SmoothSpan Blog

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Hurry, The Cloud Computing Platform Opportunity is Perishable!

Posted by Bob Warfield on April 7, 2008

As I write this post, many are predicting that the big announcement from Google tonight will be that it’s opening up BigTable for the world to use.  At least Kevin Burton and Mike Arrington think so.  I hope so, because the world needs a lot more cloud computing choices.  I wonder how many have figured out just how little time remains to introduce new cloud computing platforms?

Ray Ozzie has said, “[the cloud market] really isn’t being taken seriously right now by anybody except Amazon.”  He’s right on the mark:  it isn’t being taken seriously by anyone except Amazon.  The distant runner up is Benioff’s Force.com.  I say distant because there are a lot of problems with it, not the least of which is an economic model that makes it completely untenable for anyone but big corporate IT to use.  Technically, it is a completely closed and proprietary environment that offers only minimal leverage.  It’s true, they’re very seirous about it, so in that sense we should add them to the list, but the way they’re going about it makes it seem less than serious.

Here’s an important tip for various big industry players who’ve made noise about Cloud Computing at various points:  it’s a perishable opportunity!  You don’t have forever to contemplate how to get in and start winning.

Why?

Because ultimately it boils down to differentiation and commoditization like any market.  The longer you wait, the more bipolar the market becomes.  Allow Amazon to get too strong and you’ll have two choices:

–  Copy Amazon’s API’s very closely and charge a lot less. 

–  Launch a radically different approach that offers big advantages in some other way.

The middle ground will be untenable.  An API or service that is only slightly better than Amazon’s but is incompatible won’t succeed.  We’ve seen this time and time again in our industry.  It’ll play out the same way here.  For a brief time everyone can be slightly different.  Then the world will discover the differences don’t matter and they’ll gravitate towards one player.  If someone already has huge momentum (e.g. Amazon), you must either be incredibly differentiated or much cheaper.  Both are pretty hard to do.

We could ask whether Amazon has already reached a stage that only the two options can fly.  I don’t think so.  Not quite anyway.  It takes longer than you’d think, although their success has been phenomenal.  My prediction is that the window to introduce a major new cloud computing platform initiative is not quite 2 years.  If you’re not out by end of 2009, you will face a major uphill struggle.  In fact, if you’re not a great big player, the window is much less.

There are significant challenges for the big players to execute quickly enough:

–  Sun never seems to execute on anything quickly enough.  Sorry guys, but the company just doesn’t evolve very fast.  That’s why you’re buying properties like MySQL, right?

–  Google wants to be a precision machine, focused on squeazing margin out of a lucrative model.  What would they do, if like Amazon, they announced this thing and suddenly had more traffic to it than their core properties?  They have a history of absorbing startups and then taking a long time to get the thing to a level they feel is commensurate with their standards.  Cloud computing is in many ways worse.  They lose control and let other people’s software run inside their firewalls on their servers. 

–  Microsoft is in the unenviable position the old RISC world was in against Intel.  They have to build everything themselves on their platforms.  There is no synergy with third parties.  It’s ironic really.  The Intel/Microsoft PC Kiretsu could divide and conquer and they were so successful even Apple finally went Intel because the others couldn’t afford to do it themselves.

–  Yahoo?  People used to talk about them in the same breath, but clearly the wheels are coming off that stagecoach.  For a big player, cloud computing is not a little investment.  Particularly now when there is quite a lot of momentum already built.  Yahoo’s bets are laid, and they’re a lame duck besides.  Count them out.

–  IBM?  Could be.  They’ve made announcements but the follow up is weak.  IBM could certainly afford to throw enough services at the problem to get it going until the technology catches up.  They can sure sell such a thing.  The biggest challenge they have is their command and control culture may never let it reach critical mass.

–  Tata et al:  Big Indian or Chinese.  Why not?  These are huge companies overseas.  They have the expertise to do quite a lot.  The Asian markets are hot, hot, hot, and they’re not that well served by Amazon.  These guys would be my bet for the odds on Dark Horse players if they get it and can get their act together.  They’re ideal as low cost providers and like IBM, they can throw service at it until they get it right.  There is surprisingly little technology required at this stage to get started at the level Amazon is at.  You need an EC2 and an S3 clone and a bit of window dressing that does something they don’t.  How about an identity system?  I’ve written about that before.  Wouldn’t you think if a service was announced business would fly to it overseas?

Meanwhile, Amazon is coming to a sort of crossroads as well.  The traffic to Amazon Web Services exceeds the traffic to the rest of their properties combined.  This is no longer a remaindering strategy for unused MIPs as many VC’s I talked to late last year seemed to feel.  Amazon is now experiencing significant growth and scaling pains for the service.  EC2 just went down for about an hour for many customers.

This is both good news and bad news for Amazon.  The good news is that they’re learning how to keep these systems up and they others haven’t even started up that learning curve.  The bad news is it annoys customers mightily. 

The other thing I watch Amazon for is signs they’ll offer anything with AWS that they didn’t already have to build for their core business.  The availability of something interesting and new would be a further signal that this is not just a remaindering business.  More importantly, it would be a further barrier to entry and exit around their valuable property.  As it stands, EC2, S3, and SimpleDB are pretty low level.  They do not represent big barriers.  All that is available in one form or another via Open Source to others who want to play.  Amazon’s expertise in billing and payment processing is more differentiated, but not compelling and as currently offered, very Amazon-centric.

Note to Werner Vogels:  it’s time look for key innovations in AWS to build lock in while you continue to make the service more robust.

Note to others:  Time is running out.  Get in the game or move on.

Note to self:  Look for a dip and buy AMZN stock.

Related Articles

Google responded well to the challenges I set forth above with App Engine.  See my blog post for more details.  By focusing on language support instead of raw virtual machines, they’ve actually raised the bar in the sort of way I keep saying Amazon needs to above and below in the comments.  I stick to my 2 year prognosis.  If you aren’t a Big Player here within 2 years, the window will close.  What Google has done is raise the ante on what you must deliver to be in the poker game.

13 Responses to “Hurry, The Cloud Computing Platform Opportunity is Perishable!”

  1. nsimha said

    What is your view on EMC? They seem to be investing a lot in this area and given their size and brand, they could have a signifficant impact on this space.

  2. botchagalupe said

    [the cloud market] really isn’t being taken seriously right now by anybody except Amazon.” He’s right on the mark: it isn’t being taken seriously by anyone except Amazon. The distant runner up is Benioff’s Force.com.

    Are you kidding me?

    http://www.johnmwillis.com/mysql/cloud-vendors-a-to-z/

    more thoughts to follow…

  3. botchagalupe said

    – Launch a radically different approach that offers big advantages in some other way.

    see 3tera.com and cassatt.com

    The other thing I watch Amazon for is signs they’ll offer anything with AWS that they didn’t already have to build for their core business.

    There is a complete eco system around AWS (Rightscale, Elastra, Enomoly, etc…). This is exactly what Amazon was going after in the first place (i.e., the AWS developers network).

    With all due respect I think you need a little more “cloud” education.

    johnmwillis.com

  4. Great post Bob,

    Do you see an opportunity for the hosters (rackspace, opsource) in this world?

    Paul

  5. […] Hurry, The Cloud Computing Platform Opportunity is Perishable! […]

  6. botchagalupe said

    Rackspace has Mosso … which by the way is a great cloud for the little guys…

  7. smoothspan said

    John Willis, welcome to the conversation, glad to have you aboard. I see you have a lot of thoughts on this post.

    As I look at your a-to-z cloud vendor list, I don’t find it particularly compelling. Who do we have that can really offer a platform like Amazon does, and hence dispell the point Ozzie and I have made?

    From your list:

    – 3Tera: Very familiar with them, and in fact interviewed them on this blog. Great product, love it, but so far they just don’t have remotely the traction to be viewed as a serious competitor. That lack of momentum keeps them on that 2 year horizon list. That’s about how long they have to “arrive” before it just won’t matter. And incidentally Paul, as I’ve written about before, a technology like 3Tera’s in the hands of hosters seems to me is the best way for the two groups to get together against Amazon. FWIW, I interviewed them 7 months ago. Today, they list 4 hosting partners on their web site. Are any of the 4 among the top 10 hosting providers? The technology is great, but it will take more to keep up with Amazon. They need a lot more partners and a lot more momentum. Maybe I should revisit with them and do a progress report.

    – Apache CouchDB and Hadoop: This is my point above about there being Open Source tech available to would be cloud platform providers. But its just code. Apache has no big data centers or all the rest of what’s needed to make software a service. They’re enablers, but they aren’t serious about it in the sense that Ray Ozzie and I mean. I’m not sure why you’d list them as a hoster. They’re guests just like MySQL. Moreover, they’re orthogonal to the cloud. You can use them in your data center and even bring them up on Amazon if desired.

    – Dell, HP, Sun: Much sound and fury (not even that really) so far signifying nothing. Press releases do not serious make. Show me the installed base. Show me the companies betting their future on these offerings. They got 2 years and then it’s too late.

    – Joyent and Mosso: That’s what’s left on the list. I love Joyent’s clever partnering strategy with Facebook, but come on, are these guys really serious competitors to Amazon? Really? I sure wouldn’t want to place that bet.

    RE the ecosystem, there are two problems. First, Amazon’s current offerings are easily cloned by others. 3Tera gets you a lot of the tech with a much sexier UI right away. Add CouchDB in lieu of SimpleDB and you are there. The ecosystem can easily retarget to those alternates. Amazon has to get beyond bulk storage and virtual Linux to create the barriers to entry. If they don’t they get commoditized by the low cost providers and the business gets a lot less interesting. Unless they get big fast, which they are, which gets me back to my 2 year horizon. Better for Amazon to create real barriers.

    They also have to prove they’re ready to go beyond just doing the easy stuff they had to build for their existing business. Otherwise, everyone will continue to have a doubt how far they’ll take it. That’s a problem for a platform. If it’s just a remaindering business, it means you can’t build a big business on top of it. That takes a lot of the bloom off the rose, and is certainly not how people want to think about it.

    It’s scary to think that this market has a limited shelf life for new players. Everyone hates when that happens to a market. I’m rooting for the others to get going, get out there and get traction. 2 years is really not much time to build or complete a technology and get enough traction so that you don’t look insignificant to where Amazon will be in 2 years.

    Cheers,

    BW

  8. smoothspan said

    Nsimha, you raise an interesting point. In fact there are two players deep in the infrastructure that ought to be considered EMC/VMWare and Cisco.

    Cisco? Well, WebEx was bent on making their stuff a platform and I have heard platformish rumblings out of Cisco from time to time. With that said, not clear if there is enough Executive Thought Leadership around what it takes to be a software platform succeed at a box company. This will be an even worse problem at Dell too, BTW.

    EMC/VMWare is more interesting, but so far they’re more apps and tools than platforms. That’s closer to their comfort zone. I am told some interesting things about this world from several folks I’ve met with recently and will have a blog post on that in a day or two!

  9. […] Comments Well Done Google App… on When Do The SaaS Acquisition G…smoothspan on Hurry, The Cloud Computing Pla…smoothspan on What’s Apple Up To?smoothspan on Hurry, The Cloud Computing […]

  10. […] Hurry, The Cloud Computing Platform Opportunity is Perishable! « SmoothSpan Blog excellent piece on the narrowing cloud computing window of opportunity (tags: bobwarfield cloud computing amazon ibm sun) […]

  11. botchagalupe said

    It sounds like we agree more than we dis-agree. I totally agree on Dell, HP, and Sun. I also have some strong thoughts on IBM’s Blue Cloud Marketecture.

    However, where I dis-agree is as follows: Flexiscale in EMEA I think is making good traction. IMHO, There are three solid players in the $75 to $150 per month market …

    Matching the Customer With the Right Cloud (Part 1)

    If you look at my A-Z there are three backbone providers (Amazon, Mosso, and Flexiscale). Mosso is a very serious player in this niche and compared to EC2. There is no “E” in EC2 and there is plenty of “E”s in Mosso…

    Does Your Hosted Provider Give You This Kind of Elasticity?

    Which leads me into the next discussion area. The eco system built on Amazon I think adds a lot to the discussion on the state of “Clouds”. Some of these vendors like Rightscale, Elastra, and CohesivreFT are building for the long haul which in my guess will include platforms other than AWS.

    It’s funny we seemed to have moved backwards in the cloud discussion. First it was “I thought Amazon was a book sellar” then to Amazon is the only cloud. I felt we were sort of getting into a phase where the industry was getting clearer on what clouds/utilities/grids were and WHIAM Goolge jumps in and now there are only two clouds.

    I definitely would interested in your updated thoughts on 3Tera as well. Btw, I may come off as a jerk but your blog on the top side my google reader and I really enjoy all of your postings.

    John

  12. […] on Smoothspan suggests that Amazon should more aggressively move toward lock in to further its financial success. Hmm, I […]

  13. […] IBM’s culture but they will be largely deterministic in how they behave in the market. WithSmoothSpan and others questioning why more of the traditional big IT players haven’t entered this […]

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