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Archive for November 26th, 2007

One Cloud, Two Clouds, Four Clouds, More?

Posted by Bob Warfield on November 26, 2007

GigaOm writes recently that the world may only need 5 clouds, echoing a misquote attributed to Thomas J. Watson at IBM.  Nick Carr is much closer to the likely outcome when he writes about Vertical Clouds, an interesting article well worth a read.

The reality is that we have not yet settled on exactly what product the clouds are offering.  Today, we’re at the lowest common denominator of Linux dial tone along with bulk storage.  That’s Amazon EC2 and S3 in a nutshell.  It may be that after a suitable period of consolidatin the world only needs 5 or so Linux dial tone offerings.  Given the number of nearly identical services offering web and email servers, we seem to be a long long ways from that consolidation.

I like Carr’s idea better.  Linux dial tone is useful, but doesn’t ultimately doesn’t take utility computing very far along the path to its true potential.  That potential extends well beyond broadly generic services and into vertically oriented spaces just as non-cloud computing products do.  Just take a look at the plethora of database offerings alone.  There are Open Source databases like MySQL, column store and other specialized DB’s for Business Intelligence, Enterprise mainstays like Oracle and DB2, database hardware like Teradata, and so on.  Each of these is filling a particular niche and ecosystem.  Each of those niches can spawn at least one specialized cloud to service the interests of the niche.  The clouds are a long ways from being mature enough to start taking on multiple niches at once.

The linkages between clouds will also be interesting.  Someone remarked to me that the problem with the cloud is there isn’t just one, there are many, and there are walls between them.  We’re starting to see those walls break down in some cases.  Look at the offer by Joyent to do hosting of Facebook apps.  The offer is free to the first 3500 developers to sign up.  How do they do it?  By means of a special cloud-to-cloud link:

There is also no latency. We have set up a direct physical fiber optic line between the Joyent data center and Facebook’s data center. Somewhere under San Francisco bay, there is a multiple-gigabit-per-second fiber line capable of pumping massive traffic.

Fiber is remarkably cheap.  I would expect to see more partnerships between non-competing cloud vendors who provide connections between their clouds that offer advantages in terms of bandwidth, cost for bandwidth, and latency just like this example.  Imagine you’re creating an enterprise application of some kind.  Perhaps it’s even CRM and you want to host a component on Force.  But, Force is expensive, and you don’t want everything there.  Perhaps you’ll also need a connection to WebEx so you can do teledemos with customers.  Lastly, you want some kind of Business Intelligence capability that goes well beyond what Force offers.  Now let’s suppose you discover a utility computing vendor that has special cloud connections out to Force and WebEx, and offers BI capabilities as part of their service.  That would be exciting to you, and probably to a lot of other vendors.

Here’s another one that matters: geography.  Which geographies does your cloud vendor cover and how does that map back to your business.  Amazon recently announced the ability to target S3 data to their European datacenter.  Much more will follow.  Connections to the CDN’s will also factor in here.  There are a lot of other scenarios that could develop.  Suppose Facebook decides hosting is a way to monetize.  If you want to tie into their Social Graph database, you have to build your application in their cloud.  Hmmm.  That’s a head scratcher.  What could companies like Google do by persuading you to move into their cloud?  What if there was an economic rational to save both parties money by colocating?  Perhaps it becomes cheaper for Google to search your content and part of that savings is passed on to make it cheaper for you to host your content inside Google’s cloud. 

Get ready for a lot of complexity and choice to be injected to the cloud computing picture.  The connections that take place between different categories of Enterprise software are pretty well understood.  What’s less well understood is how they will manifest themselves as connections between clouds.  It seems clear that there are many opportunities for success out there.  Many more than just five clouds will be needed.  In fact, Business Development people should take note: before too long, a piece of the puzzle will involve asking which clouds are directly connected to which other clouds? 

Cloud computing is about to get much more interesting!

Posted in amazon, data center, saas, strategy, Web 2.0 | Leave a Comment »

Will MS Office Or Oracle Be Slaughtered First By The Cloud?

Posted by Bob Warfield on November 26, 2007

There’s a spate of articles about the new Live Documents service, a cloud-based SaaS challenger to Microsoft Office.  Like any good entrepreneur, CEO and founder Sabia Bhatia claims his new baby and it’s relatives will displace MS Office by 2010.  That’s right around the corner, but wildy optimistic.  ZDNet’s Dan Farber calls these cloud Office wannabes “ankle biters”, and with good reason.  They don’t come close to posing a threat to Microsoft yet.  It’s not for lack of trying.  There’s a pretty good crowd of them out there now.  Live Documents has joined a cast that includes Google, Zimbra (now owned by Yahoo), Zoho, ThinkFree, Adobe, and others.

Why can’t these guys take over by 2010?  Because every story you read is largely a man bites dog story.  There’s little to no discussion of amazing new features these products offer that would give a reason to switch.  The mere fact that products calling themselves Office equivalents can exist in the cloud without needing to be installed seems to be newsworthy enough.  There are no great roundup reviews that are getting big attention in the blogosphere that play them off against each other.  What one does find are articles telling us about the introduction of features that seem painfully elementary.  It wasn’t so long ago that the Google Spreadsheet learned how to hide columns, for example.  Even as TechCrunch writes “While Live Documents Yaps, Zoho Delivers,” Stowe Boyd writes that he can’t get Zoho to play nicely with Google Gears, even though the ability to work disconnected is the big newly announced feature for Zoho.  Apparently the Live Docs messaging annoys Michael Arrington, who writes:

New product press releases unencumbered by the complexities of releasing actual software set off alarm bells. And when those press releases are so boastful as to suggest that the (unlaunched) product can hurt a competitor’s $20 billion revenue stream, the alarm bells get much louder…

So far Live Documents is nothing more than bullshit and smokescreens. That may have been the way to do business when Bhatia co-founded Hotmail in 1996, but his software is going to have to survive on its own in a hyper competitive marketplace when it actually launches. Hubris alone won’t do it.

From my perspective, this matter-of-fact let’s paste together a bunch of things out on the web and not worry too much if they work well is a problem for an Office Killer.  The Microsoft Office represents basic literacy in the business world.  Give it up and you may find you’re unable to speak the lingua franca of others you must communicate with day to day.  Real challengers have to keep this in mind.  I was a General in the last Office Suite Wars, having fathered Quattro Pro at Borland.  We made considerable inroads (Quattro Pro sold on the order of $100 million its first year) but ultimately fell by the wayside because we lacked a word processor to go with our suite.  The one thing I can tell you is that absolute 100% compatibility with the market leader at the time together with significant innovation over that market leader and significant economic advantage (we were much cheaper at the outset) were key to the success we did achieve.  I don’t have a sense these upstarts have achieved any of these ideals.

There is a market that I think is more interesting when we look at who might become a Cloud Casualty sooner rather than later.  I’m speaking of Oracle, of course, and specifically of the database server business.  MySQL appears poised for an IPO, but beyond that there is a raft of contenders out there who have achieved a lot relative to Oracle.  There are fairly Oracle compatible products like Enterprise DB.  There are products that have serious innovations such as the column-based DB’s.  And the economic advantages are undeniable.  Unlike the Office Suite arena, it gets harder and harder to find significant killer features that Oracle offers that don’t exist in the Open Source DB world.  We’ve seen extremely large web sites powered by MySQL and some of these others, for example.  It would be hard to claim Oracle is dramatically more scalable in the face of the evidence, although one can likely conclude it remains easier to scale and more performant. 

The problem is that the costs associated with Oracle licenses are positively usary.  A friend who runs a SaaS company says his Oracle costs are bigger than his hardware costs.  I asked him why he continues to use it and he indicated his CTO was convinced he had to for scalability.  At my last company, Callidus, we ran some tests and were surprised at how performant these solutions were compared to Oracle.  I believe that currently, it’s an inertia thing.  People are sure they can get Oracle to scale, they have people on board who know how, and unless cost is a serious issue from the get go (as it can be with startups focused on ad revenues), the tried and true is chosen.  When enough people have experience scaling MySQL and its relatives, that inertia will have gone away.  Venture Capitalists tell me most of their portfolio companies are there.  As companies built on technologies like MySQL mature and people move on to other jobs, the word spreads.  Businesses running old-school on-premises software will be the last bastions for that inertia, but realistically, I’ve still talked to members from that elite group who are keeping COBOL CICS and IBM AS400 software alive. 

It won’t take an awful lot of shift before Oracle feels the pain.  The problem is that Oracle depends on this business as a cash cow to finance it’s other expansion.  Knock 20-25% off the top through erosion to these upstarts and it will dramatically change the Oracle profit picture for the worse.  Here’s another interesting strategic point to consider: utility computing ties together larger tectonic plates that can result in greater and more sudden market shifts.  Imagine companies like Amazon deciding to offer database dial-tone in their rent-a-clouds.  The database is the most labor intensive and problematic piece of software in the whole suite.  If someone automates those problems away, promises scalability on a utility computing grid, and handles normal SQL, many will rush at the opportunity.  Such aggregation of users can drive a lot of license fees away in a hurry.  They also take away a lot of the intertia issue in a couple of ways.  First, the cloud service has to deal with the operational knowledge required for server care and feeding.  Customers won’t have to.  Second, these cloud vendors are no small shakes.  Names like Amazon, Google, and Microsoft are bandied about.  The fear of dealing with some Open Source vendor that is viewed as too small and flakey is greatly ameliorated.  An additional sweetener is that the competitive strength of users of such services would be much greater versus their competitors who still use expensive Oracle and have to manage the servers themselves.

Despite interest by folks like Nick Car in LiveDocuments, breaking Oracle’s strangehold on the database world is a more likely spot for the disruption of the old school to show up first.  It would mark quite a change.

Posted in amazon, data center, enterprise software, grid, platforms, strategy | 3 Comments »

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