Is cloud a turkey for IT vendors? Thinking through its impact on end user IT spending

Amid preparations for Thanksgiving feasts here in the U.S., a couple recent predictions from IT industry experts could leave vendors with much less to be thankful for this year. I’ve seen more than one pundit say that even though cloud computing is the Next Big Thing for IT, it will, in the end, mean that less money is being spent on IT.

Is cloud computing really going to mean doing more with less?

Matt Asay, for example, recently noted a new Goldman Sachs report called “A Paradigm Shift for IT: The Cloud” found that even though CIOs may be “loosening the purse strings on IT spending, IT vendors may want to hold off their celebrations.” Why? “Much of this spending appears to be headed for deflationary forces like cloud computing [and] virtualization.”

At SYS-CON’s Cloud Computing Expo earlier this month, I heard GoGrid’s CEO John Keagey announce an IT vendor’s moment of triumph and death knell in one breath. “The dream of utility computing has arrived,” he said, followed quickly with: “I believe we’re at the height of IT spending right now. You’ll see the IT economy shrink to half its current size.”

And, finally, during a panel at Interop last week reported by Joe McKendrick, AT&T’s Joe Weinman, raised doubts about the sustainability of cloud computing economics, describing a scenario in which they break down as enterprise management requirements come into play. “I’m not sure there are any unit-cost advantages that are sustainable among large enterprises,” he said. He expects adoption of external cloud computing in some areas, and private capabilities for others.

Now that’s not the kind of market that the purveyors of cloud computing hype were likely hoping for. In fact, it looks to be a bit of a, um, turkey. “An economic rebound never looked so dire,” noted Asay. “That’s unless you’re an IT buyer, of course.”

More on Matt’s last comment in a moment. First, where are these comments coming from?

Goldman Sachs expects a big bump from cloud computing…

The dire remarks Asay picked up are interspersed in that pretty straightforward Goldman Sachs report he mentioned that covers the basics of cloud computing. (In fact, a big section of the report is itself entitled “Cloud Computing 101: definition, drivers and challenges,” so you shouldn’t expect big leaps forward in analysis.)

However, there are a couple of interesting observations from the report about the importance of cloud computing and its relation to the IT spending environment:

· Cloud computing is “similar in importance to the transition from mainframes to client-server computing in the 1980s.”
· The new data center approaches and architectures required for cloud computing “are coming at an auspicious time: they are likely to coincide with a meaningful cyclical upturn in IT spending over the next couple of years.” One underlying reason for the uptick: the underinvestment that the bad economy has caused in the past 18 months or so.
· “Our checks suggest that enterprise IT demand has hit an inflection point and is now beginning to improve.”

Hang on, that all sounded a bit positive, at least to my ears. They expect growth from re-architecting systems “upon a foundation of virtualization and increased automation.” Goldman (and Asay) note the typical (read: big) players that will be taking advantage of that.

So this sounds rosy for 2010 and the years just beyond. Goldman says “we expect a meaningful increase in demand in the technologies that enable virtualization and increase the availability and security of external Clouds.”

…and now the “but”:

· But, longer term, cloud computing could actually “drive some headwinds for the IT industry” because they see virtualization (one of the interesting components that can be involved in cloud computing) as a “deflationary technology.” Goldman sees IT spending concentrating into the hands of fewer buyers: mainly cloud providers, hosting vendors, and large enterprises. They think better utilization will mean less pressure to spend, and when they do, it’ll be a buyer’s market.

For SaaS, however, there was less uncertainty. SaaS offerings were seen to be expanding rapidly and leading other “external” cloud services. In fact, it is now an “unstoppable shift” from on-premise to on-demand delivery. Evangelos Simoudis, managing director of Trident Capital, posted his thoughts from the Goldman event that linked with the report, which underscored their SaaS discussion: “Two years ago,” wrote Simoudis, “the discussion was whether the enterprise will adopt any SaaS applications. Today the conversation is about which on-premise applications will be replaced by their SaaS equivalent.”

As always, baby steps to start

For areas of cloud computing other than SaaS, however, two themes emerged from the Goldman report that matched what other reputable reports have been saying. First, “for large enterprises, Cloud Computing is still very early.” And, second, “most industry participants we spoke with expect large enterprises to take baby steps in their adoption of Cloud Computing resources, especially for business-critical activities.”

Goldman highlights cloud management

Additional comments from Simoudis are relevant here in helping analyze what Goldman’s thoughts might mean. “Infrastructure-as-a-Service (IaaS) requires management skills that most IT shops today don’t have,” he said. As a result, it’s easy to see why Goldman also noted that “systems management [is] likely to become a key component of the platform over time.” Allan Leinwand of Panorama Capital, also speaking during the Interop panel I mentioned previously, underscored this management gap. “There’s a gap between what the enterprise is used to doing behind the firewall and what the cloud providers can do.”

Goldman sees traditional systems management players (BMC and CA being two they call out) going to market with more IT automation capabilities for provisioning workloads in both physical and virtual environments, as well as extending capabilities to the public cloud. But hang on to your hats, they also predict an eventual battle for where these capabilities go between systems management and platform vendors such as VMWare and Microsoft. Something to watch, for sure.

“CIOs don’t want a single, ubiquitous stack for cloud computing,” predicts Simoudis, “but the ability to work simultaneously with multiple stacks coming from different vendors.” CA’s certainly betting on that approach. Goldman’s published take on CA is that it (along with others) has cloud computing as a “potential new growth vector.” That’s a comment I agree with, or (obviously) I wouldn’t still be here.

The opposite of deflationary: Cloud as another channel for growth?

So back to the question. Is IT spending headed for a permanent downshift? As enterprises find their way to the cloud, using baby steps or otherwise, we’ll certainly see if this deflationary impact is for real.

Now, I know that this whole cloud computing revolution is supposed to first and foremost be an economic one. As in, good for the economics of running IT. No one said anything about it being good for the IT vendors. Unless, of course, they figure out how to get on the side of the customers (always a good idea, if you ask me).

And if they do figure out how to side with the customers, maybe the cloud is in fact another channel for growth. Someone recently reminded me how early e-commerce over the Internet looked back in 1999 (Black Friday was much different back then – and there wasn’t even a Cyber Monday). At that time, many analysts predicted the demise of the brick-and-mortar retail store. Instead, the Web has become another channel to sell goods; it has given people another channel to sell and buy.

Is that a good way to look at what will happen with cloud computing as well? Or maybe that’s the wrong metaphor.

Well, it’s at least worth a thought between slices of pumpkin pie. Gobble, gobble.

Salesforce.com and CA: using Force.com for agile and SaaS-y results

I don't normally spend too much time on application development topics, but CA has a bit of interesting SaaS-related news coming out of Dreamforce today that I thought was worth noting. And when an event bills itself as The Cloud Computing Event of the Year, I guess it's something I should at least mention.

Despite salesforce.com CEO Marc Benioff’s marathon keynote on Wednesday, he – and the crowds – were back for more today (albeit a bit behind schedule). That’s where CA CEO John Swainson joined him onstage to call cloud computing the “most profound change” he’s seen in computing in his 33 years in the business. They also announced a partnership between salesforce.com and CA and a nifty new CA SaaS application built on Force.com before Marc handed John a celebratory birthday bottle of Bordeaux (more on that below).

The product John showed off onstage is CA Agile Planner, a SaaS application for planning, tracking, and managing agile software development projects. Those familiar with the how the agile development approach goes can probably pretty quickly pick up on its usefulness in managing backlogs, sprints, and burn-downs. It can be used standalone or in concert with CA’s Clarity PPM tool (something that can give you visibility and control over all of your organization’s development projects, agile or otherwise).

One of the “big guys” begins to use Force.com, plus collaboration with salesforce.com

CA is one of the first (and I’m guessing the largest) major software vendors to develop apps on Force.com. (See, there are some big guys building apps on Force.com.) Benioff highlighted a number of other apps using Force.com onstage at Dreamforce today as well, but only Swainson went home with a bottle of 1954 Chateau d'Yquem Sauternes.

Why the wine? (Other than to say happy 55th birthday, of course.) Maybe it was to highlight a bit of teamwork that's gone on: CA developed the Agile Planner product in collaboration with salesforce.com itself. The CA product team used salesforce.com’s expertise and best practices from their own transition to agile development for the first version.

A community for feedback

That’s all good, and CA is taking that real-world influence a step further, creating something called the CA Agile Community to go with this product. It’s an on-line community of agile development practitioners who can help shape the feature roadmap for CA Agile Planner. Anyone can join, and folks can share ideas for what should be in the product, vote on things others have suggested, and have discussions with others interested in the agile approach.

The community feedback aspect will mean direct input from users and experts can have direct impact on the product. Unlike a lot of what’s been available on salesforce.com’s platform to date, this gives enterprise-level visibility, but with the easy-to-get-started attributes that come from being on the Force.com platform. A nice combo.

If you want to take a look, you can swing by the CA booth at Dreamforce or go to www.ca.com/agile. The press release on the partnership and the rest of the details of today’s announcement are here.

Now, if we could incorporate a way to vote on when Benioff should give attendees a mid-keynote bio break, I think everyone would be happy.

Two cloud computing Rorschach tests: 'legacy clouds' and the lock-in lesson

This week's San Francisco Cloud Computing Club gathering was a great place to meet some of the movers and shakers in the cloud computing market (or at least the ones within a short drive of San Francisco). The event's concept was to spend some quality time talking through cloud computing issues with a crowd of people who spend all day thinking about the cloud and working on making it a reality.

James Watters (now at VMware) and crew invited an intriguing crowd of about 35 or so (here’s a Twitter list of attendees). Gary Orenstein snapped some pics. John Furrier (from siliconANGLE) used some magical little device to record the entire multi-hour discussion for posterity. Hopefully the recording bit will turn out to be a good idea. There were a few pithy quotes, for sure.

Raising 2 key questions about cloud computing

As James Urquhart (CNET blogger from Cisco) guided the conversation, I heard two interesting points of contention that divided the room pretty dramatically. It struck me that each comment could actually serve as a Rorschach test of a person's view of how powerful and important the concept of cloud computing actually is.

One question was about where IT has been; the other helps define where we might be able to go. Both say a lot about the approach to cloud computing that you're likely to take.

#1: Is cloud computing compelling enough to change how IT runs existing apps?

I lobbed a question for the group to chew on that went something like this: we're hearing lots about new, pre-integrated stacks of hardware, software, storage, etc., that are intended to be used to create private clouds. These systems are interesting for new, greenfield applications. However, even if these sell like hotcakes, most of an end user organization's IT systems are going to still be using what already exists in their data centers.

The question: is it worth the pain and suffering to try to shift what's already running -- and contributing to your business -- to a private cloud? Should you create a "legacy cloud" from what already exists?

History -- and IT conventional wisdom -- say it's too hard to mess with things that work. If it ain't broke, don't fix it. The disruption of changing things adds IT operations risk, and the IT ops guys are not fans of that. Optimists, however, say that cloud computing (even if it's of the internal, private kind) is too compelling to pass up, and IT ops should make the leap.

One person in the Cloud Club discussion compared it to having to till the land to grow the wheat to make bread, versus suddenly having access to a supermarket that sells ready-made bread. You'd always choose the supermarket, right? Not so, if you're in IT operations.

I side with the optimists, but am realistic about how you'll need to get there. Customer feedback continues to say that a Big Bang approach (send everything to a cloud -- now!) certainly won't work in large companies. On the other hand, an incremental shift, app by app, is a lot more palatable by organizations with large, complex IT systems. And, in the end, there will be some apps that never move. (Last week's post mentioned John Treadway of Unisys -- he did a good presentation on a methodical, incremental approach at Cloud Computing Expo in Santa Clara.)

By the way, the answer to this question is not insignificant: it will determine how large the private cloud market will end up being. And, actually, how large the public cloud market will be as well. If end users are too timid, or unconvinced of cloud computing's benefits, this revolutionary change ends up being an uninteresting blip in the IT timeline.

However, my bet is that this process picks up steam bit by bit and is hard to stop.

#2: Has the industry learned its lesson about lock-in?

The second telling question about cloud computing I heard this week is as old as the industry itself, but with a new, cloudy twist. It's a follow-up to the previous questions in many ways. Tom Bittman of Gartner and many others have talked about the private cloud market as just the opening act for cloud computing. At Cloud Club, we talked about private clouds setting the stage for the ability to move some or all of your computing to an external cloud service somewhere. Making platforms slippery enough to be able to handle the shifting back and forth of workloads led to a discussion about how exactly that can come to be.

And the thing that might keep it from being: vendor lock-in.

One potential future tossed around at Cloud Club by James Urquhart, Rich Miller (of Replicate Technologies), and Tom Mornini (of Engine Yard) was that the eventual normal computing scenario will be one in which there are sets of interoperable clouds that customers will be able to choose from and move between, rapidly and easily. This Intercloud concept, as the Cisco folks call it, requires easy interoperability.

And, it requires that the industry (users and vendors alike) have learned the hard lessons about lock-in. The optimists and advanced technologists claim that we already have (Tom of Engine Yard certainly falls into that camp). If it's true, you'll have a slippery infrastructure supporting applications wherever it is that they need to run.

But skeptics didn't let that pass by without a fight. The concept seems too good to be true, and contradicts the way computing has progressed so far.

The economics of the vendors in many ways work against making it easy to move workloads around. Besides, big end user companies are used to making bets on technology stacks with only a few vendors. Is that no longer needed? Customers would certainly prefer the economics that result from making this possible. Will vendors cede control because they know lock-in is a losing proposition? Have we learned the lesson of lock-in at last?

You can see why this discussion needed comfy chairs, a moderator, and a healthy supply of beer and wine.

And the answer, please…

Obviously, there is no answer yet. There's not enough data one way or the other. The market, as we all know, is just getting going. But don't let that put you off. Why?

I think where you stand on this point is actually pretty intriguing: one position is a pragmatic read of what's come before; the other is an optimistic assessment of what's possible. This is a test of whether you see cloud computing as a fundamental shift or just a new buzzword to be exploited by those providing the old thing.

Of course, there is the possibility that cloud computing changes the game, but those who liked the old rules will continue to try to enforce them (read: making money from lock-in). The newcomers will try to undercut those rules and redefine the game. Innovator's Dilemma anyone?

So, my point in highlighting this subset of the Cloud Club conversations was this: keep an eye on these questions. They are some of more interesting things playing out in the cloud computing space.

And, for as much fun as it was to spend several hours in good-natured arguments over these and other topics in a penthouse in San Francisco, none of the answers will appear magically, nor overnight. We leave that to time, actual customers, and the market to decide.

Fumble! What not to do at a cloud computing conference

Ah, conferences. Attending IT events is one of those traditional fall pastimes in North America and Europe. Maybe because I spend lots of time going to them, I get very particular about how they are run, especially when it comes to what speakers and organizers deliver.

The recent flurry of cloud computing conferences got me thinking that these events have their own special challenges. Since cloud computing is at the top of Gartner’s hype curve (and top of their strategic technologies list for 2010), it’s a topic that a big chunk of the IT world is looking for information about. However, recent conferences on the topic have really fumbled what could have been a much better learning experience for everyone involved.

So, instead of spending a post complaining about SYS-CON and this week's Cloud Computing Expo in Santa Clara (or other recent cloud events for that matter), I figure I'd come up with a list for organizers, speakers, and attendees alike to keep the ball moving forward on the industry conversation about cloud computing. Here are my thoughts, along with a football-season-appropriate commentary (that'll be American football, by the way) about the impact of each of these issues:

Don’t host a panel of vendors and then lob the question “So, what’s your definition of cloud computing?” If you want to have this discussion, set up a Cloud 101 or Definitions track. But be warned: asking this question doesn’t do anything except eat up the clock. If you think you’re helping clarify the topic for the audience, think again. No one is going to agree, and the people onstage are going to try to redefine it to match their biases.

A better conversation starter? "Explain how you helped a customer take a first step toward cloud computing." Or maybe: "What underlying assumptions does your product/solution/service make that customers need to know about?" Or even: "What has been the hardest thing about helping customers move to cloud computing?" But, please, don't make us sit through another round of cloud definition roulette.

[Impact: similar annoyance factor as seeing the same Bud Light commercial for the 12th time. Or hearing the ref say the phrase, "After further review, the play stands," after 20 minutes of unnecessary deliberation.]

Don’t retread well-trodden ground, and at least point us to what's new. With cloud computing evolving so fast, it's especially worthy to note that each conference happens at a different point in time and should have something to add in to the industry understanding of where things are now and where they are going. I felt Agatha Poon of Yankee Group had a couple interesting stats about vertical adoption of cloud computing (healthcare liked it, manufacturing was worried about technology maturity levels, and financial services was very wary of the hype). In general, however, she didn't cover much new ground. I bet she lost some of the people in the audience that she hoped to engage. The EMC speaker, too, missed the opportunity to mention the Vblock, Acadia, and VCE news -- something the audience was probably a bit curious about given the story had just broken.

[This is pretty much equivalent to hearing the ref say, "Offsetting penalties, repeat first down." Do-overs can be a bit of a drag.]

Find the customers. Encourage them to come and speak. I think the whole keynote room at Cloud Computing Expo felt embarrassed by having so few hands pop up whenever a speaker asked, "How many of you are end users?" This is the most glaring item that's been missing at cloud computing events I've been to: real-world stories. At this week's event, EMC's Mike Feinberg asked, "Who has actually developed on a cloud platform?" I saw 2 hands go up. "Who has an account on a cloud computing platform?" A few more hands went up, but not many. Yikes. By the end of the conference, speakers stopped asking the question, knowing they were speaking to a room full of vendors.

newScale's Scott Hammond gave a lively pitch (as he is so good at doing) about what one of their customers was experiencing. He recounted how the customer needed to "blow up that crazy, ugly diagram of how things are done today." What would have been even better? Having the customer there to say that themselves.

Why are end users so timid to show themselves and discuss cloud computing? Maybe it's too early. Maybe they're busy. Maybe we didn't ask in a compelling way to make it worth their time. Or maybe having end users attend is not a necessary part of the conference organizer's business model. Other upcoming conferences will likely do much better on this front than SYS-CON did.

[I'd call this a long throw on third down, dropped by the star receiver, just past the first-down marker. Could have been great...but wasn't. Very unsatisfying. Time to punt.]

When you do have customer speakers, make sure they are willing to be specific about their experiences. It's almost worse to think you're going to get a bunch of useful, in-the-trenches information from a customer speaker, only to listen to a bland summary of the benefits of cloud computing. Jill Tummler Singer, the deputy CIO of the CIA, spoke at Cloud Computing Expo in nothing but generalities until the Q&A session at the end of her talk. Now maybe that's because everything that the CIA is doing with their IT infrastructure is classified, but I doubt it.

The other customer general session speaker I heard was Tony Langenstein from Iowa Health Systems. He recounted the urgent chaos around the June 2008 floods in Iowa that put an IHS data center out of commission and what he and his team did to deal with it. It was a great disaster recovery story, complete with hour-by-hour accounts, descriptions of water gushing through every nook and cranny of his data center, and before-and-after photos. The only problem? When it came to discussing the cloud computing angle (related to his use of storage) as opposed to just the data center DR issues, he wasn't specific at all. All he really said was that it "just worked." Entertaining (especially the "after" photos of fish in odd places), but not as useful as it could have been.

[This is important to get right. Not doing so is kind of like using your first-round draft pick to grab a potential franchise quarterback. And then benching him in favor of the journeyman back-up QB.]

Expert speakers can be from vendors. Just be sure to clearly delineate sales pitches from analytical, use case, or strategic content. Make sure vendors know why they are speaking -- and how to keep their selling instincts bottled up. If you're a vendor creating a pitch, it's easy to tell the difference: if you have slides with product names, it's a sales pitch. If there are slides about what customers are doing, it's probably a pretty good start.

Since a good chunk (if not all) of the presenters at Cloud Computing Expo paid for their slots, it's natural that you get a tendency toward product sales pitches. Unfortunately, that's not what the cloud computing discussion needs right now. While SYS-CON was probably able to extract some good revenue from the conference, pervasive sales pitches make it a lot harder for attendees to find the good content.

Nevertheless, there were a few very engaging, intriguing, and useful sessions that I attended (and probably several more that I missed). Yahoo!'s Dr. Raghu Ramakrishnan led what I heard Jake Kaldenbaugh (@Jakewk) call a "large-scale cloud data management master class" in his Tuesday general session. Dr. Ramakrishnan showed what putting data front and center actually means in the cloud. I'm betting Surendra Reddy's presentation (@sureddy from Yahoo!) was also pretty refreshing (thought I missed that one). I thought CA's own Stephen Elliot weaved in quite a bit of useful and relevant experiences on both virtualization and cloud. John Treadway (@cloudbzz) from Unisys and Peter Nickolov from 3Tera both did a very good job of directing business-level discussions without aggressively pitching their wares (even when pushed to do so).

[The vendor sales pitch thing reminds me of the annoyance of sitting through TV timeouts -- while you are in the stadium where the game's being played. You can't speed it up and it's exasperating to sit through.]

Vendor demos can be useful in showing what is meant. There's definitely a place at conferences for vendor-specific content, including demos. When there's someone taking a new approach or delivering a new offering, an overview of a vendor's solution is actually interesting and useful.

Cloud Computing Expo had a few like this that were worth attending. AppZero did a thrill-a-minute demo (that's sarcasm) of its Virtual Application Appliance technology that explained nicely their potential value. (To be fair, my sarcasm issn't aimed at what AppZero actually showed; it worked as advertised. It's just that, as I learned at Cassatt and BEA, infrastructure demos are tough to make exciting.) CloudSwitch explained (and quasi-demoed) a tricky bit of software indirection: their way of using a public cloud without letting your systems know that they are actually using a public cloud.

[This is kind of like a flea-flicker play. Seeing a good demo of new stuff can be pretty snazzy -- and can go for big gains. If it doesn't work, though, it does seems kind of foolish.]

Enough pontificating already. Conferences should help (somehow) capture practical advice. I heard some of the (few) customers who were attending ask a couple types of questions. First, usually of particular vendors: how does something they had been describing actually work. Sure, it's a product question, but it shows an interest in getting to specifics. The other question I heard was more general: OK, so how do I pitch these approaches we're hearing about to my organization back home? Or, (even more pointedly) assuming I buy into all this cloud computing stuff, where do I start?

[This is like the importance of having a good running game when it's fourth and goal. You want to be able to get the job done in a way that's simple, straightforward, and effective. Done right, this (and said conference) is a touchdown. Done badly, everything else is kind of pointless.]

Extracting value

These last few practical questions by end users are what can make a few days out of the office worth it. Few conferences do that. All said, and despite as negative as I sound here, the Cloud Computing Expo event was better than I expected. I even met a few Twitter followers/followees. In addition, I missed the Cloud Camp that was held the final evening -- certainly a totally different style of event that might even address some of the comments above.

In any case, extracting value from cloud computing events shouldn't be so hard. And if we're going to make progress on cloud computing, we've got to do better. Or at least find a better coach.

Note: For my "as-it-happened" tweets and commentary on Cloud Computing Expo in Santa Clara, take a look back at www.twitter.com/jayfry3 from Mon., Nov. 2 through Wed., Nov. 4.