Cloud Computing in 2013

Marc Andreesen, said recently that 2012 will be remembered as the year of SaaS. What he meant is that SaaS has been around for a while, but it came off age this year, with examples of successes such as the Workday IPO. No one questions the significance of SaaS any more. But the year 2013 will see a shift to PaaS (Platform as a Service) with “most” new activities. There is already a blurring of the lines between IaaS and PaaS, as seen from Amazon’s AWS stack. But programmatic interface in PaaS will dominate as we move forward, catering to the developer community. The incumbents such as IBM, Oracle, SAP, Microsoft, and Adobe (representing “on-premise” software) will have to combat with pure-play cloud players.

I saw a list of cloud pioneers and new cloud tools that should be worth sharing. Among the names (arguably) of cloud pioneers here are the often quoted – Warren Vogel (Amazon CTO), Chris Pinkham (architect of EC2, now head of start-up Nimbula), Randy Bias (CloudScaling, formerly GoGrid), Jonathan Bryce (Rackspace/Openstack), Lew Tucker (CISCO), Rich Wolski (Eucalyptus), Chris Kemp (NASA CTO), Urs Holzle (Google), and Frank Frankovsky (Facebook). You can google their names to see the pioneering work they have done in moving cloud computing forward.

I also saw some new cloud tools as we enter 2013: Evernote (categorize notes, PDF, image, etc.), RightSignature (doc. signing), Expensify (expenses to cloud), Square, Teambox, Backupify, RenewOnDemand. These tools are taking traditional desk-top apps. to the cloud.

Several lists are floating around on winning software startups in 2013: In the Big Data and analytics space – Cloudera, Actian, SiSense, Appranaissance, Appature, and Good Data. In Cloud and Mobile space: many cloud-native startups, CloudPassage, Facebook (new userid and security logon), Xamarian, Sensha, Square, Airbnb, Marian Software and many other HTML5 tools and platform vendors.

One thing for sure – we will see the cloud space getting hotter and hotter in 2013.

Big Shift to Enterprise Cloud Software

One of the big shifts happening in the enterprise software business is the adoption of the Cloud. This is already the dominant model for the consumer Internet space (e.g. Google, Facebook). The overall myth was that large companies are so concerned about security and privacy of data that they will be reluctant to let go of running these applications in-house. Then about 3 years back, Oracle’s CEO ridiculed the cloud as vapor. But the landscape has surely changed and will change even faster going into 2012. Why do I say that?

Recently SAP bought Success Factors at a very high valuation and many saw that as a desperate move to get into the Cloud. Oracle also bought RightNow in the same vain and there is a strong possibility that Oracle will acquire NetSuite in the next twelve months (NetSuite addresses mostly the SMB market). SalesForce.com (SFDC) has been growing and its valuation has gone quite high. The new entrant Workday (founded by the founders of Peoplesoft) has been doing very well. Someone said it is valued at almost $2B with yearly booking rate of $300M. Not bad for a five year old company. Workday addresses the HR space, but is moving to financial applications as well. It wants to be known as an “ERP Replacement” company, not just an “HR Company”.

Most of Workday customers are the large enterprises such as Tyco, AIG, Flextronics, etc. These customers are replacing legacy applications from SAP and Oracle with Workday’s SaaS suite offered through the Cloud. The advantages are obvious for the customers – same version always, new functions added more frequently, vendor takes care of upgrades, less cost paid to SI’s. The traditional applications typically require a 5 to 6 times expense (over product license cost) on consultants (SI’s) who keep customizing the apps. Workday claims their customers have a 90% reduction on SI cost, which is a big deal.

The challenge for the enterprise Cloud vendors is the revenue model, where they do not get the hefty license dollars up front. Hence their investment (both capex and opex) is quite high. For example, Workday has taken investment of $250M to date, counting the last round. But if they can sustain like SFDC, then there is a thriving growth business. By the way, Google has a growing enterprise business and currently brings $1B revenue which is not bad at all. They clearly are focused to make this part grow faster in future.

This is not good news for legacy enterprise application companies like SAP and Oracle. They have to re-invent (or acquisitions like Success Factors and RightNow) quickly to catch up with this shift to the Cloud by large enterprises. Oracle is more likely to ride this bandwagon sooner than SAP. As per the SI’s, they need to re-invent also to at least keep their current clients happy. That means they have to shift from “customization” of code to more reconfiguration of business processes.

Innovate 2011 Conference

I attended an one-day event this week hosted by GlobalLogic (a Sequoia funded private company of 6000 employees worldwide focusing on software development for over 200 clients including ISV’s) called Innovate 2011.

The welcome event was at Stanford University Faculty Club and the guest speaker was Salman Khan (not the well-known Bollywood actor). This gentleman is known as Sal Khan of the Khan Academy. He was terrific on what he has done to the world of K-12 education using short clips on YouTube made available for free to anyone across the globe. One of the first ones to discover his work and mention it to a large audience was Bill Gates last year. Bill said that he regularly uses these video modules for his children. Soon after, Sal got donations to his non-profit organization from the Gates Foundation, Google, and John/Ann Doerr. His passion and innovation in the field of school education is nothing less than revolutionary. Talk about non-linear thinking..this is awesome!

The conference keynote speaker was Geoffrey Moore, the well-known author of Crossing The Chasm. Geoffrey highlighted a big disconnect (I have been speaking about for a couple of years) between consumer technology and enterprise IT. The typical new generation worker of today is so powerful as a consumer (using latest tools of social networking and micro-blogging) yet so lame as an employee at an enterprise (where such tools are not deployed, and sometimes even barred). He mentioned “System of Record” (transactional systems in use for years at the enterprise) vs. “Systems of Engagement” for the consumer where a revolution in applications is taking place. He suggested that IT for the middle tier at large enterprises must embrace these systems of engagements. Geoffrey’s session was very meaningful and relevant. He emphasized the “Return on Innovation” as a key outcome of this adoption of the systems of engagements. Enterprises can not just have  “different” products, they must be ‘differentiated” products for success, just like what Apple’s iPhone has done over Nokia’s failure to produce an equivalent one yet after 3 years.

The rest of the conference had several panels, one on medical equipment industry adopting new innovations, mobile platform and what is happening, and finally enterprise application development panel. The last one had members from SAP, HP, SalesForce.com, Citrix, and Yammer. I did not realize that Yammer is the “social networking” company for the enterprise and is doing very well, being founded by ex-Paypal fellow David Sachs.

There were about 150 attendees and the sessions were quite interactive.

The New Amazon

Amazon is quite a company. Talk about metamorphosis and re-inventing itself, Amazon gets the highest marks.Why do I say that?

Well, it started as a e-commerce book-selling site. It survived the dotcom crash while many other B2C companies went under. The clever strategy to morph itself to a broader player started just after the dotcom crash, around the year 2000.  Now, Amazon has three key businesses, each doing well as growth engines.

First, the core business of selling books got enhanced by strengthening many aspects of the consumer retail business. With tens of millions of customers in eight countries, it created the “customer intimacy” further. Examples like recommending books based on your past purchases added to the customer stickiness. This business continues stronger than ever and has caused the demise of brick-and-mortar book stores like Borders.

Second, leveraging its web infrastructure and massive fulfillment network, Amazon invited other merchants to sell their goods. Hence there grew a massive seller business which brought an additional revenue stream. Now we can buy any goods from the Amazon website at better price points. They have even introduced an annual subscription of $79 for unlimited shipping through the year. Here Amazon competes with eBay and with its seller-partner’s own website.

Third, around the year 2000, Jeff Bezos realized the potential of monetizing the massive computing power it has in the data center. Typically such data centers are underutilized by as much as 50-70%. Amazon started the Amazon Web Service (AWS) and the first service was storage rental. Instead of buying expensive hard disks, start-up companies could use “storage in the cloud”, called S3 (Simple Shared Storage) for a fraction of the cost. Then they introduced EC2 (Elastic Computing Cloud) where computing power can be rented for much cheaper price. It is elastic because you can use as much as you need and then release EC2 instances not needed anymore. It is only configuration and takes very little time (no expensive programming needed). This was the pre-curser to the notion of cloud computing and Amazon, rightfully, is given the credit of pioneering the cloud computing concept.  AWS has added many more cloud services in content delivery (CloudFront), data (SimpleDB or RDS), monitoring, messaging, etc. This part of Amazon is a fast growth segment. Well known web companies like Zynga, and Netflix run 100% on AWS.  The savings on CapEx for these companies are significant.

All this has brought rich dividends. Amazon’s stock price has gone up significantly over last five years. It’s revenue and market capitalization has also sky-rocketed.

Amazon is a good example of a company which has re-invented itself to stay with market dynamics. This is a must to survive in our industry, as the mortality rate is so high.

Database in the Cloud

I go away for a week to Amsterdam (last week) while the annual SFDC (SalesForce.com) user event called Dreamforce took place in San Francisco. A significant announcement there was a new product called Database.com – simply a database in the cloud. Immediately the press pounced on this as much more than what is real, such as  – this is a threat to Oracle’s dominating database product, etc.

The features of this product have been under use inside Force.com platform, meant for developers to build any application that needs to be hosted as a SaaS. In other words, Database.com is a plug-and-play storage infrastructure for any developer. It has standard features like user management, row-level security, triggers and stored procedures, a query language and search functions. As this will reside in the cloud, it has autonomic tuning, backup, replication and upgrades. It supports open APIs such as REST, SOAP, oAuth, etc. Developers can write apps. in any language like Java, C#, Ruby, or PHP.  The runtime could operate on any of these – Force.com, VMForce, Amazon EC2, Google App. Engine, Microsoft Azure or Heroku.

Just like Software as a Service, or Platform as a Service, there is need for Database as a Service (DaaS).  Database.com is an attempt by SFDC to fulfill this need. It is more like Microsoft’s SQL Azure than Oracle’s DBMS. Pricing of Database.com is again made attractive for wider adoption – free for up to 3 users with 100K records and 50K transactions per month. Then the price goes in $10/month increment at certain thresholds.

I am involved with another start-up called ScaleDB that provides real scale-out for high volume workloads in the cloud. This product uses MySQL open source and adds very clever clustering technology. Clearly there is need for a Database in the Cloud. How robust is Database.com for fast-scaling application workloads? Let’s wait and see. Today it’s all marketing stuff.

The answer is “Cloud”, what’s the question?

I attended 2 days of Cloud Expo, organized by Syscon at the Santa Clara convention center here. The expo runs for 4 days, today November 4th. being the last day.  I was also one of many speakers at this conference.

One feels the Cloud computing movement is in full gear after listening to many speakers and walking the exhibit halls. Many booths by known and new vendors – Oracle, SAP, Cisco, Navisite,..the bias seemed more towards infrastructure providers.

Folks who either run hosting services or supply gear to these services were in large numbers. Hence we saw Intel, Cisco, Rackspace, Savvis, Amazon, Microsoft, etc. There were very few SaaS vendors such as SalesForce.com or Netsuite.  The part of Oracle present was, as expected, the former Sun folks displaying the Exacloud server, recently announced at Oracle Open World. Several new vendors such as Abiquo, Navisite displayed their cloud services. These are mostly in the IaaS  (Infrastructure as a Service) space. Neither Google nor IBM was there (except newly acquired Cast Iron Systems).

Overall it was a good place to learn new developments. Several keynotes were good ones and reflected on areas such as performance, management, security, governance, etc. I met many friends from the past, all working on new cloud ventures. I presented BI (Business Intelligence) delivered on private cloud at large enterprises and demonstrated some cool iPad based analytics developed by FCS Inc., a pioneer in this technology.

The caution is to watch out for the use and abuse of the phrase Cloud. Being the latest buzzword, everyone is bending their story to being a cloud offering. Hence confusion abounds. I emphasized that the definition by NIST is the best and we should stick to what constitutes the elements of cloud computing from this work.

Finally the dream of computing as a utility is happening all around us!

Centripetal & Centrifugal Forces, end of Wintel

In one recent Economist article the discussion was the end of Wintel (Windows+Intel) and I liked the start of the article – “They were the Macbeths of information technology (IT): a wicked couple who seized power and abused it in bloody and avaricious ways.”

In the article, I liked the new trends captured as both centripetal and centrifugal forces. Back to high school physics. Centripetal forces are those that push things to a central core – this is to symbolize the push of computing power into data centers (huge warehouses full of servers). Centrifugal forces are those that push things out with great force – this is to symbolize the rapid proliferation of mobile devices, businesses that Microsoft and Intel do no dominate. If you imagine that the PC (Personal Computer, lots of little) era never happened, then this was more or less how computing looked during the good old days with one big difference and that is the absence of the Internet as a key oxygen for inexpensive communication. Since then, two things changed the landscape – physics (computing power) and bandwidth (cheaper and faster).

With the Wintel duopoly declining rapidly in this new era, we see that Apple is the new leader in mobile device with its enormously successful iPhone. Amazon has emerged as the  pioneer in cloud computing with its AWS (Amazon Web Services) components such as EC2, S3, etc. Google is showing great leadership in cloud computing via its Google Applications. The need for your C disk seems so antiquated now! Given such new forces, both Microsoft and Intel are moving in separate directions.

Here is how the article concludes – “As the Wintel pair splits, computing will start to look different. Instead of being dominated by two monopolists, the market will be fought over by eight or nine more or less vertically integrated giants. Oracle, Cisco, and IBM will vie for corporate customers; Apple and Google will scramble for individuals. IT, like the world, is becoming multipolar.”

There was vertical integration (provide the entire stack) 3 decades ago – IBM, DEC, Univac,. . Then came the “democratization” or horizontal structure (many players in each layer).

Now we are back to the future again!

Extraordinary Scale

Current websites like Facebook, Google, Twitter see unprecedented growth in number of concurrent active users and volumes of data in the guise of photos and videos. This level of scalability-demand defies our collective experiences from the past.

For example, Facebook in January of 2009 had 150 million active users. On September of the same year, it reached 300m and currently it is over 400m. Back in 2006, they had one data center in the bay area. In 2008, they added a new one in Virginia. Pretty soon, they are adding a third one in Oregon. Users download 3 billion photos a month, part of 200 Terabytes of live data. They do have over 60,000 servers doing the service for this rapidly growing community. All this was described by their engineer Tom Cook at Velocity 2010 last week in a talk titled “A day in the life of Facebook Operation”.

Sometimes, operational aspects are invisible to the user community. The belief is that somehow it all works until some breakdown or failure makes headlines. It takes a huge amount of innovation and discipline to run these operations. Boring stuff like configuration management, version control, early optimization, failure management, instrumentation, and automated tools require tremendous focus. Google spends a lot of money and talent to keep its operation efficient. So does Facebook. At the same conference, my friend James Hamilton (we were at IBM years back) gave an interesting talk on “Datacenter Infrastructure Innovation”. James is currently at Amazon as a VP and distinguished engineer after working at Microsoft for a number of years. He identifies top cost components and where some innovations can yield significant savings.

As more and more cloud service providers face these challenges, they better check how these pioneers at Facebook, Amazon, and Google are charting new courses for extreme scalability.

Elastic Database Cloud?

The NoSQL movement is getting a lot of buzz lately. Recently I read an interesting article, an interview with Gigaspace CTO Nati Shalom. Several key points are made here. The one-size-fits-all approach has never worked in our industry – one operating system, one DBMS, one middleware, etc. So the exuberant folks behind the NoSQL movement must be careful when they declare that the traditional SQL RDMS business is going to die soon.

For example, we do understand the emerging needs of extreme scale from Twitter – the number of users grows continuously; each user maintains a list of followers that tends to grow continuously as well; and all communication is done on a many to many approach. “The combination of all that makes the traffic pattern in a twitter environment fairly viral and unpredictable and therefore stretches almost any boundaries of scaling we can think of.”  Hence innovative approaches are being tried such as a combination of in-memory and file-based access. It’s all based on cost/GB and read/write performance.

It’s worth looking at an analysis by Stanford researchers called “The Case for RamCloud” that gives a cost comparison between disk and memory-based approaches in terms of cost/performance.

We also see Amazon’s SimpleDB is introducing “forced consistency” to the world of  “eventually consistent” model. As features of a full-function RDBMS get added to the NoSQL solutions, they start looking more like the current RDBMS, even though Nat Shalom does not think SimpleDB is a database

We will see the co-existence of these two worlds – new-gen applications like Facebook, Twitter exploiting the KV (key-value) pair and schema-less simple approach with map/reduce algorithms for very low latency; and the existing world of RDBMS  providing high transactional consistency, flexibility,  reliability, security, and query-ability for enterprise applications, as proven over last 3 decades.

The key question is who will provide the “database as a service” in the cloud? What we need is an “elastic database as a service” similar to what Amazon does in processing with EC2. One such start-up called ScaleDB (I am an advisor) is attempting to take the RDBMS (open source) features  into the cloud with high scalability.

Musings on Oracle & Sun

So finally the European Union gave the green signal to Oracle’s acquisition of Sun yesterday. In anticipation, there is a planned update on Oracle’s Sun strategy next week.

It’s funny. Another news making rounds are the billboards in New York, San Francisco, and Atlanta where Oracle’s co-president Charles Phillips is shown with a woman, not his wife. Everyone is wondering who put these billboards (must be very expensive) and is it to embarrass the Oracle executive? This is unrelated to the Sun news, but such episodes are part of the Oracle’s executive legacy.

Speaking with someone yesterday who worked at Sun many years ago (during the hay days of fast growth), he reminisced how bad Sun has been in monetizing software over the years. Many new ideas such as virtualization, cloud infrastructure and hosted services were pioneered at Sun, but never saw the light of the day. Java was the most visible contribution from Sun, but others monetized it far better than Sun did.

So the question is – can Oracle harvest Sun’s key technologies now? One special mention is Sun’s Caroline project that deals with various layers of cloud computing (HaaS – Hardware as a Service, Storage as a Service, Networking as a Service, Database as a Service,…). It’s Oracle’s best bet to enter “cloud computing” with competitive solution offerings to those from IBM, Miscrosoft and HP. How will the myriad other products from Oracle/Siebel/Peoplesoft/BEA/… blend into this mosaic?

We seem to be back to the future, to “vertical stacks from one vendor” days. Oracle implies that having Sun hardware, Sun storage, Solaris or Linux, Oracle DBMS, and Oracle Applications, all integrated as one unit will be appealing to the customer. May be so. But how does it manifest as cloud offerings rather than in-house installed, maintained, and upgraded entities (classic Oracle’s delivery model so far)?

It will be interesting to observe next week as Oracle explains its Sun adoption strategy.