To Rule the Clouds Takes Software: Why Amazon SimpleDB is a Huge Next Step

One Ring to rule them all, One Ring to find them,
One Ring to bring them all and in the darkness bind them…

J. R. R. Tolkien

There is much interesting cloud-related news in the blogosphere.  Various pundits are sharing a back and forth on the potential for cloud centralization to result in just a very few datacenters and what that might mean.  The really big news is Amazon’s fascinating new addition to their cloud platform of SimpleDB.  Let’s talk about what it all means.

Sun’s CTO, Greg Papadopoulos, has been predicting that the earth’s compute resources will resolve into about “five hyperscale, pan-global broadband computing services giants” — with Sun, in its version of this future scenario, the primary supplier of hardware and operations software to those giants. The last was channeled via Phil Wainewright, who goes on to ask, “What is it about a computing grid that’s inherently “more centralized” in nature?”  He feels that Nick Carr has missed the mark and swallowed Sun’s line hook, line, and sinker.  For his part, Carr’s only crime was to seize on a good story, because at the same dinner, another Sun executive, Subodh Bapat, was telling Carr that sometime soon a major datacenter failure would have “major national effects.”  The irony is positively juicy with Sun talking out both sides of their proverbial mouths.

The tradeoff that Carr and Wainewright are worried about is one of economies of scale that favor centralization versus flexibility and resiliency that favors decentralization.  Where they differ is that Carr sees economies of scale winning in a world where IT matters less and less and Wainewright favors the superior architectural possibilities of decentralization.  Is datacenter centralization inexorable?  In a word, yes, but it may not boil down to just 5 data center owners, and it may take quite a while for the forces at work to finish this evolution.  The factors that determine who the eventual winners will be are also quite interesting, and have the potential to change a lot of landscapes that today are relatively isolated.  Let’s consider what the forces of centralization are.

First, there is a huge migration of software underway to the cloud.  In other words, software that is never installed on your machine or in your company’s datacenter.  It resides in the cloud and comes to you via the browser.  Examples include SaaS on the business side and the vast armada of consumer Web 2.0 products such as Facebook.  No category is safe from this trend, not even traditional bastions as should be clear from the growing crop of Microsoft Office competitors that reside in the cloud.

Second, this migration leads to centralization.  The mere act of building around a cloud architecture, even if it is a private cloud in your own company’s datacenter, leads to centralization.  After all, software is moving off your desktop and into that datacenter.  When many companies are aggregated into a single datacenter, into a SaaS multi-tenant architecture, for example, further centralization occurs.  When you offer a ubiquitous service to the masses, as is the case with something like Google, the requirements to deliver that can lead to some of the largest datacenter operations in the land. 

Third, there are the afore-mentioned economies of scale.  Google has grown so large that it now builds its own special-purpose switches and servers to enable it to grow more cheaply.  The big web empires are all built on the notion of scaling out rather than scaling up, and they run on commodity hardware.  Because they have so many servers, automating their care and feeding has been baked into their DNA.  Not so with most corporate datacenters that are just beginning to see the fruits of crude generic technologies like virtualization that seek to be all things to all people.  Virtualization is a great next step for them, but there are bigger steps ahead yet that will further reduce costs.

Fourth, the ultimate irony is that centralization begats centralization through network effects.  This is the story of the big consumer web properties.  Every person that joins a social network adds more value to the network than the prior person did.  The value of the network grows exponentially.  This connectedness is facilitated most easily in today’s world by centralization.  Vendors that start to get traction increase their network effects in various ways:  Amazon charges to bring data in and out of their cloud, but not to transfer between services within the cloud.

Lastly, there are green considerations at work.  The biggest costs associated with datacenters these days are around electricity and cooling.  Microsoft is building a data center in Siberia, which is both cold and pretty central to Asia.  Consider this:  given the speed of light over a fiber connection, what is the cost of latency in having a data center somewhere far north (and cold) in Canada like Winnipeg versus far south (and hot) like Austin, Texas?  It’s 1349 miles, which, as the photon travels (186,000 miles per second) is about 7.2 milliseconds.  The world’s fastest hard drive, the nifty Mtron solid state disks I’m now coveting thanks to Engadget and Kevin Burton, can only write a paltry 80K or so bytes in that time:  not even enough for one photo at decent resolution.  So consider a ring of datacenter clusters built in colder regions.  Centralized computing is up north where the cold that computers like is nearly free for the asking: just open a window many days.  Or come closer.  Put it up on a mountain peak.  Immerse it near a hydro dam and get the juice cheaper too.  It doesn’t matter.  Laying fiber is pretty cheap compared to paying the energy bills.

The next question is trickier: how do these clouds compete?  Eventually, they will become commoditized, and they will compete on price, but we are a long ways from that point.  At least 10 years or more.  Before that can happen, customers have to agree on what the essential feature sets are for this “product”.  I believe this is where software comes into play, and that should be a matter of great concern for the hosting providers of today whose expertise largely does not revolve around software as a way to add value.   As Eric Schmidt said (via Nick Carr) when he started saying Google would enter this market:

For clouds to reach their potential, they should be nearly as easy to program and navigate as the Web. This, say analysts, should open up growing markets for cloud search and software tools—a natural business for Google and its competitors.

Some will immediately react with, “Hold it a minute, what about the hardware?  What about the network?”  The best of the cloud architectures will commoditize those considerations away.  In fact, commoditization will start down at the bottom of the technology stack and work its way up.  The first stage of that, BTW, is already almost over.  That was the choice of CPU.  MIPS?  PowerPC?  SPARC?  No, Intel/AMD are the winners.  The others still exist (not all of them!), but they’ve peaked and are on their way down at various terminal velocities.  Their owners need to milk them for profit, but it would be a losing battle to invest there.  Even Macs now carry Intel inside, and Sun now carries the ticker symbol “JAVA”, a not-so-subtle hat tip to the importance of software.

Hardware boxes are largely a dead issue too.  There is too little opportunity to differentiate for very long and the cpu’s dictate an awful lot of what must be done.  Dell is an assembler and marketer of the lowest cost components delivered just in time lest they devalue in inventory.  Sun still pushes package design, and it may have some relevance to centralization, but this will be commoditized because of centralization.

Next up will be the operating system.  Again, we’re pretty far down the path of Linux.  Corporations still carry a lot of other things inside their firewalls, but the clouds will be populated almost exclusively with Linux, and we could already see that has happened if we could get reliable statistics on it.  Linux defines the base minimum of what a cloud offering has to provide:  utility computing instances running Linux.  This is exactly what Amazon’s EC2 offers.

What else does the cloud need?  Reliable archival storage.  Again, Amazon offers this with S3.  Cloud consumers are adopting it in droves because it makes sense.  It’s a better deal than a raw disk array because it adds value versus that disk array for archival storage.  The value is in the form of resiliency and backup.  Put the data on S3 and forget about those problems.  This begins the commoditization of storage.  Is it any wonder that EMC bought VMWare and that a software offering is now most of their market cap?  Hardware guys, put on your thinking caps, this will get much worse.  What software assets do you bring to the table.

3Tera is a service I’ve talked about before that has a very similar offering available from multiple hosting partners of theirs.  They create a virtual SAN that you can backup and mirror at the click of a mouse.  They let you configure Linux instances to your heart’s content.  Others will follow.  IBM’s Blue Cloud offers much the same.  This collection is today’s blueprint for what the Cloud offers in terms of a platform.

But, this platform is a moving target, and it will keep moving up the stack.  Amazon just announced another rung up with SimpleDB.  For most software that goes into the Cloud, once you have an OS and a file system, the next thing you want to see is a database.  Certainly when I attended Amazon Startup Project, the availability of a robust database solution was the number one thing folks wanted to see Amazon bring out.  The GM of EC2 promised me that this was on the way and that there would be several announcements before the end of the year.  First we saw the availability of EC2 instances that had more memory, disk, and cpu, so that they’d make better database hosts.  SimpleDB is much more ambitious.  It’s a replacement for the conventional database as embodied in products like mySQL and Oracle that was designed from the ground up to live in a cloud computing world.  At one stroke it solves a lot of very interesting problems that used to challenge would-be EC2 users around the database.

Along the lines of my list of factors that drive data center centralization, Phil Windley says the economics are impossible to stop.  Scoble asks whether MySQL, Oracle, and SQL Server are dead:

Since Amazon brought out its S3 storage service, I’ve seen many many startups give up data centers altogether.

Tell me why the same thing won’t happen here.

There is no doubt in my mind that all startups will give up having datacenters altogether before this ends.  However, before we get too head up in assuming that SimpleDB gives us that opportunity, let’s drop back and consider what it’s limitations are:

- It is similar to a relational database, but there are significant differences.  Code will have to be reworked to run there, even if it doesn’t run afoul of the other issues.

- Latency is a problem when your database is in another datacenter from the rest of your code.  Don MacAskill brings this one up, and all I can say is that this is another network effect that leads to more centralization.  If you like Simple DB, it’s another reason to bring all of your code inside Amazon’s cloud.

- All fields are strings, and they are limited to 1024 characters.  Savvy developers can use the 1024 characters to find unlimited size files on S3, as well as other methods like combining fields to get around this limit.  Mind you, a lot can be done with that, but it is again a difference from traditional RDMS systems and it means more work for developers that must overcome the limitation.

- There are no joins, if you want them (and many proponents of hugely scalable sites view joins as evil), you have to roll your own. 

- Transactions and consistency are also absent.  Reads are not guaranteed to be fully up to date with writes.

- There is no indexing and a whole host of other trappings that database afficionados have gotten comfortable with.

Mind you, serious web software is created within these limitations including some at Amazon itself.  In exchange for living with them, you get massively scalable database access at good performance and very cheaply.  And, as Techcrunch says, you may be able to get rid of one of the highest cost IT operations jobs around, database administration, and your costs are even lower.  Remember my analysis that shows SaaS vendors need to achieve 16:1 operations cost advantages over conventional software and you can see this is a big step in that direction already.

There is no doubt that cloud computing will be massively disruptive, and that Amazon are well on their way in the race to plant their flag at the top of the mountain.  The pace of progress for Amazon Web Services has been blistering this year, and much more hype free than what we’ve gotten from the likes of Google and Facebook when it comes to platform speak.  It’s almost odd that we haven’t heard more from these other players, and especially from the likes of Google.  GigaOm says that Simple DB completes the Amazon Web Services Trifecta.  They go on to say that Amazon’s announcements have the feel of a well thought out long term strategy, while Google’s make it sound like the ad hoc grab bag of tools.  I think that’s true, and perhaps reflective of Google’s culture, which is hugely decentralized to the point of giving developers 20% free time to work on projects of their choosing.  The problem is that such a culture can more easily give us a grab bag of applications, as Google has, than it can provide a well-designed platform, as Amazon has.  Or, as Mathew Ingram puts it, while everyone else was talking about it, Amazon went ahead and did it.

I’ve talked to a dozen or so startups that are eagerly working with the Amazon Web Services and having great success, as well as some frustrations.  They require rethinking the old ways.  Integrity issues are particularly different in this brave new world, as are issues of latency.  That matters to how a lot of folks think about their applications.  Because of the learning curve, I don’t plan to go out and short Oracle immediately, but the sand has started running in the hourglass.  There will be more layers added to the cloud, and over time it will become harder and harder to ignore.  There will be economic advantage to those who embrace the new ways, and penalties for those who don’t.  This is a bet-your-business drama that’s unfolding, make no mistake.  At the very least, you need to get yourself educated about what these kinds of services offer and what they mean for application architecture.

Business located low in the stack I’ve mentioned will be hit hard if they don’t have a strategy to embrace and win a piece of the cloud computing New Deal.  We’re talking hardware manufacturers like Sun, Dell, IBM, and HP.  Software infrastructure comes next.  Applications that depend on low cost delivery, aka SaaS, are also very much in the crosshairs, although probably at a slightly later date.

Welcome to the brave new world of utility cloud computing.  Long live the server, the server is dead!

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Scalability is a Requirement for Startups

Dharmesh Shah wonders whether startups should ignore scalability:

You’re worrying about scalability too early. Don’t blow your limited resources on preparing for success. Instead, spend them on increasing the chances that you’ll actually succeed.

It’s an interesting question: should startups worry about scalability, or does that get in the way of finding a proper product/market fit?  If you’ve read my blog much you’ll know that I view achieving that product/market fit as the highest priority for a startup, and I’m not alone, Marc Andreesen says it too.  I think this is so important that I have advocated some relatively radical architectural ramifications to help facilitate the flexibility of a product so it can evolve towards that ideal even faster.

But where does scalability fit in?  Can you achieve that product/market fit without it?  For most startups, I think it is either difficult to verify a true product/market fit without it, or worse, you may achieve it only to immediately fall to earth a victim of poor user experience.  There are certainly plenty of examples of companies that started out great, seemed to have that product/market fit, but got into persistent hot water because they couldn’t scale out a good user experience when their site began to take off.  Fred Wilson writes recently about his love/hate relationship with Technorati, which has been a good example of this.

Here is another question, “How much success do  you need to verify product/market fit?”  Signing up a few customers to a beta, or even having a large beta is not really enough in my opinion.  It’s pretty easy to get a ton of people to try something that sounds sexy and is promoted well.  The question is whether that really takes well enough.  Marc Andreesen’s Ning is a good example.  When they launched their original product it required a fair amount of custom programming to create a custom Social Network.  They had 30,000 social networks created even so, but the service wasn’t taking off.  Michael Arrington was calling it R.I.P.  Then they released a version that eliminated the need for programming and suddenly the product/market fit was there and it took off like a rocket, crossing 100,000 social networks in record time.  Clearly Ning had to deal with scalability before they could learn much about their product/market fit.

Google is another great example of this.  They had to scale from day one because of the problem they were solving.  Om Malik says their infrastructure and ability to scale is actually their strategic advantage.  Certainly the nature of the problem Google wanted to solve required scalability from day one.  This is how Aloof Schipperke wants to view the question when he says, “Scalability is a requirement, not an optimization.”  It’s a bit of a double entendre.  One could say it is a requirement that all startups deal with it, or one could say startups need to evaluate whether scalability is a requirement in their domain.  I’m in that latter camp.  Figure out what success really looks like.  When do you know you have product/market fit?  Be conservative.  What are the requirements to get there?  Aloof lumps scalability in with other “ilities”.  Can your startup reach product/market fit without security, for example?  The answers may surprise you if you’re really honest about it.

Chances are, you may have to do more to be sure about product/market fit than you are comfortable with in release 1.0.  You’ll need a phased plan for how to get there.  Lest you use this as an excuse to ignore scalability until the last minute, keep in mind that these phased plans should have short milestones.  Quarterly or six month iterations at most.  Scaling a really poorly architected application can amount to a painful rewrite.  So do a phasing plan for scaling.  What are the big ticket items you’ll need to enable early so that scaling later is not too hard?  There are a few well-known touchpoints that can make scalability easier.  I’m not going to go over all of them, you know what I’m talking about:  statelessness, RESTful web services, and beware the database.  If you don’t know about these things, get some people on your team who do!  It’s not hard to start out with a plan in mind about your eventual scalablity and just make sure that along the way you don’t inadvertently shoot yourself in the foot.  It usually boils down to securing the two ends of the puzzle with good scalability:

- How will the client side web servers scale?

- How will the database back end scale?

Make a plan for what it will look like when it’s done, and put phased milestones in place to get there over time. 

Here’s another key issue.  Dharmesh’s original question assumes scalability and user/experience compete for scarce resources.  Ed Sim somewhat follows this path too when he writes that it’s hard to sell Scalability.  Aren’t we talking about the tradeoffs between UI/Features and Infrastructure (web or DB)?  Are the same engineers really doing both things?  It seems to me a lot more common to have a “front end” or application group and a “back end” or infrastructure group, even if “group” is a bit grandiose for a couple of people.  Take the opportunity to map out how the modules produced by these two groups will communicate.  Make that communication architecturally clean so the groups are decoupled.  Make the communication work the way it will when you build out scalability, but then don’t build it out at first.  This will enable the infrastructure group’s agenda to decouple from the user experience guys. 

BTW, if you’re thinking the true competition between the two is you want to hire all user experience people with your capital and no infrastructure, that just sounds like a bad idea to me.  It’s hard to deliver good user experience if your infrastructure is lousy, buggy, and doesn’t perform.  There are ample studies that show the speed with which your application serves up pages is a big contributor to user experience as well. 

I’ve gone down this path before of having essentially two small teams and making sure there was clean communication between their code from the start.  My company PriceRadar was lucky enough to land a partnership with AskJeeves early on.  Part of the deal was we had to pass a load test that showed we could handle 10,000 simultaneous users hammering our application.  At the time, most of my experience and developers were from the Microsoft world, so we were .NET all the way.  I remember meeting with the advisory board for a company called iSharp.  It was an all-star cast of web application CTO’s and VP’s of Engineering.  We went around the table to hear what everyone was doing.  I was the only Microsoft guy in the room, and the Unix crowd just laughed when I told them we had to pass this big load test.  AskJeeve’s CTO was there as well as the fellow in charge of AOL Instant Messenger and about 10 others.  They flat said it was impossible on Unix.  In less than a month we had it all working with a distributed grid architecture.  The front end guys were never even involved and changed little or no code.  The back end guys didn’t sleep much, but they emerged triumphant.  And the entire team was about 10 developers, per my small team mentality.

Yes Virginia, you should worry about your scalability, but it need not be all consuming.  You can handle it.

One Cloud, Two Clouds, Four Clouds, More?

GigaOm writes recently that the world may only need 5 clouds, echoing a misquote attributed to Thomas J. Watson at IBM.  Nick Carr is much closer to the likely outcome when he writes about Vertical Clouds, an interesting article well worth a read.

The reality is that we have not yet settled on exactly what product the clouds are offering.  Today, we’re at the lowest common denominator of Linux dial tone along with bulk storage.  That’s Amazon EC2 and S3 in a nutshell.  It may be that after a suitable period of consolidatin the world only needs 5 or so Linux dial tone offerings.  Given the number of nearly identical services offering web and email servers, we seem to be a long long ways from that consolidation.

I like Carr’s idea better.  Linux dial tone is useful, but doesn’t ultimately doesn’t take utility computing very far along the path to its true potential.  That potential extends well beyond broadly generic services and into vertically oriented spaces just as non-cloud computing products do.  Just take a look at the plethora of database offerings alone.  There are Open Source databases like MySQL, column store and other specialized DB’s for Business Intelligence, Enterprise mainstays like Oracle and DB2, database hardware like Teradata, and so on.  Each of these is filling a particular niche and ecosystem.  Each of those niches can spawn at least one specialized cloud to service the interests of the niche.  The clouds are a long ways from being mature enough to start taking on multiple niches at once.

The linkages between clouds will also be interesting.  Someone remarked to me that the problem with the cloud is there isn’t just one, there are many, and there are walls between them.  We’re starting to see those walls break down in some cases.  Look at the offer by Joyent to do hosting of Facebook apps.  The offer is free to the first 3500 developers to sign up.  How do they do it?  By means of a special cloud-to-cloud link:

There is also no latency. We have set up a direct physical fiber optic line between the Joyent data center and Facebook’s data center. Somewhere under San Francisco bay, there is a multiple-gigabit-per-second fiber line capable of pumping massive traffic.

Fiber is remarkably cheap.  I would expect to see more partnerships between non-competing cloud vendors who provide connections between their clouds that offer advantages in terms of bandwidth, cost for bandwidth, and latency just like this example.  Imagine you’re creating an enterprise application of some kind.  Perhaps it’s even CRM and you want to host a component on Force.  But, Force is expensive, and you don’t want everything there.  Perhaps you’ll also need a connection to WebEx so you can do teledemos with customers.  Lastly, you want some kind of Business Intelligence capability that goes well beyond what Force offers.  Now let’s suppose you discover a utility computing vendor that has special cloud connections out to Force and WebEx, and offers BI capabilities as part of their service.  That would be exciting to you, and probably to a lot of other vendors.

Here’s another one that matters: geography.  Which geographies does your cloud vendor cover and how does that map back to your business.  Amazon recently announced the ability to target S3 data to their European datacenter.  Much more will follow.  Connections to the CDN’s will also factor in here.  There are a lot of other scenarios that could develop.  Suppose Facebook decides hosting is a way to monetize.  If you want to tie into their Social Graph database, you have to build your application in their cloud.  Hmmm.  That’s a head scratcher.  What could companies like Google do by persuading you to move into their cloud?  What if there was an economic rational to save both parties money by colocating?  Perhaps it becomes cheaper for Google to search your content and part of that savings is passed on to make it cheaper for you to host your content inside Google’s cloud. 

Get ready for a lot of complexity and choice to be injected to the cloud computing picture.  The connections that take place between different categories of Enterprise software are pretty well understood.  What’s less well understood is how they will manifest themselves as connections between clouds.  It seems clear that there are many opportunities for success out there.  Many more than just five clouds will be needed.  In fact, Business Development people should take note: before too long, a piece of the puzzle will involve asking which clouds are directly connected to which other clouds? 

Cloud computing is about to get much more interesting!

Will MS Office Or Oracle Be Slaughtered First By The Cloud?

There’s a spate of articles about the new Live Documents service, a cloud-based SaaS challenger to Microsoft Office.  Like any good entrepreneur, CEO and founder Sabia Bhatia claims his new baby and it’s relatives will displace MS Office by 2010.  That’s right around the corner, but wildy optimistic.  ZDNet’s Dan Farber calls these cloud Office wannabes “ankle biters”, and with good reason.  They don’t come close to posing a threat to Microsoft yet.  It’s not for lack of trying.  There’s a pretty good crowd of them out there now.  Live Documents has joined a cast that includes Google, Zimbra (now owned by Yahoo), Zoho, ThinkFree, Adobe, and others.

Why can’t these guys take over by 2010?  Because every story you read is largely a man bites dog story.  There’s little to no discussion of amazing new features these products offer that would give a reason to switch.  The mere fact that products calling themselves Office equivalents can exist in the cloud without needing to be installed seems to be newsworthy enough.  There are no great roundup reviews that are getting big attention in the blogosphere that play them off against each other.  What one does find are articles telling us about the introduction of features that seem painfully elementary.  It wasn’t so long ago that the Google Spreadsheet learned how to hide columns, for example.  Even as TechCrunch writes “While Live Documents Yaps, Zoho Delivers,” Stowe Boyd writes that he can’t get Zoho to play nicely with Google Gears, even though the ability to work disconnected is the big newly announced feature for Zoho.  Apparently the Live Docs messaging annoys Michael Arrington, who writes:

New product press releases unencumbered by the complexities of releasing actual software set off alarm bells. And when those press releases are so boastful as to suggest that the (unlaunched) product can hurt a competitor’s $20 billion revenue stream, the alarm bells get much louder…

So far Live Documents is nothing more than bullshit and smokescreens. That may have been the way to do business when Bhatia co-founded Hotmail in 1996, but his software is going to have to survive on its own in a hyper competitive marketplace when it actually launches. Hubris alone won’t do it.

From my perspective, this matter-of-fact let’s paste together a bunch of things out on the web and not worry too much if they work well is a problem for an Office Killer.  The Microsoft Office represents basic literacy in the business world.  Give it up and you may find you’re unable to speak the lingua franca of others you must communicate with day to day.  Real challengers have to keep this in mind.  I was a General in the last Office Suite Wars, having fathered Quattro Pro at Borland.  We made considerable inroads (Quattro Pro sold on the order of $100 million its first year) but ultimately fell by the wayside because we lacked a word processor to go with our suite.  The one thing I can tell you is that absolute 100% compatibility with the market leader at the time together with significant innovation over that market leader and significant economic advantage (we were much cheaper at the outset) were key to the success we did achieve.  I don’t have a sense these upstarts have achieved any of these ideals.

There is a market that I think is more interesting when we look at who might become a Cloud Casualty sooner rather than later.  I’m speaking of Oracle, of course, and specifically of the database server business.  MySQL appears poised for an IPO, but beyond that there is a raft of contenders out there who have achieved a lot relative to Oracle.  There are fairly Oracle compatible products like Enterprise DB.  There are products that have serious innovations such as the column-based DB’s.  And the economic advantages are undeniable.  Unlike the Office Suite arena, it gets harder and harder to find significant killer features that Oracle offers that don’t exist in the Open Source DB world.  We’ve seen extremely large web sites powered by MySQL and some of these others, for example.  It would be hard to claim Oracle is dramatically more scalable in the face of the evidence, although one can likely conclude it remains easier to scale and more performant. 

The problem is that the costs associated with Oracle licenses are positively usary.  A friend who runs a SaaS company says his Oracle costs are bigger than his hardware costs.  I asked him why he continues to use it and he indicated his CTO was convinced he had to for scalability.  At my last company, Callidus, we ran some tests and were surprised at how performant these solutions were compared to Oracle.  I believe that currently, it’s an inertia thing.  People are sure they can get Oracle to scale, they have people on board who know how, and unless cost is a serious issue from the get go (as it can be with startups focused on ad revenues), the tried and true is chosen.  When enough people have experience scaling MySQL and its relatives, that inertia will have gone away.  Venture Capitalists tell me most of their portfolio companies are there.  As companies built on technologies like MySQL mature and people move on to other jobs, the word spreads.  Businesses running old-school on-premises software will be the last bastions for that inertia, but realistically, I’ve still talked to members from that elite group who are keeping COBOL CICS and IBM AS400 software alive. 

It won’t take an awful lot of shift before Oracle feels the pain.  The problem is that Oracle depends on this business as a cash cow to finance it’s other expansion.  Knock 20-25% off the top through erosion to these upstarts and it will dramatically change the Oracle profit picture for the worse.  Here’s another interesting strategic point to consider: utility computing ties together larger tectonic plates that can result in greater and more sudden market shifts.  Imagine companies like Amazon deciding to offer database dial-tone in their rent-a-clouds.  The database is the most labor intensive and problematic piece of software in the whole suite.  If someone automates those problems away, promises scalability on a utility computing grid, and handles normal SQL, many will rush at the opportunity.  Such aggregation of users can drive a lot of license fees away in a hurry.  They also take away a lot of the intertia issue in a couple of ways.  First, the cloud service has to deal with the operational knowledge required for server care and feeding.  Customers won’t have to.  Second, these cloud vendors are no small shakes.  Names like Amazon, Google, and Microsoft are bandied about.  The fear of dealing with some Open Source vendor that is viewed as too small and flakey is greatly ameliorated.  An additional sweetener is that the competitive strength of users of such services would be much greater versus their competitors who still use expensive Oracle and have to manage the servers themselves.

Despite interest by folks like Nick Car in LiveDocuments, breaking Oracle’s strangehold on the database world is a more likely spot for the disruption of the old school to show up first.  It would mark quite a change.

Cloud Computing in Someone Else’s Cloud: The Future

Ever hear of a fabless chip company?  This is a company that sells Integrated Circuits but owns no manufacturing facilities.  They just write software, in effect, and send it out to someone else’s fab.  Brilliant.  Many kinds of manufacturers often do the same.  After all, manufacturing may not be the distinctive competency of a company, or the company may achieve better economies of scale by using centralized manufacturing owned by much large companies.

This is starting to happen big time with web software.  IBM just announced they’re going to join Amazon in the cloud computing business with “Blue Cloud”.  Companies will be able to buy capacity in someone else’s cloud which they sell as their own.  No need to own any hardware or even visit a colo center.  Why would you want to own a datacenter if you didn’t have to?  Why would you think you can do it as well as Amazon or IBM?  Many others including Yahoo, Google, and Microsoft will be a part of this future.  Sun is already there with Sun Grid. 

So far, the formulas are pretty similar.  IBM and Amazon are both Linux-based systems built on virtualization software.  At some point, if enough hardware capacity is locked up in this rental data centers, it will become an important sales channel for all server hardware manufacturers.  Take Dell for example.  They’ve always sold direct.  Shouldn’t they consider this kind of business, especially when other hardware companies are going there?  What about HP?  Look at it as a way for hardware makers to switch from the equivalent of perpetual licensing to the SaaS rental model. 

What about Microsoft?  Can .NET be as successful if they don’t build a Cloud Computing Service that is .NET based?  Seems to me this is a strategic imperative for the OS crowd lest Linux steal the show.  Sun is already there with Solaris on Sun Grid.  This is the system my old alma mater Callidus Software uses to host their SaaS solution and it works well.  IBM is not missing the chance to offer PowerPC as well as x86 servers for Blue Cloud.  IBM is also partnering with Google around Cloud Computing, so there may be all sorts of interesting bedfellows before this new paradigm is done rolling out.

A great example that’s being written about by Scoble and others is Mogulus.  CEO Max Haot says they don’t own a single server, it’s all being done on Amazon, and yet they’re serving live video channels to 15,000 people with just over $1M in funding.  You’ve got to love it!  A number of other serverless and near serverless companies commented on Scoble’s post if you want to see more.  These big guys are not the only ones in the business.  Certainly companies like OpSource and Rackspace count too. 

There are many potential advantages, and a few pitfalls.  First the advantages: it’s a whole lot easier and cheaper to build out your infrastructure this way.  Why have anything to do with touching or owning any real hardware?  How does that add value to your business?  The real innovators will make it easy to flex your capacity and add more servers on extremely short notice.  Take a look at your average graph of web activity:

This is traffic for cnn.com.  Notice how spikey it is?  Those are some big spikes.  If you web service hits one, you must either have a ton of extra servers on tap, or deal with your site getting painfully slow or going down altogether.  With a utility computing or grid service such as Amazon EC2, you can provision new servers on 10 minutes notice, use them until the load goes away, and then quit paying for them.  Payment is in 1 hour increments. 

I know a SaaS vendor whose load doubles predictably one week out of every month because of what his app does.  He owns twice the servers to handle this peak.  He’s growing fast enough at the moment that he doesn’t sweat it much, but at some point, he could really benefit by flexing capacity.

Now let’s talk about downsides.  First, most software doesn’t just run unchanged on these utility grids.  Even if it did, most software isn’t written to dynamically vary it’s use of servers.  Adding servers requires some manual rejiggering.  Amazon has a particularly difficult pitfall: you have to write your software to deal with a server going down without warning and losing all it’s data.  In fairness, you should have written your software to handle that anyway because it could happen that you whole machine is toast, but most companies don’t start out writing software that way.  There are companies, Elastra is one, that purport to have solutions to these problems.  Elastra has a MySQL solution that uses Amazon’s fabulously bulletproof S3 as it’s file system.

The second issue isn’t so much a downside really.  We can’t blame these services for it at any rate.  What I’m talking about is automation.  To really take advantage here you need to radically increase your automation levels.  I recently saw a demo of some new 3Tera capabilities that I’ll be writing about that help a lot here.

The bottom line?  You’re missing out if you’re not exploring utility computing: it can save you a bundle and make life a lot easier.  The subtext is that there are also a lot of new technologies, vendors, and partnerships coming down the pipe to help maximize the benefits.

Related Articles

Nick Carr picks up the theme.  One of the commenters raises an excellent point.  Using an IBM or Amazon gives peace of mind to customers of small startups.

Interview With 3Tera’s Peter Nickolov and Bert Armijo, Part 3

Overview

3Tera is one of the new breed of utility computing services such as Amazon Web Services. If you missed Part 1 or Part 2 of the interview, they’re worth a read!

As always in these interviews, my remarks are parenthetical, any good ideas are those of the 3Tera folks, and any foolishness is my responsibility alone.

Utility Computing as a Business

You’ve sold 100 customers in just a year, what’s your Sales and Marketing secret?

3Tera:  We’re still in the early growth phase, our true hockey stick is yet to come, and we expect growth to accelerate.  Right now we’re focused on getting profitable.

We don’t have a secret, really.  We have a very good story to tell.  We’re attending lots of conferences, we’re buying AdWords, we’re getting the word out through bloggers like yourself, and we’re getting a lot of referrals from happy customers.

The truth is, the utility computing story is big.  People hear about Amazon and they start looking at it, and pretty soon they find us.  It’s going to get a lot bigger.  If you read their blogs, Jonathan Schwartz at Sun and Steve Ballmer at Microsoft are out talking to hosters.  Hosting used to be viewed as a lousy business, but the better hosters today are growing at 30-40% a year.  This is big news.

Bob:  (I think their growth in just a year has been remarkable for any company, and speaks highly to the excitement around these kinds of offerings.  Utility computing is the wave of the future, there is a ton of software moving into the clouds, and the economics of managing the infrastructure demand vendors take a look at offerings like 3Tera.  We’re only going to see this trend getting stronger.)

Tell us more about your business model

3Tera:  We offer both hosted (SaaS) and on-premises versions.  As we said, 80% choose the hosted option.  The other 20% are large enterprises that want to do things in their own data center.  British Telecom is an example of that.

We sell directly on behalf of our hosting providers, and there are also hosting providers that have reseller licenses.  Either way, the customer sees one bill from whoever sold them the grid.

Bob:  (This is quite an interesting hybrid business model.  Giving customers the option to take things on-premises is interesting, but even more interesting is how few actually take that approach:  just 20%, and those mostly larger enterprises.  It would make sense to me for a vendor looking to offer both models to draw a line that forces on-premises only for the largest deals anyway.  3Tera’s partnering model with the hosting providers is also quite interesting.)

How do you see the hosting and infrastructure business changing over time?

3Tera:  There are huge forces at work for centralization.  Today, if you are running less than 1000 servers, you should be hosting because you just can’t do it cost effectively yourself.  Over time, that number is going up due to a couple of factors.

First, there is starting to be a lot of regulation that affects data centers.  Europe is already there and the US is not far behind.  There are lots of rules surrounding privacy and data retention, for example.  If I take your picture to make a badge so you can visit, I have to ask your permission.  I have to follow regulations that dictate how long I can keep that picture on file before I dispose of it.  All of this is being expressed as certifications for data centers such as SAS-70.  There are other, more stringent standards out there and on the way.  The cost of adhering to these in your own data center is prohibitive.  Why do it if you can use a hosted data center that has already made the investment and gotten it done?

Second, there are simple physics.  More and more datacenters are a function of electricity.  That’s power for the machines and power for the cooling.  I talked to a smaller telco near hear recently that was planning to do an upgrade to their datacenter.  This was not a new datacenter, just an upgrade, and not that big a data center by telco standards.

The upgrade involved needing an additional 10 megawatts of power.  The total budget was something like $100 million.  These are big numbers.  The amount of effort required to get approval for another 10 megawatts alone is staggering.  There are all kinds of regulations, EPA sign offs, and the like required.

Longer-term, once you remove the requirement for humans to touch the servers, it opens up possibilities.  Why do we put data centers in urban areas?  So people can touch their machines.  If people didn’t have to touch them, we’d put the data centers next to power plants.  We’d change the physical topology and cooling requirements to be much more efficient.

We want people to think of servers the way they think about fluorescent tubes in the office.  If a light goes out, you don’t start paging people and rushing around 24×7 to fix it.  You probably don’t fix it at all.  You wait until 6 or 8 are out and then you send someone around to do it all at once, so it’s cost effective.  Meanwhile, there is enough light available from other tubes so you can live without it.  It’s the same with servers once they’re part of a grid.

Conclusion

The changes in the industry mentioned at the end of the interview are quite interesting.  Legislation is not one I had heard about, but it makes total sense.  Power density is something I’d heard about from several sources including the blogosphere, but also more directly.  I met with one SaaS vendor’s Director of IT Operations who said the growth at their datacenter is extremely visible, and he mentioned they think about it in terms of backup power.  When the SaaS vendor first set up at the colo facility, it had 2 x 2 Megawatt backup generators.  The last time my friend was there that number had grown to 24 units generating about 50 megawatts of backup power.  For perspective, an average person in the US uses about 12,000 watts, so 50 megawatts is enough for a city of over 4,000 people.

Another fellow I had coffee from this morning runs all the product development and IT for a large well-known consumer focused company on the web.  He mentioned they now did all of their datacenter planning around power consumption, and had recently changed some architectures to reduce that consumption, even to the point of asking one of their hardware vendors to improve the machinery along those lines.

These kinds of trends are only going to lead to further increases in datacenter centralization and more computing moving into the cloud to increase efficiency, centralize management to make it cheaper, and load balance so fewer watts of energy need be consumed idling.

Interview With 3Tera’s Peter Nickolov and Bert Armijo, Part 2

Overview

3Tera is one of the new breed of utility computing services such as Amazon Web Services.  If you missed Part 1 of the interview, it’s worth a read!

As always in these interviews, my remarks are parenthetical, any good ideas are those of the 3Tera folks, and any foolishness is my responsibility alone.

What can a customer do with your system, and what does it do for them?

3Tera:  AppLogic converts applications, all of the load balancers and databases, firewalls and Apache servers, to metadata. This is done simply by drawing the topology of the application online, as if it were a whiteboard.  Once that’s done, your application becomes completely self-contained. It’s portable and scalable. In fact, it literally doesn’t exist as an app until you run it, at which point AppLogic instantiates it on the grid.

A 2-tier LAMP stack application can be set up in 5 to 10 minutes.  Once you’re done, you can operate your application as easily as you open a spreadsheet. Starting, stopping, backup and even copying are all single commands, even for applications running on hundreds of cpus. You can also scale resources up and down, from say 1 ½ cpus to 40 cpus, which covers a range of say 6 to 3000 users. You can make copies, or even move it to another data center. 

To make it easy to use existing software, we have what we call Virtual Appliances, which are a combination of virtual machine, virtual network and virtual storage that act together. You can install almost any Linux software in a virtual appliance and then manage the appliance as a unit, which is better than having to go machine by machine.
Applications are then created by simply dragging and dropping Virtual Appliances on an online whiteboard, and become a type of template.  We offer a bunch of these already configured for lots of common applications like the LAMP Stack, and there’ s even one for hosting Facebook applications that somebody did.  Probably half our customers bring everything up with these pre-defined Virtual Appliance templates and they never change anything there, they just run.

In a couple of weeks we’ll introduce new functionality we call Dynamic Appliances, a sort of Infrastructure mash-up, that let’s you package data center operations in the same way.  You can implement performance based SLA’s, offsite backups, and virtually any other policy.  Once added to an application, the app will then manage that function for itself, becoming more or less autonomous.

Our larger Enterprise customers have told us how hard it is (impossible really) to implement standard policy across several hundred applications, but we make it easy with Dynamic Appliances because you’re dealing with the needs of just the specific application.

The bottom line is we eliminate the need for human hands to touch the servers.  You can do it all remotely, and we make it possible to automate most things.  You can configure, instrument, and manage even the largest online services with a web browser.

Bob: (I’ve spoken to a number of people about the 3Tera system, and they all confirm how expensive and painful it is to setup and manage servers.  Jesse Robins over on O’Reilly Radar recently wrote a post called “Operations is a competitive advantage” that talks about exactly what 3Tera offers.) 

What kind of technology is behind these capabilities?

3Tera:  There’s quite a lot, as you can imagine.  Let’s take storage as just one example.  We decided up front that we needed to run entirely on commodity hardware because it keep’s our customer’s costs low.  There are no hardware SAN’s or NAS storage as a result—we work entirely off the local disks attached to the servers in the grid.

But, we also felt users needed redundancy and high-performance. The solution - we’ve written a virtual SAN that runs within the grid, controlling all the available storage out on the grid. Our volume manager runs on top of this and makes mirroring totally painless.  If you lose your disk or a server, access to data isn’t interrupted and we’ll mirror that same data again as well. 

People complain that Amazon has no persistent storage, but Amazon didn’t need to have persistence for their application, so you can’t blame them.  If you choose the same architecture as them, it works great, but if not, you have a lot more work to do.  The trouble is, all the apps we see need persistence for their databases, so we gave it to them.  We’re offering infrastructure that matches the common architectures everyone uses.

The other important foundation for the service is our component assembly technology. This is what allows AppLogic to capture infrastructure definitions using the whiteboard metaphor and package the application. More importantly, it’s what allows AppLogic to then convert that into running applications on the grid.

Bob: (I thought the virtual SAN was very cool.  It will be interesting to see how Amazon addresses the persistence problem.  There are several companies working on a solution for mySQL, but I suspect Amazon has their own internal efforts as well.  OTOH, Amazon’s S3 has a lot of fault tolerance that seems to go a bit beyond 3Tera’s out of box capabilities.  The truth is that a finished complex application will require a number of different capabilities in this area ranging from the immediate problem of keeping the database up to the problems of making sure their are good off-site backups and replication.)

Who are your competitors?

There really isn’t much of anyone unless you want to think of Amazon as a competitor.  We don’t, though, because most users are coming from collocation or managed service providers today.

Challenges for Utility Computing

What concerns do your prospects have when you first meet with them?

3Tera:  Their first concern is how long it will take to learn the system.  It turns out its really easy, and most users are up and running in a couple weeks.  Just to make sure customers know we’re going to make them succesful, we put together a program we call the Assured Success Plan.  It’s designed to take a customer from zero to full production in 2 to 4 weeks.  We charge $300/month for it.

Customers who sign up for the Assured Success Plan get a 1:1 relationship with an assigned 3Tera engineer.  They communicate via WebEx and teleconference.  Their first session is an orientation, and their homework is to just install some app on a grid.  The engineer and customer choose which app.

The second session, they go over the homework, and then they start talking about how to fit the customer’s app onto a grid.  By the third session, they’re ready to try to install the app.  The customer is asked to make a first go of it, and then the 3Tera engineer goes over how the customer did it and gives feedback on how to do better.

The fourth session is really interesting.  Here the customer tests failures and learns to deal with it.  It’s really easy with our management tools to simulate a failure anywhere in the grid.  So the customer practices failure management and recovery.  Most customers never get a chance to thoroughly test these failures when building out with physical servers because the time and cost is prohibitive, so we’re adding a lot of value going through the exercise.  The customer, meanwhile, is getting comfortable that they can manage the system when the chips are down.

Bob: (The assurance program sound like an excellent and very practical introduction and training for the system.  This is classic SaaS.  Why do a proof of concept if you can be up and running in the same time?)

Do customers stay paying for ongoing service?  How do you do Tech Support?

We made the Assured Success Plan cheap enough that we think customers will like to keep it running. After the initial consultations, it converts to pre-paid support.  At the same time, we offer support in units of 5 hours for $300.  Most customers buy at least a unit of support as part of their contract, and we make it easy for them to flex that up if they’re having an unusual amount of trouble.

What about costs?  How do customers get comfortable with what you cost?

First, understand, in many cases they can’t do it at all without a service like ours.  Our service is an enabler.  We make it possible to fund a data center pay-as-you-go on a credit card.  Even in Enterprises, we see a lot of customers go hosted, label it as a “proof of concept” to keep IT happy, but once things are running, they never go and move it to their own data center.

Second, our hosting provider partners are brutally efficient at cutting costs and passing those savings along.  They know they have to be competitive and they’re good at it.  We add a surcharge on top of that, but it’s offset by your savings in management overhead.  You don’t have to buy or write your own infrastructure software, and you can manage your grid with far fewer people.  One person part-time can run 100 servers easily.  A full time person could run probably 500 servers.  Do the math on what a person costs and you’re net/net way ahead.

Our most popular configuration is an 8 server.  It costs about $5000/month as a grid.  If you shopped very carefully, you might save 30% on that.  However, you’d have none of the management advantages we offer.  You’d spend that difference very rapidly either developing infrastructure to automate management with scripts, or hiring people to do it by hand.

Bob:  ( I asked one Director of Operations for a SaaS vendor what they thought of a 30% markup for this kind of service.  He laughed and said they would make that back in productivity savings so quickly that 30% would never be an issue to them.)

What’s a nightmare story you helped a customer with?

Imagine a largish bank.  What do you suppose their procedure and policy is to release code?  They need 1000 signatures over 9 months!  Most of the signatures involve internal manual processes.  They’d developed numerous layers of management to ensure stability and now they can’t get it done internally any other way. Because of this, many projects simply couldn’t get started. The cost wasn’t justifiable.  AppLogic eliminates many of those manual processes because the application is packaged as a unit. No one needs to touch the servers, the firewalls, or the load balancers. Plus, test applications can run in a hosted configuration, outside the corporate data center where there’s no interference with production systems. When they’re completed, they can be migrated inside with a single command. Thus, many of the issues with test deployments just don’t apply.

So this customer was able to move their project, which was dead in the water internally, into PoC. 

Next Installment

Next installment we’ll wrap up with a discussion of SaaS Sales and Marketing and Business Model thoughts from 3Tera.  Be sure to click the “subscribe” link at the top left of the blog page so  you don’t miss out on future posts!

Interview With 3Tera’s Peter Nickolov and Bert Armijo, Part 1

Overview

3Tera is one of the new breed of utility computing services such as Amazon Web Services.  I recently had dinner with Peter Nickolov, COO and CTO, and Bert Armijo, SVP of Sales and Product Management to hear their story.  I’ve been watching utility computing closely, and believe it is the wave of the future for hosting.  Check out the 3Tera web site and at least get a look at the screen shots of their visual data center design and management tool, and I think you’ll agree it’s pretty exciting.

As always in these interviews, my remarks are parenthetical, any good ideas are those of the 3Tera folks, and any foolishness is my responsibility alone.

Introduction to 3Tera

What’s your basic elevator pitch to a customer?

3Tera:  We offer Google-like infrastructure for everyone else.  Running grids to power utility computing let’s you run standard infrastructure software that you are used to including the LAMP stack, Oracle RAC, and most anything else in a virtual datacenter together with the tools to make it very easy to manage that datacenter.

Bob: (As 3Tera’s site says, “If servers are cheap and open source is free, why does it cost so much?”  The answer is you have to manage those servers.  If this is done manually, it is horrendously expensive, and eventually becomes impossible with enough servers.  The alternative is creating automated infrastructure, which is also extremely difficult.  3Tera brings you a “virtual datacenter” where that infrastructure is built-in for a modest cost on top of your normal hosting fees.)

How is your product sold?  By seat/month?  Other metric?

3Tera:  We sell by the server since our software is installed on the server to create the virtualization.  We sell both hosted and on-premises depending on where you want to put your servers.  80% of our customers go for hosted, but the price is roughly the same either way. 

How many customers have you sold?

3Tera:  In our first year since being live, we’ve sold over 100 customers.  90% of them are in production today, and 10% are doing development and proof of concept work.

What kinds of customers come to you?

3Tera:  Most of our customers are doing SaaS and Web 2.0 projects., and there are tons of them out there. They come in all sizes, from very small startups all the way up to Enteprises, including British Telecom. 

Bob:  (I found the rapid adoption of 3Tera to be nothing short of astounding.  Since the interview, I have mentioned 3Tera to everyone I’ve come into contact with who would be a potential customer and the responses made it clear how 3Tera has grown so quickly.  There is a burning need for any mechanism that simplifies hosting and data center operations and makes it possible to grow in a utility computing pay-as-you-go way.  Other than Amazon’s Web Service, which everyone I know is watching very closely, and OpSource which one person mentioned, most were not aware of such a service that is ready today.)

What stage is 3Tera at?

3Tera:  We were founded in August, 2004.  We started Beta test in March, 2006, and our oldest customer (International News Media) went live during that Beta, so we’ve had live customers for about 18 months now.  We brought the service out of Beta and launched it in September of 2006, and now AppLogic is at release 2.2 with around 100 production applications deployed.

We are headquartered in Southern California, but we also have offices in Bulgaria, Israel, the Bay Area, and Canada.  Bulgaria and Israel are developers, we have Tech Support in Canada, and the Bay Area is primarily a sales office.

We never would have thought of doing multiple locations in the past for a startup, but times have changed, communication is much better, and you go where the talent is. 

We live on Skype and WebEx!

How were you capitalized?

3Tera:  The company is funded about half and half by management and angels.  We had successes in other startups that let us fund it in this way.  We have no professional institutional investors at this stage.

How did you come up with the idea?

3Tera:  It was a need that we saw while discussing how folks scale online services.  After a while it became clear much of the difficulty occurred because these distributed systems lacked a mechanism to unify the lifecycle of the application.

There really isn’t much new under the sun.  Mainframes were doing virtualization a long time ago, and I guess you could say we’re the modern, visual equivalent of JCL, LOL.

What is Utility Grid Computing and What Does 3Tera Offer?

What fundamental problem are you really solving here, hosting?

3Tera:  No, we’re not a hosting company. Rather we allow access to the inventory of hardware that hosting companies operate. 

Hosting providers are brutally efficient at operating hardware.  A small hoster has maybe 2000-3000 machines, and large hosters can have 50,000 or more.  Their volume allows them to drive out every last penny and deliver you a server at the lowest possible cost. The problem has been that while this was great for standard web hosting there was no way to use that resource to power large scalable services. 

Take a small web startup.  Two or three guys can take the LAMP stack and write a cool piece of software.  Then they have to host it on something. They can start out on a single server, but pretty soon they’ll need to add more. Then they’ll move to colo and before they know it they’ll find they don’t have any time left to write software.  They spend nearly all of it chasing around the machines and keeping them running. 

Even a well funded startup will find it ridiculously hard and expensive to manage, say, 100 machines.  You can’t get past 100 servers writing scripts and hiring warm bodies.  Machines are failing constantly due to MBTF (Mean Time Before Failure).  Things go into gridlock. Large internet companies have found the way to get beyond 100 machines; they write their own infrastructure software to manage the process.  You have to automate failover, backups, and all the hundreds of other processes involved in keeping the thing going.

The beauty of 3Tera is we provide all of that in a world-class easy to use web-based system, but you don’t have to be at 100 servers to take advantage.  The three guys in the web startup can take advantage right away and it grows with them. 

Bob: (The bottom line is 3Tera accelerates the evolution of a web company.  We’ve all read countless tales of what happens when these companies are “TechCrunched” and have to scramble.  You’ve probably heard the iLike story about driving around the Bay Area borrowing servers to keep up with demand after launching their Facebook app.  We’ve seen companies get large only to have service levels fall of rapidly.  Few companies successfully manage to create the kind of automation and virtualization capabilities 3Tera offers up front.)

Do you have a real story about how that worked?

3Tera:  Sure.  We had a company go live on our system very quickly.  Then one day, 3 months later, the System Administrator quit.  The CTO called us up and said, “I understand we’re running something called 3Tera, I lost my SysAdmin, can you help me find someone experienced on your system to hire?”  So we suggested he take the Grid University training so he could manage the system while he looked to hire.  He was skeptical, but took took a couple of the online courses.  We called him back 3 weeks later to ask how he was doing, and he told us it had been so easy to manage the servers that he was just doing it himself and saw no need to hire a SysAdmin.

Bob: (The 3Tera guys assure me one person can run 100 servers in their spare time with the system.  When you look at what IT people cost, these people costs are nearly always the largest cost item in datacenter operations.  I asked the Director of Operations for one SaaS vendor what they thought those people costs were relative to hardware.  In his mind, people were perhaps 60% of the overall costs.  A system that can drastically reduce the people costs, as well as providing a better service could really make the difference for a lot of datacenters.)

Next Installment

We got the basics on what 3Tera is.  For the next installment, I want to drill down deeper on the service, understand some of the technology they’ve built, and start to see this from the customer’s eyes.  Be sure to click the “subscribe” link at the top left of the blog page so  you don’t miss out on these future posts!
 

Google and Apple to Rule the Universe? (Interesting Theory from Nick Carr)

Nick Carr has this interesting theory that Google and Apple can work together to rule the universe.  Google builds the back-end “cloud” piece, which is the cloud supercomputer.  Apple builds the hip click gotta-have-it devices that talk to that cloud supercomputer.  Carr sees many advantages for this model:

1.  It will be cheap.  Carr says $199 for the machine, and all the software and data storage is free, supported by ad revenue.

2.  It will be energy efficient.  Very little power is needed on the PC, and the power of the cloud supercomputer can be efficiently managed through centralization.

3.  It will be low maintenance.  This is the promise of cloud computing reflected in paradigms like SaaS that radically lower maintenance.  Nothing local but a browser.

4.  It will be flexible.  You never have to backup, sync, or copy data again.  It’s all in the cloud.  Backups are automatic.  You see the same data from any machine anywhere.  You can give out links to share the data in place.

Nick says the fireworks from this will start in a matter of months, not years.

It’s a beautiful vision, really.  I’ve had similar thoughts myself, so I found myself daydreaming about sitting at a sidewalk cafe in Paris, smoking a Gauloise, sipping a Vins Nouveau, all while surfing the web and doing all my computer activity on an Uber Cool Apple PowerTechieThingey that was hooked to the Google Cloud Supercomputer and could run for a month on a single charge.  And then the bubble burst and I was back to reality.

Aside from the fact that I don’t smoke, there are a number of problems with the vision.  First, 100% everywhere all the time WiFi connectivity remains problematic.  The hot spots are fragmented, some are free, some charge, and the big municipal projects to equip whole cities with WiFi seem to have stalled.  This is not to say that it isn’t coming.  There is tremendous interest.  One of the most common “off-topic” search terms leading people to this blog is people trying to figure out if they can live with just an iTouch and Skype or whether they really want an iPhone.  But, it takes more than just Google and Apple to finish out that infrastructure, and it is not an especially fast process so far as I can see.  Forget WiFi everywhere you might want to phone, just getting it in every coffee shop (not just Starbucks) is still not a done deal.  The world is working this from both ends.  We’re getting more connectivity daily, and we’re learning to run web apps disconnected, but this all takes time and is far from being resolved in mere months.

Can these two companies collaborate on a vision like this?  As I write this, the GOOG has a market cap of $196 billion.  AAPL is about $149B.  A merger is possible, but do we see a merger of equals in the cards given the personalities involved?  I don’t think so.  So then these two have to somehow collaborate perfectly in a completely arms-length mode.  I guess it’s possible, but neither has a great history of such statesmanship.  Even the best intentioned partnerships are often quite rocky.

The next big issue is the Walled Garden issue.  This is a Walled Garden vision we’re talking about here, where Google and Apple get together and own the world.   Are they wonderful philosopher kings who will do no evil?  Hmmm.  Benevolent dictators.  I say, “Hmmm,” again.  Can we settle for open and highly receptive to customer feedback?  I’m still at, “Hmmm”, when I look at Apple bricking iPhones and being a total control freak about everything.  Is this the world you want to surrender total control to?  Not me.  I’ll buy the products because I have options.  I can run Windows on the Mac if I want, and the World Wide Web is a big ole open prairie.  Start walling me in and I have a problem.

What about Google?  Are these guys really that innovative?  I mean, they’ve been brilliant at search and cornering the online advertising market, but so much of the rest of it seems a careless afterthought.  In many ways they are a lot like Microsoft in terms of innovation.  What have they done for us lately?  When was the last time they punctuated the equilibrium?  Seems to me they’re largely working on a lot of “me-too” stuff they get through acquisition, they’re not real fast at rolling the stuff out, and they don’t really tie it all together nearly as seamlessly as the vision calls for.  I mean, it took quite a while to get blog search inside the blog reader, and I recently read they’re only now able to hide columns in their spreadsheets.  I mean, hello?  We could hide columns in Visicalc.  That’s pretty basic stuff, folks. 

Let’s not forget the ever-present antibodies that suddenly spring up when it seems an infection will overwhelm.  We’re all hardwired to become increasingly suspicious and unsupportive when too much power is concentrated in too few hands.  It’s a normal survival instinct that has evolved to take a firm grasp on all of us.  It’s healthy, and keeps innovators and the little people from getting squashed.  Sometimes power is so great and so sudden that we live with it for a while because it surprised us.  But inevitably, we want to throw that yoke off.

The real answer that so many have been saying, is that the Internet needs to stay open.  Everything will not wind up inside a Google-Apple technology and product mashup.  Everything will not reside inside Facebook.  Every piece of software will not wind up in the clouds.  But, in each case, the owners of the franchises will try mightily to tempt us, and they will make progress towards their visions.  That’s great.  Just remember to draw the line if they try to make things too pat and too closed.

Let’s also remember to understand how centralization works best.  That’s when the entity being centralized has become commoditized.  If there is no further value in differentiation, and if the commodity is sufficiently open as to be entirely fungible (nobody likes having someone corner the market on their commodities!), you get massive centralization driven around economies of scale.  This is happening today in the world of cloud computing.  It makes less and less sense to own a data center.  MIPs and Gigabytes are commodities.  They are fungible as I can run lots of different software on them.  I just want them as cheaply as I can get them. 

Search pretty well went that route.  Google got enough better for long enough to capture a good enough share that nobody since does enough better to unseat them.  It’s entirely open and fungible.  I can buy the ads at reasonable prices and Google is egalitarian about what they search, or at least with respect to how most users like to see it (Spammers are less happy).

The Google-Apple vision assumes we’re ready to commoditize the personal computing experience.  I have a big problem with that.  We’re far from done innovating there.  We’ve barely scratched the surface in fact.  Wait until we see the same thing for 5 years, let alone 10 years, going on with every PC and then you’ll know it’s time to commoditize.

SAP’s A1S Brings Competition to SaaS for the First Time

On September 19, SAP will bring competition to the SaaS world for the first time.  Everyone else in Enterprise Software will be affected. 

Seasoned SaaS executives will dislike my conjecture that there’s been little competition prior to A1S, but I don’t think its far from the truth.  There has been some choice in the SaaS market, but its largely been a green field opportunity where choice between SaaS offerings didn’t matter as much as choosing SaaS over On-Premises.  Just to underscore the point that A1S is all about competition, SAP has chosen to launch their product during Salesforce.com’s Dreamforce week.  Nothing like the stranger walking out onto the street at high noon to call the hometown guy out!

What does it mean?  Well for starters, it means SaaS has come of age and its here to stay.  SAP doesn’t choose its moves at random.  It’s an extremely deliberate company that puts a lot of power behind each stroke.  It will execute relentlessly until it achieves its goals, which may take quite some time.  That’s okay, because SAP has been a very patient company in the past.  Having this stamp of approval on the market, not to mention having a big player begin to invest in growing the market further should accelerate the SaaS market’s growth.  More importantly, it means that the chasm has shifted.  SaaS is mainstream, and that means this announcement affects everyone involved with Enterprise Software.

At the 800lb gorilla end of the market, SAP has stolen a march on arch-rival Oracle’s Fusion efforts, which has got to feel good to SAP loyalists.  The description of Fusion as being heavily SOA and SaaS enabled sounds much like A1S.  Oracle can’t be counted out, but it is interesting to watch the pendulum swing back and forth between these two companies as they struggle for dominance at the top of the heap.  Time will tell whether A1S and more importantly SaaS form the next major competitive axis for the pendulum to swing on.

For those Enterprise vendors that still haven’t figured out the SaaS conundrum, the window where you could bury your heads in the sand has just officially closed.  You need to have a SaaS strategy now.  There’s no more time for stalling.  If you’re public, the pain of a switch will be massive.  Lack of a SaaS game plan will start to show up in the form of pointed questions from analysts and investors.  You will need a good story, and they’ll be monitoring closely how well you execute on it.  If you’re private, perhaps part of a leveraged buyout consortium, you’d better be reinventing yourself as SaaS and not just fiddling with the numbers.  If you’re planning on being acquired, you would do well to have a story about how you help the acquirer’s SaaS strategy.

The A1S launch and subsequent scrambling affects the technology landscape as well.  It puts considerably more teeth into the whole SOA thing than we’ve seen in the past.  It’s more urgent to implement it, rather than just talk about it because it is the central nervous system behind A1S and a critical enabler for SaaS.  This opens the door to a domino scenario:  as more and more companies open their Enterprise fabric with SOA, it becomes easier to contemplate more SaaS projects.  This is a spiralling positive feedback loop that will help accelerate SaaS adoption further.

Adoption of SaaS overseas has been slow.  But this will change, particularly in Europe where SAP is very strong.  If a European company blesses the trend, it can accelerate in Europe.  Europe and the rest of the world represent incredible market growth opportunity for the SaaS world if it starts firing on all cylinders, as well as insulation from short term economy woes that may only affect the US.

As more and more computing moves into the cloud, the industry that serves hosting and data centers will have to look on that trend and decide how to succeed.  SaaS needs a different offering than a lot of hosting providers are used to.  Investments in complex data center management such as HP’s Opsware acquisition are likely a good move.  Products aimed at IT’s internal data centers or departmental data centers are moving into difficult territory.  Internet technology will stay hot or get hotter.  Cisco can regard all of this as good news.

These developments are extremely positive for the SaaS world, but there will be pitfalls and pain for both SAP and the other old school players as they try to execute a move to SaaS.  Some of it will be real, some just positioning games spun by the new kids on the block.  I’ve written a two-part series on the problems SaaS brings for On-Premises companies.  It’s an extremely disruptive game for the Old School because it forces them to choose which way a customer will be sold up front, and it sharply defines short term and long term benefits in a way that brings short term pain to the On-premises company in exchange for long term benefits.  As if to underscore how touch this tension between models can be, Hasso Platner had to backpedal a bit on whether A1S would cannibalize the installed base recently because of exactly these concerns.  SAP is heavily positioning A1S as a mid-market solution.  Part of that may be the reality of whether Big Enterprise is quite ready to embrace SaaS yet, and part of that may be SAP trying to construct a Protected Game Preserve for their SaaS offering that protects the core business.

It’s interesting to contemplate just how much new business SAP is getting anyway.  Like Oracle, they’ve got a raft of maintenance and professional services engagements that make up the bulk of their revenues.  It’s unlikely an existing customer would rip out a successful solution in order to switch it over to SaaS.  Therefore, swapping an increasing percentage of their new business to SaaS may not have quite the same negative effects on revenue deferral as it would for a less mature company.  It seems that even when it comes to something as disruptive as SaaS, scale still makes it easier for the big guys.

The SaaS world will be watching carefully how well A1S delivers on the SaaS formula.  As ZDNet puts it, SAP is known for being liquid concrete poured into the organization.  That doesn’t sound too much like the nimble experience we’ve come to expect from SaaS vendors.  Oracle has had a SaaS-like offering of its products for a long time, and they’d tell you they’re in the SaaS business, but they aren’t really according to folks like NetSuite and others I’ve heard from.  If A1S turns out to be almost-SaaS, it won’t make much more of a difference than Oracle has, other than to futher legitimize the markets.  As so many have pointed out, SaaS is about Service, but more importantly, it’s about an experience that can only be achieved by a thorough combination of the right software and service.  Otherwise hosting would’ve succeeded.  SaaS is a lot more than just hosting.

This move by SAP also represents a big splash in the partner world.  As I look over the Google Blog Search results for “A1S” in the last week, a lot of it is focused around discussions on the impact it will have on partners and the SAP job market for consultants.  Barbara Darrow puts it well when she says, “SaaS is still viewed by many in the channel as the ultimate in disintermediation.”  This is one of those deep dark secrets that shows another disruptive nature of SaaS.  I’ve written about it on a couple of occassions starting with my po