VCs Back Tools to Look Inside the Cloud.
Enterprise software, which has gone from running on the computer to being hosted in a corporate data center, is now moving out to nebulous pools of servers called clouds. As computing clouds become part of the corporate information technology environment, making sure software hosted in the cloud is delivered as quickly and efficiently as possible will become increasingly important.
Whether it’s an external cloud such as those offered by Amazon.com or an internal cloud operated by a Wall Street investment bank, connecting the applications running on those pools of compute power to the employees using them is going to be an integral part of a company’s wide area network, or WAN. And that has venture firms taking a fresh look at an already mature industry known as WAN optimization.
There’s nothing terribly exciting about making sure the pipeline that delivers applications between various corporate branch offices and data centers keeps moving and the software gets delivered as quickly as possible, but it’s a multibillion-dollar area of spending for corporations intent on squeezing every bit of efficiency from their broadband connections. Players in the WAN optimization market include Riverbed, BlueCoat, and Packeteer, which BlueCoat agreed to buy back in April, as well as Citrix, Cisco and Juniper.
Despite the relative maturity of the market, venture dollars are still coming in, with two fundings in August alone. On Aug. 18, Ipanema Systems, whose tactic of selling to service providers could be used to offer WAN optimization to providers of computing clouds, said it raised $7 million from Noble Ventures. About a week later, Expand Networks said it raised $8.5 million from Intel Capital, one of several rounds of funding the company has raised since its 1998 formation. On Wednesday, Expand purchased software provider NetPriva, a move that will deepen Expand’s visibility into data networks.
Both Expand and Ipanema are smaller players, says Tracy Corbo, an analyst with Gartner. She says these firms have niche products but aren’t likely to take a lot of market share away from the existing vendors. Meanwhile, there is also venture interest in creating and finding startups that might use the building blocks of WAN optimization as a launchpad for better cloud utilization and pricing. As Ryan Floyd, a general partner with Storm Ventures, says, “There are opportunities in this space for connecting two types of compute clouds and using WAN optimization to ensure reliability so outages don’t happen.”
What’s so interesting for venture firms (and eventual corporate customers) is the type of knowledge some WAN optimization startups have on hand. That visibility into a network and the servers running applications make it possible to track the delivery of cloud-based services and offer service-level agreements. Many offer compression that could reduce the costs of delivering data from a cloud. For consumers it means Twitter may become more reliable while for corporate users, it means one less strike against cloud computing. It’s also why Expand bought NetPriva and why David Asprey is starting a new company called Cloud Nines.
Asprey plans to launch within six months and doesn’t yet have venture backers, but as a veteran of Citrix, Akamai and Exodus, he’s familiar with some of the problems facing cloud providers. “The reason people care so much about WAN optimization now is that cloud computing is coming up, and clouds remove the barriers and policies an IT department has in place. So now visibility of the network traffic has become very important,” Asprey says.
Being able to measure the availability and costs associated with delivering every byte of data will benefit corporate users, but it should help the providers of clouds squeeze the lowest costs and most utilization out of their networks as well. Google has talked about such network-aware pricing, as have other service providers. Given that providing the basic pools of servers that comprise a computing cloud is a fairly low-margin business, finding pricing models that can take into account cheaper routes for data is a compelling way to shave costs.
Since you have to be able to see the network — a capability some of these WAN optimization firms have — in order to determine the best way to traverse it, expect older players to try to enhance their visibility across the network and newer players to try to usurp their dominance with a cloud-specific model.
This article was also published on BusinessWeek.com.
What Netscapeâs Founder Thinks About the New Google Browser.
Marc Andreessen, whose first startup, Netscape Communications, introduced the consumer web to millions thanks to its Netscape browser, seems to be suitably impressed by Googleâs recently released Chrome browser. He waxed eloquent about Chrome during an onstage conversation with Portfolio magazine contributing editor Kevin Maney at The Churchill Club in Palo Alto, Calif. “Any desktop application that has not been implemented in the browser is now going to be implemented in the browser,” Andreessen said. It was an idea he had espoused over a decade ago.
Blown away by the speed of the browser, and its radical and innovative JavaScript engine, Andreessen called the launch of Chrome an “extraordinary event.” He said that it is going to make Firefox and Internet Explorer compete actively with Chrome and that it would ultimately boost browsers as a whole. Mozilla CEO John Lilly had shared similar sentiments in an interview earlier this week.
“Microsoft can build good products when they want to,” he said. The barons of Redmond released a version of Internet Explorer that was superior to a bloated version of Netscape and gave it away for free, driving a stake through Netscapeâs heart. Thatâs ancient history, anyway. Andreessen thinks that IE and Firefox will have to accelerate their plans and introduce new technologies. He thinks that all this is going to boost the performance of JavaScript. Giving into nostalgia for a minute, he pointed out that it was 10 feet away from his desk at Netscape that JavaScript first got going. He said.
More than a decade later it is everywhere. “If JavaScript gets any faster, then developers will question if they should develop in Flash or (Microsoftâs) Silverlight (technologies),”
“Super interactive browser that sits atop a super-fast connectionâ¦now interesting things will happen over the next 5-10 years,” he said. While he talked at length about Facebook, Twitter, Qik and Ning, it was his comments about the Chrome browser that were quite interesting.
Why? Because back in the day he was one of the first few people to talk about the browser as an operating environment. I had bought into the concept then, and I buy into it now. With always-on connections feeding networked devices and mobile phones, the browser-as-an-operating-environment is close to becoming a reality.
During the Q&A session, in response to a question, Andreessen said the share of Googleâs browser market share depends on the companyâs ability to fully productize the browser and then distribute it.
P.S.: I tried to take notes as fast as I could, but since Marc speaks too fast I apologize if some of the quotes might be wee bit mangled.
Dell Shrinks Computers and Operations.
Just a day after Dell launched it’s own line of mini Inspirons, and after CEO Michael Dell said carriers would likely subsidize such netbooks, creating smaller price tags, the Wall Street Journal speculates that Dell will sell its manufacturing plants, shrinking its operations. This would be good for Dell because it would give it a chance to ditch an aspect of its business with diminishing returns and go after a growth area, like cloud computing.
Dell already outsources some of its manufacturing, but if it gets out of the business entirely it would join its rivals who no longer build their own machines, and give up a key to its past. Dell came on the scene in 1984 with a manufacturing model that drove change across the industry, from requiring just-in-time manufacturing, which cut the costs of rapidly depreciating components, to analyzing how workers moved in the plants in order to shave seconds and pennies off the job of building a PC.
But like any good entrepreneur, Michael Dell can see the changes in the industry and appears ready to abandon what made his company big now that it’s not working anymore. Here is a another test for him as he gears up to make his company over — kind of like a $65 billion startup.
That’s a tall order, but IBM has done it by selling off its iconic PC business and relying on services. Hewlett-Packard focused on a mix of hardware and services for corporate customers while drawing in consumers on the PC side. And Apple shook things up with the iPod and now the iPhone. Dell had tried all of these strategies without huge success, but I think with cloud computing it has a chance.
The hardware and operations that comprise a computing cloud will be a low-margin business for those offering it. If Dell can take the lessons of squeezing the costs from a low-margin business like building computers and translate that into helping build, deliver and operate clouds most efficiently, it could win. By tying its range of consumer and corporate devices back into such clouds, it could become a powerful business generator for cloud providers.
When it comes to the utility industry (which is what many cloud providers like to compare their business to), GE sells billions in equipment and services to providers. Dell has made some acquisitions that get it started down that road offering both services and equipment to clouds, but it also has a company culture of exactitude and discipline that can’t be bought. I think if Dell can dump its manufacturing plants, it will head for the clouds.
image of the Inspiron Mini 9 courtesy of Dell
Joost To Kill Desktop Client.
Exclusive: In what is likely to be a major shift in the company’s strategy, peer-to-peer startup Joost is going to stop making its desktop client. The decision to suspend the client is likely to be announced soon, I am told. The company is going to a browser-only strategy, in which much of its content is going to be available through a browser-based player. Joost, I am told, will release a small plug-in that would embed itself in the browser and allow you to grab files using the P2P technologies. The web client is likely to have better quality than average video sites. (Update: Liz has an indepth review of the upcoming service along with screenshots.)
Joost had launched its desktop client with much fanfare but for a panoply of reasons, such as bandwidth limitations, software issues and lack of content, the company lost traction and usage of its client dropped. Joost isn’t the only startup to give up backing solely the client. Veoh and Jaman adopted a browser-and-client strategy, which has helped boost their audience.
Joost was started by Skype co-founders Janus Friis and Niklas Zennström and raised over $45 million in venture capital. The company hired former Cisco executive Mike Volpi as its CEO, and in the summer of 2007, it seemed Joost was heading to the moon. Over past the 12 months, the company has had to tweak its game plan, trim its work force and refocus to a world that is less accepting of clients. The company wanted to be a key distributor of Hollywood content, but that opportunity has faded with the rise of Hulu.
Liz wondered about the possibilities of turning Joost into a web app, and well, it looks like that is finally happening. NewTeeVee writer Janko Roettgers had come up with five ways to save Joost when trouble hit last year — developing a web version was one of them. Killing the desktop client points to that.
Forrester Defines the Cloud, But We Beg to Differ.
A new report out from Forrester takes a chart-filled look at cloud computing, offering the analyst firm’s own definition of the cloud and attempting to dispel three myths they have noticed. Since we at GigaOM buy pretty heavily into two of these so-called myths — namely that a cloud is comprised of a scalable virtualized server environment and that it’s a low-margin business — I was eager to see where we had been led astray.
But I don’t think we have been. The report takes a big tent approach to clouds, applying the cloud moniker to both the end user market and to a class of goods it calls infrastructure-as-a-service. That’s far above the hardware level where Amazon, Mosso and GoGrid sit, and includes software-as-a-service and even consumer web applications like Zillow or Flickr. Such a broad definition doesn’t really help clear any of the fog for the industry, and would likely only serve to make the term “cloud” even more of a marketing tool than it already is.
As the chart shows, Forrester sees clouds where most people see web applications. The lower three tiers are in line with a post written by the CEO of RightScale, a startup adding a platform on top of the physical infrastructure of the cloud. We’ve tried hard to distinguish between the hardware layers and the layers resting on it, such as platforms-as-a-service and APIs offered for mashups, which Forrester calls application-components-as-a-service, but are we being too dogmatic? What we’ve called the cloud, Forrester calls hardware-as-a-service (HaaS). Personally, I could do with fewer aaSes in my life, but regardless, since our readers are pretty savvy on this topic, what do y’all think?
chart Copyright © 2008, Forrester Research, Inc.
AT&T, T-Mobile, 3 to Speak at Mobilize.
As most of you know, this summer we have been working hard to put together our next-generation mobile conference Mobilize 08, which will look at the emergence of new devices and their impact on mobile data — in particular the opportunities they present for entrepreneurs.
Unlike some of the existing events, which focus almost exclusively on the handset, we are taking a more holistic view of the mobile data world, devoting time to connected devices such as the Kindle, as well as new platforms like the iPhone and Google Android.
Most importantly, we’re bringing in the carriers so that we can learn from the horse’s mouth what they plan to do to keep the mobile data industry growing, as well as how they want to work with innovators. We will hear from them on the panel Strategies To Keep Mobile Data Growing, on which wireless data guru Chetan Sharma will speak with Russ McGuire of Sprint, as well as three recently confirmed speakers: Michael Woodward of AT&T Wireless, Frank Meehan of Hutchinson Whampoa/3 and Venetia Espinoza of T-Mobile USA. (Read their bios on the speakers page.)
Tickets are going fast, so hopefully you’ve registered for the conference by now. If not, you can get tickets here.
Poll: Is the New Microsoft Ad Any Good?.
What's Your Take On The New Microsoft Ad?
Microsoft has launched its largest consumer marketing campaign focused on the broad potential of Windows across PCs, the web and mobile devices to date. The reviews are in — the blogging corps have given it a thumbs down. I kinda found it funny, but then I love everything Jerry does. And Bill Gates acts almost human. However, if the ad is trying to engage me about Microsoft and Windows, I give it an “F.” What do you think? Take the poll and share your thoughts.
VoIP Like You Give a Damn.
When I checked out Google’s blog post Tuesday about its Free the Airwaves project, which aims to convince the FCC to approve the use of the white spaces between the spectrum vacated by analog television channels for broadband access, I saw it offered the ability to phone your Congressman. I thought that was kind of cool, so I clicked through to learn more.
I found myself at the master’s thesis of Fred Benenson — a VoIP-based program called Cause Caller that mixes IP telephony and activism. At the site you can enter your telephone number and Cause Caller makes a VoIP call to one of a randomized list of Congressional reps. So far 11 people have made calls on behalf of the Google campaign, which is exactly where things stood on Tuesday when Google provided the link. On the site Benenson said he funds the project himself, so I wondered if an influx of Google calls might bankrupt him, or if Google had volunteered to help offset costs.
Apparently the answer to both is no, and since few calls have been made so far, Benenson may not have to worry. So far Benenson says his most expensive cause has been an effort to impeach President George W. Bush that generated 1,000 calls, but also says he pays less than 3 cents a minute for VoIP and uses Amazon’s EC2 for his servers and Asterisk for the PBX. The EC2 is the most expensive part of the project, which in total has cost him about $500 so far. Benenson has a day job at Creative Commons, so he’s not looking for a revenue model, and says he doesn’t mind footing the bill so far.
“I keep it alive because it’s a fun hobby,” Benenson says. “I basically did the whole site by myself from the design to the VoIP programming, so I kind of took a long hiatus, but now I’m ramping up and starting to blog about it again. The Google notice is like a shot in the arm.”
Cause Caller strikes me as one of the more interesting ways that technology can intersect with politics, with the potential to make a greater impact than emailing petitions and encouraging voter engagement by texting a candidate’s running-mate announcement.
Earthscape for iPhone to Add Geotagged Photos.
I moderated a panel on the future of mobile phone technology for accessing MMOs at the Virtual Worlds Expo in LA this week, but one of the most interesting demos showcased there was a very cool iPhone application for the real world: the ability to upload geotagged photos onto a 3D map of the plane in near real time.
It’s an upcoming feature for Earthscape, an iPhone app that renders satellite imagery into a navigable, 3D map of the world — think Google Earth at your fingertips. 300,000+ places on the Earthscape globe also have a link to the Wikipedia page associated with the location.
While there are other iPhone geotagging photo apps, founder and CEO Tom Churchill told me his company has tried to make theirs “brain-dead simple to use.” You don’t need an account on Flickr or another service to use it, for example.
Instead, photos are associated with each phone’s unique identifier, making it a simple process of point, shoot and upload. (Churchill sent me the one above, showing two photos he took at LA’s Staples Center.) You can see photos you’ve added to the Earthscape map instantaneously — and if you choose, photos taken by all other Earthscape users across the planet. That’s the feature that excites me most, because it suggests a crowdsourced, photographic depiction of the world updated in near real-time. (Almost like Twitter with images instead of words.) Churchill expects Apple to approve the update and have it available on the App store by mid-September.
Disclosure: My Second Life blog was an unpaid media partner for the Virtual Worlds Conference.
Image credit: www.earthscape.com.
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F|R: 5 Reasons to Go All Angel à la Lookery.
This week, Lookery, the ad network launched last July to serve über-cheap ads into Facebook applications, has announced a new $2.25 million round of funding. Itâs a nice sum for the 14-month-old startup, which now sends Facebook some 3 billion ads a month, according to Lookeryâs CEO, Scott Rafer.
But here’s whatâs really interesting: Rafer and his cofounder, David Cancel, elected to raise the money almost entirely from angels, forgoing the traditional venture capital most companies would pursue at this stage. This is Lookeryâs second funding event. In January, it raised a $1 million note, which converts to equity given in this deal.
The participant list is heady, including Salesforce.com founder Marc Benioff; Reed Hundt; Tickle founders James Currier and Stan Chudnovsky; and About.comâs Scott Kurnit. There are some notable VCs in the deal, too, but theyâre participating individually, not with their firms: Ted Dintersmith, late of Charles River Ventures; Ravi Mhatre of Lightspeed; and Allen Morgan, of the Mayfield Fund, who is also a Lookery director.
Serial founders with good track records, Rafer (MyBlogLog) and Cancel (Compete.com) could have gone after marquee venture firms if theyâd want to, but the pair has specific reasons for favoring angels. After the jump, Rafer explains why other founders ought to consider doing the same.
Lookery’s 5 Reasons to Go All Angel
1) Focus. Angels can concentrate on the individual strategy of your company, rather than the larger portfolio management strategy a VC must bear in mind (e.g. How deep are my fund reserves? How fast must I spend them?), most of which don’t apply to your company. “Founders want their startups managed as sovereign entities, not as portfolio segments, â Rafer says.
2) Fewer confusing ownership terms. Angels donât get the level of liquidation preferences VCs demand. Angels like convertible notes and often get what Rafer calls “thin preferreds,” but you’re unlikely to suffer the dreaded participating preferreds. Without a multi-tiered equity structure, every investor, including founders, gets paid in proportion to what they put in.
3) You will control negotiations on future funding rounds. You’re less likely to have a “dissonant chorus of voices between the common shareholders and preferred shareholders, each at the table and wrestling in a different directionâ over the terms of the new round, Rafer says.
4) Transaction control. If a good purchase offer comes your way, youâll get to decide when to sell. You won’t have to seek permission from investors who aren’t on your board or worry about what a VC needs to have happen vis á vis managing his limited partners. Chances are you’re not an LP, so why should you care? Angels have no LPs, so their agendas tend to be far more transparent.
5) Angels aren’t compensated in ratios. Angels get 100 percent of the profit they generate with their investment in your company. A VC only gets a fraction of the “carry” generated on your deal. This is one reason a VC might be motivated to urge you to sell bigger; they need the numerator in the exit math ratio to be bigger, or the denominator to be smaller, to maximize their piece of your deal. With an IRR compensation method, VCs get paid even more if you sell faster. But the thing to remember is that a VC is negotiating for the interests of others, not just himself. With angels, “itâs a merit-based discussion, or at least much more so, because the angel is actually getting the entire return,” Rafer says.
Google at 10: Larry, Sergey & Me.
It is not clear how old Google is - some argue that world’s largest search engine operator is 13 - after all it operated in stealth for about 3 years before launching in September 1998. Many major news organizations are going with September 2008 as the tenth anniversary so I am going to play along. Forbes.com even asked the question, Has Google Changed The World? from many well known people. For some odd reason they decided to seek my thoughts.
Gandhi changed the world. The steam engine changed the world. Heart transplants changed the world. The Internet changed the world. Google simply made a small (albeit important) contribution toward making Internet a better experience for all of us.
Google’s contributions are still worthy of praise. It is no longer impossible to find relevant information on the fast-growing Internet. I remember tearing my hair out looking for relevant information. Today it is as simple as acting on our impulse to seek that knowledge–and that has infinitely changed the way we interact with the machines.
The article triggered a chain reaction and a trip down the memory lane. I had been a Google-addict for a while and loved its simple elegance over rivals such as AltaVista and Inktomi-powered searches. I had talked to the company earlier, but I didn’t meet the Stanford duo in person up until September 1999. The company had just raised about $25 million in venture money.
“I have never paid more money for so little a stake in a startup,” John Doerr of Kleiner Perkins Caufield & Byers was heard saying. Good thing he did - for he paid next to nothing for what could arguably be the Internet-equivalent of Alaskan oil and gas fields.
Larry Page & Sergey Brin had stopped by at the Forbes.com offices and we talked at length about the company. It ultimately resulted in this feature, How Google Is That? Larry still had the same disastrous haircut he supports today. Brin was measured and logical as always in his responses. They thankfully made no meaningless and “do-no-evil” hypocritical statements. They were just two guys out to change the world. I remember getting along with them famously, but never saw or talked to them since, though I have been to many Google press events.
Then & Now: You’ve come a long way baby
The company was 12-months old. They had just come up with their version of contextual-text advertisng system. They had 40 employees, were looking for an inhouse chef, and were doing about 4 million page views a day and about 4 million searches a day. That’s 45 searches per second. No one in the company owned a glider, though their venture backers had their own private planes. The company was housed in 165 University Avenue in Palo Alto and the co-founders were single.
In July 2008, Google registered 7.23 billion searches - about 242 million a day. That works out to about 4 10 million searches in an hour or over 1100 2772 searches per second. (Funny, it turned out to be much bigger than the market estimates used by Google.) It had sales of $5.4 billion in the second quarter of 2008 alone. It now employs over 19,000 people. Larry and Sergey are billionaires and own a Boeing 767 & a Boeing 757. They are both married. The company has offices in multiple locations and data centers that are sprinkled around the globe.
After meeting with them and discussing the merits of search-only approach versus portals, I came to this conclusion: “Perhaps the other Stanford duo, Yahoo! cofounders David Filo and Jerry Yang, should be a little concerned–their media ambitions have superseded their customers’ desire for a really smart search engine.” In hindsight, I am surprised I was able to get away with making that statement and my editor didn’t catch what clearly was an opinion - a no-no in the non-blog mediascape. After all, it seemed so stupid to suggest that because Yahoo had 240 million page views a day and was literally printing money.
Brin tried to convince me that the text-based contextual advertising (first popularized by LinkExchange, a company that was bought by Microsoft) was their way of making money. “Banners are not working and clickthrough rates are falling, I think highly focused ads are the answer,” Brin said, and pointed out that Google would be in black in 24 months. By 2001, I could have kicked myself for doubting the kid!
Why did they win?
Fast forward 9 years, and most of Google’s competitors have gone to the great technology graveyard, nary a tombstone. Simpli.com, Dogpile, Direct Hit and Northern Light were all part of the new search engines that were taking on the incumbents like Yahoo, Lycos and HotBot and wanted to make web searches simpler and more accurate.
“Google is essentially trying to categorize and catalog the web. We have a very different product and a different approach,” Jeffrey Stibel, cofounder and CEO of then Providence, R.I.-based Simpli.com told me for the Forbes.com story. He was taking a more exotic linguistic approach to search. It is now owned by Valueclick, an ad-network.
In comparison, Google’s analysis of the link structure of the World Wide Web and large-scale data mining and ability to ranks a page against similar pages turned out to be the right approach. Was it just the algorithm and a better monetization scheme? Was it a right solution at the right time? I think it was a bit of all that - but most importantly, it was a farsighted approach to infrastructure and the network.
It’s the infrastructure stupid.
This was the critical difference - I wrote about it recently - between winning and losing. I was reminded of this by an old PowerPoint presentation. They talked about using commodity compute infrastructure to out muscle everyone and doing analysis of the web like it has never been done before. It seems so obvious today - but back then it was an idea ahead of its time. The impact of pizza box servers was yet to be seen, and companies like Cobalt Networks (sold to Sun Microsystems for $1 2.4 billion) were selling early versions of Linux-powered thin servers, but they were not cheap by any means.
Many on Wall Street question why Google spends so much money on infrastructure. The question is why not - after all every millisecond of performance means more searches and more searches mean more advertising. More infrastructure means more crawling, more indexing and better results. I think that slide reminds us of the fact that infrastructure-as-an-advantage is in the DNA of Google. And that is unlikely to change - and that is why world’s smartest engineers and computer scientists still want to work there.
History has made a genius out of all who bet on Larry and Sergey - the investors, the employees, journalists who were enthralled by their story. In reality to those who built Google, it was the only option.
Tomorrow: What You, Me & Corporations Can Learn From Google
Will Incumbents Stifle Innovation?.
Earlier today, I spent a delightful hour with Vinnie Mirchandani, a well respected analyst in the enterprise software industry, mostly because he knows how to figure out the impact of big technological trends on software. Accompanying him was George Gilbert, formerly an enterprise software analyst with Credit Suisse First Boston, a Wall Street firm.
While the conversation flitted from topic to topic, the main question they asked me was this: Can innovation survive against the backdrop of a broadband duopoly? Can we innovate when the plumbing of the network is controlled by only a handful of players, even when it comes to selling connections to corporations? Those are the very same questions that I have raised on numerous occasions, and you very well know that I am quite alarmed by new impositions such as silly bandwidth caps and attempts to do away with Net Neutrality.
The answer to that question isn’t that simple. However, as I told Vinnie, the incumbents are fighting a losing battle. It is obvious that Comcast’s 250 GB cap is a blatant attempt by the cable company to save its own video-on-demand franchise. It wants to make sure that video watchers buy video from Comcast (CMSCA), instead of Netflix (FLIX), Apple (APPL) or anyone else.
But Comcast has an indefensible position. Why? Because the innovators are going to figure out a way to beat those caps. Take Roku, which is making a special video player for Netflix. Tim Twerdhal, Rokuâs VP of consumer products, told Chris Albrecht over on NewTeeVee, “Weâll be introducing same visual quality at lower bitrates in the future…There are lots of things going on with codecs and bitrates that make caps not as relevant as they may appear to be.” What will Comcast or any other incumbent do then? Lower their bandwidth caps even further? In all likelihood that is how they are going to react — a futile exercise, in my opinion.
Of course, you might have an entirely different opinion on the question. Will incumbents stifle innovation? Care to share with me?
The 10 Laws of Cloudonomics.
If your enterprise has access to the same things — virtualization, automation, performance management, ITIL, skilled IT resources, etc. — as cloud service providers, would clouds provide any real and sustainable benefit?
Public utility cloud services differ from traditional data center environments — and private enterprise clouds — in three fundamental ways. First, they provide true on-demand services, by multiplexing demand from numerous enterprises into a common pool of dynamically allocated resources. Second, large cloud providers operate at a scale much greater than even the largest private enterprises. Third, while enterprise data centers are naturally driven to reduce cost via consolidation and concentration, clouds — whether content, application or infrastructure — benefit from dispersion. These three key differences in turn enable the sustainable strategic competitive advantage of clouds through what Iâll call the 10 Laws of Cloudonomics.
Cloudonomics Law #1: Utility services cost less even though they cost more.
An on-demand service provider typically charges a utility premium — a higher cost per unit time for a resource than if it were owned, financed or leased. However, although utilities cost more when they are used, they cost nothing when they are not. Consequently, customers save money by replacing fixed infrastructure with clouds when workloads are spiky, specifically when the peak-to-average ratio is greater than the utility premium.
Cloudonomics Law #2: On-demand trumps forecasting.
The ability to rapidly provision capacity means that any unexpected demand can be serviced, and the revenue associated with it captured. The ability to rapidly de-provision capacity means that companies donât need to pay good money for non-productive assets. Forecasting is often wrong, especially for black swans, so the ability to react instantaneously means higher revenues, and lower costs.
Cloudonomics Law #3: The peak of the sum is never greater than the sum of the peaks.
Enterprises deploy capacity to handle their peak demands â a tax firm worries about April 15th, a retailer about Black Friday, an online sports broadcaster about Super Sunday. Under this strategy, the total capacity deployed is the sum of these individual peaks. However, since clouds can reallocate resources across many enterprises with different peak periods, a cloud needs to deploy less capacity.
Cloudonomics Law #4: Aggregate demand is smoother than individual.
Aggregating demand from multiple customers tends to smooth out variation. Specifically, the âcoefficient of variationâ of a sum of random variables is always less than or equal to that of any of the individual variables. Therefore, clouds get higher utilization, enabling better economics.
Cloudonomics Law #5: Average unit costs are reduced by distributing fixed costs over more units of output.
While large enterprises benefit from economies of scale, larger cloud service providers can benefit from even greater economies of scale, such as volume purchasing, network bandwidth, operations, administration and maintenance tooling.
Cloudonomics Law #6: Superiority in numbers is the most important factor in the result of a combat (Clausewitz).
The classic military strategist Carl von Clausewitz argued that, above all, numerical superiority was key to winning battles. In the cloud theater, battles are waged between botnets and DDoS defenses. A botnet of 100,000 servers, each with a megabit per second of uplink bandwidth, can launch 100 gigabits per second of attack bandwidth. An enterprise IT shop would be overwhelmed by such an attack, whereas a large cloud service provider — especially one that is also an integrated network service provider — has the scale to repel it.
Cloudonomics Law #7: Space-time is a continuum (Einstein/Minkowski)
A real-time enterprise derives competitive advantage from responding to changing business conditions and opportunities faster than the competition. Often, decision-making depends on computing, e.g., business intelligence, risk analysis, portfolio optimization and so forth. Assuming that the compute job is amenable to parallel processing, such computing tasks can often trade off space and time, for example a batch job may run on one server for a thousand hours, or a thousand servers for one hour, and a query on Google is fast because its processing is divided among numerous CPUs. Since an ideal cloud provides effectively unbounded on-demand scalability, for the same cost, a business can accelerate its decision-making.
Cloudonomics Law #8: Dispersion is the inverse square of latency.
Reduced latency — the delay between making a request and getting a response — is increasingly essential to delivering a range of services, among them rich Internet applications, online gaming, remote virtualized desktops, and interactive collaboration such as video conferencing. However, to cut latency in half requires not twice as many nodes, but four times. For example, growing from one service node to dozens can cut global latency (e.g., New York to Hong Kong) from 150 milliseconds to below 20. However, shaving the next 15 milliseconds requires a thousand more nodes. There is thus a natural sweet spot for dispersion aimed at latency reduction, that of a few dozen nodes — more than an enterprise would want to deploy, especially given the lower utilization described above.
Cloudonomics Law #9: Donât put all your eggs in one basket.
The reliability of a system with n redundant components, each with reliability r, is 1-(1-r)n. So if the reliability of a single data center is 99 percent, two data centers provide four nines (99.99 percent) and three data centers provide six nines (99.9999 percent). While no finite quantity of data centers will ever provide 100 percent reliability, we can come very close to an extremely high reliability architecture with only a few data centers. If a cloud provider wants to provide high availability services globally for latency-sensitive applications, there must be a few data centers in each region.
Cloudonomics Law #10: An object at rest tends to stay at rest (Newton).
A data center is a very, very large object. While theoretically, any company can site data centers in globally optimal locations that are located on a core network backbone with cheap access to power, cooling and acreage, few do. Instead, they remain in locations for reasons such as where the company or an acquired unit was founded, or where they got a good deal on distressed but conditioned space. A cloud service provider can locate greenfield sites optimally.
Joe Weinman is Strategic Solutions Sales VP for AT&T Global Business Services. The views expressed herein are his own and do not necessarily reflect the views of AT&T.
DEMO: 10 Mobile Apps in 10 Words.
I’m hanging out at DEMO the next few days, and wanted to start off with a quick rundown of the mobile apps launching at the show. With 72 companies to check out in San Diego, plus the competing coverage out of the TechCrunch50, I figured I should keep it short and sweet. So, without further ado, I present the 10 mobile app companies showing at DEMO in 10 words or less.
- HeyCosmo: Call with questions. Cosmo’s machines find answers. In 60 seconds.
- Message Sling: Voicemail to SMS, email or web. Free on any carrier.
- Say Where: Say a place. Get local maps or information on iPhones.
- G.ho.st Mobile: Takes the free virtual g.ho.st desktop and makes it mobile.
- Maverick Mobile: Online backup and remote tracking or locking for Nokia phones.
- Rocketron: Call 408-907-2323. Hear ads. Get personalized news. Comment via voice.
- SkyData: Send secure corporate data to mobiles from the cloud.
- UbiSafe: Stalk teenagers, monitor older people and track thieves using GPS.
- WebDiet: Finds nearby healthy food using GPS and tracks calories.
- Xumii: Single sign-in connects IM, media and OpenSocial apps on mobiles.
SOASTA Raises $6.4M to Test in the Cloud.
Software testing provider SOASTA has closed a $6.4 million Series B financing from Formative Ventures, Canaan Partners and The Entrepreneurâs Fund, bringing the total amount of money it’s raised to $10 million. The three-year-old, 20-person startup based in Mountain View, Calif., hopes its cloud-based approach will shake up the relatively mature testing market.
SOASTA CEO Tom Lounibos says he realized the need for new testing methods while running SaaS provider Dorado. âQA went from 3 to 16 testers because we needed to do so much scripting.â AJAX, SOAP and RESTful APIs had become increasingly difficult to test with open-source tools (just try testing Google Maps), while licensed software like Loadrunner costs too much, he said.
Generating traffic on demand is nothing new: Companies like Gomez and Keynote Systems have offered web stress-testing services for years. But SOASTA wants to offer an entire suite of tools for scripting tests, instrumenting servers, and analyzing problems.
Testing is inherently elastic. One minute, systems are idle; the next, theyâre hammering a new application with thousands of transactions a second. âSoftware is only part of the cost,â said Lounibos. âYou need hardware, a development environment, deployment, collection and analysis.â So Lounibos teamed up with OLAP veteran Ken Gardner (now SOASTA’s Executive Chairman) to create an entire test platform in the cloud, including device monitoring and post-test reporting.
The thing about the cloud is that it scales. SOASTA just finished a 100,000-user test for QTRAX using EC2 and is preparing for a million-user test soon. While tests currently have to be scheduled beforehand, the company plans to let developers schedule their own tests, Lounibos said. So we have to ask: Isn’t it dangerous to give testers the keys to what is, effectively, a huge denial-of-service system? And can a huge test eat up the resources of a cloud, making other cloud users suffer?
âWe donât want to overwhelm the cloud, or create the next generation of spam,â said Lounibos.
Still, the potential for mischief is huge, and with more and more “open clouds” emerging, regulation needs to go beyond just terms of service. Companies that run on-demand tools have an obligation to see that those tools aren’t abused. As Lounibos puts it, âItâs imperative for companies like ours to work together not to crash this thing.â
