I admit that I haven’t written a blog in more than three months — but I do have a good reason. I just finished writing my latest book — not a Dummies book this time. It will be my first business book based on almost three decades in the computer industry. Once I know the publication date I will tell you a lot more about it. But as I was finishing this book I was thinking about my last book, Cloud Computing for Dummies that was published almost two years ago. As this anniversary approaches I thought it was appropriate to take a look back at what has changed. I could probably go on for quite a while talking about how little information was available at that point and how few CIOs were willing to talk about or even consider cloud computing as a strategy. But that’s old news. I decided that it would be most interesting to focus on eight of the changes that I have seen in this fast-moving market over the past two years.
Change One: IT is now on board with cloud computing. Cloud Computing has moved from a reaction to sluggish IT departments to a business strategy involving both business and technology leaders. A few years ago, business leaders were reading about Amazon and Google in business magazines. They knew little about what was behind the hype. They focused on the fact that these early cloud pioneers seemed to be efficient at making cloud capability available on demand. No paperwork and no waiting for the procurement department to process an order. Two years ago IT leaders tried to pretend that cloud computing was passing fad that would disappear. Now I am finding that IT is treating cloud computing as a center piece of their future strategies — even if they are only testing the waters.
Change Two: enterprise computing vendors are all in with both private and public cloud offerings. Two years ago most traditional IT vendors did not pay too much attention to the cloud. Today, most hardware, software, and services vendors have jumped on the bandwagon. They all have cloud computing strategies. Most of these vendors are clearly focused on a private cloud strategy. However, many are beginning to offer specialized public cloud services with a focus on security and manageability. These vendors are melding all types of cloud services — public, private, and hybrid into interesting and sometimes compelling offerings.
Change Three: Service Orientation will make cloud computing successful. Service Orientation was hot two years ago. The huge hype behind cloud computing led many pundits to proclaim that Service Oriented Architectures was dead and gone. In fact, cloud vendors that are succeeding are those that are building true business services without dependencies that can migrate between public, private and hybrid clouds have a competitive advantage.
Change Four: System Vendors are banking on integration. Does a cloud really need hardware? The dialog only two years ago surrounded the contention that clouds meant no hardware would be necessary. What a difference a few years can make. The emphasis coming primarily from the major systems vendors is that hardware indeed matters. These vendors are integrating cloud infrastructure services with their hardware.
Change Five: Cloud Security takes center stage. Yes, cloud security was a huge topic two years ago but the dialog is beginning to change. There are three conversations that I am hearing. First, cloud security is a huge issue that is holding back widespread adoption. Second, there are well designed software and hardware offerings that can make cloud computing safe. Third, public clouds are just as secure as a an internal data center because these vendors have more security experts than any traditional data center. In addition, a large number of venture backed cloud security companies are entering the market with new and quite compelling value propositions.
Change Six: Cloud Service Level Management is a primary customer concern. Two years ago no one our team interviewed for Cloud Computing for Dummies connected service level management with cloud computing. Now that customers are seriously planning for wide spread adoption of cloud computing they are seriously examining their required level of service for cloud computing. IT managers are reading the service level agreements from public cloud vendors and Software as a Service vendors carefully. They are looking beyond the service level for a single service and beginning to think about the overall service level across their own data centers as well as the other cloud services they intend to use.
Change Seven: IT cares most about service automation. No, automation in the data center is not new; it has been an important consideration for years. However, what is new is that IT management is looking at the cloud not just to avoid the costs of purchasing hardware. They are automation of both routine functions as well as business processes as the primary benefit of cloud computing. In the long run, IT management intends to focus on automation and reduce hardware to interchanagable commodities.
Change Eight: Cloud computing moves to the front office. Two years ago IT and business leaders saw cloud computing as a way to improve back office efficiency. This is beginning to change. With the flexibility of cloud computing, management is now looking at the potential for to quickly innovate business processes that touch partners and customers.
I started thinking a lot about software as a service environments and what this really means to customers. I was talking to a CIO of a medium sized company the other day. His company is a customer of a major SaaS vendor (he didn’t want me to name the company). In the beginning things were quite good. The application is relatively easy to navigate and sales people were satisfied with the functionality. However, there was a problem. The use of this SaaS application was actually getting more complicated than the CIO had anticipated. First, the company had discovered that they were locked into a three-year contract to support 450 sales people. In addition, over the first several years of use, the company had hired a consultant to customize the workflow within the application.
So, what was the problem? The CIO was increasingly alarmed about three issues:
- The lack of elasticity. If the company suddenly had a bad quarter and wanted to reduce the number of licenses supported, they would be out of luck. One of the key promises of cloud computing and SaaS just went out the window.
- High costs of the services model. It occurred to the CIO that the company was paying a lot more to support the SaaS application than it would have cost to buy an on premise CRM application. While there were many benefits to the reduced hardware and support requirements, the CIO was starting to wonder if the costs were justified. Did the company really do the analysis to determine the long-term cost/benefit of cloud? How would he be able to explain the long- term ramifications of budget increases that he expects will come to the CFO? It is not a conversation that he is looking forward to having.
- No exit strategy. Given the amount of customization that the company has invested in, it is becoming increasingly clear that there is no easy answer – and no free lunch. One of the reasons that the company had decided to implement SaaS was the assumption that it would be possible to migrate from one SaaS application to another. However, while it might be possible to migrate basic data from a SaaS application, it is almost impossible to migrate the process information. Shouldn’t there be a different approach to integration in clouds than for on premise?
The bottom line is that Software as a Service has many benefits in terms of more rapid deployment, initial savings in hardware and support services, and ease of access for a highly distributed workforce. However, there are complications that are important to take into account. Many SaaS vendors, like their counterparts in the on-premise world, are looking for long-term agreements and lock-in with customers. These vendors expect and even encourage customers to customize their implication based on their specific business processes. There is nothing wrong with this – to make applications like CRM and HR productive they need to reflect a company’s own methods of doing business. However, companies need to understand what they are getting into. It is easy to get caught in the hype of the magic land of SaaS. As more and more SaaS companies are funded by venture capitalists, it is clear that they will not all survive. What happens to your customized processes and data if the company goes out of business?
It is becoming increasingly clear to me that we need a different approach to integration in the cloud than for on premise. It needs to leverage looser coupling, configurations rather than programmatic integration. We have the opportunity to rethink integration altogether – even for on premise applications.
There is no simple answer to the quandary. Companies looking to deploy a SaaS application need to do their homework before barreling in. Understand the risks and rewards. Can you separate out the business process from the basic SaaS application? Do you really want to lock yourself into a vendor you don’t know well? It may not be so easy to free your company, your processes, or your data.
I spent the other week at a new conference called Cloud Connect. Being able to spend four days emerged in an industry discussion about cloud computing really allows you to step back and think about where we are with this emerging industry. While it would be possible to write endlessly about all the meeting and conversations I had, you probably wouldn’t have enough time to read all that. So, I’ll spare you and give you the top four things I learned at Cloud Connect. I recommend that you also take a look at Brenda Michelson’s blogs from the event for a lot more detail. I would also refer you to Joe McKendrick’s blog from the event.
1. Customers are still figuring out what Cloud Computing is all about. For those of us who spend way too many hours on the topic of cloud computing, it is easy to make the assumption that everyone knows what it is all about. The reality is that most customers do not understand what cloud computing is. Marcia Kaufman and I conducted a full day workshop called Introduction to Cloud. The more than 60 people who dedicated a full day to a discussion of all aspects of the cloud made it clear to us that they are still figuring out the difference between infrastructure as a service and platform as a service. They are still trying to understand the issues around security and what cloud computing will mean to their jobs.
2. There is a parallel universe out there among people who have been living and breathing cloud computing for the last few years. In their view the questions are very different. The big issues discussed among the well-connected were focused on a few key issues: is there such a thing as a private cloud?; Is Software as a Service really cloud computing? Will we ever have a true segmentation of the cloud computing market?
3. From the vantage point of the market, it is becoming clear that we are about to enter one of those transitional times in this important evolution of computing. Cloud Connect reminded me a lot of the early days of the commercial Unix market. When I attended my first Unix conference in the mid-1980s it was a different experience than going to a conference like Comdex. It was small. I could go and have a conversation with every vendor exhibiting. I had great meetings with true innovators. There was a spirit of change and innovation in the halls. I had the same feeling about the Cloud Connect conference. There were a small number of exhibitors. The key innovators driving the future of the market were there to discuss and debate the future. There was electricity in the air.
4. I also anticipate a change in the direction of cloud computing now that it is about to pass that tipping point. I am a student of history so I look for patterns. When Unix reached the stage where the giants woke up and started seeing huge opportunity, they jumped in with a vengeance. The great but small Unix technology companies were either acquired, got big or went out of business. I think that we are on the cusp of the same situation with cloud computing. IBM, HP, Microsoft, and a vast array of others have seen the future and it is the cloud. This will mean that emerging companies with great technology will have to be both really luck and really smart.
The bottom line is that Cloud Connect represented a seminal moment in cloud computing. There is plenty of fear among customers who are trying to figure out what it will mean to their own data centers. What will the organizational structure of the future look like? They don’t know and they are afraid. The innovative companies are looking at the coming armies of large vendors and are wondering how to keep their differentiation so that they can become the next Google rather than the next company whose name we can’t remember. There was much debate about two important issues: cloud standards and private clouds. Are these issues related? Of course. Standards always become an issue when there is a power grab in a market. If a Google, Microsoft, Amazon, IBM, or an Oracle is able to set the terms for cloud computing, market control can shift over night. Will standard interfaces be able to save the customer? And how about private clouds? Are they real? My observation and contention is that yes, private clouds are real. If you deploy the same automation, provisioning software, and workload management inside a company rather than inside a public cloud it is still a cloud. Ironically, the debate over the private cloud is also about power and position in the market, not about ideology. If a company like Google, Amazon, or name whichever company is your favorite flavor… is able to debunk the private cloud — guess who gets all the money? If you are a large company where IT and the data center is core to how you conduct business — you can and should have a private cloud that you control and manage.
So, after taking a step back I believe that we are witnessing the next generation of computing — the industrialization of computing. It might not be as much fun as the wild west that we are in the midst of right now but it is coming and should be here before we realize that it has happened.
As I was pointing out yesterday, there are many unintended consequences from any emerging technology platform — the cloud will be no exception. So, here are my next three picks for unintended consequences from the evolution of cloud computing:
4. The cloud will disrupt traditional computing sales models. I think that Larry Ellison is right to rant about Cloud Computing. He is clearly aware that if cloud computing becomes the preferred way for customers to purchase software the traditional model of paying maintenance on applications will change dramatically. Clearly, vendors can simply roll in the maintenance stream into the per user per month pricing. However, as I pointed out in Part I, prices will inevitably go down as competition for customers expands. There there will come a time when the vast sums of money collected to maintain software versions will seem a bit old fashioned. In fact, that will be one of the most important unintended consequences and will have a very disruptive effect on the economic models of computing. It has the potential to change the power dynamics of the entire hardware and software industries.The winners will be the customers and smart vendors who figure out how to make money without direct maintenance revenue. Like every other unintended consequence there will be new models emerging that will emerge that will make some really cleaver vendors very successful. But don’t ask me what they are. It is just too early to know.
5. The market for managing cloud services will boom. While service management vendors do pretty well today managing data center based systems, the cloud environment will make these vendors king of the hill. Think about it like this. You are a company that is moving to the cloud. You have seven different software as a service offerings from seven different vendors. You also have a small private cloud that you use to provision critical customer data. You also use a public cloud for some large scale testing. In addition, any new software development is done with a public cloud and then moved into the private cloud when it is completed. Existing workloads like ERP systems and legacy systems of record remain in the data center. All of these components put together are the enterprise computing environment. So, what is the service level of this composite environment? How do you ensure that you are compliant across these environment? Can you ensure security and performance standards? A new generation of products and maybe a new generation of vendors will rake in a lot of cash solving this one.
6. What will processes look like in the cloud. Like data, processes will have to be decoupled from the applications that they are an integral part of the applications of record. Now I don’t expect that we will rip processes out of every system of record. In fact, static systems such as ERP, HR, etc. will have tightly integrated processes. However, the dynamic processes that need to change as the business changes will have to be designed without these constraints. They will become trusted processes — sort of like business services that are codified but can be reconfigured when the business model changes. This will probably happen anyway with the emergence of Service Oriented Architectures. However, with the flexibility of cloud environment, this trend will accelerate. The need to have independent process and process models may have the potential of creating a brand new market.
I am happy to add more unintended consequences to my top six. Send me your comments and we can start a part III reflecting your ideas.
I haven’t written a blog post in quite a while. Yes, I feel bad about that but I think I have a good excuse. I have been hard at work (along with my colleagues Marcia Kaufman, Robin Bloor, and Fern Halper) on Cloud Computing for Dummies. I will admit that we underestimated the effort. We thought that since we had already written Service Oriented Architectures for Dummies — twice; and Service Management for Dummies that Cloud Computing would be relatively easy. It wasn’t. Over the past six months we have learned a lot about the cloud and where it is headed. I thought that rather than try to rewrite the entire book right here I would give you a sense of some of the important things that I have learned. I will hold myself to 10 so that I don’t go overboard!
1. The cloud is both old and new at the same time. It is build on the knowledge and experience of timesharing, Internet services, Application Service Providers, hosting, and managed services. So, it is an evolution, not a revolution.
2. There are lots of shades of gray with cloud segmentation. Yes, there are three buckets that we put clouds into: infrastructure as a service, platform as a service, and software as a service. Now, that’s nice and simple. However, it isn’t because all of these areas are starting to blurr into each other. And, it is even more complicated because there is also business process as a service. This is not a distinct market unto itself – rather it is an important component in the cloud in general.
3. Market leadership is in flux. Six months ago the market place for cloud was fairly easy to figure out. There were companies like Amazon and Google and an assortment of other pure play companies. That landscape is shifting as we speak. The big guns like IBM, HP, EMC, VMware, Microsoft, and others are running in. They would like to control the cloud. It is indeed a market where big players will have a strategic advantage.
4. The cloud is an economic and business model. Business management wants the data center to be easily scalable and predictable and affordable. As it becomes clear that IT is the business, the industrialization of the data center follows. The economics of the cloud are complicated because so many factors are important: the cost of power; the cost of space; the existing resources — hardware, software, and personnel (and the status of utilization). Determining the most economical approach is harder than it might appear.
5. The private cloud is real. For a while there was a raging debate: is there such a thing as a private cloud? It has become clear to me that there is indeed a private cloud. A private cloud is the transformation of the data center into a modular, service oriented environment that makes the process of enabling users to safely procure infrastructure, platform and software services in a self-service manner. This may not be a replacement for an entire data center – a private cloud might be a portion of the data center dedicated to certain business units or certain tasks.
6. The hybrid cloud is the future. The future of the cloud is a combination of private, traditional data centers, hosting, and public clouds. Of course, there will be companies that will only use public cloud services for everything but the majority of companies will have a combination of cloud services.
7. Managing the cloud is complicated. This is not just a problem for the vendors providing cloud services. Any company using cloud services needs to be able to monitor service levels across the services they use. This will only get more complicated over time.
8. Security is king in the cloud. Many of the customers we talked to are scared about the security implications of putting their valuable data into a public cloud. Is it safe? Will my data cross country boarders? How strong is the vendor? What if it goes out of business? This issue is causing many customers to either only consider a private cloud or to hold back. The vendors who succeed in the cloud will have to have a strong brand that customers will trust. Security will always be a concern but it will be addressed by smart vendors.
9. Interoperability between clouds is the next frontier. In these early days customers tend to buy one service at a time for a single purpose — Salesforce.com for CRM, some compute services from Amazon, etc. However, over time, customers will want to have more interoperability across these platforms. They will want to be able to move their data and their code from one enviornment to another. There is some forward movement in this area but it is early. There are few standards for the cloud and little agreement.
10. The cloud in a box. There is a lot of packaging going on out there and it comes in two forms. Companies are creating appliance based environments for managing virtual images. Other vendors (especially the big ones like HP and IBM) are packaging their cloud offerings with their hardware for companies that want Private clouds.
I have only scratched the surface of this emerging market. What makes it so interesting and so important is that it actually is the coalescing of computing. It incorporates everything from hardware, management software, service orientation, security, software development, information management, the Internet, service managment, interoperability, and probably a dozen other components that I haven’t mentioned. It is truly the way we will achieve the industrialization of software.
For the last six months or so I have been researching cloud computing. More recently, our team has started writing our next Dummies Book on Cloud Computing. Typically when we start a book we talk to everyone in the ecosystem — vendors big and small and lots of customers. For example, when we started working on SOA for Dummies almost three years ago we found a lot of customers who could talk about their early experience. Not all of these companies had done things right. They had made lots of mistakes and started over. Many of them didn’t necessarily want their mistakes put into a book but they were willing to talk and share. As I have mentioned in earlier writings, when we wrote the second edition of SOA for Dummies we had a huge number of customers that we could talk to. A lot of them have made tremendous progress in transforming not just their IT organization but the business as well.
We had a similar experience with Service Management for Dummies which comes out in June. Customers were eager to explain what they had learned about managing their increasingly complex computing and business infrastructures. But something interesting in happening with the Cloud book. The experience feels very different and I think this is significant.
Our team has been talking to a lot of the vendors — big and small about their products and strategies around the cloud. Some of these vendors focused on some really important problems. Others are simply tacking the word cloud in front of their offerings hoping to get swept up in the excitment. But there is something missing. I think there are two things: there is a lack of clarity about what a cloud really is and what the component parts are. Is it simply Software as a Service? Is it an outsourced infrastructure? Is it storage capacity to supplement existing data centers? Is it a management platform that supports Software as a service? Does cloud require a massive ecosystem of partners? Is it a data center with APIs? Now, I am not going to answer these questions now (I’ll leave some of these to future writings).
What I wanted to talk about was what I see happening with customers. I see customers being both confused and very wary. In fact, the other day I tried to set up a call with a senior executive from a large financial services company that I have spoken to about other emerging areas. This company always likes to be on the forefront of important technology trends. To my surprise, the executive was not willing to talk about clouds at all. Other customers are putting their toes in the cloud (pun intended) by using some extra compute cycles from Amazon or by using Software as a Service offerings like SalesForce.com. Some customers are looking to implement a cloud-like capability within their own data center. Could it be there they are afraid that if they don’t offer something like Amazon’s EC2 cloud that they will be put out of business? Just as likely they are worried about the security of their intellectual property and their data.
I predict that the data center is about to go through a radical transformation that will forever change the landscape of corporate computing. Companies have recognized for a long time that data centers are very inefficient. They have tried clustering servers and virtualizing their servers with some level of success. But the reality is that in time there will be a systematic approach to scalable computing based on the cloud. It will not be a simple outsourced data center because of the transition to a new generation of software that is component based and service oriented. There is a new generation of service management technologies that makes the management of highly distributed environments much more seamless. The combination of service oriententation, service managment, and cloud will be the future of computing.
The bottom line is that while the vendor community sees dollar signs in this emerging cloud based world, the customers are afraid. The data center management team does not understand what this will mean for their future. If everything is tucked away in a cloud what is my job? Will we still have a data center? I suspect that it will not be that simple. At some point down the line we will actually move to utility computing where computing assets will all be based on a consistent set of standards so that customers will be able to mix and match the services they need in real time. We clearly are not there yet. Today there will be many data center activities that either cannot or will not be put into a cloud. Internal politics will keep this trend towards clouds moving slowly.