NYSE. Wow. Talk about going big or going home. The NYSE community cloud has a lot of eyes on it. A large number of other vertical deals are hanging in the balance, hoping to learn what not to do when details of the NYSE project become more public. I think this VMware play will be a big success and in 2012, you will see many other big players follow suit.
2013 Perspective: Do you hear that sound? No? I didn’t think so. There’s no sound in a vacuum that is the lack of follow up from the big NYSE deal in 2011. No big pharma cloud. No big banking cloud. No big offshore financial cloud.
Would-be community cloud enablers in 2012 figured out what they needed to figure out, which they are hoping to do in 2013. What they need to figure out has nothing to do with the technology and everything to do with operational and contractual concerns. The commonality of vertical market integration resolves certain compliance risks, but it doesn’t mean private IT operators are ready, suited or even capable of offering a legitimate outbound customer service. Ask any CFO or CEO of a publically traded company about the idea of taking on the liability risk created by a new service that, oh by the way, has nothing to do with existing strategy. At a minimum in 2013 look for new corporate structures to emerge in order to facilitate offering community clouds as a service.
2012 Perspective: I am still a firm believer in the channel and I’m still banking my company’s future on it. However, the Channel failed to capitalize on the cloud opportunity in 2011 the way I thought it would. Don’t get me wrong, the needle definitely moved. But the cloud operators and the broader channel are still separated by an expertise gulf that is limiting how much cloud money flows via the intermediary. The investment from the IaaS providers continues to be there. Find me one IaaS services or software provider that doesn’t showcase a channel program today. 2012 will see the gulf shrink and the channel heat up because Distribution will hit its stride and carry with it more evidence of the gold rush I saw last year.
2013 Perspective: The channel didn’t emerge as the boon of cloud computing adoption in 2012, but it continued to make significant progress. Cloud Sherpas recently raised $40M on a bet that it had figured out the model to integrate cloud into the enterprise. That’s not a small bet on the channel intermediary concept. There were other big wins in the market too.
In 2013 you will see vendors get very serious about forcing channel intermediaries to declare their allegiance. Programs are maturing and dollars are flowing inbound to support the intermediary to the customer. This is a sure sign that we are on the cusp of growing the cloud wave in a big way.
6. IaaS Futures Market
2012 Perspective: Spot market concepts made progress in 2011 but as expected were not able to truly capture the imagination of the market. However, the groundswell around commodity compute resource trading is gaining momentum. And in 2012 look for general progress in this area with a few players coming out of the woodwork to surprise some.
2013 Perspective: Fact – trading compute contracts is going to happen. If you trust nothing else I write, trust me on this.
As predicted, a few players came out of the woodwork on this. Specifically, the Eurex and Zimory (via TSystems) in Europe announced that they had formed a partnership to build a trading platform in 2013.
What is unclear is exactly how this is going to happen. How will the market be organized? Look for clarity to emerge in 2013 on this subject.
Since last year’s 6.1 bonus prediction was such a hit (um, cloud brokerage, anyone?) I will keep with the new tradition. Here’s my scoop: Keep an eye on the fall of old empires. The world economy is definitely not what it was two years ago, but neither are some of these tech titans of yesterday:
Cloud Computing – the agent of change – can mean rebirth or extinction for some of the biggest companies to dominate the tech landscape in the last 30 years. Look for significant strategic moves by some of the giants as they posture for survival in the new era.
Have a great 2013!
I spent last week in Las Vegas at the AWS re:Invent show and it was a great week – and not just because I love Vegas! As Co-Founder and CTO of 6fusion I spend a lot of time evaluating new cloud technologies and cloud trends, and then leveraging the best cloud technologies into our technology platform for our customers’ and partners’ benefit. We have an advanced cloud platform that is pushing the boundaries of infrastructure-as-a-service (IaaS) and cloud federation.
That’s one of the reasons I enjoyed the AWS re:Invent conference, because it’s great to see an industry leader and very large company like Amazon also pushing the boundaries of what’s next. For those that weren’t able to attend the conference, here are some highlights that I found interesting:
1. AWS launched 2 new services last week that are of interest:
First, the AWS data warehousing service they launched in beta and are calling Redshift is interesting not only because of the order of magnitude lower costs, but also because it is fully managed – data warehousing-as-a-service if you can call it that. Amazon takes care of all the set up, maintenance and scaling of the data warehouse.
Second, AWS Simple Workflow Service (SWS), also launched in beta, is a workflow service aimed at asynchronous and distributed processing needs for applications. This obviously encourage application development and deployment in AWS, but is also interesting because you don’t necessarily have to use AWS for the application. You can leverage SWS only for workflow processing-as-a-service without having to develop and coordinate tasks across distributed applications, again fully managed and maintained by Amazon.
2. Both of the services launched last week are indicative of a move by AWS toward a data-centric, IT in the cloud world where gathering, organizing and processing relevant data is becoming a competitive differentiator. AWS is moving this way by expanding platform-as-a-service (PaaS) on top of the IaaS foundation they have established. If you look at services such as Beanstalk, CloudFormation, Identity and Access Management (IAM), and others you see services that support the development, integration, operation and management of applications in AWS. These are PaaS services and cloud software applications that support building more robust applications on AWS. I expect to more of this coming in future product announcements from AWS.
3. The move to build more PaaS services is a highly logical move for AWS to drive additional usage of AWS infrastructure, something Andy Jassy (AWS SVP) commented on in his keynote presentation. He referenced a virtuous circle of growth AWS is experiencing where reduced prices leads to more customers, which leads to more AWS utilization, which leads to more IaaS that AWS builds, which gives AWS better economies of scale, which lowers infrastructure costs, which reduces prices and the circle continues. We’ve recently seen AWS and Google drop prices on compute and storage.
4. Andy Jassy also referenced a few other things in his keynote worth noting regarding the adoption of cloud computing and IaaS. First, you no longer need to guess about capacity anymore like you do when build your own infrastructure. I completely agree and this is a foundational component of 6fusion’s technology platform and the WAC. Getting detailed IT resource consumption data is key to understanding exactly how many resources you need regardless of where they are being sourced from. Second, companies can now stop spending resources on undifferentiated “heavy lifting” involved in infrastructure. As much as I hate to call infrastructure undifferentiated, he’s right. Today infrastructure and computing capacity does not differentiate – it’s critically important to run any organization but the day-to-day operation and maintenance of infrastructure doesn’t separate you from your competition. Third, even the smallest companies can go global in minutes. We see this as a key value proposition for IaaS and 6fusion’s iNodes in 4 countries on 3 continents attest to that. Customers absolutely see the value and necessity for putting workloads in different locations (see 6fusion’s recent UK expansion).
5. All of the items above are indicative of a larger trend within AWS and the IaaS market as a whole, which is the abstraction of the infrastructure and OS/hypervisor layers. The lines between machine and application are blurring – similar to the way PaaS is blurring lines across the industry as a whole. The world is moving to an app-centric model where you don’t have to worry about individual machines and servers – how many cores, how much storage, what processing power, etc is included in each machine and how many machines we need. Instead of worry about servers and capacity, we are moving to a world where we think about the amount of cloud computing power needed and for how long. Compute infrastructure is becoming a true on-demand utility compute-as-a-service. My fellow 6fusion Co-Founder John Cowan has a great series of blogs on utility computing.
Overall what I saw at the conference validated several trends that we at 6fusion are seeing and working on every day. I look forward to continuing to push the envelope in IaaS and cloud services in general. To that end, we are working on building some exciting new technology that will leverage AWS and 6fusion’s metering technology that we call Cloud Resource Meter. More on that to come in future posts.
6fusion Co-Founder and CTO
By Steven Wolford, Director of Information Security, 6fusion
During the season of politics here in the US, I would like to borrow shamelessly from topics in the political debate with a look towards the state of information security.
According to CNN (Poverty Rate Rises as Incomes Decline), the number of US citizens living below what is considered the bare essentials is on the increase. I believe we can say the same for information security programs. According to SANS, the top security controls can be boiled down to 20 Critical Controls (Top 20 Critical Controls). These are regarded as the “poverty line” for an Information Security Program. The bare essentials needed for a program to live at a level regarded as a minimum standard.
Have you turned down a security control because it was too expensive?
ENSIA (the European Network and Information Security Agency) has stated “the same amount of investment in security buys better protection” (Cloud Computing, Benefits, Risks, and Recommendations for Information Security). We have long understood that scale brings cost optimization. By spreading the cost of controls over a larger number of organizations, Cloud Service Providers (CSPs) are able to either deliver equivalent controls at a lower price or enhanced controls at a similar price.
Work with your CSP to understand the controls already implemented, those that are planned, and those that you require for the assets you are moving to the CSP. The different cloud models (software/platform/infrastructure as a service) will each be able to deliver a different set of controls. You should expect to bring more controls to an IaaS provider than to a SaaS provider. However, you should still expect to see cost efficiencies with IaaS.
What if the chosen CSP doesn’t offer the controls you need? Reinvest the capital expenditure (CAPEX) or operating expenditure (OPEX) savings into providing your own controls or even better negotiate with the CSP to get the controls installed and leveraged across all of their customers. Security is moving from “build your own” to “assemble your own” (that sounds like a blog all on it’s own). There is even a growing industry in Security as a Service (SecaaS or SaaS), which is a cloud computing model that delivers managed security services over the Internet. Technopedia defines Secaas as “based on the Software as a Service (SaaS) model but limited to specialized information security services.” Engaging a SecaaS provider is yet another way to help lower the cost of living at the information security poverty line.
Have you not implemented a security control because your environment is too complex?
Your business does not have to be listed on the NYSE for you to have not implemented a security control because your existing IT feels too complicated to integrate with a control or for the cost of applying a control to become cost prohibitive due to IT sprawl.
Most security frameworks today recommend taking a risk-based approach to identifying the controls that are appropriate for any given environment. In order to first identify risk you must know ALL of the components that collectively create an information system. Often the cost of implementing a proper set of controls spirals out of control when attempting to apply them to a complex or spread out system.
Moving an information system into an IaaS CSP is the perfect opportunity to identify, consolidate, and simplify an information system. Identifying all the components of an information system is potentially the most significant step towards proper control selection; you cannot protect what you do not know about. It is still not uncommon to hear about a critical business system that relies on the spreadsheet saved on a folder on the hard drive in someone’s workstation. As an example, when you plan for the security of your current monthly billing do you in fact remember this critical component or do you go about happily installing the latest IDS on the accounting server; congratulating yourself along the way for protecting the companies financial systems.
Consolidating components is at the same time a risk and a benefit (what in life isn’t a dichotomy?). Personally, I see far more benefits and, with the concept of cloud brokering, there are ways to enjoy the benefits while minimizing the risks. Let’s get the scary stuff over first. The risk is that consolidation puts all your eggs in one basket, so to speak. The target becomes a higher value target because the reward of breeching (or the cost of loss) becomes higher. Enter the cloud broker – enjoy the benefits of consolidation by information system but spread the risk by sprinkling your information systems over different CSPs.
What are the benefits that outweigh the risks? Reduced complexity to install, manage, and monitor the controls used to protect the system. There is a reason why banks put valuables into a safe – same risks identified above but even bankers know it is far easier and less costly to put them into a central location.
That leads us to simplify. By moving your information system to a CSP you are able to simplify the implementation of appropriate security controls. One of the leading causes of delay in detecting and responding to a security incident is an overly complicated control implementation. Even if controls are properly implemented in a complicated system, gathering the control information in one place can be difficult (if your environment was such that getting data in one place was easy you would probably already have the information system simplified).
Craig Balding in his cloudsecurity.org blog even lists centralized data as the number one security benefit of “The Cloud”. I think this understates the real benefits. While Craig believes reduced data leakage and monitoring benefits as the winners, I would extend that to improved knowledge of how the system as a whole works and is architected. Move the financial system into an IaaS provider and you will quickly find that critical spreadsheet on that workstation.
Have you not implemented a security control because it was too difficult?
Many modern security controls require infrastructure just as complex as the information systems they protect. Network, application, data, access, logging, and much more all require technical solutions to be implemented, updated, managed, monitored for relevant information, and then responded to when an interesting event happens. It is not surprising at all that some have had to make the decision that applying all of this is just far too difficult. You make a decision that doing that one thing for security is just too hard to digest into your other business responsibilities.
CSPs can help ease that pain. Many security vendors offer solutions that take advantage of cloud architectures and make the implementation process much easier.
Take antivirus (AV) for example. Most major vendors today offer a cloud ready solution where AV can be offered as a SecaaS or in cloud optimized versions to let you maintain total control over the AV solution. Either way, actually implementing the AV solution can be as easy as install the client in a base image and deploy that client with each and every server turned on. EASY.
As we hear the political messages of the day, I encourage your to consider the “Information Security Poverty Line.” Take a look at your security posture and tolerance for risk. Are you forcing the information security program to live below the poverty line? If so, is there something that you can do about that?
I would say YES! The first step, to paraphrase James Carville, is to remember, “It’s the risk, stupid.” Stay tuned for more on that politically inspired theme.
By John Cowan, CEO
As the Internet has matured over the past ten years, channel disintermediation was rather limited in scope. Managed co-lo operators were busy picking up the pieces from companies like Exodus and Worldcom and other dot bombs, building out the new infrastructure foundation for customers to ‘host’ or rent virtual or physical servers in their purpose built facilities. Companies like Savvis, Terremark, Data Return and Rackspace (and even a few telco’s) were building co-lo businesses that featured the missing link to making serious dough in this business: Services.
Regardless of where they sit on the maturity scale, every single channel constituent respects the gravitational pull of Managed Services. It is the natural evolutionary step in the life of every VAR/integrator that has the moxy to stay in the game. (I won’t drop a lot of ink on this subject, but if you want some background context, Yuval Shavit penned a really good position paper back in 2008.)
For most of the past 10 years, the existence of managed co-lo providers and VAR/MSP types lived rather harmoniously. In fact, they often worked together on client projects and initiatives.
This all began to change with the advent of cloud computing. The cloud, you see, creates a conduit for managed co-lo types to reach beyond the confines of their four walls and into the end user customer domain. Building cloud platforms on top of virtualization technologies like Xen and VMware, companies like Savvis, Rackspace, Terremark and a cadre of other software enablement companies have become the ultimate threat to the traditional channel stakeholder.
The cloud extends and intensifies the push for disintermediation because, for the first time, services have permanently fused to the foundation of IT: Infrastructure. The “as-a-Service” revolution that underpins the cloud paradigm is the ultimate dividing line between service provider and technology vendor. Regardless of the outcome for the channel in the coming years, we will retrospectively point to the cloud as the catalyst for the upheaval currently gripping the industry.
In part IV of this series, I will attempt to offer a forward-looking business strategy for channel constituents as they prepare for the eventuality of a new IT delivery paradigm.
Throughout the 1990’s Michael Dell was the poster child for IT Channel disintermediation. His ‘direct’ sales model took the industry by storm. Leveraging logistical efficiency and a ‘no middle man’ mantra were hallmarks of Dell’s strategy. Interestingly though, Dell has in recent years given the entire model a rethink. Nowadays, Dell sells heavily through the channel.
Pioneering giants of cloud computing looked very much like 1990’s Dell in the early days. And, just like Dell, companies like Rackspace and Google are starting to realize that the Channel plays an important role in the IT service supply chain and broader ecosystem – a horn I have been blowing for years. Gartner, in a recent report addressing the impact of the cloud on the traditional IT channel, also recognizes the same trend, noting:
Even the largest cloud brands (Google, Amazon and salesforce.com) are seeking to leverage indirect channels to reach markets and customer segments they can’t get to themselves. They, too, are looking for more partners to invest more heavily in skills and capabilities to integrate their cloud-based services.
What I find even more intriguing is the extent to which Gartner goes beyond the basic observation to create a call to action. “Work aggressively,” Gartner advises cloud companies, “to build the appropriate channel program infrastructure to recruit, enable and train a new set of channel partners to accommodate the fact that not all of your existing partners will make the transition.”
Interestingly, the Gartner report does not touch at all on the role and future of traditional IT distribution. Distribution represents large-scale buying power and market coverage to aggregate the MSP and VAR communities on behalf of vendors. Leveraging scale efficiency to sell large volumes on thin margins and a better logistical framework than any of the manufacturers allowed distribution to create an important niche for itself during the client/server era of computing.
The realization of the Channel’s importance to sustained market success for cloud companies, coupled with the radical change the cloud era generally represents, creates a fascinating paradox for distribution. Cloud is not a business delivered through supply chain EDI, warehouses and net 30-day terms. The cloud is a virtual technology product of sorts. Thus Gartner aptly concludes, “any company that relies on the product transaction (hardware and software) to drive attached services revenue supported by ongoing maintenance contracts will have to rethink how and what it offers its customers today and in two or three years.”
Companies like Ingram Micro have been very vocal about the channel and the cloud revolution. But to date I would consider the effort, shall we say, lacking inspiration.
Because like most big companies in our market that can sense the disruption and fear obsolescence, they revert to what they know. In the case of IT distribution, what they know is Product Line Cards. PLC’s basically amount to glossy placards that list the names, descriptions and manufacturers of products they sell.
In essence, early adopters in distribution, like Ingram, have lined up some heavy hitters and they are trying to promote those brands the way they would promote printers, computers and peripherals. Sure, they put it all under a new division and they wrap some captive managed services in there. But isn’t that really just a pretty dress on the bearded lady (no offence to ladies with beards intended)?
The line card strategy is fatally flawed because it misfires on what is a volume business model (cloud) with what is needed to exact a volume play (access to markets).
So if the handy line card plays won’t cut it, what exactly is needed to realize the riches for distribution? That is a complex question that won’t get answered here. But I can share some thoughts based on what I know about cloud and the IT service market:
1) Standardized Skills
The cloud is a nascent and immature world where skillful market execution is extremely hard to produce and the skills to do it are even harder to find. Cloud is missing the underlying foundation of training and certification (think A+, CCNA, MCSE type programs), which buttress efforts to make meaningful market penetration in the IT service business. Until that happens distribution needs to KISS (Keep It Simple Stupid). Distribution needs to cast as wide a net as possible without overwhelming the VAR community with scores of technologies for which training is embryonic at best.
2) Technological Abstraction
Winning at the distribution layer in the supply chain means recognizing what you truly need in order to capture the foundation of a nascent market. I’ve blogged about this subject before, but what it comes down to is making complex technology simpler to consume. Giving me brochures for a bunch of cloud vendors is a useful visual, but that’s about it. Show me how I can reduce vendor sprawl, universalize my customer SLA, and expand markets with as little capital and effort as possible. That would really raise some eyebrows.
3) Integration & Interoperability
The cloud is not about selling product silos to your customer base. That is so 1995. The cloud is about selling the bridge between legacy IT and the future of IT delivery. In order to do that you must have tangible and meaningfully integrated solutions that solve real problems for the partners who sell them and the customers that buy them. I liken the cloud today to what the Remote Monitoring and Management software vendors went through during the early MSP days. Selling RM&M product is nowhere near as powerful for the VAR partner and meaningful to the customer as selling an IT management solution in an MSP fashion.
All of this makes the early adopters in distribution at risk of either being too early (the market may be ready for line card distribution five years from now) or too late (they are now pot committed just like in a good game of poker and can’t turn back).
Either way, the field of opportunity for distribution is still anyone’s game at this point. There is a lot of market to be had for the company that steps up with the right model to truly leverage the power of the IT service channel.
Building the ecosystem is critical for the cloud to thrive. This isn’t just a prediction for us, it is a philosophy – customers want solutions that are designed, tested, and certified to work together. Recently, the 6fusion ecosystem got even better (and bigger) with the announcement that Network Box USA has been granted Certified Solution status with 6fusion.
For more details, see the announcement here
We are excited to welcome Network Box to the 6fusion family! Stay tuned for more ecosystem announcements from 6fusion as we continue to build out the premier cloud ecosystem for the channel.
I love this time of year because it is one of those rare occasions during the corporate and product development process where creative ideas and concepts designed to stimulate future success enter the entrepreneurial blood stream. It is that rare moment where you have the benefit of an entire year of business fresh in your mind to build upon and an entire new year ahead of you to set new standards and push the envelope of success.
For our company and for the industry, 2010 was a huge year. We completed our Series A round of venture financing, relocated the company to the coveted North Carolina State University’s Centennial Campus and tripled the size of our team. Meanwhile, the industry took meaningful steps toward maturity as mainstream private sector businesses and governments of all shapes and sizes began giving IaaS a very serious look. If 2010 was the year of formal organization, 2011 will be the year of some serious and meaningful growth. Not just for our company and our technology, but for the IaaS market as a whole.
In a post I wrote recently I did my best to explain some of the core characteristics that would be central to IaaS achieving mass adoption as the technology revolution marches forward. While I think it’s very difficult for anyone to offer up accurate predictions for the year ahead of any fledgling market, there are some specific ‘themes’ that I think, as we look back a year from now, will have clearly emerged as bell weather trends in the industry.
To borrow a format from Peter King, one of my favorite sports writers, here are the six things (6 things, 6fusion, get it?) I think I think (for the cloud biz in 2011):
- Hybridization Will Prove Critical to Enterprise Adoption. I’ve been to the edge and back and I have a few words of wisdom to share with my peers about the Enterprise cloud. Unless what you are doing bridges a gap between what exists inside the four walls of the enterprise data center and what might safely and securely exist outside of those four walls you are just another GUI in the Red Ocean peddling the same wares we’ve seen for years. Hybridization is something enterprise buyers will use to separate the crème from the crop in 2011.
- Regional Clouds Unite. The arms race among regional managed hosting providers to beef up for cloud services was evident in 2010. But the silo approach to building up IaaS on a regional basis will prove difficult if not impossible to compete on scale – and it won’t take long to figure this out. In 2011 expect to see the concept of broad-based IaaS federation become a much more prominent theme as owners of regional facilities and compute partner to create scale and increase market size in the quest to truly monetize their resources and compete with the national players.
- The Ecosystem is Bigger Than the Organism. The IaaS industry is beginning to realize that the creation and quantification of IaaS demand is much more important than the creation of supply. Its one thing to have the capability to power or enable the creation of IaaS resources, but it is entirely another to drive revenue and margin to the cloud. The emergence of business ecosystems will be a consistent theme for the coming year because partnering is the key to success in a nascent market. In 2011 you will see more and more eyebrow-raising deals announced based on ‘synergistic’ partnerships – partnerships that drive mutual revenue and margin between companies that are bound by the common interest of leveraging, distributing and powering IaaS.
- It’s All About the Channel. Building a global business tackling one end-user customer at a time doesn’t scale if your business is supposed to compete with the market pioneers. In order to generate a serious outbound push to globalize IaaS the cost of business acquisition will be too high for almost every player. In 2011 IaaS vendors will wake up to the fact that they need help in order to scale revenues and ultimately generate the ROI they are promising shareholders. Queue the channel gold rush.
- Communities Will Emerge. I subscribe to the notion that one day every business in every vertical will consume a form of public cloud – but we are not anywhere close to this reality. Large scale IaaS operated by a trusted third party and made available to a select group of common-interested stakeholders is a concept that has legs. Trust me on this one. Building out community clouds will emerge in 2011 as one of, if not the most important, concepts to help accelerate IaaS adoption.
- A Course Will Be Charted for an IaaS Futures Market. If you don’t subscribe to the notion that the final destination for this ride is a commodity exchange for compute, stop and take a look around. Spot markets emerged in 2010, much to the surprise of many industry pundits. But spot markets, as novel as they are, do not a true market make. The real money and the real opportunity are in futures trading. There are forces at work on this as I type away, and although you won’t actually see compute on a major exchange in 2011, do expect to see this theme to creep it’s way into mainstream IaaS thinking.
Ok, so with the predictions for themes and threads out of the way, I’ll conclude this post with the 6 things I’ll be watching closer than my wallet at a pick-pocket’s convention as 2011 progresses:
- Shifting Big Iron: Companies like HP and IBM have yet to emerge with serious IaaS plays and if you read the tea leaves they won’t any time soon. I’ll be watching to see if any of the whales in the pool make a splash in the IaaS business.
- Processor Plays: Intel made huge moves in the cloud in 2011 and you don’t need your tarot cards out to see where they are going. Anyone know what AMD is thinking these days? I’ll be watching to see if this gentle giant makes any moves that can rival thier kool-aid-drinking-all-in-pot-committed competitor.
- Government Clouds: The GSA announced a major IaaS initiative announcing a schedule of vendors that could be purchased from their schedule. But will these IaaS vendors truly make any money this way? I’m not so sure. My personal opinion is that the money is at a different level of the Public Sector. Can’t wait to see!
- Hypervisor Competition: KVM is rocketing up the relevance chart. No doubt. I’ll be watching to see how VMware plans to keep it’s toe-hold on the hypervisor market as IaaS enablement begins to drive more and more purchasing decisions.
- Network Providers: The accelerated adoption of cloud services will put a big piece of the pie squarely in the hands of the network operators. I will be watching to see how Network operators jockey to position themselves. I don’t think it is a foregone conclusion that operators will follow the lead of companies like BT and DT.
- Disclosure Watch: As more and more private sector orgs make the move to the cloud, the greater the potential that something somewhere is going to go wrong. I will be keeping a watchful eye on key disclosures and cloud failures which could dramatically stunt the industry’s pace of growth.
6fusion’s first webinar of our 2011 series called: “Make your 2011 New Year’s cloud Resolution Now”. I’ll be elaborating on some of these points and drilling down into how service providers can drive new business to kick the session off. Come join the discussion!