Cloud and Business – Our survey results are in…

November 2, 2010November 2, 2010 Dr Will VentersLeave a comment

You will be aware that we have been running a survey along with “Horses for Sources” of industry attitudes to Cloud Computing. We received 1053 responses – an impressive sample of the business community. While I have yet to fully analyse the results HfS have done some initial sifting as shown in the following graph from their site:

Graph of results

As Phil writes in his Blog this suggest that business function leaders are more impressed with Cloud and are involved in driving its adoption – marketing to IT functions is less likely to impress than targetting business executives. Unsurprisingly it seems clear that Cloud is seen as driving down costs (50+% suggest this appeals to a great extent”) but I was most struck by the number who strongly believe it will facilitate virtual/distributed organizations (also around 50%).

This is important because it suggests they believe Cloud computing offers the chance for organisational change – not just replication of existing functions or apps. Further it is supported by Business Executives who (nearly 50% of them) belived it will “enable us to focus on transforming out business”.

Cloud, in my view, offers the chance to do things differently not just cheaply. It offers the chance for new forms of organisation to challenge existing businesses. In particular it offers the chance for businesses to collaborate in new ways. SalesForce for example allow their users to open up specific parts of their SalesForce offering to business partners simply and easily allowing closer collaboration (something which would have required massive EDI investment a few years ago). Who knows what new forms of business this technical facility, and business executive desire will open up… One might imagine “clouds” of nimble agile small enterprises collaborating using Cloud systems to take on the big corporates. Such businesses nimbleness and close integration of systems (through the cloud) might be a potent mix.

SLA’s and the Cloud – the risks and benefits of multi-tenanted solutions.

October 25, 2010 Dr Will VentersLeave a comment

Service Level Agreements (SLAs) are difficult to define in the cloud in part because areas of the infrastructure (in particular the internet connection) are outside of the scope of either customer or supplier. This leads to the challenge of presenting a contractual agreement for something which is only partly in the suppliers control. Further as the infrastructure is shared (multi-tenanted) SLA’s are more difficult to provide since they rest on capacity which must be shared.

The client using the Cloud is faced a challenge. Small new cloud SaaS providers, which are increasing their business and attracting more clients to their multi-tenanted data-centre, are unlikely to provide usefully defined SLA for their services than that which a data-centre provider can offer where it controls all elements of the supplied infrastructure. Why would they – their business is growing and an SLA is a huge risk (since it is multi-tenanted breach of one SLA is probably a breach of lots – the payout might seem small and poor to the client but is large for a SaaS provider!). Further with each new customer the demands on the data-centre, and hence risk, increase. Hence the argument that as SaaS providers become successful the risk of SLAs being breached might increase.

There is however a counter-point to this growth risk though – as each new customer begins to use the SaaS they will undertake their own due-diligence checks. Many will attempt to stress test the SaaS service. Some will want to try to hack the application. As the customer base grows (and moves towards blue-chip clients) the seriousness of this testing will increase – security demands in particular will be tested as bigger and bigger companies consider their services. This presents a considerable opportunity for the individual user. For with each new customer comes the benefit of increasing stress testing of the SaaS platform – and increasing development of skills within the SaaS provider. While the SLA may continue to be poor, the risk of failure of the data-centre may well diminish as the SaaS grows.

To invoke a contract is, in effect, a failure in a relationship – a breakdown in trust. Seldom does the invocation of a contract benefit either party. The aim of an SLA is thus not just to provide a contractual agreement but rather to set out the level of service on which the partnership between customer and supplier is based. In this way an SLA is about the expected quality demanded of the supplier and with the above model the expected quality may well increase with more customers – not decrease as is usually envisaged for cloud. SLA’s for cloud providers may well be trivial and poor, but the systemic risk of using Clouds is not as simplistic as is often argued. While it is unsurprising that cloud suppliers offer poor SLA’s (it is not in their interest to do otherwise), it does not mean that the quality of service is, or will remain, poor.

So what should the client consider in looking at the SLA offering in terms of service quality?

1) How does the Cloud SaaS supplier manage its growth? The growth of a SaaS service means greater demand on the providers data-centre. Hence greater risk that the SLA’s will be breached for their multi-tenanted data-centre.

2) How open is the Cloud SaaS provider in allowing testing of its services by new customers?

3) How well does the Cloud SaaS provider’s strategic ambition for service quality align with your desires for service quality.

Obviously these questions are in addition to all the usual SLA questions.

Lock-ins, SLAs and the Cloud

July 13, 2010December 6, 2010 Dr Will VentersLeave a comment

One of the significant concerns in entering the cloud is the potential for lock-in with a cloud provider (though clearly you otherwise remain locked-in with your own IT department as the sole provider).

The cost of moving from one provider to another is a significant obstacle to cloud penetration – if you could change provider easily and painlessly you might be more inclided to take the risk. Various services have emerged to try to attack this problem – CloudSwitch being one which created a considerable buzz at the Structure 2010 conference. Their service aims to provide a software means to transfer enterprise applications from a company’s data centre into the cloud (and between cloud providers). Whether it can live up to expectations we have yet to know, but CloudSwitch is attempting to provide a degree of portability much desired by clients – and probably much feared by Cloud Service providers whose business would reduce to utility suppliers if they are successful.

But this links into another interesting conversation I was having with a media executive last week. They mentioned that since cloud virtual machines were so cheap they often (effectively) host services across a number of suppliers to provide their own redundancy and thus ignore the SLA. If one service goes down they can switch quickly (using load balancers etc) to another utility supplier. Clearly this only works for commodity IaaS and for relatively simple content distribution (rather than transaction processing) but it is a compelling model… why worry about choosing one cloud provider and being locked-in or risking poor SLA – choose them all.

Fordism and the Cloud

June 4, 2010June 7, 2010 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 🙂 ).

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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

June 4, 2010June 8, 2010 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.

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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).

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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

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