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According to a recent Gartner press release, 20% of businesses will own no IT assets by 2012:

Several interrelated trends are driving the movement toward decreased IT hardware assets, such as virtualization, cloud-enabled services, and employees running personal desktops and notebook systems on corporate networks.

The need for computing hardware, either in a data center or on an employee’s desk, will not go away. However, if the ownership of hardware shifts to third parties, then there will be major shifts throughout every facet of the IT hardware industry. For example, enterprise IT budgets will either be shrunk or reallocated to more-strategic projects; enterprise IT staff will either be reduced or reskilled to meet new requirements, and/or hardware distribution will have to change radically to meet the requirements of the new IT hardware buying points.

This is a bold statement. If we believe Gartner, it means that we are at the beginning of an explosion in cloud-based services managed by trusted providers on behalf of the enterprise. Of course not all businesses will choose this path, but a substantial number of industries can and will. As I blogged about earlier, the message from the CFO office is clear. We will see adoption rates rise dramatically as the benefits of cloud services become more obvious to business leaders.

A second point of interest is the prediction that by 2012, India-centric IT services companies will represent 20 percent of the leading cloud aggregators in the market (through cloud service offerings).

Here’s the take-away:

Gartner is seeing India-centric IT services companies leveraging established market positions and levels of trust to explore nonlinear revenue growth models (which are not directly correlated to labor-based growth) and working on interesting research and development (R&D) efforts, especially in the area of cloud computing. The collective work from India-centric vendors represents an important segment of the market’s cloud aggregators, which will offer cloud-enabled outsourcing options (also known as cloud services).

We are witnessing examples of what GE innovation consultant Vijay Govindarajan calls reverse innovation in IT. Natarajan Chandrasekaran, the CEO of Tata Consultancy Services notes:

I’ve seen the new cloud-based computing models for applications and processes gaining currency in emerging markets. Rural cooperative banks and small and medium businesses in India are actually far ahead of their western counterparts in adopting these models. In fact, companies from emerging markets, buoyed by strong domestic revenues and revival in growth, have been making adjustments to their global strategies and fine-tuning their investments in order to be part of the recovery process in the west and build on their global expansion plans.

As the enterprise embraces the cloud, they’ll need a maturity model to help them on their journey. My next post will explore what the maturity model for cloud storage looks like. 

A recent report by Forrester's Andrew Reichman titled Business Users Are Not Ready For Cloud Storage: Current And Planned Adoption Of Storage-As-A-Service Is Minimal For Now paints a picture for cloud storage adoption, that at first blush, is not encouraging.

He states:

In Forrester's Enterprise And SMB Hardware Survey, North America And Europe, Q3 2009 survey, we asked businesses about their interest in "hosted storage capacity" offerings. Interest was minimal at best. Forty-three percent of all respondents said that they were simply not interested, and another 43% said that they were interested but had no plans to move forward.

While it could be argued that as a cloud storage supplier, I am necessarily bullish about the ultimate prospects, I believe the data is actually quite good and clearly represents what we are experiencing in the marketplace.  Now, Mezeo is engaged with many service providers, as well as the early adopters in the enterprise space as they begin their evaluations.

When I look at enterprise cloud-storage adoption based on Everett Rogers' diffusion curve I see a pretty clear view of the typical market place approach to adoption of disruptive technologies:    

For new, emerging, and potentially disruptive technologies, we should look for what the next practices are, i.e. the practices of the innovators and early adopters. The survey reflects the typical technology adoption cycle and re enforces what we are experiencing in the market place.

11% of companies are taking the plunge - these are the early adopters and innovators.  The early majority (43%) is interested, and watching.  The late majority is not in the game, yet.

So we are on track. And to prove it, let's look at one of these enterprise-level innovators: General Electric.

According to IBM storage expert Tony Pearson, GE has implemented cloud-based backups and archive for GE Corp, NBC Universal and GE Asset Management divisions running at only 32 cents per GB/month, representing a 40-60 percent savings over their previous methods. This includes backups of their external Web sites, archives of their digital and production assets, RMAN backups including development/staging databases. They plan to add out-of-region compliance archive in 2010. They also plan to monetize their intellectual property by offering "CloudStorage Manager" as a software offering for others.

Here's an interesting read on some of the issues that traditional file systems face which can now be overcome with an object-based system. 

According to the author, Beth Pariseau:

Unstructured data is expected to far outpace the growth of structured data over the next three years. According to the "IDC Enterprise Disk Storage Consumption Model" report released last fall, while transactional data is projected to grow at a compound annual growth rate (CAGR) of 21.8%, it's far outpaced by a 61.7% CAGR predicted for unstructured data.

This is a direct result of the digital content explosion. 

Robin Harris, senior analyst at StorageMojo observes:

"There are going to be extreme amounts of data as things like digital video and mobile networks grow; in five years, pretty much every phone will be 'smart,'...All of us storage geeks agree on that, and different people are beginning to visualize what that kind of growth needs in terms of storage infrastructure."

The article makes the case to "Think APIs, not files."  In essence, the point is as follows (as explained by Harris):

"File systems make less sense over time as the amount of data grows. Architecturally, it makes more sense for each file to have a unique 128-bit ID and use an Internet-like system for locating that file; a URL points to an address and there are files at that address, and object-based storage interfaces are essentially operating on the same principle."

The result, writes Pariseau, is that "with an object ID replacing a file name, more extensive data can accompany an object than the simple 'created,' 'modified' or 'saved on' fields available in traditional file systems. Thus, detailed policies can be applied to objects for more efficient and automated management. Without NFS or CIFS to serve up files to applications, object-based storage systems need to replace that layer of abstraction between raw blocks of data on disk and files that applications can recognize. Today's object-based systems use standard APIs such as Representational State Transfer (REST) and Simple Object Access Protocol (SOAP), or proprietary APIs to tell applications how to store and retrieve object IDs.

One of our key decisions when we designed Mezeo was the adoption of object-based architecture for cloud storage.  Mezeo can use traditional file systems as object based systems to deliver cloud storage, and can also expose cloud storage as a traditional file system (even though it has objects underneath the covers, or as an object system).  This reflects our view that there will be a prolonged period of co-existence followed by a migration to object based systems.

If you'd like to learn more about how Mezeo offers an agnostic storage services platform for storage service providers (SSP), take a look at this paper (registration required) by the same Robin Harris: Building a scalable shared file infrastructure. The paper gives service providers an introduction to:

• Cloud storage applications and customer drivers
• Mezeo's storage architecture and options
• Basic shared file storage reference designs
  

In the paper, Harris says that there are multiple ways to build highly scalable storage for cloud storage applications. He tells us how SSPs can differentiate their offerings:

The Mezeo platform allows the special features of the storage to be delivered to customers, while giving SSPs a powerful platform on which to build a business. Understanding what storage choices will better meet target market needs is a critical success factor. SSPs can differentiate their cloud services by careful selection of back end storage systems. The Mezeo platform gives SSPs great flexibility. Understanding how to use that flexibility will be key to growing a successful cloud storage service business.

Harris also presents five reference configurations (see diagrams below) in the paper, which vary in performance, availability, scalability, self-management and, of course, cost.

CONFIGURATION # 1: NEXENTA





CONFIGURATION # 2: PERMABIT




CONFIGURATION # 3: PARASCALE




CONFIGURATION # 4: Red Hat Enterprise Linux




CONFIGURATION # 5: NetApp




DOWNLOAD:
Robin Harris' Building a scalable shared file infrastructure >>

We've discussed ITIL and Cloud Computing and the role of trust as a differentiator for service providers. Yes, we see the evidence that IT Hosting companies and managed service providers are closer to their customers and we see that their differentiation is their commitment to serving the customer.

But Amazon, Google, and Microsoft aren't going away. As they pressure customers to make the switch to the cloud, traditional service providers must find new ways to compete. Step one, of course, is providing alternatives - cloud services, like storage for example.  Step two is to highlight their customer commitment - the relationships they already have and defend this "advantage" by becoming even more responsive. 

So how do you build trust? According to Stephen Covey Jr. trust is built through behavior. His work has identified 13 behaviors which build trust:

1. Talk Straight
2. Demonstrate Respect
3. Create Transparency
4. Right Wrongs
5. Show Loyalty
6. Deliver Results
7. Get Better
8. Confront Reality
9. Clarify Expectations
10. Practice Accountability
11. Listen First
12. Keep Commitments
13. Extend Trust

But how do these behaviors translate to a cloud service delivery model? 

To answer this question, I dug up an old model for assessing service quality - SERVQUAL -  which was introduced to the world of service and retail back in 1988 (those were the days before ITIL).  SERVQUAL has its share of detractors, but even recent research reminds us that it is still a useful model.  In particular, I'm interested in how it can be used to help service providers improve and extend their intangible advantages over the more impersonal big shops.

Over the years, the SERVQUAL instrument has been a popular methodology used to measure consumers' perceptions of service quality. Its five generic dimensions or factors are still valid:

(1) Tangibles: physical facilities, equipment and appearance of personnel.
(2) Reliability: the ability to perform the promised service dependably and accurately.
(3) Responsiveness: willingness to help customers and provide prompt service.
(4) Assurance: includes competence, courtesy, credibility and security; the knowledge and courtesy of employees and their ability to inspire trust and confidence.
(5) Empathy: includes access, communication, understanding the customer; caring and
individualized attention that the firm provides to its customers.

None of these dimensions will change in the cloud, with the exception that some of these dimensions are now virtual and must be proven online (customer support, for example) or through superior automation of work processes.

Let's also analyze the SERVQUAL "gap model," as it was called, and see how it applies to service delivery in the cloud:

Let's look at the meaning of each "gap" - the possible breakdown areas in service delivery:

Gap 1: Customers' expectations versus management perceptions: caused by the lack of a marketing research orientation, inadequate upward communication and too many layers of management.

Gap 2: Management perceptions versus service specifications: caused by an inadequate commitment to service quality, a perception of unfeasibility, inadequate task standardization and an absence of goal setting.

Gap 3: Service specifications versus service delivery: caused by role ambiguity and conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and lack of teamwork.

Gap 4: Service delivery versus external communication: caused by inadequate horizontal communications and propensity to over-promise.

Gap 5: The discrepancy between customer expectations and their perceptions of the service delivered: caused by the influences exerted from the customer side and the shortfalls (gaps) on the part of the service provider. In this case, customer expectations are influenced by the extent of personal needs, word of mouth recommendation and past service experiences.

Gap 6: The discrepancy between customer expectations and employees' perceptions: caused by the differences in the understanding of customer expectations by front-line service providers.

Gap 7: The discrepancy between employee's perceptions and management perceptions: caused by the differences in the understanding of customer expectations between managers and service providers.

Three of these gaps are directly connected external customers: Gap 1, Gap 5 and Gap 6.  Service providers will find their optimal "trust-building" opportunities here.  Apply Covey's 13 behaviors to each one of these gaps to build on your commitment to your customers.

Amazon, Google, and Microsoft aren't building a high-touch responsive model for their cloud services. But you, the service-provider, already have a high-touch relationship. Your cloud-based SLAs must reflect this advantage. The security issue is just a small part of this reality.

Service providers who dedicate themselves to closing the gaps will succeed in this new world.

The quest for quality service didn't start yesterday. I highly recommend that service providers give Delivering quality service: balancing customer perceptions and expectations by Valarie A. Zeithaml, A. Parasuraman, Leonard L. Berry, a second look.

Articles and blog posts associated with security and cloud computing are a daily occurrence, unless some well-publicized breach occurs in the cloud.  At that point the number of commentaries and discussions will increase exponentially, and then, over the following week, return to normal frequency.  I decided to focus on security as it relates to cloud storage, to see if something really new and different is occurring, and if overall changes need to be contemplated, as it comes to classic data security activities.  When I focused in this way, I quickly discovered that not much has changed, and security of data in the cloud is highly dependent on the same precautions and understandings as security of your data in a private data center.

In this recent article, it was suggested that files of one owner residing on a physical device with the files of others could somehow result in unauthorized access. It could, and the answer to this and a myriad of concerns fits within traditional approaches and understandings of security.   For example, Mezeo encrypts all files prior to storage.  So, even if you somehow got access to another's file, it would do you no good.  My point is that the cloud introduces a few additional complications, but it is not a problem that the current level of speculation seems to portray it as.  An extension to typical security practices, diligence, effective execution and audit of your current practices is what is required.

With this underlying theme, we look at how best we can ensure the security of the data in the cloud. Let's look at five areas that you should consider in regards to storing data in the cloud.

1. Physical Security: First, understand some things about the data center that is hosting the cloud where your data is stored:

• Is the data center physically secure? 
  
• What about it's ability to withstand power outages? 
  
• For how long? 
  
• Are there multiple, independent (on different grids) electrical power paths? 
  
• How are communications facilities enabled and where does the fiber enter the facility?
  
• How many communications providers have a POP (point of presence) at the facility? 
  
• How is the data center certified (SAS 70 Type II)?  

World class data centers are expensive, and they are also well understood.  What is the tier rating of the data center? (Tier IV is best). Make sure you do business with a cloud storage service provider who makes use of such facilities.

2. Data encryption: Encryption is a key technology for data security.  Understand data in motion and data at rest encryption.  Remember, security can range from simple (easy to manage, low cost and quite frankly, not very secure) all the way to highly secure (very complex, expensive to manage, and quite limiting in terms of access).  You and the provider of your Cloud Storage solution have many decisions and options to consider.  For example, do the Web services APIs that you use to access the cloud, either programmatically, or with clients written to those APIs, provide SSL encryption for access, this is generally considered to be a standard.  Once the object arrives at the cloud, it is decrypted, and stored.  Is there an option to encrypt it prior to storing?  Do you want to worry about encryption before you upload the file for cloud storage or do you prefer that the cloud storage service  automatically do it for you? These are options, understand your cloud storage solution and make your decisions based on desired levels of security.

3. Access Controls: Authentication and identity management is more important than ever.  And, it is not really all that different.  What level of enforcement of password strength and change frequency does the service provider invoke? What is the recovery methodology for password and account name?  How are passwords delivered to users upon a change?  What about logs and the ability to audit access?  This is not all that different from how you secure your internal systems and data, and it works the same way, if you use strong passwords, changed frequently, with typical IT security processes, you will protect that element of access.

4. Service Level Agreements (SLA): What kind of service commitment is your provider willing to offer you? Are they going to be up 99.9% of the time or 99.99% of the time? And how does that difference impact your ability to conduct your business? What is the backup strategy that your cloud provider uses, and does it include alternative site replication?  Do they use one at all, or is backup something you have to provide for?  Is there any SLA associated with backup, archive, or preservation of data.  If your account becomes inactive (say you don't pay your bill), do they keep your data?  For how long?  Once again, realize that there are different services, with different features, at different costs, and you get what you pay for.

5. Trusted Service Provider: The trusted service provider is a critical link.  Unlike your in-house IT department, you are now putting your trust in a 3rd party.  You must feel confident that they will do what they say they will do.  Can they demonstrate that the safeguards they claim are indeed delivered?  What is their record?  Do you have a successful business relationship with them already, and if not, do you know of others who do?  Remember, are they in business to serve business, or is it simply another service that they offer, focused first on cost per gigabyte, versus service and support.  This is where many IT service providers have made their living, providing world class service and support, along with effective, efficient, low cost infrastructure.

So what has really changed? More than anything it is a heightened awareness of the need for security.  Security is delivered on a sliding scale, and the result you achieve is based on well understood principles.

Of equal interest are the legal implications associated with hosting your data at service providers.  You can extend the notion of security to access by various government entities, depending on where your data is hosted.  While the focus of this post has been associated with preventing unauthorized access, this is yet another consideration associated with where your data is stored. 

Sure, cloud storage requires that you add some additional and/or different considerations to your evaluation and monitoring process, like understanding your service provider versus your own IT department.  The IT Service Providers know and understand the importance of this. Most will step up and ensure that they deliver excellent service to you and become your long term Trusted Partners. Those that don't will fall by the wayside.

Many Cloud Computing pundits have predicted that the early adopters will be largely comprised of small and mid-sized businesses.

Some new data from Forrester suggests that won't be the case.  

According to Forrester's Frank E. Gillett in Conventional Wisdom Is Wrong About Cloud IaaS, one out of four large companies plan to use an external provider soon, or have already employed one.  Furthermore, we learn that 33 per cent of large companies plan to use a service provider for Infrastructure-as-a-Service, while just 24 per cent want to run their own "private" clouds.

Industry commentators are surprised by Forrester's findings.

Naysayer Bernard Golden writes that what he found most surprising was that more than one-third of both large and medium enterprise companies are ready to put enterprise applications into production in external cloud providers. He also notes "interest in production app placement in external clouds is nearly as high as for test/dev."

Mary Hayes Weier joins the chorus as well, and says that the Forrester report proves that "conventional wisdom is wrong."

The question is why.  Why are large companies challenging convention and turning to external service providers?

It's the economics.  We see that cloud computing brings a disruptive and liberating pricing model to infrastructure. Why sink capital costs into infrastructure when you don't have to?
The cloud brings game-changing pricing and service capabilities to disaster recovery, fault tolerance, geographic redundancy, and other solutions that until now have been prohibitively expensive to everyone except for the largest organizations in the world. And now even these large organizations are not about to look the other way. They are looking at ways to optimize their IT and improve their cash flow.  Why spend money up front when you can pay as you play?

Steve and I have been saying this all along, and now we're glad to see the evidence has reached the mainstream.

On this blog, we've talked about GE and Bechtel - and their enterprise level cloud computing plans. We've emphasized that it is the IT service providers who have the core competencies - the people and the ITIL processes to deliver the promise of cloud computing to the enterprise.  Enterprise hosting companies are already positioned to deliver cloud computing services to the enterprise market, and before long we think dedicated hosters who succeed in fully automating the purchase, provisioning and support of the physical/hardware layer (some would say, the commodity layer) will move up market in a Christensensian assault on the enterprise market.

As described by Nick Carr in The Big Switch, IT hosting is in the process of transforming to electric-utility-like status.  We will think of IT hosters as providing IT infrastructure as a service, and we will want to "plug in" to these providers as we plug in to the power grid today. 

For some time now, we have been making the case that Cloud Storage is a disruptive innovation, a game changer in its category.

By stating this, we are of course employing  Clayton Christensen's now famous theories on disruptive innovation (refer to his books: The Innovator's Dilemma, The Innovator's Solution, and Seeing What's Next)  His theory of disruptive innovation goes something like this:

Most companies innovate faster than their customers' requirements, and end up creating products and services that are too expensive, too elaborate, and even too inconvenient for use. They focus on "sustaining technologies" to  improve the performance of established products along dimensions of performance that their customers have historically valued. By doing this, they neglect "disruptive technologies," thus opening the market to low-end competitors, which compete on cost, convenience, and ease-of-use.  Over time these "disruptors" eat into the markets of the established players. The result?  According to Christensen, the established firms are "disrupted" by the upstarts, whose product and services are invariably cheaper, faster, and easier to use.  

As I read the countless opinions and articles on cloud computing and cloud storage, I keep coming across the mistaken belief that successful cloud services offerings will be delivered by very large companies, that have the capex and the scale to deliver large scale computing services.  I have blogged on two occasions about this issue (Microsoft: Losing Margins to the Cloud? and Trusted Service Provider ≠ "Big" Service Provider).

The common assumption is that the traditional IT vendors will be disrupted by cloud computing offerings from Amazon and Google.  The truth is, Amazon and Google may eventually impact this market, but they will not be the first to disrupt traditional IT service providers.Already we see hosting providers like Rackspace and SoftLayer provide their own suite of differentiated cloud offerings.



And what's more, companies like Mezeo can enable a relatively small IT service provider to quickly and efficiently deliver a cloud storage solution to their customers.  As such, many hosting companies, with significant expertise in delivering computing infrastructure capabilities, can quickly deploy and manage a service that is equal to or even better than currently available public storage clouds like S3 from Amazon, for example.

Our observation is that service providers around the globe are resolutely focused on deploying cloud computing services themselves, and they are in no way ceding this new growth market opportunity to the very few but large, significant providers. 

Cloud interoperability will also drive the delivery of many cloud-computing solutions.  We expect that you will see single name space solutions spanning multiple locations of a service provider, and, ultimately, the capability to interoperate clouds from different providers.  None of these capabilities suggest that we will see only a very few service providers.

Christensen defines the characteristics of disruptive technology as follows (Innovator's Dilemma, p. 234):

-    they are simpler, cheaper, and lower performing
-    they generally promise lower margins, not higher profits
-    leading firms' most profitable customers generally can't use and don't want them
-    they are first commercialized in emerging or insignificant markets

If you read what Microsoft's Ray Ozzie says about how Cloud Computing diminishes margins for Microsoft, or read about Larry Ellison's about-face on Oracle's entry into Cloud Computing, we see that Christensen's model predicts the evolution of our market - the same patterns apply; history it seems, will repeat itself.

Solutions like Mezeo enable the IT service provider community to deliver public cloud computing and Public Cloud Storage solutions, today.  No one told either technology or IT service providers that they should not do this.  The cloud is coming to you, and it is brought to you by the IT service provider community.  

The current issue of InfoStor contains an article by Jeff Boles, "Use Cases Make the Case for Cloud Storage," in which he provides some key examples illustrating why we at CloudStorageStrategy.com believe certain key principles will shape the future of the cloud storage industry and cloud computing more generally.

Specifically, the article highlights three things:

• Cloud storage will bring disruptive change to several large market niches.
• Cloud storage adoption will be evolutionary, starting with archival and long-term storage.
• Relationships, account management and custom solutions are still important in selling solutions to the business market.
  

Disruptive change. As we have discussed before, cloud storage brings game-changing pricing and service capabilities that will disrupt entire industries. Specific industries such as disaster recovery, data protection and recovery, records management, and other data services will be changed, as pricing and service delivery models are completely overturned. For the most part, customers and service providers will find the new pricing models liberating, as services that have been affordable to a few businesses will become relevant to a much larger segment of the market. Jeff provides examples of new services being launched by Iron Mountain. Whether or not Iron Mountain is successful in navigating the disruption that cloud storage will surely bring to its records management, data protection and recovery business, these moves by Iron Mountain are at least reflective of a corporate recognition that disruptive change is underway. Many new entrants are pursuing this market with innovative solutions and aggressive business models. The future of this market segment, and many other segments such as disaster recovery, will be interesting to observe.

Evolutionary change. Cloud storage will change the storage market, but it will change different segments of the storage market on different timescales. Jeff has it right in saying that file archiving and other forms of long-term storage will be the use cases that drive adoption of cloud storage solutions in the early going. At the other end of the spectrum, database storage will be among the last types of storage to move to the cloud. In setting expectations about the adoption rate of cloud storage, we need to keep in mind that use cases will drive the adoption rate. Legacy storage systems will remain in use, and will continue to be upgraded, for a long time for many use cases. Success for cloud storage solutions isn't so much about displacing all legacy storage systems; it is more about improving price/performance of certain existing use cases, as well as creating new use cases.

Solution selling. The "cloud" moniker tends to be associated with Web-based and credit card sales models. "Cloud" is independent of sales model. In the case of storage, cloud storage implies Web services API access and Web-scale multi-tenant architecture. While there are consumer-oriented solutions for cloud storage, the commercial market will embrace cloud storage. As Jeff points out, business customers demand security, portability, performance, availability and access - all within the context of their business applications and their IT governance policies. One-size-fits-all cloud storage solutions, such as Amazon S3, will certainly continue to have their place in the world, but cloud storage proponents need to recognize that an equally large market opportunity exists for those who can integrate high-impact business solutions on a cloud storage platform. Ultimately we will see a large number of mature service provider solutions that are customizable for mid-tier and enterprise customers, and configurable for the small business market. These service providers will spearhead the disruptive and evolutionary change as they drive adoption of cloud storage solutions.

Here's an interesting interview with our friend Nick Carr in which he once again highlights important long-term strategic issues for enterprise IT.  I've pulled out some of his quotes for quick review:

- "..there is a basic conflict of interest that IT departments face as they think about the cloud, and that's true, of course, of any kind of internal department that faces the prospect of being displaced by an outside provider."

- "... if one of your competitors moves to more of a cloud operation and saves a lot of money, then whether your IT department likes it or not, you're going to have a competitive necessity to move in that same direction."

- "...People who are so plugged into social networks at home or at school, they're going to want those same capabilities at work. It's really driven by the user because it upsets the traditional IT apple cart. IT departments and staffers will generally drag their feet and then will play catch-up."

- "...That doesn't mean IT shops won't continue to exist and have important functions -- they might have even have some more important functions -- but it does mean that their traditional roles are going to change and they're going to have to get used to, I think, having a lot fewer people and probably having considerably lower budgets."

So what's a CIO to do? 

I wrote about how Bechtel's CIO embraced the Cloud. The CIO's IT infrastructure goals should be twofold: (1) the relentless pursuit of efficiency (i.e., operating costs for a given level of computing capacity) and (2) the search for reliability, flexibility and scalability in support of mission-critical data and applications.  Cloud computing and cloud storage solutions don't address these issues in all IT cases today, but the relevance of these progressive solutions applies to a greater and greater percentage of the IT pie with each passing month.  In other words, keep an open mind about the cloud.

Cloud computing won't go away, but Carr is right to say it's a long-term trend.  The hosting industry, broadly defined, has recently completed its first decade of life, and is now early in its second decade.  As one of the pioneers of the hosting industry, I agree with Carr's forecast that the Cloud Computing trend still has another 15 years or so to run full course.  But the opportunities for enterprise IT are very real now, and will continue to become more real - and more strategic - over time.

whurley talks about this as well in his blog post: "IT needs to get over its cloud denial, or management will get over IT."

Well said.

One more point of note. The NY Times reports: "In February, Salesforce reported a 34 percent rise in fourth-quarter revenue, to $290 million, and net income of $14 million, up from $7.4 million in the same period last year. The sales and earnings figures beat analysts' expectations."

Looks like the down economy is accelerating SaaS adoption.

Coming on the heels of the Cisco-BMC announcement, the news of an IBM/Sun merger and the simultaneous announcement of Sun’s Open Cloud Platform are not mutually exclusive events.  They’re all part of the ongoing race to capture the Enterprise Cloud. The elephants are dancing.  

The announcement continues the pattern of rapid marketplace adoption of Cloud Computing in general and that includes Web services API based storage access that began with Amazon and continued with Rackspace.  This space is really heating up.  More and more players are stepping up to challenge Amazon.

This tells us that IT hosting providers are running to get in the cloud storage and cloud computing game sooner rather than later. Having come from that space, I can tell you that this issue is top of mind in the hosting space. Amazon, Google, Microsoft and now Sun want to be the cloud for every customer. 

The hosting industry is ideally positioned to deliver cloud computing and cloud storage solutions to their existing and future customers.  Cloud Computing (see previous post on Cisco and BMC) is a service offering for which both hardware and software technology is rapidly developing.  Management tools are also coming online from many vendors.  The ability for the IT hosting industry to effectively compete will quickly be enabled by a new market segment, “Cloud Infrastructure Providers”.  When you combine the availability of solutions with the effective service oriented relationships that IT hosters have enjoyed with their customers, a significant opportunity is emerging.

The first act in Cloud Computing is underway.  Another character has entered the stage and received a round of applause.  They lend additional credence, and a call for more standardization, and less vendor lock in.  The key to the cloud will be ease of use, reliability, security, and of course, cost. 

With so much negative news on business and our economy, I find that Cloud Computing, and its new technologies and opportunities are very exciting.  This is how it has always felt in our industry, which we can change for the better, innovate like no one else, and create significant businesses and new opportunities.

Let’s dig a little deeper into the real story here: Sun’s open source vision and stated commitment to interoperability and its extension into Cloud Computing:

Ideally, users of cloud computing would be able to move their applications among a variety of standardized providers who offer open-source interfaces to common services. Today, most clouds are proprietary, and even where the components offered are open source, cloud operators cultivate significant lock-in through their underlying services, such as storage and databases.

Jonathan Schwartz explains on his blog:

This morning, Dave Douglas, the SVP of our Cloud Computing business, announced we’re building the Sun Cloud, atop open source platforms - from ZFS and Crossbow, to MySQL and Glassfish. With more than 4,000 developers hard at work on these enabling elements, and a twenty year history of network scale software innovation, we’re very comfortable with our technology lead. By building on open source, we’re also able to radically reduce our costs by avoiding proprietary storage and networking products.

Second, we announced the API’s and file formats for Sun’s Cloud will all be open, delivered under a Creative Commons License. That means developers can freely stitch our and their cloud services into mass market products, without fear of lock-in or litigation from the emerging proprietary cloud vendors.

Third, unlike our peers, we also announced our cloud will be available for deployment behind corporate firewalls - that we’ll commercialize our public cloud by instantiating it in private datacenters for those customers who can’t, due to regulation, security or business constraints, use a public cloud. We recognize that workloads subject to fiduciary duty or regulatory scrutiny won’t move to public clouds - if you can’t move to the cloud, we’ll move the cloud to you.

So where does IBM come in? 

If you read about Schwartz’s three strategic imperatives, you learn they are as follows:

1. Technology Adoption
2. Commercial Innovation
3. Efficiently Connecting 1. and 2.

Notice too, that Schwartz is brutally honest about Sun’s challenges with imperative #3:

With Sun’s current products, we could be selling to twice the number of customers we currently serve - our products appeal to an audience far greater than our customer base. But we’re limited by our size - our sales and partner force has a tenth the resources of our biggest peers.

So let’s review, Sun’s doing well on 1. and 2. with widespread adoption of “free” products like MySQL and Open Solaris, but lacks the sales and service firepower to execute on 3..

Did anyone say “IBM Global Services”?

And now, with the Cloud being touted as the future of IT, we see why a merger between IBM and Sun becomes a value creating proposition for both concerns.  Sun becomes the “low-cost” open-source provider, while IBM gets to feed its highly profitable (and nowadays hungry) professional services division.

Which leaves Microsoft’s Azure out in the cold. Small wonder that Bill Gates used to say that IBM, not Google, was Microsoft’s real competitor.

On a more technical level, the rationale behind this merger can be seen more clearly if you take a look at Troy Angrignon’s wonderful Cloud Computing Ecosystem Map v1.0. Scroll down and zoom into the map; the merger seems to make more sense at this level. When you combine IBM and Sun, the resulting “tessellation” of competencies is very impressive.

For more on this story, take a look at these columns by James Urquhart, Reuven Cohen, and Matt Asay.

As an end note, I’d like to state that this merger does not mean the race is over.

Far from it.

What we’re seeing is a new strategy developing across the IT industry. Hosting  companies, MSPs, and SaaS providers will still have to provide clouds of their own to compete against Amazon, Microsoft and Google. There has always been room for a number of providers for hardware, software and services, competing on price, value, and support. No one player need dominate the cloud computing space. Choice and competition always drives value and innovation.

And that’s where we’d like to help.