Posts Tagged ‘IT’

The three stages of acceptance for carriers in the cloud

April 17, 2012

casa de la cultura

Carriers have some major issues when it comes to mental inertia.

They always put themselves at the centre of the universe and, especially in enterprise markets, they tend to be fixated on infrastructure rather than the applications i.e. the things that actually matter. This is a trait they share with their target customers, product-minded IT departments.

Some providers have tried buying clouds, some building, some just investing, and amongst the analysts there’s been plenty of talk about the broker model. However, the jury is still out on whether carriers can indeed find a suitable and profitable role in the new cloud world order.

I believe that if carriers can find enduring success it will depend on the acceptance of three basic, related truths.

1) Accept the commoditisation of IT

Throughout history all infrastructural technologies, from railways, to electricity, to telephony, have undergone the same process of transition from initial innovation, to product, through to commodity and utility provision.

Cloud computing is the latest phase in the relentless commoditisation of IT infrastructure. This is not news, but unfortunately the message is still not getting through to a telco industry steeped in dogma.

It’s important to keep in mind that as infrastructure becomes an inexpensive commodity utility service, all value shifts from hardware to software.

“Enterprise grade” is no longer synonymous with “the best”. From now on, whenever you read this in the context of hardware, simply replace it with “Suitable for Legacy/Unreliable Software“. That will help you to keep things in perspective.

If you’re actually trying to build cloud infrastructure, remember this: Using expensive purpose-built enterprise hardware ignores the trend of commoditisation and creates only a competitive disadvantage. When infrastructure becomes a commodity utility, you need to shift your focus onto software.

2) Accept that every conversation has to start with software.

It amazes me how almost every IT sales conversations starts with infrastructure, considering it has no inherent value. The applications that serve the business might get considered as an afterthought, if they’re lucky.

Developers who are clued-up are writing cloud applications today that surpasses the resilience and scalability that was previously achieved in hardware. Your enterprise grade infrastructure has no meaning here. Carriers will need to work out where the customer is on the application journey and make sure they understand it.

Ultimately success in cloud will depend on acquiring something that has so far eluded carriers; an ability to operate with a software-oriented mindset.

3) Accept that the customer is changing

Business Internet access is now fit for purpose in most mainstream applications. Meanwhile public commodity cloud has demolished barriers to entry for greenfield software development.

This has created an entirely new service-centric value network that is beginning to dismantle the product-centric world of Enterprise IT departments and the IT incumbents that serve them.

It’s common knowledge that developers everywhere are bypassing IT to get the resources they need from public cloud. Meanwhile the business users can now access better and faster applications and services outside the organisation, than from their internal IT dept.

Most productivity gains are coming from outside the business and this is not sustainable for Enterprise IT.  A strategy which targets only the traditional value chain or “stack” of Enterprise IT is akin to moving into a house that is scheduled for demolition.

Service providers still regard the IT dept as their sole customer. When the IT dept’s own customers (i.e the business) starts to look elsewhere, changing procurement patterns, carriers need to think about what the implications are for them.


From product to service: a tale of two value networks

December 16, 2011

A Tale of Two Value Networks

If you care to step outside of your startup, look beyond your #clouderati twitfeed, or take a break from your achingly futuristic unconference, to have a stroll in the workaday realm of Enterprise IT (for now, still the ruler of global business technology) you may be shocked and appalled to encounter the steadfast opinion that cloud is “nothing new”.

“We’ve been doing this for years”, enterprise people say. “It’s just another form of outsourcing”

Normal people, eh? Don’t they ever go to Cloudcamp?

On occasions, if I’m able to summon the strength to open this can of worms, I pause for a moment and then ask,

“Do you know why you can’t understand cloud computing?”

Enterprise person: <Shrug>

“It’s because nobody wants you to”.

What on earth do I mean by this?

Well in fairness I should clarify here; when I say “nobody” what I actually mean is, “nobody in your value network”.

If you haven’t heard of value networks then you should check them out, because they provide some wonderful business analysis perspective; I’m referring to them here in the way that Clayton Christensen explains them in The Innovator’s Dilemma.

Have a closer look at my picture above.

I drew this to help me make sense of  things, and help me explain my view to others (you could call it a cluebat). It might be an over-simplification for some folk, but it works for me.

So this is how it works: you’re in a value network right now. It might even be one of the ones I’ve drawn. For most normal people just trying to get their work done, their value network largely tends to define their world view.

We have the Enterprise IT incumbents on the left of the picture and the new kids on the block sit on the right. Broadly speaking we also see a product-centric on the left and a service-centric view on the right.

The two value networks have fundamentally different costs structures and value perceptions, which is why none of the companies on the left have been able to compete with Amazon. Not even the largest IT companies on earth have managed to compete because they are prisoners of their value network.

Going back to my initial point, this picture also explains why if you work in Enterprise IT, and never stick your head above the parapet, your experience and understanding is dominated by the FUD and cloud-washing efforts of traditional vendors selling yesterday’s products packaged as a high cost “enterprise grade” services.

According to Christensen, the only really successful way for a business to enter the new value network is a spinout strategy where you start a new business entity that is independent of the normal resource allocation process . This is what VMware have apparently done with their CloudFoundry PaaS. This is what Quantum hard disks did in the 90s, and what HP Deskjet printers did. It is how IBM survived the move from Mainframe/minicomputer to desktop PCs.

Now I should point out that what I’m using to position these companies are their traditional core values as I perceive them. I’m aware that some companies on the left have made strategic acquisitions or have divisions in the right of the picture, but fundamentally their core business is based on the sales of high margin products. This is how they have created shareholder value and it’s what shareholders expect to be reflected in the financial results.

When thinking about various companies strategic moves I am reminded of JP Rangaswami’s comments at this years Business Cloud Summit: We are seeing a radical changes in the IT industry. Are acquisitions at the edge, without radical changes at the core, enough to cope with this?

I have tried to reflect movement in the diagram. You will notice that I’ve shown Dell moving mostly to the right because of their historic focus on relentless commoditisation of hardware. Microsoft also seem to be trying quite hard to find a place in the new world order, but we shall see if they manage to break across.

Finally, right at the top of picture, you have the person who actually matters – the business user. This is the sharp end of the Consumerisation of IT or, as I think more aptly describes it, the Democratisation of IT.

In a future post I want to examine a specific topic that relates to these two value networks – the concept of Carrier Cloud – and how I see the conflict between the two networks shaping the developments that are coming from the likes of Cisco and Alcatel Lucent.

All technological change is generational change

May 19, 2011

In my last post I explained why arguments over private clouds are a by-product of our industrial era, top-down thinking and how this will change over time. A few days later I found myself reading the closing paragraph in Nick Carr’s The Big Switch:

All technological change is generational change. The full power and consequence of a new technology are unleashed only when those who have grown up with it become  adults and begin to push their  outdated parents to the margins. As the older generations die they take with them their knowledge of what was lost when the new technology arrived, and only the sense of what was gained remains. It’s in this way that progress covers its tracks, perpetually refreshing the illusion that where we are is where we were meant to be.

We should always keep this point in mind when arguing over the “validity” of different types of clouds.

Those of us in control of today’s enterprise IT are destined to spend our time puzzling and arguing our way through transition. We are not equipped with the mindset, the technical or institutional context necessary to imagine a world of ubiquitous public utility computing; our fears and expectations are shaped too heavily by our past and what we already know.

Only when today’s IT decision makers have been replaced by the next generation will the true significance of cloud computing become apparent. It will be this generational turnover, together with the much discussed effects of commoditisation, that will combine to create our cloudy future.

Fort business and cloud semantics

May 11, 2011

The boundaries that exist today between private and public IT are a concept born of industrial era, hierarchical institutions. This is what David Weinberger called Fort Business. It’s about building walls around the firm, being inside and looking out. The distinction between us and them.

The rise of the term cloud itself comes from business rather than consumer perceptions (for whom consumption of IT as a service over the Internet has been a transparent progression). It’s surely no coincidence that fluffy clouds have traditionally been used on corporate network diagrams to denote something out there that we don’t understand.

I was following the private vs public cloud battle at ECS Interop this week, as it was echoed on twitter. As entertaining as this was, I couldn’t help wondering if, beyond the technical and economic debates, anyone is taking time to think about the social factors that play an inherent part in today’s cloud semantics, and the direction in which we’re heading.

The transition from IT as physical product to public commodity service is an insurmountable mental hurdle for many middle aged IT managers and senior execs. The very idea of it turns their whole world upside down, regardless of the actual risks. What we term “private” cloud is essentially the stepping stone that has been created to bridge the fear gap.

So private cloud is a real thing and it serves a real purpose. But we know from history that it’s only a transitional step, so what happens next?

At Infosec Europe this year I heard Bruce Schneier say that the Internet represents “the greatest generation gap since rock and roll”.

He’s right.

We do not fear what we have always known. We view everything already in existence at the point of our birth to be the natural order of the world – simply constants in life that have always been. When today’s digital natives – our Facebook generation – are running tomorrow’s institutions, not only will these institutions begin to look very different, but there will be no distinction between public and private cloud. It will just be a big mesh of utility computing.

The subversion of hierarchy is already running at full steam; the IT department in Fort Business is being bypassed at an astonishing rate. Business Line Managers are buying IaaS on credit cards, employees are using Google Docs and Yammer for collaboration, Linkedin for their customer contact, Prezi for presentations, Dropbox for filesharing.

As Joe Baguley puts it, the IT department (the department of No) “is just one of the providers in your life”.

As time marches on, shaping our attitudes, our institutions and the way we perceive them, the private vs public cloud battle will become a relic consigned to the museum of human debate; appearing about as relevant to tomorrow’s business leaders as an argument over the respective merits of CDs and vinyl.

Unravelling Cloud Economics

February 14, 2011

What I’m finding most interesting about the shift to cloud computing, this transitionary period in which we find ourselves, is that it has almost nothing to do with technology. It’s actually all about economics.

By moving to the cloud – real cloud, not cloudwashing – we’re utilising economies of scale in IT infrastructure, using the same physical stuff to deliver the same things. But by building shared infrastructure at scale we’re allowing the resources to be consumed much more efficiently. This follows the same path that occurs in all business activities, from that first innovation through to ubiquitous commodity provision. Eventually the physical product becomes a utility service.

So the cloud is about efficiency. But so what? I was interested in finding out what this translates into financially. So I had a look around at what everyone had been saying about cloud economics. Even Microsoft have been at it. When I boiled it all down, this is what I got:

“It’s cheaper, even when it’s more expensive”

This is actually rule #1 from Joe Weinman’s 10 Laws of cloudonomics. If the demand has peak to average ratio of at least 2:1 then you’re on to a winner.

If the demand is spiky, then pay-per-drink pricing makes sense. In fact it’s more economical to use public cloud resources on pay-per-use, even if the unit price is twice as much as equivalent fixed, physical resources. This is because you don’t pay for the resource when you’re not using it, unlike when you build and run your own datacentre.

It’s this economic advantage of utility pricing that is invaluable for startups and SMEs, for whom the barriers to entry have been lowered to the floor; anyone with a laptop and a credit card can rent servers by the hour. Also, they don’t have to pay for the resource until the point they’re actually (hopefully) making a return on it. These on-demand economics can also be attractive to large businesses, depending on requirements.

Brilliant. Everyone will save lots of money then?

Er, well no. Not exactly. What we have is proof that cloud computing is more efficient.

What else is being said?

“Yes it’s cheaper, but we won’t spend any less money. Actually, we will spend more.”

Cool paradox, bro!

The Jevons Paradox has been brought to the foreground of discussion by several of the cloudarati recently, most notably Simon Wardley. I have to hand it to Simon, the presentations from OScon and other events last year are great – a fine example of how to present visually, with humour and personality.

What old Jevons worked out in 1865, when he was just 29, was that when things become more efficiently consumed (therefore cheaper) this tends to increase consumption rather than decrease it.

When we look at history we find this pattern occurring repeatedly, especially during the industrial revolution when things really kicked off. We take advantage of any savings. We demand more. When coal fired steam engines become more efficient we burnt more coal. When car engines become more efficient we just drive further; we live in commuter towns and go on holiday.

Stop and think about it for a moment. When have advances in IT efficiency ever caused budgets to shrink? What happened when CPUs and memory became faster and cheaper? We bought bigger, better computers to run more intensive apps. When we can do more with less, we just end up doing much more.

To see how the theory translates in practice, have a look at Andrew Mcaffe’s graphs which illustrate the Jevons effect on the history of IT spending. The only time total expenditure dropped was just after the dotcom crash. We can assume that general IT demand is going to increase with cloud, but the composition of IT budgets will also change as the transition continues and costs are shifted from fixed to utility services.

It seems, from looking at economic history, that the main benefit of cloud is not overall cost savings. This is essentially about doing more stuff. It’s about reduced barriers to entry and lower risks. It’s about increased agility of business and an increased ability to innovate.

Update: What impact do private clouds have on all this? And aside from the maths, how do people actually feel about the different pricing models?

“Public cloud = accessible economics,
Private cloud = sustainable economics”

There are of course two delivery models for cloud services: public and private. I won’t get into security, governance or semantics here, whether private cloud is an oxymoron, or any of that stuff. That’s a separate discussion – for now I’m only interested in the cost models.

So when it comes to economics, how can we compare public and private? Understanding the value of each is crucial to understanding the use cases. We know that public cloud has on-demand characteristics that are invaluable to SMEs starting out with zero infrastructure, but what about the large corporates?

Stephen O’Grady explained his take on this. I imagine this is analogous to the same reasoning behind an individual selecting a PAYG phone, or a contract phone.

The on-demand, accessible economics are evident in the public cloud. You have as much as you want on tap, but the elasticity of price might also introduce uncertainty. It’s accessible, but pure pay-per-use may not be considered sustainable by large entities. When private clouds are built, this changes the operational cost model to suit those who like a more long-term, predictable outlook.

I’ll be very interested to see how the cloudonomics discussion shapes up as adoption of both public and private services increases.