As befitting any great online vendor, Amazon cloud product guys listen carefully to their market targets and ensure fast implementation and delivery to satisfy their needs. It is clear that Amazon cloud is eager to conquer the enterprise market, as I already mentioned in my past post, “Amazon AWS is the Cloud (for now anyway)”.

Cloud Reserved Capcity Card

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The cloud debate vanished. I will rememeber 2011 as the cloud POC year. We all “ran” this proof of concept and most of us agree that cloud computing just makes sense.

While cloud adoption is the first priority for all IT organizations, the service vendors will need to prove infrastructure improvement and strength. 2012 will be the year where cloud issues will be solved. Cloud technologies’ infrastructures will become better and the whole cloud environment will become more robust.

Check the presentation below. It includes some screen-shots of the most famous outages (Amazon AWS, MS 365, Gmail, etc.) and the common performance issues (Twitter, Linkedin). I hope that these will occur less and that past experience will support future evolution.

I wish you a great and happy new year. A year of happiness and success.

-Ofir,

@iamondemand

As the founder of Cloudonomics.com, Joe Weinman is one of the most known cloud computing evangelists in the world. Weinman researches the economics of the cloud. Among other cloud aspects he examines, he also relates to the cloud financial operational costs together with its buisness benefits. Following I Am OnDemand last posts summarizing and discussing several Cloudonomics researches, we asked Mr. Weinman to meet for a brief discussion. Last week I had the honor to interview him for about an hour and hear his clouds’ perceptions and vision.

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Three months ago I started this LinkedIn discussion and I keep getting comments about it. People might say that it is just a defiant question for marketing purposes. I say that this question raises many thoughts and opinions that helps marking the strategy of an IT organization. I invite you to read the following comments that can bring you to think a bit more about your current On-Demand strategy and approach.

> > > > > Answer #1: Just a Buzzword

It’s a buzzword. This is a 70’s-80’s technologies evolution. Remember mainframes, VM/370, per-time payments when using machine. Just another evolutionary loop, development of already existent technologies. In my opinion Cloud computing is an evolution. Started with the revolution of Grid computing, then Utility computing, SAAS computing and now it finds its preliminary conclusion in Cloud computing. Thus no it is not a revolution, it is a revolutionary step in the evolution of what is now called Cloud computing. This is just a good name for number of technologies that was ready years before than customers are become ready for it and useful software was written. Many companies added “Cloud” to the titles of their solutions. Any site can be marked “Cloud ready” or “SaaS solution” 🙂 It means that it’s only marketing. This all is possible because people don’t know what Cloud is in details; sellers often talk about it as about some magic. You can use Magic instead of Cloud; meaning stays the same – marketing.

> > > > > Answer #2 : Depends! From the technology perspective: Evolution and from the business point: Revolution

“From a technology point of view I am pretty positive about categorizing it as evolution and not even sure if representing a significant step; from a business standpoint however I think there is much more value in the concept. I believe that Cloud Computing introduces a capability to rapidly map dynamic changes in the business models that is kind of revolutionary

“My observation is that “cloud” is a description of how IT is supposed to work from a business perspective: flexible, available, efficient (lower cost), secure, dynamic, responsive, etc. If you are an IT specialist, the technology is evolutionary, but the thinking may be revolutionary.”

“I tend to think that the cloud computing Revolution will transform the way all businesses interface include enterprises with technology and communications, and marks the next wave of the fundamental changes that the evolution of the internet has already brought about the Tera Play

> > > > > Answer #3: IaaS just an Evolution. Massive Scaling, supported by PaaS and SaaS, is the Revolution.

“I’ve seen global Trading and risk systems, (30,000 node compute grids, nano second trading platforms), some true cutting edge platforms. And this is really a complete transformation of IT. If you’re thinking just IaaS then it’s just evolutionary. True SaaS and PaaS is a revolution. The fact that Salesforce (and the force.com platform) can deliver millions of users and 97500 customers on a single multi-tenant platform with three major upgrades per year. That’s the power of the cloud. Giving a small 10 user non-profit the same reach and scale as a multibillion dollar organisation. The cloud. No admin or maintenance, pure development and software business process IP. What other technology can scale from 1 to 100,000 users. It can take much less than 10% of the traditional development to build a SaaS app compared to traditional platforms. Cheaper , faster AND better . That’s a revolution.

“The prior comment reflects a deep misunderstanding about what timeshared (outsourced) mainframe computing was all about. Cloud is just another swing in the pendulum. The business owners in the 60’s were right: why should we buy and maintain our own computers when we can better spend the money by renting the computing resources from somebody who knows how to take care of all that “stuff”? It’s not new. We’re just coming around to the fact that PC computing set the industry back 40 years and we’re now where we would have been if PCs had not taken 25 years to “grow up”.

As amorphous as this question might be, the analogy to mainframes is highly misplaced and not very useful. Among other defining characteristics, cloud services allow software developers to control infrastructure resources programmatically. This means that applications specifically designed for cloud environments can bypass the historically slow and error prone layer of IT administrators that maintain computing resources through largely manual, error prone processes. Companies that use such functionality to enable auto-scaling, such as Netflix, are doing so without the need to invest capital into stranded computing capacity that may or may be fully subscribed. I’ll leave the ever so important question of evolution vs. revolution to you, but explain to me how the Netflix development team could have replicated their

“Revolution – Cloud is a disruption of everything internet and application as we know them. The very large infrastructure and service vendors are racing to rework their offers and slow things down to keep their competitive advantage. Revolutions are messy – like a massive earthquake or coup d etat. Evolution is what you study afterwards when learning which creatures adapted and which went extinct.”

> > > > > Revolution by Wikipedia takes place in a short period of time

“According to the Wikipedia definition: A revolution (from the Latin revolutio, “a turnaround”) is a fundamental change in power or organizational structures that takes place in a relatively short period of time. So how this aligned with the “Cloud Computing Revolution” that doesn’t seem to come up in a short period of time?… I remind you that Amazon started its AWS 11 years ago… ” I asked

“Ofir – most revolutions have a long lead up time where the angst ferments underground and bursts out in a moment of time when the underlying ability to organize action is catalyzed by some event – Egypt for example (mobile devices & Facebook). Think of the internet revolution in 1995-1997. The internet was slowly building out (DARPA net, etc) with organization by the scientific/defense communities and catalyzed by Tim Berner Lee public gift of http/html. The corporate world was seeking a way to collaborate beyond the bonds of one company’s offer, like IBM & MSFT. Within two years the Internet exploded into the corporate world, literally revolutionizing the ways companies marketed themselves. The coup was over when Bill Gates announced that Msft was an Internet company and Netscape dropped $25 in a day!”

This month Christian Verstraete, HP’s Chief Technologist also raised this question in the CIO magazine. In his post he writes:

“One of the questions that came on the table was whether cloud computing is a revolution, a paradigm shift, or not. I’d like to answer, it’s both.

I say that the cloud computing is Evolving faster to become a Revolution,

what do you think ? Join the discussion

> > > > >   Market Overview and Definitions 

According to Gartner’s PaaS Road Map report, cloud-based solutions will grow at a faster rate than on-premises solutions. By 2015, 50% of all ISVs will be SaaS providers. Most enterprises will hold major part of their business applications running on the cloud computing infrastructure, using PaaS and SaaS technologies directly or indirectly.

It is confusing to describe PaaS as one category as there are different values presented by the different ISVs whom developing and delivering solutions on different layers. Gartner’s report lets categorize the market of PaaS into the following 3 layers –

  1.  Application platform as a service (aPaaS) – providing a complete application platform that is used by the actual application’s components (those which support the business process) or by its APIs. Business-level power users and developers gain speed-to-market and the ability to focus on bringing their expertise to the business process layer rather than having to build the whole application infrastructure.
  2. Software infrastructure as a service (SIaaS) – those services provide management for software parts such as online cloudy database, integration and messaging. This layer is similar to the previous layer as it provides the development tools to build an application in the cloud, but it’s targeted at developers rather than business-level power user.
  3. Cloud enabled application Platform (CEAP)  – Software middle-ware tothat support the public and private cloud characteristics including monitoring, complexity management, scaling and optimization.

There’s been a veritable explosion of platform-as-a-service choices coming onto the market in the past month or two, and the pace of introductions is accelerating.

During the next two years, today’s segmented PaaS offering market will begin to consolidate into coalition of services targeting the prevailing use patterns for PaaS. Making use of such reintegrated, targeted suites will be a more attractive proposition than the burdensome traditional on-premises assembly of middleware capabilities in support of a project. By 2015, comprehensive PaaS suites will be designed to deliver a combination of all specialized forms of PaaS in one integrated offering.

> > > > >   PaaS Providers and Products —

There are several well-known PaaS providers such as GoogleApps, Heroku,  Microsoft Azure  and of course Force.com, the most mature and rich PaaS for those who want to build a classic forms-and-database SaaS application in the “old” Salesforce.com fashion.

“We don’t spend any time talking about the acronyms,” Andy Jassy, senior vice president of AWS, told eWEEK. “All those lines will get blurred over time. It’s a construct to box people in and it fits some stack paradigm. We started with raw storage, raw compute, and raw database in SimpleDB. And we’ve added load balancing, a relational database, Hadoop and Elastic Map reduce, a management GUI… All those lines start to get blurred, and you can expect to see additional abstraction from us.” Read more on eWeek

 SpringSource (by VMWare) –  Cloud Foundry, VMWare PaaS offering works with a variety of development frameworks and languages, application services and cloud deployment environments. It includes the SpringSource Framework, an enterprise Java programming model that VMware picked up in its August 2009 acquisition of SpringSource. The Spring Framework is in use by about 2 million developers worldwide as a lightweight programming environment to make applications portable across open-source and commercial application server environments. Read more on crn.com

Caspio – `Cloudy` online database platform to support online software development. One of the best features of Caspio is its “embed” feature which offers an embed code for a Caspio-based “datapage” much the same way that YouTube offers embed codes for its videos. Caspio handles blobs at the field level (in other words, there’s support for video, images, and other large binary objects) and supports SQL/API-based access to its databases. Caspio has a personal “version” that’s free but is limited to 2 data pages (essentially forms) and then starts at $40 per month for 10 datapages, 1 GB worth of data transfer and 1 GB of storage. There’s a corporate version that goes for $350 per month (more datapages, capacity, and “logins”) and several levels of subscription in-between. See how Caspio works or read more about this vendor on informationweek.com

Gigaspaces – Gigaspaces’ core product the Gigaspaces XAP is an enterprise-grade, end-to-end in-memory application server for deploying and dynamically scaling distributed applications. If an ISV or any IT organization needs to boost workload performance and has business-critical Java and .NET applications. that can be spread over a computational or data grid configuration, XAP can be a good option. GigaSpaces started as a firm that could manage a server’s local cache; it expanded to manage the combined cache of a cluster of servers, then figured out how to make that cache expandable by managing the cache as servers were added to the cluster. In its latest iteration, the GigaSpaces CEAP (Cloud Enablement Application Platform) makes application business logic elastic by managing its multiple moving parts in a shared memory system.The cloud-enabled platform allows “continuous scaling of application data and services. Think of Amazon style of SimpleDB scaling,” Nati Shalom, CTO and founder of GigaSpaces. Check out Gigaspaces.com and read the recent news brought to you by InformationWeek.com

OrangeScapeOrangeScape is one of the 10 global companies featured in Gartner’s ‘PaaS competitive landscape’ report and also has been featured in all the PaaS reports of Forrester.As an aPaaS provider, Orangescape Studio offers an UI similar to modern Excel application so the business users can design an application by capturing various aspects of the application declaratively in an XML-like format which is then executed by the proprietary Orangescape virtual machine. The core of the virtual machine is their main platform, which is nothing but a rules engine that works on a complex networked data model. Read more on CloudAve

Cordys – aPaaS vendor Delivering MashApps Cordys Process Factory (CPF) is a Web browser-based, integrated cloud environment for rapid Cloud Application Development. Cordys Process Factory allows users to use and sell Cloud Applications, and also subscribe for applications built by others in the Cloud Marketplace. All of this is achieved through visual modeling, without having to write code. Check out Cordys and read more on getApp.

There are other interesting PaaS providers such as Joyent, MuleSoft, CloudBees, Appistry and more, I will release another post on those later on this month so you are welcome to stay tuned with `I Am OnDemand`.

> > > > >   Choose Your PaaS Providers

Traditional ISV conversion to become a pure SaaS vendor should carefully plan its application deployment strategy. By learning the PaaS Market and selecting its relevant vendors in this market the traditional ISV will present a fast go-to-market and eventually a smoother conversion. Together with those benefites, I find that the ISV consideration of using a PaaS provider will make the smart ISV’s CTO to understand the strong lock-in to whichever PaaS providers the CTO will choose. This will make the CTO nervous as the lock-in feature on the On-Demand market is with no doubt more aggressive.

Check those important criteria to consider in evaluation PaaS vendor.

Learn more about PaaS vendor lock-in

To summarize I can say that no doubt that PaaS has an important part in the adoption of cloud computing by the ISVs and the IT organizations. The PaaS players are technology-rich companies, the market definitions and roles are not completely clear and it seems that PaaS evolve slower than the other two layers (i.e IaaS and PaaS). As in every evolving new market you can expect a wave of innovation and of hype as there today new business opportunities for startups companies, the leading software vendors and the IaaS giants.

Do you still have a lack of knowledge with basic market definitions? Check I Am OnDemand Terminology Page

“The battlefield is a scene of constant chaos. The winner will be the one who controls that chaos, both his own and the enemies.” (Napoleon Bonaparte)

Microsoft – ״Last week, Microsoft president Jean-Phillipe Courtois announced that the company will be spending 90% of its research budget on improving cloud computing technologies. Since Microsoft’s annual R&D budget this year is $9.6 billion, this investment translates to a massive $8.6 billion.״ cloudweaks.com

Amazon – “Amazon.com Inc is thinking long-term when it spends heavily on “the cloud” …It has invested heavily in areas such as “cloud computing” — which allows companies to store data on its servers — to take on its rivals Google Inc and Apple Inc” reuters.com

IBM – “IBM expects to continue its investment on higher value businesses, and will increase research & development (R&D) spending by $35.0 billion in the next 5 years. The company expects to incur productivity savings of $8.0 billion over the next 5 years.” finance.yanoo.com

Rackspace – “This is Rackspace’s second acqustion in recent months. The company bought cloud-management start up Cloudkick in December.” theregister.co.uk

Cisco – “We are putting our partner community at the heart of Cisco’s cloud go-to-market strategy,” said Ralph Nimergood, vice president of data center and virtualization for Cisco’s Worldwide Partner Organization ..” crn.com

CA – At the heart of CA’s strategy is a big bet on the cloud. In October 2010, CA lifted the curtain on a new MSP channel program based off the acquisition it made of 3Tera and 3Tera’s AppLogic offering. Bill McCracken, CEO of CA Technologies says:

“The rate and pace is going to pick up,” McCracken told a gathering of CA solution providers in New York Tuesday, discussing cloud adoption. “The industry estimates are wrong. They’re low. You can write that down. It’s growing faster and moving faster than we’re predicting. The opportunity is standing in front of us.”

Read more about CA faith in the cloud.

IaaS Providers are a hot topic – as evident by recent acquisitions of Terremark by Verizon for $1.4B and Savvis for $2.5B by CenturyLink (Qwest).

Following part 1, here is part 2 including the second half of Waineright’s important lecture:

Waineright starts the revenue generation and pricing discussion, by explaining that a difficult issue for the SaaS vendor is to find a clear relation between the expenses and revenues generated by the subscription fees. He is not elaborating on that point but summarizes it by saying that the specific ISV, as well as the specific industry market, will need to find their way by learning on the go.

I think that there is place to continue investigating this point. I found that SaaS vendors are struggling on a daily basis with calculating and optimizing their low profit margin, obviously this has a clear impact on their business life. Discussing monetization strategies, he presents five ways to generate revenues: subscriptions, advertising, transaction fees (revenue share on the transactions made), digital good and aggregated data (selling information about the customers and industry benchmarks). These options are clearly driven from the economies of scale benefits and in my opinion we must learn them by heart.

“I don’t quite understand it”

The next discussion was about subscription strategies including freemium.”I don’t quite understand it” Waineright says. I can add that acquiring lot of “freemium subscribers” can be a good option for a startup company to prove abilities and value but for an ISV who wishes to generate revenues, the freemium is not an option. The clear conclusion here is that freemium is only a marketing tool that has a cost and that must prove its benefit though there are better tools to achieve a cost effective sales promotion. Waineright says that people expect to get the same service level as if they were to pay for the service (such as Gmail users) and that ..

“there is a huge delta between using something for free and deciding to pay for it as a customer”.

Waineright is adding that there is still the administration cost and that eventually there will be an investment on the infrastructure to support the collection of payments (if the SaaS vendor starts delivering as only a freemium service). For this matter he exemplifies his points using study cases such as Box.net , Malichimp and Intuit. The latter demonstrate a success story  with 60% of revenues that are generated from its SaaS operations.

In the last part of his presentation, Waineright suggests to use a trust advisor that can help with strategic guidance in order to do the right things. Due to the character of this lecture and the lecturer’s nature,a as well as from my personal experience I find this suggestion to be very important specifically for software vendors that are finding themselves “forced” to move to the cloud. SaaS is here more than 10 years and although it is just now starting to spread, you are able to find experts in this industry and they will be able to assist. Waineright is summarizing with the following 5 tips:

  1. Find your prospects – measure carefully your service values and focus on the potential customers’ users that will get the most from the application.
  2. You are a service provider – SaaS vendor does not deliver toolkits anymore but a “working service”.
  3. Pricing model must be kept simple and aligned with the service value proposition.
  4. Simple packaging of the application is important in order to get new customers on-board quickly and continue on with leveraging the upsale capabilities.
  5. Don’t forget to collect the cash!

The end of the presentation includes Q&A . One of the questions was “why are SaaS companies not profitable?” Learn more by listening to the lecture audio. I want to thank SafeNet and IGT for arranging this event as it was very inspiring. I also want to thank Mr. Phil Waineright on sharing this valuable knowledge with us.

Listen to the lecture and check the slideshare presentation

More than a week ago I attended SafeNet and IGT event discussing monetization of cloud applications. In this event I had the pleasure of meeting and hearing Mr. Phil Waineright who lectured on the industry of Cloud Computing, including specifics for ISV as SaaS vendors. Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant. The presentation started with a technical PowerPoint problem, so it was a bit amusing as he started the lecture in a spontaneous manner.

The lecture begins with an overview of the cloud and SaaS markets including basic definitions. Mr. Waineright expresses his visionary outlook in the following words –

People think: oh, cloud is a technology problem, it’s a way of making my technology work better, and to think about that is to ignore the bigger picture”.

He presents a strong determination that Google search is a SaaS and he describes a strong synergy between the cloud computing and the `explosion` of mobile or social applications. Describing the 3 layers, Waineright describes SaaS, as the most powerful of the three and is also noting that it holds 50% of the cloud computing market. SaaS is the fastest to grow with a rate of 25% a year on average (by IDC analysts) comparing to a decline in software licenses sales. I can strengthen the latter with Forrester research forescast that In 2011, SaaS will be a $21.2 billion market and grow to $92.8 billion in 2016. {block:More} Read More {/block:More}

..so Why move to the cloud? Time and money 

Waineright explains his obvious answer by saying that “time and money” means that the ISV’s customer does not need to invest in upfront costs and wait for months for the application to be deployed. He also talks about the accelerated pace of innovation supported by the SaaS model.

  “… some ISVs will make that mistake as well .. You can’t make break through savings in cost of operations by adopting and emulating the cloud architecture using virtualizations and automated operations…you have to go to a multi-tenant architecture in order to exploit the economies of scale”,

Waineright holds a definitive position on the multi-tenancy conversion issue by saying that cloud computing is not a “Relocation Exercise” He states that there is no other choice but to invest the money and the efforts to make sure that the technology supports the model of SaaS and the `economies of scale`.

 ”..the difference between using public cloud and having a private cloud instance can be up to 40 times difference in economies of scale. Even for a large enterprise …will still get cost 10 times more per server instance”. .

This statement together with his recent blog post “Private cloud discredited”, make it seems that Waineright does not believe that the private cloud is a strategic option. I agree with this viewpoint and I think that the private cloud is a tool to support this temporary stage of moving applications and data into the public cloud. I find that there is strong debate about this “temporary stage”, as it seems that for enterprises it can take long years to rebuild their IT from scratch in the cloud.

 “Software vendors who embrace the cloud, are actually soaking up revenue that previously was spent on servers’ infrastructure and database administrators … You can save your customers all of that expense and it becomes part of your margin ..”.

I totally agree that the enterprise which already decided strategically on moving to the cloud will be a perfect match for the model presented. Today we are still wondering what are the immediate motivations of an enterprise that already invested a lot of money over the years and today has a full control over stable IT environment and operations. I think that we can expect that this organization will be hesitant with shifting to the cloud. Taking that in mind together with the “uncertainty of the cloud” (still a common phrase) the debate is still around. The shift to the cloud decision must be made and real actual actions are being taken today only by the visionary and early adopters organizations, though as I consider myself an optimist I believe that we are about to be surprised in the very near future.

… Part 2 will include the lecture audio and the presentation itself with more insights.

Check out the SaaS blog at ZDNet

More information about Monetization of Cloud applications using Sentinel, a SafeNet product

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