Community Clouds Indicate Evolution in the Public Cloud Market | Gaining Altitude in the Cloud

Posted On June 10, 2011

Commercial technology tends to evolve in a repeatable pattern. An innovative firm releases a technology thinking it has the potential to have an impact on the way a task is performed. Because new technology is unproven, it is interpreted as being risky; it thus appeals first to early adopters who play a vital role in its evolution. Their enthusiasm for “the new” is related to a desire to test a technology, identify its shortcomings, and occasionally reengineer it to solve a problem the original inventors may not have thought of previously.

When a new entrant into a market tries to gain a foothold by incorporating the feedback and experimentation of early adopters into its own evolution of the underlying technology, this signals that the product has entered a new phase of maturity in the market.

Cloud technology is not immune to this cycle. With the announcement of NYSE Technologies Capital Markets Cloud Platform last week, we are now entering what I believe is the next phase of maturity for the public cloud: vertically focused cloud service providers selling access to community clouds.

Community clouds are public, architected with some level of specialized design or configuration optimized to a particular business user community. While not new in concept, there were very few examples of public community clouds before NYSE’s announcement. To date, most discussions and preliminary use cases for community clouds have been in sectors in which competition is extremely low or non-existent, such as governments and higher education. Industry competitiveness is an important characteristic because community clouds involve some degree of sharing more proprietary infrastructure with a group of peers. In most industries, this level of openness goes well beyond normal practice.

Here is the most interesting part of the NYSE community cloud. Its purpose is to bring a level of fairness to one of the most competitive industries: financial services. With the advent of electronic trading, financial services firms have tried to get their machines as physically close as possible to the servers that run the market to gain a competitive advantage through the execution of faster trades. According to James Staten, principal researcher at Forrester Research, this community cloud enables any firm to place its virtual machine on the same infrastructure as the exchange and allows the NYSE to monitor access in an effort to promote fairness. Said Staten, Now financial firms can compete on their trading algorithms, market insights and knowledge without geolocation, colo relationships and big money prioritization creating an uneven playing field. This doesn’t mean that a large financial institution can’t still colocate a massive server farm, just that winning isn’t defined by your ability to do so.”

Community clouds are designed to appeal to a specific group of users and thus are not truly “public” in that not everyone needing computing resources will see value in them. Community clouds will always attract fewer customers than traditional public clouds because of their more narrow appeal than a “vanilla” IaaS offering like Amazon Web Services. However, community cloud providers are still able to deliver some of the same economic benefits (e.g., lower operating costs per server) of larger scale public cloud to their clients.

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