Category: Business Models

Hybrid Clouds – Inside and Outside

Dr Will Venters1 Comment

I want to argue that our current categorisation of “Public and Private” cloud is inappropriate. Instead I want to propose a categorisation of “Inside and Outside” cloud.

Public and Private clouds imply a strict boundary between the organisation and the internet. The organisation is hidden behind a private firewall, while the outside is public.

But in reality everything sits within the cloud – including the enterprise. Using the cloud is not either-or but can be a hybrid. For example I met this week with Peter Cowley, ex MD of New Media at Endermol (makers of TV shows such a “Big Brother”). He pointed out that Endermol for some projects would  ship everything possible to the cloud (video, pictures, pages), but where personal information or critical information was used, the cloud services would hook back to an internal server. This internal server would be basic – supplying only simple HTML pages on the data, but would be integrated into the complex Cloud offering seamlessly. My Hybrid cloud is neither public nor private – it is a mix between inside and outside.

Similarly by thinking about “private clouds” internally – for internal users – we are focusing too heavily on the boundary of the enterprise. This limits options – for example allowing an outside supplier to capitalise on the “Inside Cloud” to offer new services to staff or outside customers.  For example in Telecos the internal fabric of the business (the network) might allow outside companies to run applications on it as a platform. For example an innovative ConferenceCall system – hosted within the Telcos “Inside Cloud” might be offered to the public  –  not exactly public, but neither private.

(see Creeger,M (2010) “CTO Roundtable: Cloud Computing” , Communications of the ACM, 52(8) p 50-56 for more details on the Telecoms case study).

Fordism and the Cloud

Dr Will VentersLeave a comment

In a recent Article Dustin Owens (2010) argues that elasticity defines the benefit of Cloud Computing.  He states “Elasticity could bring to the IT infrastructure what Henry Ford brought to the automotive industry with assembly lines and mass production: affordability and substantial improvements on time to market.” (p48). The article is useful and focuses primarily on security however it was the comparison with Henry Ford which got me thinking.

It is a bold statement and deserves further analysis. In particular it is unclear what Ford brought the motor industry – certainly increased penetration, increased usage, increased availability all of which are positive. Arguably though it also brought with it urban sprawl, oil-dependence, reduced wages and Tailorism. One can imagine similar problems with the cloud. Urban sprawl might be similar to flattening organisational sizes and increasing risk. For those companies whose data-centre provides competitive advantage will see an increased landscape of small competitors capitalising on the Cloud to compete – the sprawl. Our oil-dependence will similarly remain – Cloud computing hides the electricity and environmental impact of our actions in data-centres hidden from view. Purchases are unlikely to know what percentage of costs are electricity – and are unlikely to care. Finally reduced wages and Tailorism. Prior to Ford those involved in developing cars were highly skilled and worked across the line – Ford reduced this movement of skill, and Fredrick Tailor developed this into scientific management. One can see similarities in the cloud provider with increased specialism among staff  within these very large data-centres. With this comes risks – the generalist is better able to respond to radical architectural change and innovation. The generalist also has a more interesting job (a failure of Scientific Management). All this is speculation at the moment – I await my first Model T Cloud.

On another level however this comparison is interesting. because it is worth remembering that Ford was overtaken by General Motors for the simple reason that Henry Ford was against debt and demanded people pay in cash, whereas GE realised that borrowing to buy a GE car was beneficial. With the car you’re earning potential rose as you could travel for work and you were thus better able to afford the car.

In cloud computing the same might also be true. The argument behind Cloud Computing has always been that start-up ventures do not need to purchase the expensive IT equipment they can focus on  Opex not CapEx. Similarly SaaS offers reduced CapEx costs. But one might also imagine a growth of financial services industries around the cloud. For example providing short-term loans to allow small companies to ramp up websites in response to incredible demand (and perhaps insuring against this). Or allowing small media enterprises to rent cycles for rendering films as a percentage of future profits. Finally, and perhaps most importantly, if computing is a commodity we are likely to see spot-markets and commodity markets spawn. Can we imagine CDOs developing based not on sub-prime mortgages but on poorly used processor cycles within the cloud… or imagine insuring against a Denial of Service Attack such that when one occurs you can ramp up website services to respond, but not have to pay for the processor cycles! I can see many small companies taking out such insurance for their websites (if anyone profits from this – then donations received with thanks 🙂 ).

——

Owens, D (2010) “Securing Elasticity in the Cloud”, Communications of the ACM 53(6) 48-51 doi:http://doi.acm.org/10.1145/1743546.1743565

An Over Simplistic Utility Model

Dr Will VentersLeave a comment

Brynjolfsson, E., P. Hofmann, et al. (2010). “Economic and Business Dimensions Cloud Computing and Electricity:Beyond the Utility Model.” Communications of the ACM 53(5): 32-34.

—-

This paper argues that technical issues associated with innovation, scale, and geography will confront those attempting to capitalise on utility computing. They take the utility model of computing (i.e. that cloud computing is analogous to the electricity market) and identify key challenges.

In particular they identify the following technical challenges:

1)    The pace of innovation of IT – managing this pace of change requires creative expertise and innovation (unlike utilities such as electricity which, they argue, are stable).

2)    The limits of scale – Parallelisable problems are only a subset of problems. Scalability of databases has limits within architectures. APIs e.g. using SQL are difficult for high-volume transaction systems. Further large companies can benefit from Private Clouds with little advantages, and greater risks, if they go to the public cloud.

3)    Latency: The speed of light limits communication. Latency remains a problem. For many applications performance, convenience and security considerations will demand local. [While not mentioned in the article it is interesting to note that this problem is being attacked by http://www.akamai.com/ who specialise in reducing the problems of network latency through their specialist network]

They also identify the following business challenges:

1)    Complementarities and Co-Invention: “Computing is still in the midst of an explosion of innovation and co-invention First that simply replace corporate resources with cloud computing, while changing nothing else, are doomed to miss the full benefits of the new technology” (p34). It is the reinvention of new services which are key to the success of cloud. IT enabled businesses reshape industries – e.g. Apple quadrupled revenue by moving from perpetual licence to pay-per-use in iTunes, but this demanded tight integration of EPR and Billing which would have been difficult within the cloud given their volumes.

2)    Lock-in and Interoperability: Regulation controlled energy monopolies, and electrons are fungible. Yet for computing to operate like electricity will require “radically different management of data than what is on anyone’s technology roadmap”. Information is not electrons – cloud offerings will not be interchangeable. “Business processes supported by enterprise computing are not motors or light-bulbs”.

3) Security – We are not concerned about electrons as we are with information. Regulators, laws or audit is not needed. New security issues will need to be faced (see  (Owens 2010) for interesting debate on security).

—-

Owens, D (2010) “Securing Elasticity in the Cloud”, Communications of the ACM 53(6) 48-51 doi: http://doi.acm.org/10.1145/1743546.1743565