The cloud is revolutionising IT. However there are two sides to every story: the winners and the losers. Who are they going to be and why? If you can’t wait here are the losers: HP, Oracle, Dell, SAP, RedHat, Infosys, VMWare, EMC, Cisco, etc. Survivors: IBM, Accenture, Intel, Apple, etc. Winners: Amazon, Salesforce, Google, CSC, Workday, Canonical, Metaswitch, Microsoft, ARM, ODMs.
Now the question is why and is this list written in stone?
What has cloud changed?
If you are working in a hardware business (storage, networking, etc. is also included) then cloud computing is a value destroyer. You have an organisation that is assuming small, medium and large enterprises have and always will run their own data centre. As such you have been blown out of the water by the fact that cloud has changed this fundamental rule. All of a sudden Amazon, Google and Facebook go and buy specialised webscale hardware from your suppliers, the ODMs. Facebook all of a sudden open sources hardware, networking, rack and data centre designs and makes it that anybody can compete with you. Cloud is all about scale out and open source hence commodity storage, software defined networks and network virtualisation functions are converting your portfolio in commodity products. If you are an enterprise software vendor then you always assumed that companies will buy an instance of your product, customise it and manage it themselves. You did not expect that software can be offered as a service and that one platform can offer individual solutions to millions of enterprises. You also did not expect that software can be sold by the hour instead of licensed forever. If you are an outsourcing company then you assume that companies that have invested in customising Siebel will want you to run this forever and not move to Salesforce.
Reviewing the losers
HP’s Cloud Strategy
HP has been living from printers and hardware. Meg rightfully has taken the decision to separate the cashcow, stop subsidising other less profitable divisions and let it be milked till it dies. The other group will focus on Cloud, Big Data, etc. However HP Cloud is more expensive and slower moving than any of the big three so economies of scale will push it into niche areas or make it die. HP’s OpenStack is a product that came 2-3 years late to the market. A market as we will see later that is about to be commoditised. HP’s Big Data strategy? Overpay for Vertica and Autonomy and focus your marketing around the lawsuits with former owners, not any unique selling proposition. Also Big Data can only be sold if you have an open source solution that people can test. Big Data customers are small startups that quickly have become large dotcoms. Most enterprises would not know what to do with Hadoop even if they could download it for free [YES you can actually download it for free!!!].
Oracle’s Cloud Strategy
Oracle has been denying Cloud existed until their most laggard customer started asking questions. Until very recently you could only buy Oracle databases by the hour from Amazon. Oracle has been milking the enterprise software market for years and paying surprise visits to audit your usage of their database and send you an unexpected bill. Recently they have started to cloud-wash [and Big Data wash] their software portfolio but Salesforce and Workday already are too far ahead to catch them. A good Christmas book Larry could buy from Amazon would be “The Innovator’s Dilemma“.
Dell’s Cloud Strategy
Go to the main Dell page and you will not find the word Big Data or Cloud. I rest my case.
SAP’s Cloud Strategy
Workday is working hard on making SAP irrelevant. Salesforce overtook Siebel. Workday is likely to do the same with SAP. People don’t want to manage their ERP themselves.
RedHat’s Cloud Strategy
[I work for their biggest competitor] RedHat salesperson to its customers: There are three versions. Fedora if you need innovation but don’t want support. CentOS if you want free but no security updates. RHEL is expensive and old but with support. Compare this to Canonical. There is only one Ubuntu, it is innovative, free to use and if you want support you can buy it extra.
For Cloud the story is that RedHat is three times cheaper than VMWare and your old stuff can be made to work as long as you want it according to a prescribed recipe. Compare this with an innovator that wants to completely commoditise OpenStack [ten times cheaper] and bring the most innovative and flexible solution [any SDN, any storage, any hypervisor, etc.] that instantly solves your problems [deploy different flavours of OpenStack in minutes without needing any help].
Infosys or any outsourcing company
If the data centre is going away then the first thing that will go away is that CRM solution we bought in the 90’s from a company that no longer exists.
For the company that brought virtualisation into the enterprise it is hard to admit that by putting a rest API in front of it, you don’t need their solution in each enterprise any more.
Commodity storage means that scale out storage can be offered at a fraction of the price of a regular EMC SAN solution. However the big killer is Amazon’s S3 that can give you unlimited storage in minutes without worries.
A Cisco router is an extremely expensive device that is hard to manage and build on top of proprietary hardware, a proprietary OS and proprietary software. What do you think will happen in a world where cheap ASIC + commodity CPU, general purpose OS and many thousands of network apps from an app store become available? Or worse, a network will no longer need many physical boxes because most of it is virtualised.
What does a cloud loser mean?
A cloud loser means that their existing cash cows will be crunched by disruptive innovations. Does this mean that losers will disappear or can not recuperate? Some might disappear. However if smart executives in these losing companies would be given the freedom to bring to market new solutions that build on top of the new reality then they might come out stronger. IBM has shown they were able to do so many times.
Let’s look at the cloud survivors.
IBM has shown over and over again that it can reinvent itself. It sold its x86 servers in order to show its employees and the world that the future is no longer there. In the past it bought PWC’s consultancy which will keep on reinventing new service offerings for customers that are lost in the cloud.
Just like PWC’s consultancy arm within IBM, Accenture will have consultants that help people make the transition from data centre to the cloud. Accenture will not be leading the revolution but will be a “me-to” player that can put more people faster than others.
X86 is not going to die soon. The cloud just means others will be buying it. Intel will keep on trying to innovate in software and go nowhere [e.g. Intel’s Hadoop was going to eat the world] but at least its processors will keep it above the water.
Apple knows what consumers want but they still need to prove they understand enterprises. Having a locked-in world is fine for consumers but enterprises don’t like it. Either they come up with a creative solution or the billions will not keep on growing.
What does a cloud survivor mean?
A cloud survivor means that the key cash cows will not be killed by the cloud. It does not give a guarantee that the company will grow. It just means that in this revolution, the eye of the tornado rushed over your neighbours house, not yours. You can still have lots of collateral damage…
IaaS = Amazon. No further words needed. Amazon will extend Gov Cloud into Health Cloud, Bank Cloud, Energy Cloud, etc. and remove the main laggard’s argument: “for legal & security reasons I can’t move to the cloud”. Amazon currently has 40-50 Anything-as-a-Service offerings in 36 months they will have 500.
PaaS & SaaS = Salesforce. Salesforce will become more than a CRM on steroids, it will be the world’s business solutions platform. If there is no business solution for it on Salesforce then it is not a business problem worth solving. They are likely to buy competitors like Workday.
Google is the king of the consumer cloud. Google Apps has taken the SME market by storm. Enterprise cloud is not going anywhere soon however. Google was too late with IaaS and is not solving on-premise transitional problems unlike its competitors. With Kubernetes Google will re-educate the current star programmers and over time will revolutionise the way software is written and managed and might win in the long run. Google’s cloud future will be decided in 5-10 years. They invented most of it and showed the world 5 years later in a paper.
CSC has moved away from being a bodyshop to having several strategic important products for cloud orchestration and big data. They have a long-term future focus, employing cloud visionaries like Simon Wardley, that few others match. You don’t win a cloud war in the next quarter. It took Simon 4 years to take Ubuntu from 0% to 70% on public clouds.
What Salesforce did to Oracle’s Siebel, Workday is doing to SAP. Companies that have bought into Salesforce will easily switch to Workday in phase 2.
Since RedHat is probably reading this blog post, I can’t be explicit. But a company of 600 people that controls up to 70% of the operating systems on public clouds, more than 50% of OpenStack, brings out a new server OS every 6 months, a phone OS in the next months, a desktop every 6 months, a complete cloud solution every 6 months, can convert bare-metal into virtual-like cloud resources in minutes, enables anybody to deploy/integrate/scale any software on any cloud or bare-metal server [Intel, IBM Power 8, ARM 64] and is on a mission to completely commoditise cloud infrastructure via open source solutions in 2015 deserves to make it to the list.
Metaswitch has been developing network software for the big network guys for years. These big network guys would put it in a box and sell it extremely expensive. In a world of commodity hardware, open source and scale out, Clearwater and Calico have catapulted Metaswitch to the list of most innovative telecom supplier. Telecom providers will be like cloud providers, they will go to the ODM that really knows how things work and will ignore the OEM that just puts a brand on the box. The Cloud still needs WAN networks. Google Fibre will not rule the world in one day. Telecom operators will have to spend their billions with somebody.
If you are into Windows you will be on Azure and it will be business as usual for Microsoft.
In an ODM dominated world, ARM processors are likely to move from smart phones into network and into cloud.
Nobody knows them but they are the ones designing everybody’s hardware. Over time Amazon, Google and Microsoft might make their own hardware but for the foreseeable future they will keep on buying it “en masse” from ODMs.
What does a cloud winner mean?
Billions and fame for some, large take-overs or IPOs for others. But the cloud war is not over yet. It is not because the first battles were won that enemies can’t invent new weapons or join forces. So the war is not over, it is just beginning. History is written today…
Although the number of solutions Amazon AWS is offering has become very large, here are 5 ideas of what Amazon could be adding next.
There are thousands of APIs out there. However what is missing is an easy way for companies to control their costs. In line with other marketplaces Amazon runs, there could be an API marketplace. An API marketplace would allow third-party API providers to let Amazon do the charging. Companies would be able to pay one bill to Amazon AWS and use thousands of APIs. Also third-party API providers would be winning because they often can not charge small amounts to a large set of developers. Amazon already sends you a bill or charges your credit card, hence adding some dollar/euro cents for external API usage would be easy to do. The third-party API provider would avoid having to lock-in users in large monthly usage fees to offset credit card and management charges. Amazon of course would be the big winner because they could get a revenue share on these thousands of APIs. End-users would also be winning because they can easily compare different APIs and get community feedback from other developers and pick those APIs with the best reputation. The typical advantages of any online marketplace. Also cross-selling, advertisement, etc. and other areas can be reused by Amazon. A final advantage would even be to have Amazon be in the middle and offer a standard interface with third-parties offering competing implementations. This would allow developers to easily switch providers.
A lot of applications would be helped if they could use language APIs that are paid per request. Language APIs is a group name for text-to-speech, speech recognition, natural language processing, even mood analysis APIs. These are all APIs that are available individually but there is a clear economies of scale effect. The more speech you transcribe or text documents you process, the better your algorithms become. Also there is an over-supply of English language APIs but an under-supply of any other language in the world, except for Spanish, French and German perhaps. Another problem with existing APIs is that a high monthly volume is needed in the even the most basic subscription plan. Examples are Acapela VaaS pricing that costs a minimum of €1500. Very few applications will use this amount of voice.
M2M APIs and Services
Amazon is already working hard on Big Data solutions. M2M sensors can generate large volumes of data pretty quickly. S3 or DynamoDB would be ideal to store this data. However what is missing is an easy way to connect and manage large number of sensors and devices and their accompanying applications. There are few standards but with examples like Pachube, Amazon should be able to get inspired. Especially the end-to-end service management, provisioning, SLA management, etc. could use a big boost from a disruptive innovator like Amazon. Also M2M sensor intelligence could be offered from Amazon, see my other article about this subject.
Mobile APIs and Solutions
With billions of phones out there, mobilizing the Web will be the next challenge. Securely exposing company data, applications and processes towards mobile devices is a challenge today. BYOD, bring-your-own-device, is a headache for CIOs. We do not all have a MAC so we can not sign iPhone apps and launch them on the App Store. Ideally there would be a technical solution for enterprises to manage private app stores, deploy apps on different devices and be able to send notification to all or subsets of their employees. Also functionality like Usergrid in which developers would not have to focus on the backoffice logic would be of interest. Also tools to develop front-end for different devices would be appreciated, examples like Tiggzi come to mind. There are a lot of island solutions but few really integrated total solutions.
Support APIs and Services
Amazon is becoming more and more important in the global IT infrastructure business. This means that solutions will move more and more to the Cloud and sometimes be hybrid cloud. With these complex solution scenarios in which third-parties, Amazon and on-site enterprise services have to be combined, risks of things going wrong are high. Support services both from a technical point of view:
- detect failures and to automatically try to solve them
- manage support ticket distributions between different partners
- measure SLAs
as well as from a functional point of view:
- dynamic call centers with temporary agents
- 3rd party certification programs in case small partners do not have local resources
- 3rd party support marketplace to offer more competition and compare reputations
are all areas in which global solutions could disrupt local and island solutions that are currently in place.
What if you had a gigabit Internet connection at home and you could connect a simple device to it and start to offer mobile broadband services without paying for the spectrum?
Four disruptive technologies and the support from a large disruptive player like Apple, Amazon or Google could make it possible in 2013. You could make money from instead of paying money for your fiber to the home connection.
Disruption 1: white spaces
FCC, the US telecom watchdog, is opening the US spectrum to unlicensed communications. The term is called white spaces. It basically means that unused spectrum can be used as long as you consult the FCC database and use an FCC approved device.
Disruption 2: Vanu
Vanu Bose is the son of the famous sound systems Bose. Vanu’s venture is about software-defined radio. It basically disconnects your mobile phone from the underlying radio technology.
Disruption 3: Openflow
I discussed Openflow before. It is one of the major standards for software defined networks.
Disruption 4: Cloud Computing
No further introduction necessary.
Bringing it all together
A white spaces compatible “mini base station” at your home that connects to the FCC database to get some local spectrum. Via the cloud and Openflow your nano operator network is linked to hundreds of other networks. A disruptive player offers Vanu enabled phones, e.g. iPhone 6 or Android Nexus Vanu as well as a monthly broadband subscription, e.g. €10 for 100gb. You download a database of “mini base stations”, their location and spectrum onto your phone. You are ready to go. Each time a phone connects to a “mini base station” a virtual network slice is setup (flowvisor / Openflow) and the owner receives money per Mb (nano payments). At the end of the month your Fiber to the Home subscription is paid for or you are even able to make money if you have enough traffic…
In recent weeks I had the pleasure to talk to the team behind Mobicents. I have been pleasantly surprised by Restcomm. Restcomm is Twilio for the Private Cloud. Telco 2.0 SaaS for private cloud. Tropo APIs are also on the roadmap. Mobicents is starting a revolution by moving away from telecom standards and moving to the new Cloud telecom standards. Telecom engineers are no longer needed to make enticing value-added services. Any web developer can make telecom apps in minutes and integrate them with Web 2.0 and social networks.
Is Restcomm a threat for Twilio? Quite the contrary. Many larger companies did not want to move to Amazon because of fears of vendor lock-in. Eucalyptus brought a way for public cloud apps to move to a private cloud. Restcomm will allow companies to move their telco apps to the private cloud when they become a large hit. Developers could even start from a private cloud deployment and move apps to Twilio when spikes in demand happen, a.k.a. cloud bursting. In general Twilio is very likely going to get more customers instead of less by having a valid open source alternative.
Mobicents is also undergoing large changes. There has been a shift in direction at Red Hat and the Mobicents team started their own company called Telestax. The company is independent from Red Hat, however it will partner with Red Hat for telecom opportunities involving RHEL and JBoss products.
Several operators are planning on launching Cloud Infrastructure-as-a-Service (IaaS) soon. Afterwards they want to launch SaaS and Telco SaaS (SaaS + Telecom assets) that run on top of their IaaS. Unfortunately this is doing things the wrong way around.
Since an operator spends millions on IaaS, CxOs want to see results. As such telecom managers are looking for applications and SaaS that can utilize this new IaaS. The problem is that operators are likely to spend again 4-6 months to launch a limited number of SaaS that are fully integrated into their complete backoffice system. This means that operators will be able to launch a limited set of SaaS by mid 2012 at very high APEX. Due to the limited number of services, operators are picking the “usual” suspects to launch, e.g. Microsoft 365.
What will happen in mid-2012?
Several European operators will launch their highly priced IaaS together with a limited number of similar SaaS services. The end result will be an oversupply of Microsoft and virtual servers with an immediate price pressure as a result. Enterprise customers will find local operators offering similar services as global IT players, e.g. IBM, HP, Fujitsu, etc. All will have good SLA promises to compete with the likes of Amazon and Rackspace, so at the end the lowest price will be the only selection criteria.
Operators should focus on launching SaaS and Telco SaaS first via open marketplaces. Operators should focus on building up a unique SaaS catalog that sets them apart from competition and builds an eco-system of customers and partners. The next step should be to open telecom assets and allow SaaS solutions to be extended into Telco SaaS. Only when operators see a clear winner in a niche or global marketplace, then they should talk to the supplier about becoming a strategic partner and to use the operator’s infrastructure to guarantee SLAs, etc.
The SaaS market is not mature yet. It is hard to pick winners because end-customers are only beginning to migrate towards SaaS. Most operators think that big names like Google and Microsoft are the only way of helping their end-customers move towards SaaS. However applying “Crossing the Chasm“, tells us that it would be better to be a big fish in a small pont first. Pick niche markets and specialized solutions that solve problems that currently are not addressed or generate new revenues that currently are not available. These niche products are easier to sell since they often involve a clear customer segment that will see a real problem solved. It will take time for end-customers to switch off their data centers and move everything to the cloud. These end-customers have established policies, IT-staff, etc. that will work against moving towards the cloud. By offering a solution that is substantially better then the current and offering a complete eco-system around a limited set of solutions, operators will be able to easily pursuade a well-defined group of companies to move parts of their operations towards the cloud. A final advantage is also that suppliers of niche products win most with the push of a large incumbant that has established relationships with all potential customers within a niche market. End-customers will not trust SmallABC.com but will trust LargeIncumbant offering the SmallABC solution. A Microsoft-like SaaS has its own name so LargeIncumbant’s 365 offering is not bringing end-customers any value.
Operators should focus on automating the onboarding of SaaS and offering quick and easy ways to over-the-top players to integrate telecom assets and become Telco SaaS providers and sell them via the operator’s open marketplaces. The only thing missing is to add Support 2.0 to the mix to have a telecom platform-as-a-service or Telco PaaS…