Tag: cloud service provider

Larry Ellison Bets on Oracle’s Organic Route to the Cloud, But How Are Buyers Evaluating the Cloud Capabilities of Their Service Providers? | Gaining Altitude in the Cloud

Last year when I wrote a blog on how AT&T was betting on its network legacy to win in the cloud, I dropped a hint as to how cloud was turning out to be a melting pot for service providers with disparate legacies.

In fact, all broad categories of service providers approached cloud in their own unique way. On one end of the spectrum were new-age service providers like Amazon Web Services, (AWS), which pushed ahead with its public cloud concept. On the other end, some traditional service providers simply brushed aside the hysteria associated with cloud. In that vein, quotes such as the following ensured that cloud got media coverage even outside technology space, inciting (ironically) even wider interest on this topic.

2008: Oracle’s Larry Ellison on cloud – “When is this idiocy going to stop?”

2010: HCL’s Vineet Nayar on cloud – “Cloud is Bullsh*t”

On Wednesday, when Larry Ellison explained that Oracle’s cloud strategy is focused internally on developing cloud solutions (and deviating from its usual acquisition strategy), the debate came full circle, demonstrating that service providers have indeed moved beyond rhetoric on cloud.

Cloud-based strategies (go-to-market, solutions, pricing models, IP, etc.) are in place and buyers are increasingly engaging service providers on cloud. For example, per service provider responses to a recent Everest Group survey, cloud-based services now constitute five to 15 percent of the scope of infrastructure deals being signed.

As a result, the time is now ripe to shift the discussion from cloud providers to cloud services buyers. As enterprises contemplate moving a larger share of their IT spend to the cloud, their efforts invariably focus on the following two considerations:

  • Evaluating the opportunity cost (total cost of ownership, or TCO) of cloud adoption
  • Evaluating the cloud capabilities of service providers

While TCO evaluation models are still maturing and are currently situation dependent, provider capabilities and standards have matured enough for buyers to benefit from research data.

Going back to my earlier comment on service providers with disparate legacies…following is how Everest Group’s IT outsourcing team depicts a sampling of the melting pot of cloud service providers:

Melting Pot of Cloud Service Providers

IT buyers’ incremental approach to cloud adoption has led service providers to reinforce their legacies, and develop and/or acquire cloud solutions around them. Most of the cloud deals we have analyzed were existing service agreements wherein a cloud service component was introduced either as a value-add from the service provider or per a specific request from the buyer. Hence, as the above picture illustrates, all service providers are now in earnest trying to carve out their own niches in the cloud services market – through solutions, partnerships, technology, or asset ownership.

Based on our interactions with a wide range of buyers, it is clear that cloud will increasingly constitute up a major portion of large enterprise deals in the next five years. The following illustration summarizes those discussions:

Questions about Cloud

Everest Group has embarked on an initiative to help buyers answer the above questions in order to assist them in achieving their overall sourcing goals.

Watch this space for more details on this new area of research.

Cloud Wars: the Demise of Simplicity and Standardization | Gaining Altitude in the Cloud

In its comparatively short yet highly significant lifetime, the cloud industry has quickly devolved into a confusing morass of technology jingoism, marketing hype, aggression, and even negative allegations. Though the SaaS world is reasonably understood, it’s the infrastructure cloud that is creating an enterprise cloud war. Just think about the flurry of announcements and assertions about the big boys of technology taking sides with various cloud platforms or hypervisors:

  • Rackspace announced that OpenStack will be its cloud platform for public infrastructure service
  • Terremark introduced its private cloud offering built on VMware’s hypervisor
  • Sungard and CSC are using the vBlock architecture (based on VMware) for their cloud offerings
  • Savvis has chosen VMware for its Symphony Dedicated cloud
  • IBM is investing in a KVM-based public cloud offering
  • Amazon Web Services are based on proprietary implementation of open source Xen
  • GoGrid prefers the Xen hypervisor
  • HP proclaimed support for KVM/OpenStack for public cloud services
  • OpenStack announced large technology providers such as IBM, Yahoo, HP, AT&T, Dell, Cisco, and Canonical becoming platinum and gold members of OpenStack Foundation. Citrix, a supporter of OpenStack until a few weeks back, bemoaned that it is “tired” of the speed of evolution of OpenStack, and thus gave its CloudStack platform to the Apache Software Foundation. Though market watchers may say that Citrix made the move because OpenStack was perceived as being inclined towards the open source KVM hypervisor rather than Citrix’s  XenServer (a commercial hypervisor by Citrix based on open source Xen)
  • Amazon partnered with Eucalyptus, another open source cloud platform, for hybrid cloud computing thus giving Eucalyptus a big boost as a cloud platform
  • VMware claims there are over 100 providers across 24 countries that offer cloud services based on its technologies. Large enterprise technology providers have partnered with VMware for various cloud offerings
  • Similar providers (e.g., Dell, Fujitsu, Hitachi, Hewlett-Packard, IBM, and NEC ) earlier also signed the Microsoft Hyper-V Cloud Fast Track Program to offer private cloud

Therefore, as happens in enterprise IT, large providers are partnering with all the known players to offer services across different markets, technologies, and customer type. It is evident that the large enterprise providers are choosing commercial platforms for private cloud and open source for public cloud offerings. Unfortunately, this whole muddle of messages have left buyers in an increasingly dense smoke cloud of confusion regarding vendor lock-in, maturity of technologies, reliable support for platforms, services around cloud, etc.

Granted, the implementation architecture of these cloud platforms/hypervisors are in some respects similar, yet the way they handle files, storage, virtual LANs, etc., have sometimes subtle and other times very evident differences.  Customers need different tools and resources to manage these myriad of platforms, hypervisors, and technologies.

However, the premise of cloud was based on standardization and simplicity, wherein customers were simply supposed to self-provision their infrastructure needs irrespective of the underlying platform, and manage it with minimal effort. But the ecosystem doesn’t seem to be evolving in that manner. Rather, it appears to be becoming more confusing and a personal dual between technologists and supremacy of technology than an attempt to improve enterprise IT delivery. Indeed, with so much variation in cloud middleware, how can we expect simplicity and standardization? Which leads to the all important question, will the cloud end up being another technology silo or will it transform the enterprise IT landscape?

To cut through this complex maze of intertwined offerings, buyers must understand the nuances of different cloud technologies, including their impact, limitations, costs, and use specific to their own ecosystem. Approaching it in this manner, the cloud can be a real game changer. Providers will keep on overselling and hyping up their offerings and the buyers require relevant skills to evaluate these offerings for their requirements.

Of course, this is easier said than done. While it’s a given that the enterprise technology world can never be imagined to have a single technology, system, or innovation, and differences will always prevail, there is a dire need to simplify the entire cloud paradigm in terms of its architecture, standards, implementation, usage, and evolution. Too many complexities may scare buyers, and the industry may miss out on exploiting a once-in-a-generation idea.

Will Platform Wars Freeze the Enterprise IaaS Market? | Gaining Altitude in the Cloud

As we work with our clients to understand the implications of Next Generation IT technologies, it’s clear that large enterprise adoption of public cloud IaaS is progressing more slowly than other types of cloud services (e.g., SaaS, private cloud). When we ask ourselves “why,” we continue to come back to three critical issues:

  • Vision and reality gap – we continue to be impressed with the sophistication that many of our client IT executives have around how private, public and hybrid clouds can be used to fundamentally transform their IT infrastructures. They then talk to vendors and face the disappointing gap between the state of cloud technologies today and their expectations and requirements (legitimate or not).
  • Risk aversion – it’s one thing for a CIO to passively support their VP of Sales as they roll out Salesforce.com.  It’s quite another to own the decision to migrate critical IT workloads out of the data center to public cloud services. While early adopters are clearly out there experimenting with IaaS, don’t expect your typical Fortune 500 CIO to be eager to get on the diving board and jump in until they have to, or they feel it’s safe.
  • Market “noise” – just when CIOs think the drumbeat of vendor provider announcements around public, private and hybrid cloud offerings and standards can’t get any louder, someone dials it up a notch.  The noise (and uncertainty) is now being amplified even further by the emerging battle around enterprise cloud platforms / operating systems like vCloud and Open Stack (more on this later).

Certainly we’re finding that these issues are reflected in enterprise IaaS adoption patterns that are not quite what many in the enterprise CSP vendor community had hoped for at this point. Namely we’re seeing:

  • Enterprises growing cloud usage from the “inside out” – nearly all the activity we see in the enterprise market around cloud and infrastructure today is focused around private cloud pilots or full deployments (hosted or on-prem). Rather than experiment with cloud with public service providers, they’re opting to try the model internally first. Some call it “server-hugging,” others a reactive move to keep IT spend in house, and still others a rational response to the current state of technology and services.
  • Heavy reliance on proprietary enterprise IT vendors – despite their vision, promise and industry support, new open source platforms (and Eucalyptus) have seen limited adoption in enterprise private clouds. While OpenStack has had success with service providers, many CIOs don’t consider it ready for prime-time yet in their data centers. CloudStack has had more success, but enterprise deployments still likely number only in the double digits. Perhaps not surprisingly we see enterprise cloud deployments (private cloud) dominated by VMware and IBM.
  • Selective, incremental migration of targeted use cases – where we do see enterprise IT migrating to public cloud or hybrid infrastructure models is for very targeted or smaller scale, lower risk use cases. Examples include test / dev environments, backup and archival, websites and batch data analytics. IT is dipping their “toe in the water” with public cloud, and not feeling a compelling need to drive widescale transformation – yet.

So where are we headed?

In general, enterprises are obviously not comfortable with the current risk / return profile associated with public IaaS and hybrid cloud models. We believe one of the few levers that would pull both components of this ratio would be a cloud management platform that would enable true workload portability / interoperability and policy enforcement across private, public and hybrid models. Not surprisingly, competing enterprise cloud vendor platforms, standards and ecosystems are emerging around VMware, Open Stack and Amazon (and to a limited extent Microsoft) to address this market gap. Several major announcements over the past several weeks that have served both to partially clarify and muddy this evolving landscape at the same time include:

  • The Amazon / Eucalyptus announcement around extended  API compatibility for hybrid clouds
  • The Citrix announcement that they will be breaking away from Open Stack and open sourcing CloudStack to the Apache Software Foundation
  • HP’s announcement of the Converged Cloud portfolio of public, private and hybrid cloud offerings based on a “hardened” version of OpenStack and KVM.

Most major enterprise IT vendors are still hedging their bets and publicly keeping feet in multiple camps. With the marketing engines in overdrive it’s difficult to understand what commitments vendors are really at the end of the day making to the different platforms. In fact it’s quite instructive to take a look at who’s putting their money where their mouths are when it comes to open source efforts like Open Stack, not just in terms of sponsorship fees but also developer contributions.

Historically IT platform markets end up with a dominant leader and one to two credible challengers that end up with 2/3 to 3/4 of the market, with the remainder shared among niche players. When we take a look at the enterprise cloud operating system or management platform market, we don’t see why it would be any different here, though we’re obviously still a long, long way from the end game.

The critical question in our mind is: Is a cloud platform market shakeout required for enterprise adoption of IaaS to accelerate and hit the tipping point? If so, we could be waiting a long time.

What are your thoughts?

Amazon in the Headlines | Gaining Altitude in the Cloud

I’m sure many of you have read the reports of Amazon’s new CEO’s steps to revitalize the company’s growth. News of restructuring that could involve widespread layoffs that cut deeply across Amazon, including some of its key development areas are also driving changes across the company’s management ranks.

Meanwhile, there’s at least one part of Amazon that is taking aggressive steps to fuel growth rather than cutbacks.

Amazon Web Services (AWS) announced today that it is reducing prices for the 19th time in the last six years. And it’s not just a nudge downward:

  • EC2 prices for longer term (3-year) Reserved Instances in some configurations are dropping by 35 to 40 percent
  • EC2 On Demand prices for high memory instances are now 10 percent lower
  • Similar price reductions span services beyond EC2 as well (e.g., RDS, EMR, ElastiCache)

While the reductions are meaningful for its flagship EC2 On Demand services, I interpret the very large reductions for longer term Reserved Instances as yet another salvo that plays to the enterprise market. Moreover, the introduction of volume tiering that enables additional discounts should turn many CIOs heads who are in the midst of pilots that test the value of cloud services in a modest way.  Spend over US$250K on Reserved Instances and get 10 percent off the amounts above that level – more than $2 million steps that up to a 20 percent incremental discount. And finally, in a distinct departure from previous positions, AWS is inviting “one off” deals by asking those spending more than $5 million to “call me!”  Some of AWS’ largest users are ending up with pricing that is over 50 percent lower than before these actions.

The business case for broader adoption across the enterprise continues to get stronger. Enterprises should be including ongoing pricing improvements in their Infrastructure-as-a-Service models; can internally-delivered infrastructure be cost competitive with options that are likely to drop another 20 percent over the next few years?

AWS appears to continue its leadership in cloud infrastructure services with this pricing action, and it continues to add solutions and features that should appeal to enterprise buyers. Recent discussions with enterprise CIOs, however, suggest a gap continues to exist – at Amazon and most of the other cloud service providers – around the ease of enterprise solutioning. The low touch, self-service approach enables attractive price points but still leaves the enterprise with do-it-yourself tasks that impede their widespread adoption of mainstream solutions.  AWS’ strategy appears to rely on the VAR / SI channel do the solutioning, focusing on the horizontal cloud delivery platforms (which we suspect may be higher margin, at least for AWS). This provides an opening for other cloud pioneers – Rackspace, Savvis, Terremark, and others – to step up to fulfill the enterprise market’s needs for true enterprise-class solutions that include the all-important solutioning capabilities. Competing on price is essential – but the value player is likely to seize the enterprise leadership role in the long run.

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