Cloud Computing: Its Evolution Depends on Economics

The 20th century saw an incredible shift in access power, from literacy and the newspaper to radio and the telephone, from television and the satellite dish to the personal computer and the network.

Newspapers were originally fed on presses manually one sheet at a time. Telephones were once connected via legions of operators connecting callers (one at a time) with cables and plugs; and today computer networks are still managed by legions of manual administrators who configure network appliances and manage IP addresses as endpoints are added or moved or networks are acquired. Yet can cloud computing really take that pain away?

How cloud evolves will be partly driven by technical limitations and partly by business case economics; and the way in which cloud is adopted may have a significant impact on the market caps of a host of networking and IT powerhouses, from Cisco (CSCO) and Juniper (JNPR) to Microsoft (MSFT), IBM and F5 Networks (FFIV).

That may be part of the reason behind IBM’s recent launch of its own dynamic infrastructure meme in early 2009. At this point, cloud positioning may be everything.

Is Cloud an IT Escapist Fantasy?

Part of the attraction of cloud computing is its ability to decouple IT services from hardware, especially the kludge works of silos and processes and administrators needed to do everyday network tasks, from adding a printer to a network, reclaiming an IP address or even provisioning a new network. Very few companies have audited how much is wasted on such tasks, even as they are relentlessly squeezing costs out of supply chains.

They may be the cloud dream’s most promising market: those so out of touch with the micro expenses and delays within their network that everything else looks cheap and flexible. For them, the promise of cloud offers an escape from the nightmare of a thousand cuts.

The question is really to what extent the cloud leaders, including Google (GOOG), Amazon (AMZN) and others have really addressed these problems. Or are they simply writing off these costs as insignificant because the revenue generated is still insignificant?

All of these common network tasks (and many others) require ongoing human intervention and thus drive up network costs as networks continue to grow. They also impact a network's availability and ability to address new requirements. As long as networks are islands of manual, anachronistic tools to what benefit are mobile servers and endpoints? They cannot move very far without manual intervention, pigeonholing the very benefits of virtualization… in a very un-cloudlike manner.

The Free Hypervisor Illusion

Perhaps the most significant contribution made to the IT industry in recent years has been the hypervisor (and VMotion) and its ability to decouple software from hardware; and offer the potential to decouple IT services from hardware, which is the promise of cloud. VMware (VMW), Citrix (CTXS) and Microsoft have led the way, now to be joined by Red Hat (RHT).

While these virtualization vendors play with predatory pricing, the real payoffs are perhaps delivered by the partner ecosystems. That’s why hypervisor-based pricing may miss the point. It’s really what you can do with that hypervisor that drives the value. That’s why VMware has an enviable position, despite the Microsoft and recent Citrix price-centric marketing moves.

VMware is also further along in technology, features and deployments. VMware’s relationship with Cisco and the other ecosystem power players could be a second advantage and be a driver behind the Microsoft and Citrix alliance of necessity. Then where does that leave Juniper and IBM? Perhaps in a similar alliance.

If the likes of VMware, Cisco and F5 Networks (and others) can deliver the connectivity intelligence that would allow networks to automatically keep up with the status of a VM, it will be a massive payoff that could impact the market caps off all involved. They could, in effect, drive the manual expense out of the network and establish new economies of scale and performance.

It seems likely that connectivity intelligence will require the cooperation of multiple players, including Infoblox (my employer). Core network service automation may be step one; yet step two would likely involve the deployment of IF-Map.

The bottom line is that the more expense that can be driven out of the network the more gear the vendors will sell and the lesser the business case for the coming cloud disruption with or without an economic rebound. Free gear could cost more in management and consulting and merely hide the core problems even further.

It’s Not the Economy, Just Economics

Management (not hardware) costs have been increasing as data centers and networks grow, thanks to CIO preoccupations with systems, applications and endpoints and perhaps more recently, tight budgets. Many executives, however, are not aware of the often hidden sources of the operational costs of the network, which are often scattered (and hidden) among infrastructure budgets, help desk budgets, server teams, network teams and/or checklist committees.

These costs grow every year under the canopy of business as usual while the common denominator is really an ironic inability to deliver automation where it could really make a difference… on the network. That’s right; the network may be one of the last bastions of manual labor in the modern enterprise; and it is a critical factor in the proliferation of many types of cloud computing.

While systems pros dream about the day when virtual machines can follow the moon (e.g. VMs move from one cloudplex to another chasing cheap evening electrical power around the world) networking pros are already under siege from more endpoints, more manual processes and more business operations risks. It is this disconnect between the cloud computing buzz and the reality of life managing a network (where most endpoints don’t yet move) that ignited the Infrastructure 2.0 conversation.

Dreaming Isn’t Free

Many enterprise network pros will spend 30 minutes to an hour each on many of these common, routine kludge tasks; and perhaps wait for a few days each time for approvals from various teams or departments for a final go ahead. The idea of systems and endpoints going mobile is understandably more of a horror (given the network operations resources required to connect and keep up with static resources) than a dream for those responsible for maintaining the integrity of the network.

Those who grasp the potentially threatening gap between system and endpoint mobility and static networks requiring ever higher rates of manual intervention will either drive for core network services automation or keep the cloud genie contained within dozens (if not hundreds) of VLAN bottles, called virtualization-lite. The latter scenario I’ve called The CIO Shell Game.

That’s why I think cloud computing is really a code word for dynamic systems, storage and infrastructure. And you need all three. Cloud computing without a network capable of keeping up is merely a fantasy propped up out of frustration with the “kludgenomics” of today’s increasingly expensive infrastructure.

As much as the headlines about the economy may convince us otherwise, cloud is more likely an artifact of rising management costs more than a weak global economy. I think the vendors who minimize those costs via automation will win. Those who simply try to discount their hardware as a way to make room for the operational pain will lose.

Disclosure: long CSCO

Comments

[Jeff Noel A...:]

Another great analyses, and maybe great argument that this coming quarters, or at least the next full year, everyone at least in the IT management that also are wary about their funds, should step away from costly hardware/software fixes/updates. Might as well do a company wide "system reboot." Funny because I just ran through an article on Mr. Shuttleworth's new baby, at least for the upcoming release for his open source.

Feb 27 10:35 AM

[GNESS:]

Thanks Jeff. I think that core network service automation would certainly be on a shortlist... automating some of the kludge and reducing the expense of the network.

Greg

Feb 27 11:36 AM

[Stephen Str...:]

I'm a great believer in moving some services to specialist providers, just as I use the National Grid to provide my electricity. My own company specialises in professional web-based video tools for TV broadcasters and websites.

The key to these web based services is their scalability. Since we started selling internet video services back in 2001, central video storage costs have followed the price of disks down in price by 1000x; and the typical modem has increased in speed by around 1000x in the same time frame (you can see I don't live in the US ;-)).

Even without the advances in our Java applet software and video codec technology over the last decade, these external infrastructure improvements would allow us to provide the same service to 1000x the number of users - with the same number of IT staff.

And while disk storage and internet speeds are continuing their rapid progress, advances in software and design are reducing the per-customer requirement for them too.

The main supply-side cost advantages will come from scale. With people are coming on board because of the user benefits of web-based access, the scale advantages will (I hope) follow on in due course.

Feb 28 12:05 PM

[Teutonic Kn...:]

Greg,

I always enjoyed your articles, and this one is no exception. However, as you alluded and even insinuate your employer infoblox many times in passing, I wonder if you could just tell us some of the accomplishments and/or product and services that are unique of infoblox in the Cloud Computing arena. Hopefully of course this would not disclose any proprietary information or compromise any company plans. But I guess, like many other interested readers, we'd like to learn something from you as an innovative leader.

Teutonic

Mar 01 10:03 AM

[GNESS:]

Teutonic:

Thanks for asking. Infoblox solutions automate the core network services that TCP/IP networks utilize, thus making networks more resilient and more able to keep up with growth and an increased velocity of change. Virtualization increases the ease of change and cloud implies changes/movment over larger areas. I think it will be challenging, risky and costly for enterprises to deploy new automation initiatives (virtualization, RFID/supply chain, cloud) without automating core network services. Ultimately I see collaborations between Infoblox and others leading to other breakthroughs (including IF-MAP).

I joined Infoblox as Blue Lane was in the acquisition process. I was attracted by their sales success and the strategic role I perceived them playing in dynamic infrastructure. In a way, I saw once boring technology becoming strategic to most of the significant enterprise IT initiatives in an up or down economy.

Thx
Greg

Mar 01 09:13 PM

[GNESS:]

Stephen:

Thanks for your comments and the points you raised about infrastructure and scale. Its interesting that more PC demands seem to be related to browsers versus hard drive-installed software these days. With netbook sales taking off one has to wonder if we'll see another even larger explosion in endpoints. Cisco has predicted about 10 billion I recall by 2010... and I wonder if they took netbooks into account.

Thanks,
Greg

Mar 01 09:17 PM

[Stephen Str...:]

Netbooks are set to boom of course, but let's not forget that the typical internet device is now a mobile phone. Annual sales of around a billion dwarf PC sales.

This is one of the few areas where Europe is ahead of the US. The iPhone launch without 3G caused astonishment here - I was already on my 5th 3G phone [phone] N90, N93, N95).

Mar 02 02:18 AM

[GNESS:]

Stephen:

Good point. Clearly there was huge growth in endpoints before the netbook. I just think that:1) the netbook will put disproportionately more strain on the network; 2) its yet another mobile device; and 3) it could eventually outsell PCs with hard drives.

Thanks,
Greg

Mar 02 09:55 AM

[MDC:]

Greg,

I always read you're articles with great interest, but this one finds me unusually in full alignement. Cloud Computing will remain a fad unless we move intelligence back on the network and allow universal simple access to the (various) clouds from any endpoint on the fly. Netbooks are just an initial signal of the size of the opportunity we may well be able to miss if we continue building a network-for each-device-and-for-ea... service.
Best
Mario

Mar 04 05:10 PM

[GNESS:]

Thanks Mario:

Cisco's Doug Gourlay recently shared data with me about the state of legacy data center infrastructure and the massive opportunity for leaps in economy, efficiency, energy savings etc. In addition to the obvious motive to invest in new infrastructure to address the demands of endpoint growth and network complexity and the emergence of VMotion he made a great case for bringing our installed IT infrastructure up-todate. That of course means automation and additional capacity.

CIOs will need to take a step back and a fresh look at how their IT is deployed and the extent of recurring costs (from electricity to labor and process delay) in addition to addressing the network effects of VMotion and cloud. Thanks for the comment.

Greg

Mar 05 06:16 PM