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As the world is moving to online in general and cloud in particular, what is going to happen to the $40 bln hosting industry?

Parallels (which is probably the largest software vendor for hosters) published video recordings from their Parallels Summit 2012, including this keynote fro their founder Serguei Beloussov. At 31:51 mark he talks about the area near and dear to my heart – Platform-as-a-Service (PaaS) and specifically Jelastic in which I work. Check it out and see if you share Serguei’s views on where the industry is going:

Click to watch the recording on YouTube

 

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In this article in Enterprise Systems Journal I argue that this might very well be the case.

Here’s a quick excerpt:

IT professionals seem to be the most conservative crowd when it comes to the cloud. While we all have been uploading our pictures to Flickr and communicating via Facebook, and our sales reps have been utilizing Salesforce.com and doing Web demos, system administrators have stayed cautious, preferring to keep IT under their control.

Now that software as a service (SaaS) has become more widespread and commonly accepted — and C-level executives are falling under the charm of the cloud — something’s got to give. That’s definitely the expectation of the systems management vendors quickly ramping up their acquisition and development cycles to have SaaS for IT management products ready.

Read the full text here.

Don Fornes of Software Advice posted an interesting piece on how cloud solutions are a classic example of disruptive technology emerging from niche/small market and then growing, becoming ever more feature-rich and cost-effective and eventually starting to replace big market incumbents when it is already too late for them to compete on this redefined market.

He shows how SaaS to on-premise software is classical disruptive innovation from Clayton Christensen‘s “The Innovator’s Dilemma“.

Don's diagram of the disruptive innovation cycle applied to SaaS

While I don’t have much doubt in the argument as a whole, I would be very interested to see whether it plays evenly across all software markets or only apply to some of them.

I have little doubt that vendors with huge on-premise platforms and corresponding on-premise platform-dependent revenue streams – such as Microsoft and Oracle – will find this SaaS transition challenging. Just look at Microsoft’s operating income by division: the vast majority of their profits come from Windows client and Office. If SaaS transition would mean that users just need a browser running on iPad, WebOS or Chrome OS device – this would mean that Microsoft’s profits evaporate and go to the corresponding device and service vendors. If they try to go full speed into SaaS world to compete effectively against Apple, HP and Google – they can hurt their own existing revenue streams without necessarily succeeding in establishing new ones. That’s classical Innovator’s Dilemma.

Now, if you look at IT Management/Systems Management sector, the situation is somewhat similar but also quite different. I will use my own company – Quest Software – as an example. We provide a big set of software tools which IT professionals in enterprises use to better manage the platforms they get from Microsoft, Oracle and others.

On the one hand, we are somewhat susceptible to the disruption: SaaS may help competition release products faster and if platform transitions starts happening fast we can potentially see our addressable market shrinking.

On the other hand, the opportunities SaaS gives us, are way bigger than risks:

  • New platforms: Platform fragmentation is great for us. We love heterogeneous environments and transitions. Quest is helping tens of thousand customers make sure that their Unix/SAP/Blackberry systems integrate seamlessly with Microsoft Active Directory, their Notes/Sametime communication systems co-exist with Exchange/OCS, and so on. This is the gap which platform vendors such as Microsoft cannot bridge, and as SaaS platforms start getting added to the mix our solutions become more important rather than less important.We are already switching gears and using this opportunity to expand the range of services which we support, provisioning identities and access to Google Apps,  providing monitoring and management and enabling development for SQL Azure, and so on.
  • New way to reach customers: We are starting to offer our own IT Management technology as SaaS solutions, so customers can just point their browsers to our Quest OnDemand web site, subscribe to our service and start managing their local IT using our remote infrastructure. This means that not just big enterprises but small and medium businesses can start enjoying services such as secure offsite-stored Active Directory backup with granular recovery, or event log collection and management. This lets us expand, rather than cannibalize our market. We have a lot of great technology and can now repackage it for easier consumption by bigger audience.See this video for detailed discussion of Quest OnDemand and IT Management as a Service.

I think these are the reasons, why at the moment it looks like IT management companies will probably – with proper execution – find themselves benefiting from the very same disruption hurting their platform partners.

Judging by the recent Cloud Computing Explained: Knowing the Best Cloud Computing Vendors article published by The Latest Tech News – which included Quest in the short list of the vendors gaining from the SaaS transition, I am not alone who thinks that way.

private-cloudHere I continue the 2009 predictions series started with my IaaS/PaaS 2009 post.

In the world of cloud computing we are living in very exciting times. Cloud Computing is the buzz word of the day even though the segment is barely two years old. Interest in private clouds is even more astonishing considering that these barely exist at all and we are likely to be only entering the first days of real developments in this area.

In a nutshell, private clouds are Amazon-like cost-effective and scalable infrastructures but run by companies themselves within their firewalls.

There are a couple of reasons why this is an interesting option for a lot of enterprises out there:

  1. Some data and systems belong on premise due to security and legal concerns, or simply companies wanting to stay in control.
  2. The story of not having to provision and manage hardware resources when using public clouds from Amazon and others sounds great but the reality is that enterprises already have hardware of their own. Instead of tearing down datacenters in which they have been investing all these years – why not start to use them more efficiently?

These are the reasons why both enterprise and government structures (you don’t expect Department of Defense to use Amazon for their apps, do you?) are very interested in pursuing the private cloud option, and analysts like Gartner are giving the concept their high blessing.

Surprisingly enough, I would argue that no real solution is currently obvious on the market.

VMware is working on their Datacenter OS and vCloud initiatives, and has had LabManager offering for a long time. Microsoft is obviously happy sell you their Hyper-V and Systems Center Virtual Machine Manager. And then there are quite a few startups like 3Tera (grid operating system), ParaScale (disk-storage aggregation software), Cassatt (resource-pooling technology), Elastra (cloud-like application management inside a company’s firewall) and so on.

However, I believe that the real solution is yet to come.

Here are the key characteristics that private clouds should have from my perspective:

  1. More than a hypervisor and VM management tool: storage services, standard scalability APIs such as load balancing and queuing, and so on.
  2. Unified approach with public clouds: APIs, software stack, licensing, virtual machine formats (in case of IaaS), development tools…

Unified public/private approach is important for a few reasons:

  • It would provide for scenarios like outbursting (using internal clouds most of the time and public ones for peak loads) and freedom to go to external vendors and back.
  • From development perspective, ability to write application once and sell it both as SaaS offering from a public cloud and software one for private deployments will stimulate software vendors to create solutions for the platform.
  • And obviously the more unified the technology gets the easier it would be for in-house developers and IT to have skills necessary to develop and manage applications of their own.

There are companies working on elements of private cloud systems of the future but there is nothing close to being a real solution with Amazon-like acceptance (still curious to see what happens to Eucalyptus in 09 by the way).

Will 2009 be the year when private clouds really take off? I seriously doubt so – there seems to be a lot of work ahead to make this a reality. However, there definitely is demand (for the reasons I mentioned above), analysts’ blessing, and a lot companies rushing in to deliver a solution. Which means that no matter how early things are we will see a lot of interest developments in this area in 2009.

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Here’s my attempt to put together the list of things I expect to happen to Cloud Computing in 2009 – kind of natural thing to do the fist day of the year, right?

Overall, this is going to be a year when cloud computing will start rapidly maturing with competition heating up on the infrastructure/platform level, real private cloud solutions hitting the market, traditional applications increasingly moving to SaaS or hybrid model, and browser offline becoming a reality.

Let’s go through these one by one – and go through the IaaS and PaaS markets first.

Platform and Infrastructure as a Service (PaaS and IaaS) markets maturing and blurring.

IaaS is basically Amazon EC2 approach with hosters giving customers the ability to instantiate and control virtual machines running in the datacenter. This is a natural progression from the traditional server hosting model. However, this model of raw VM does not provide a lot of opportunity to differentiate which in turn is leading to higher competition and lower profit margins. We will see more and more platform functionality being added to infrastructure offerings and these two layers merging more and more.

Amazon is clearly adding more and more services besides EC2, and partners such as RightScale are adding automated scaling features normally associated with PaaS.

Even newcomers are now often shooting for something in between right from the get go. Can you tell where Windows Azure is? It is already kind of both infrastructure and platform.

Speaking of Windows Azure, this is likely going to be the year when it will hit the market. Folks at Microsoft are doing their best to make it easier for existing software ecosystem to get in with effectively the same or very similar tools they use today. The sheer size of the ecosystem, and this evolutionary approach is likely to immediately make Microsoft a serious player in the space.

VMware can definitely get into the top 3 as well if they execute well with their vCloud initiative. They would need to make sure that:

  • Their hosting partners can compete effectively against Amazon, Microsoft, Google, and others.
  • This pick your partner approach does not confuse the market, and
  • They don’t end up being behind competition by limiting themselves to basic infrastructure only.

The interesting aspect of that is that VMware really has the potential of forcing Microsoft to let partners run Azure. Today this is not the case and the only place where Azure exists is Microsoft’s datacenter.

It remains to be seen whether pure Platform as a Service players such as Salesforce.com (with its Force.com) and Google App Engine will be in the leaders group. They will likely start feeling pressure from the infrastructure level as I mentioned already but it might be challenging for them have the ease of migration and the flexibility that IaaS solutions have.

Also, Google seems to be making surprisingly small progress lately. They have posted some information on the upcoming System Status site and billing/quota dashboard – which means that the beta status is likely to be gone soon. However, their development story (Python as the only programming language and quite limited development environment) and the economy forcing them to concentrate on their core search and ad business are limiting their ability to compete.

Thoughts, comments on any of these?

I will continue with other trends next week.

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The posts on this blog are provided “as is” with no warranties and confer no rights. The opinions expressed on this site are mine and mine alone, and do not necessarily represent those of my employer Jelastic or anyone else for that matter. All trademarks acknowledged.

© 2008-2012 Dmitry Sotnikov

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