Transcript of a BriefingsDirect podcast on the state of cloud computing and its future outlook based on a recent survey of buyers and sellers.
Dana Gardner: Hi, this is
Dana Gardner, Principal Analyst at
Interarbor Solutions, and you're listening to
BriefingsDirect.
Today, we present a special podcast discussion that draws on
a new survey about
cloud computing and explores the business growth opportunities for buyers and consumers of cloud services alike.
First
we'll hear the results of this multi-year annual survey on the cloud
market and then explore some of the implications for where the growth
opportunities are and where the inhibitors for the growth may be.
Here to share his insights into where the cloud business has been and where it’s going, we're very pleased to welcome
Michael Skok, Partner at
North Bridge Venture Partners.
For more details on the survey, go to:
Before
joining North Bridge in 2002 to seek out great entrepreneurs and lead
innovative software investments, Michael had himself been an
entrepreneur and CEO in the software business for 21 years.
We'll hear the results of this multi-year annual survey on the cloud market.
He
founded, led, and attracted more than $100 million in venture backing
to his investments in multiple successful software companies. As a VC
himself, Michael has invested in many entrepreneurs who have built more
than a $1 billion of value, focusing on large market-changing
technologies and disruptive business models such as
software as a service (SaaS), cloud computing,
open source, and
mobile.
Current representative investments include
Acquia,
Akiban,
Apperian,
Demandware (NYSE:
DWRE), and
Unidesk, as well as
Actifio and
Revolution Analytics.
Michael's
passion for innovation and entrepreneurship is also fueling his work
mentoring and developing the next generation of entrepreneurs. For
example, he is currently developing and leading workshops such as the
"Startup Secrets" series with the
Harvard i Lab. You can follow him at
www.mjskok.com and
@mjskok.
I'm very happy to welcome you to the show, Michael.
Michael Skok: Great to be here.
Cloud hype curve
Gardner:
I'm very intrigued by any survey on the cloud market nowadays, so let’s
start at a fairly high level. I'd say we're probably now in about the
third year of a fairly steep cloud-
hype curve.
Is there anything to indicate from your survey and your experience
lately that there is a waning interest or enthusiasm for cloud? Are we
past the peak? Are we still in a period of where people are still
building up their enthusiasm for clouds?
Skok:
That’s a great question, Dana, and it falls into two parts. Obviously,
there's an increasing interest in understanding cloud, but as cloud has
captured so much attention, there is also a respectful, significant
actually, interest in understanding what the real applications and
potential for it are. People are trying to get beyond the hype, at this
stage, to understand the practical applications and opportunities.
Gardner:
Is it fair to say that confidence is up because the perceived risks are
down, or are we still working through how confident people are and
whether there are significant risks here?
Skok:
Maybe the best way to answer that is to give you some specific data from
the survey, and rather than have my commentary, it will give you the
market’s viewpoint on this. That’s one of the key reasons we run the
survey -- to try to understand what vendors and customers believe are
some of the key issues, both driving and inhibiting the cloud.
So
I'll jump in and give you some of the inhibitors first to answer your
question on risk, for example, and then perhaps we can talk about some
of the drivers. Does that sound good?
Gardner: Yeah.
Skok:
On the inhibitors, one of the things that’s interesting this year is
that, if you look back to 2011, 10 percent of the survey respondents
would have said that the cloud is just too risky, and they gave many
reasons last year. This year, we're down to 3 percent. So that’s a
significant drop.
Now, I'd argue that 3 percent says that you're at a
point where people are beginning to understand cloud better, because the
issues that they are raising are things like data sovereignty and the
Patriot Act.
Those are very real issues that are unlikely to just disappear, and
they are beyond just cloud. They have to do with the reality of how
people have to run their businesses.
The good news is
that 12 percent feel that the cloud still needs to mature. That's not so
significant number, but it’s down from 26 percent in 2011. So again,
people are starting to feel that the cloud is obviously meeting more of
their needs.
When you look at the issues behind those
12 percent who are looking for greater maturity, there are things that
again you would expect to see in an early-stage market -- things like
security and compliance, and that’s very typical.
If you looked at any major trend that comes into the marketplace, if you looked at the initial early days of the web and
eCommerce,
people said things like, "We'll never put our credit cards on the web."
Now, not only do we put our credit cards on the web, but we allow
people to do Internet banking and take photos of the checks as a means
to make deposits from their cellphones.
So things have
come a long way, and that’s just the time
-scale that it takes. It’s
typically several years before things mature and get people confident in
these kinds of applications.
Encouraged by results
So
I'm encouraged by those results. The next obvious thing that comes out
of the survey is how many people are still experimenting. About a third
are experimenting, 34 percent to be precise, with concepts in the cloud,
driving applications, and using the cloud in some innovative ways.
For example, you see companies like
Bank of America,
who do trials using the cloud, and if they are successful, they use the
cloud’s elasticity to quickly expand their trials. If they're not, they
just throw them away. That’s a great example of how the cloud is
specifically enabling people to do trials and get to market faster and
be more effective.
And the other side of the coin, the
great news this year is the rapid growth in confidence overall in the
marketplace. If you had asked how many people had complete confidence in
2011, you would have gotten an answer about 13 percent, and this year
it was fully 50 percent.
So we're not quite at a
tipping point, because you have to double-click on that 50 percent. You
have to understand the split between vendors and customers, and vendors
were over half. In fact, 56 percent of them have complete confidence in
the cloud. So you're seeing net new development in cloud from
independent software vendors (ISVs), absolutely the tipping point. You see very few companies starting up today that aren’t building in a cloud.
If you look at the customers, they're not quite at that same level of confidence.
But
if you look at the customers, they're not quite at that same level of
confidence. Just over a third, 37 percent in fact, have complete
confidence. More of them are experimenting and waiting for it to mature,
as we were just talking about, and some of them still feel it’s too
risky.
So it’s a long answer to your question. I hope
it gives you some substance backed up by the survey to get a sense of
this, and I am happy to answer any questions behind that.
Gardner:
It’s interesting that those who are in the cloud ecosystem themselves
are very confident, and you'd think that they would have the most to
lose. They're making their investments, but the longer tail toward the
consumer side is still catching up to that.
It
certainly seems optimistic for the market in general that those in the
know -- those that are using these to build business -- that they themselves
will be providing cloud services and are so confident.
Skok:
It turns out that there’s an interesting representation of players in
the survey here, in that we have got both vendors and users responding.
There were over 785 in total, mostly
C-suite, but more than a third of it are customers.
Of the vendors that are represented, we're covering everything from
Amazon to
Citrix, to some of the mid-tier players like
Rackspace,
Red Hat, and others, and also up-and-coming and emerging players, for example,
Eucalyptus and
Acquia.
Bridge the gap
So
it’s a very good breadth of players to drill one level beneath this,
and we did that. We tried to understand what’s going to bridge the gap
between vendor’s confidence and user’s confidence and we heard five
specific things.
Number one, people want more complete
value propositions.
A lot of what’s being sold at the moment is technology and what people
really want is the second key thing, which is clear business benefits.
And they want that in the form of case studies, which is the third thing
that would help people.
The fourth thing is more
proof of specific opportunities that are being addressed in their
industry, the vertical specific applications if you will. The bottom
line, the fifth thing, is that people want greater
return-on-investment (ROI) case studies to be presented to them so that they can put that forward as they champion this on an economic basis.
So
to answer your question in summary, Dana, what we'll see is this gap
between the confidence in the cloud the vendors are seeing and what
users are seeing it is going to get bridged, as we become more able to
deliver on the benefits with specific examples that drop right to the
bottom line.
Gardner: Just to allow our
audience to evaluate the data that we're presenting, tell us a little
bit about the survey -- how it was sponsored, when it took place. You've
told us already about the participants being C-suite level folks in
both the sell and buy side, but tell us a bit more, just so we have a
better sense of the quality of this data?
The beauty of the survey is that it represents a broad swath, about 40 of the key vendors.
Skok: Sure and by the way,
the full results of the survey, as you may have already pointed out, are available on our site at
mjskok.com. Just look under the "Industry for Cloud," and you'll see "
Future Cloud."
This
year’s survey is an opportunity to get a level set as to what’s going
on in the industry, where are we, and to understand what’s going on in
the key drivers and inhibitors, because everybody in the ecosystem is
trying to understand how to better address the tsunami that’s rolling
over the industry in cloud computing.
So the beauty of
the survey is that it represents a broad swath, about 40 of the key
vendors, both driving and enabling cloud, and also key buyers and
C-suite members who are trying to evaluate and deploy cloud.
The
idea behind the survey obviously is to enable both sides to get a
better understanding of how to take actionable steps toward implementing
what might be the next generation of IT. Pretty much everybody
recognizes cloud as the platform on which not just applications and
solutions are going to get built, but IT is going to transform to the
next generation of providing itself as a service in an effective form.
Gardner: When were the results gathered?
Skok: The results were gathered in the summer of 2012, and they're continuously updated.
Independent survey
For
example, we're in constant conversations with these vendors and also
with the CIOs to continue to keep them fresh. But while we sponsor it,
40 collaborators are driving it. Again, the details of that are on the
web, but the point is that it’s an independent survey so that no one
vendor is driving it, it’s a collaboration of the industry as a whole to
ensure that it's an independent survey.
Gardner:
One of the things that jumped out at me, as you were trying to define
what we could start to call loosely "killer applications of the cloud,"
where this is going to get traction, clearly one of the areas was
platform as a service (PaaS). So let’s address that. Then, there's also
big data --
fast data,
analytics in the cloud. How prominent were they in the survey in terms of the priorities or the endgame for these two types of uses?
Skok:
That’s a great question. You only skipped one, so I'll cover it
briefly. The most surprising thing is just how much SaaS has gained in
the survey since last year.
We also worked with Goldman Sachs,
to give credit to them, and some of the information is also pulled from
the industry as a whole. We found that 67 percent of the survey
respondents are already deploying SaaS applications, and the value that
people are seeing is in the application solving real business problems.
Respondents were saying that 75 percent of them thought that they would
be building software with PaaS in the next five years, which is a big
jump.
Of course, SaaS is built on PaaS and
infrastructure as a service (IaaS)
too. The important thing that you are pointing out is that there was a
significant jump of interest in PaaS this year. In fact, looking forward
to the future, the respondents were saying that 75 percent of them
thought that they would be building software with PaaS in the next five
years, which is a big jump.
We have a viewpoint on
that, and I'll come back at it in a second, but what’s interesting here
is that people recognize that they're going to be building applications.
Why would they build them in anything other than in a cloud-based
manner? That’s what’s so interesting here.
Now, I'll
come back to that, because there’s some interesting controversy around
how PaaS will play out and that came out of the survey too. But to talk a
little bit about what you were describing as key application areas, big
data was certainly one of them. It was top of the list on what people
thought would be changed by cloud. As far as which application
categories would be disrupted most, big data was at the top of the list.
Beneath that, were others that wouldn't surprise you, for example,
customer relationship management (CRM). With
Salesforce having led that charge, it’s not surprising that people see that continue to be a key area.
What
was exciting to me was that number three was eCommerce. In our own
portfolio, for example, we saw one of my investments, Demandware, go
public this year and that was real evidence to me that you're going to
be able to build confidence in mission-critical applications.
eCommerce
applications, like Demandware, are the front door representing major
vendors and brands, and people can track the nature of their business
literally second by second and measure how much revenue would be lost if
eCommerce applications were down.
Mature and strong
So
the fact that major retailers and brands now bet billion of dollars on
eCommerce as a service gives you a sense that people feel like the
technology is in place and mature, strong, and reliable enough for them
to back it with their brand and have it at their front door. That was
very interesting.
Gardner: Just to expand on that a bit, in addition to retail and consumer side eCommerce, we saw
SAP acquire Ariba. So there is obviously some interest in the
B2B side as well.
Skok:
Exactly. The B2B side is very early, and there is tremendous potential
there too. We think that’s relatively untapped and that there's great
white space there. You're quite right.
Gardner: So continuing down your list.
Skok:
The list obviously is long, but what we did was to look forward and try
to understand some of the key areas that are driving cloud and some of
the opportunities. I'll cover what we talked about as the future cloud
formations and the potential opportunities for applications. Would that
be helpful?
Gardner: Yes, please.
Skok:
They fall into what we call five cloud formations, and we're specific
in talking about formations, as opposed to cloud-washed opportunities.
What we mean by that is that you've seen a lot of vendors try to bring
out just another level of their application and host it in some shape or
form and deliver it via the cloud. That’s really not what we're talking
about here.
We think the future is in applications that have been built specifically for the cloud.
Those kinds of things that aren’t true
multi-tenant
applications that are born in the cloud, and we think they're not the
real future here. We think the future is in applications that have been
built specifically for the cloud and enable you to do things that you
wouldn’t find possible should you not have had the cloud available to
you.
The formations we talk about first are media and entertainment. People have gotten used to that with
iTunes and their music and
Netflix
to get their movies online. That was a major revolution and it started
initially with web ordering where Netflix was delivering physical DVDs.
As the pipes got fatter, we could just physically deliver over the web,
and you're seeing more and more of those opportunities.
If
you look at gaming, it has also all gone online, and people are taking
it for granted. That’s actually a lot of what drove the cloud initially.
This media and entertainment formation is very real, here to stay, and
we think has tremendous opportunity, especially as the mobile platform
expands too.
The second key area is what we call social
and collaboration. The social and collaborative cloud is very much
understood by people who use
Facebook
in the consumer world. What's interesting is that it has moved into the
enterprise with applications important to supply chain management that
are enabling things like tighter inventory control.
Also,
there's collaboration all the way down to the customer, so that people
can get better service and support, and in many instances self-service,
which has a great cost savings and ROI payback.
Easier to collaborate
You're
seeing that now start to play out. People are getting used to the fact
that it's so much easier to collaborate in the cloud than it is to try
to send people on-premise applications to work with, when you want to
collaborate with them. We'll see a great expansion of that going forward,
too.
The third key area, which I would describe as
almost a platform shift, is identified as mobile and that includes
location data, too. Mobile, if you think about it, is not possible
without the cloud. Again, it goes to a real, true cloud application.
These
devices that we carry with us, smart as they are, are nothing without
the connections back to the cloud, to be able to do everything from
synchronizing our contacts, calendars, and email, to much more important
and significant things, such as to connect back to business processes
and provide such key information as price lists and contracts for the
people in the field to be able to do their job
in situ.
That’s a really important shift, and the incredible rise, it's unparalleled, of new devices like the
iPad,
which has been the fastest growing device ever, in both consumer and
enterprise, are giving rise to new demands and new services.
eCommerce has really become something
that people take for granted that they can do over the web.
What's
perhaps obvious when you think about it, but less obvious in this
context, is how much location data is being generated from that. We'll
talk about that in terms of the big data formation in a second, but
location data is providing new opportunities for new applications. That
links nicely to the fourth key cloud formation that we think about.
That's commerce and that includes payments.
eCommerce,
as we were just talking about, has really become something that people
take for granted that they can do over the web. It's not just Amazon
anymore, as you said, it's even B2B commerce, for example, that
companies are taking a lot of the
supply chain, collapsing it, and taking out cost.
That’s
being enabled by the cloud. As mobile payments and the payment system
in general become more accessible by the cloud, which is more of a
political challenge than it is a technical one, that will become a very
interesting opportunity for new applications that will be spawned and
connected back to the cloud.
All of those applications,
as I started to hint at with location data, are generating a huge
amount of data, and that’s giving rise to the big data cloud. Big data
is interesting on two fronts. It's interesting because with every click
and step we take we're creating information that is being collected in
the cloud, in a form that you can consider part of the big-data
opportunity.
What's interesting on the second side of
the coin is that the cloud itself provides the kind of scale, indeed
economy of scale, for crunching that data, analyzing it, and providing
insight from it.
The fact that you can spin out an analysis of anything from the
human genome
to a click stream in the cloud, and then provide insight, in some cases
in real time, to drive applications wherever they may be and reach them
with things like your mobile devices, is really changing the game.
Cloud formations
So
these five cloud formations: media and entertainment, social
collaboration, mobile and location, eCommerce and payments, big data and
analytics, are where we think cloud is dramatically changing the scope
of the landscape.
When you look at them, what's really
exciting here is what's happening at the intersection. I'd be happy to
give you an example of that, if it's useful to you.
Gardner:
What's very fascinating to me, Michael, is not just these impressive
arenas that you have described on their own, but how they intersect and
in many ways multiply each other -- being mobile, having the big data to
crunch, relating that data into a commerce activity, and bringing that
back out through collaboration or social activities. It's really the
whole greater than the sum of the parts here. Please explain a bit where
you think that is going or where the survey tells you it's going?
Skok:
You said it very well. The sum is greater than the parts here, and
you've obviously picked right up on it. We could give you many examples,
but I'll take one that’s simple, so that everybody can relate to it.
It
used to be that if you thought about going to see a movie, you would
have to go and check your local listings, but obviously people are way
beyond that today. We can go right online and if it's not available to
you at Netflix, you can quickly check to see where it is available on
your local cinema from your cellphone
geo tag where you are and it can quickly tell you that the closest place to go to see the movie.
Of course, you can use commerce in the cloud to buy it on something like
Fandango.
Then what's interesting is that you can choose at that time to check
out what your friends think of the movie, see the collaboration that’s
been going on of reviews from people that you know, and decide whether
it's that movie or something else you should see.
At the application level, the big game changer is going to be what I call social commerce.
So
you're using all of the things we are just talking about, media and
entertainment, social collaboration, mobile and location, commerce and
payment, to do all of that.
What gets to be exciting
is all that data that’s being generated, if you go and see the movie, or
if you rate it yourself, it gets fed back to you in things like
recommendations for the next movie you might want to see, or if you take
your kids, the kind of merchandizing that follows up with offers to
you, and payments that can drive you to make further additional
purchases.
And that’s just a simple example. There are
many others I can think of that are, exactly as you say, the whole being
much greater than the sum of these individual client formations. It's
really quite game changing.
Gardner: So who are
the beneficiaries? Clearly there is a business to be had providing cloud
services and in integrating process benefits across some of these
domains. You can sell hardware and software. You can build new business
models by either giving consumers things they couldn't get before or
making what they had done before far more efficient and productive. But
where is the margin?
This gets to the business of
cloud. We see Amazon being very aggressive on price, maybe racing to the
bottom on some of the commodity services for IaaS for example. And we
certainly expect a lot of competition between the likes of
Google and
Microsoft for cloud and PaaS types of services. Salesforce of course is in there.
But where is the point in all of this where you could say, "Here is another
Apple
with the iPad. Here is the margin. Here is the place where the business
is as revolutionary as the productive benefits of cloud activities?"
Three examples
Skok:
Very good question. I'm going to give you three examples at the
different levels: so one at the application level, one
at the PaaS level, and then one at the infrastructure level. I hope that will be
helpful.
At the application level, the big game changer
is going to be what I call social commerce. It's the intersection of
two of those cloud formations, if not three of them, which is social
connections and recommendations, connected with eCommerce, and
potentially mobile within there too.
You're going to
see there is tremendous opportunity, because what people most rely on
when they are actually buying things is their friends and trusted
recommendations, and we're very early in that. Surely, people have begun
to recognize the power of the
like button, but we haven’t yet seen that translate into commerce. We're early in Facebook trying to realize that.
The
other extreme, the eCommerce companies, are taking off doing what we
call omni-channel commerce, connecting everything from bricks and
mortar, and are also recognizing the power of being able to do that as
people are out and about with the mobile devices and gaining data on,
for example, local offers and so forth.
The next great
opportunity is going to come in the combination between social and
commerce, and it might involve mobile and local as well. We haven’t seen
the next great company emerge from that, but we're certainly seeing
many opportunities. At the application level, that’s probably a good
example.
People are looking for more analytics, and more of the capabilities that
are going to be specifically taking advantage of cloud scale.
To
deliver on all of that, one of the things we're taking for granted is
that the infrastructure is going to be in place to do all that. A part
of the survey that we always take time to ensure we cover is to
understand the things that people are actually spending money on right
now.
If we look at the intersection between vendors and
users, and in the survey it's a slide called "Rainmakers," at the
bottom of the infrastructure stack there's still a tremendous amount to
do to enable the kinds of applications that you and I are talking about
here.
Some things are very basic, the things like
single sign-on on authentication to enable this collaboration across the supply chain. More specifically, in
mission-critical
businesses, it's things like backup, archiving, and business continuity
to ensure that all this information is being stored and managed on a
significantly scalable basis.
When we looked at all
that, the thing that stood out, which is not going to surprise you
probably, given that we talked about big data, is that people expect one
of their greatest areas of spend to be analytics.
So
at the infrastructure level, I think we are going to see some of the
things that I talked about that are basic, like next generation of
single sign-on. But the big thing that came out was that people are
looking for more analytics, and more of the capabilities that are going
to be specifically taking advantage of cloud scale.
Insights in real time
Whether that’s using things like
Hadoop or next generation
NoSQL or
NewSQL,
our capability is to get those kind of insights in real-time. In the
end, the more data that’s being generated, the more we're going to have
to step up the scale of analytics to provide insight in an effective
time scale.
Those two would exemplify the application
opportunities and the infrastructure opportunities. In the middle, as we
talked about earlier, there’s a great deal of interest in PaaS, and
it's less clear to me what the opportunity is for a specific breakout.
I'll
say both what the survey revealed and what it didn’t reveal, which is
interesting. We talked about how it revealed that there is a strong
interest in PaaS, but when we dig in with vendors, what we see is that
the vendors are actually at the bottom of the stack. The IaaS vendors,
people like Amazon,
VMware, and others, are actually trying to add more capabilities to their IaaS platform, to enable them to feel more like a PaaS.
If
you look at Amazon, they've added numerous new services to make
themselves more platform like, and they have become the de facto
standard there. So they are moving from the bottom upward.
But
you also see the SaaS vendors, exemplified by Salesforce.com,
introducing their PaaS, like
Force.com, to extend the use of their
infrastructure or their applications to be more platform like too.
There's a pretty big squeeze from the top and the bottom that’s making
it difficult to see what will be the white space for a PaaS vendor.
People have historically very rarely made money out of tools. I don't think it will be any different in the cloud.
The
honest truth is that I can describe the first two, what the
opportunities for the SaaS and IaaS are, but it's not clear to me where
the white space is in PaaS, and it feels like it's getting squeezed, if
that makes sense.
Gardner: So to sum up, perhaps
there is a significant business to be had up and down the spectrum,
infrastructure, hardware-software, facilities, management, building out
the applications, but perhaps one of the larger two opportunities that's
yet to be solidified or clear is in the analytics and in
PaaS.
Now,
in the past, development was often a tricky market to make money in --
tools, frameworks, IDEs, but in many cases there was a deferment
involved. You might break even or even lose money on some of those areas
in order to capitalize on the deployment side or even gain lock-in for
those applications on a platform, and that's where you would have a very
good business.
I think what we're seeing with cloud is
something a bit different. When it comes to lock-in, and you have had
experience of course in open source software, what are some of the good
things and some of the more risky things when it comes to this desire,
as we've seen in the past, to lock people in to either a platform, a
service, a standard, or even a toolset?
Skok:
You're on the money on a number of different fronts. First of all, as
you say, people have historically very rarely made money out of tools. I
don't think it will be any different in the cloud. The interesting
piece in the cloud is you have the runtime potential to make money, but
even then, it's an economy of scale game, so it's not a place that's
easy for startups to play.
Platform lock-in
The
second key point you're making is that people traditionally have looked
at it as a means to get lock-in to a platform, and that is the exact
thing that people are worried about in this cloud revolution too. The
third biggest item of what's inhibiting cloud adoption in the survey is
lock-in, and the fourth was interoperability. They were both very high
on the ranking.
What people are worried about there is
very simple. If we double-click on it, they're looking for three things
to avoid lock-in. They want to avoid data lock-in, they want to avoid
programmatic lock-in with
application programming interfaces (APIs),
and they want to avoid being locked into proprietary services or
features that can't be transparently supported on other platforms.
That's
a real challenge for the PaaS players at this point, because the giant
here is Amazon, and they've got a series of de-facto standards. There
are some companies like Eucalyptus who have been very smart and are
reverse engineering or making sure they are compatible with those
standards.
But those that are trying to compete on new
grounds are certainly going to have to struggle with gaining critical
mass and then answer the question about how they'll provide that
interoperability on those three layers we just talked about, to get over
that inhibitor of an adoption that people are worried about around
lock-in.
People will have open access to the source to modify, adopt, and even change to create their own abstraction layers.
Gardner: So perhaps there's a de-facto standard around Amazon, but being challenged by
OpenStack and
CloudStack
as well. Is there any inference in the survey as to whether the
OpenStack and CloudStack approaches would mitigate a de-facto standard
evolving rapidly, and how do you view that?
Skok:
I'm going to slightly branch outside of the survey and mention that for
several years, we've run an equivalent industry survey on open source.
It's very widely adopted now, but when we started several years ago, it
was early.
We've seen that cloud has very much become a
part of open source, not just because a lot of cloud is built on open
source, but because, as you say, people are looking at open source as a
means to answer this lock-in. It answers one of the key areas, which is
certainly programmatic, an API type lock-in.
People
will have open access to the source to modify, adopt, and even change to
create their own abstraction layers, but that will potentially enable
this kind of interoperability.
Things like OpenStack, CloudStack,
OpenShift,
and other platforms are potentially an answer to that. The challenge
there is that they're relatively young and early in their adoption.
While they've got significant backing, you have yet to see broad
deployment of them yet.
I'm hopeful that open source
will provide some of the answer to vendor lock-in. It's certainly being
proposed that way and it's being supported that way. If you talk to a
certain segment of the user population, they would tell you that it's
exactly what they're relying on, but in reality, we're too early to call
that one.
Making good money
Gardner:
One observation from me would be that the folks that are in a position
to make good money on infrastructure, hardware or software facilities,
and management, seem to be a natural affinity environment with the
OpenStack, CloudStack approach, but those higher up the food chain in
cloud that have more of a pure-services business model might be
interested in having the de facto standard land in their particular data
center. It will be interesting to see how that pans out.
Tell us once again, Michael, how people can get more information on your survey. Where could they go to get the nitty-gritty?
Skok: They can just go to
mjskok.com under Industry,
Future of Cloud Computing,
and the full survey is available from that site on a slideshow for
people to click through. Also, it's being covered in many different
places by many of the vendors who have supported it. There's a lot of
information being disseminated by the collaborators. You have full
access to it.
Just to answer your question, because it's too good a question, who has what interest to go where? It's best exemplified by
Oracle.
Oracle took a long time to enter the cloud market. Of course, they have
benefit all the way from hardware out to the applications because of
the acquisition of Sun.
That's how they're pushing
their cloud approach as a series of applications that are totally
integrated from hardware, all the way through to software. That's
certainly going to suit some class of buyers.
If you look at major waves like this, it's always a while before people
can afford to have best of breed at various different layers.
But
if you look at major waves like this, it's always a while before people
can afford to have best of breed at various different layers. If you
started building application, as we did in some of our investments like
Demandware eight or nine years ago, there was no IaaS, there was no real
depth of Amazon and no
service-level agreements (SLAs) that you could have built a mission-critical eCommerce application on.
That
is evolving, and the more stable and capable the IaaS and PaaS players
become, new applications will be to take advantage of those, and new
vendors will potentially be able to take advantage of best of breed.
That's what's interesting about the surveys, but it's all about
verifying and tagging the state of the industry to see where we are and
benchmark how the future is going to play out.
Gardner:
Perhaps what we're seeing is a flip from best of breed being a
technology to best of breed being a service or ecosystem approach. And
if you can perhaps sweeten the offer of moving your best of breed
mentality in that direction by not locking people in, or at least giving
them an option to have interoperability, or mobility of their services,
then that might be an irresistible offer that the market can't refuse.
We just don't know who is going to make it, right?
Skok: That's exactly right. That's perfectly said. A good example to highlight how this is still playing out is
Zynga, who reverse burst to their own
zCloud because the economies of scale made it worth their while to do that.
If
you look forward, people are even talking about cloud brokerages. I
think it's too early to do that. Forrester had some thoughts about that
and was talking about cloud brokers like travel agents. I think we are a
ways off from that.
But in the ultimate scenario,
exactly as you were talking about it, you might see a place where you
have best of breed, cloud services, and all kinds of cloud formations
that we were talking about.
Best of breed
Applications
will effectively be an amalgamation of the best-of-breed cloud services
and cloud formations that will enable new classes of applications that
have interoperability, or at the bare minimum of things like data that's
passed up and down supply chains or along applications streams. The
consumer is the ultimate benefactor, because they're getting those, not
only at best of breed, but hopefully at the lowest cost and at highest
value.
Gardner: Then, perhaps it would be
embedded services across those best of breed processes that would
include widespread analytics, mobility, and location services, so those
become more sweeteners to the offer. There would be a race to who can
put together the best banquets of services under the best
interoperability terms and licensing terms. So again, it could be a very
interesting next five years.
I assume that over the
next several years, you're going to be continuing to do this survey each
summer and therefore get the gravitas that we have seen with your
open-source survey.
Skok: Indeed. There's been
unbelievable response to it. In fact, just to give you a sense of it,
the open-source survey took a number of years to gain the kind of
momentum that it's now enjoying in its seventh year here.
This survey gained such incredible popularity that within
the first couple of years, it already has as much support from the
industry as the entire open-source survey does.
This survey gained such incredible popularity that within the first couple
of years, it already has as much support from the industry as the entire
open-source survey does. And we have got tremendous demand to continue
doing it, from both vendors and customers alike.
We're
continuing to use it to keep dialogue between vendors and customers and
enhance the industry’s ability to respond to what they see as the
future. So with your support, we will continue to do it.
Gardner:
I look forward to periodically dropping in and learning more about the
survey results and, of course, some of the insights and inferences that
we can draw.
Skok: Thanks.
Gardner:
You've been listening to a special BriefingsDirect podcast discussion
on the cloud-computing market and how a recent survey at North Bridge
Venture Partners helps define the business growth opportunities for
buyers and consumers of cloud services alike.
I want
to extend a huge thank you to our special guest, Michael Skok, a partner
at North Bridge Venture Partners. You can follow him at
www.mjskok.com and
@mjskok. Thank you so much, Michael.
Skok: Pleasure. Great being with you here, Dana.
Gardner:
This is Dana Gardner, Principal Analyst at Interarbor Solutions. Thanks
to you also our audience for joining us, and don't forget to come back
next time.
Listen to the podcast. Find it on iTunes. Download the transcript. Access the survey.
Transcript of a BriefingsDirect podcast on the state of cloud computing and its future outlook based on a recent survey of buyers and sellers. Copyright Interarbor Solutions, LLC, 2005-2012. All
rights reserved.
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