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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. 

The Parallels Summit has been very successful for Mezeo, with excellent booth traffic, a number of leads and we still have this afternoon to go. Our business development and partner discussions have also been productive.

Why blog about this? Because this is representative of two secular trends in the hosting industry. First, the industry is maturing, the business issues are more compelling and the opportunities and the vendors are more serious and engaged. Second, the interest in the cloud and cloud storage is at an all time high. It’s really that simple and that visible.

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.

A lot has been written about the reluctance of many to use the cloud for their mission critical applications, and in particular, the enterprise.  While this may be a popular topic from the perspective of many, the Cloud is most certainly seeing a significant increase in adoption as more and more companies build their SaaS offerings on platforms from Amazon, Google, Force.com and Microsoft.

Platform as a service (PaaS) is defined in Wikipedia as "the delivery of a computing platform and solution stack as a service. It facilitates deployment of applications without the cost and complexity of buying and managing the underlying hardware and software layers, providing all of the facilities required to support the complete life cycle of building and delivering web applications and services entirely available from the Internet--with no software downloads or installation for developers, IT managers or end-users. It's also known as cloudware."

In general, PaaS offerings include workflow facilities for application design, application development, testing, deployment and hosting as well as application services such as team collaboration, web service integration and marshalling, database integration, security, scalability, storage, persistence, state management, application versioning, application instrumentation and developer community facilitation. These services are provisioned as an integrated solution over the web.

We just saw another Cloud validation as three established ISVs announced offerings on platfoms from PaaS providers.  Both BMC Software and CA announced their intent to offer apps built on Force.com next year. Quest Software also announced the launch of its first set of Software as a Service (SaaS) Windows management solutions on Microsoft Azure.

Note also the following examples of SaaS services built on AWS, Google AppEngine and Force.com.  This "explosion of entrepreneurship"  further the case that platform-as-a-service is rapidly gaining acceptance in the market.



What we are witnessing is a boom in platform-based businesses, made possible by the cloud model: pay-per-use, instant scalability, and the elimination of up-front capex costs.

We have built a free Cloud Storage Toolkit for Service Providers to help them answer the question: “Should we enter the Cloud Storage marketspace?”

The toolkit includes a tutorial and a spreadsheet - both of which are accessible immediately when you sign up for our Cloud Storage Strategy newsletter.

THE TUTORIAL is a 15 page document which shows you how to use the Cloud Storage: A Business Model for Service Providers spreadsheet. It explains each of the 15 variables which make up the model, step-by-step.

[15-variable spreadsheet model]

THE SPREADSHEET is a customizable spreadsheet which takes in your input and is made up of three distinct parts: Inputs, Results, and Graphs.

You will input your individualized business model cost drivers which will in turn calculate your revenue generators.

The business model also calculates and graphs your gross margin, cumulative cash flows, and plots your monthly recurring revenue against your monthly gross margin.

Register for the  Cloud Storage Strategy newsletter and get instant access to Cloud Storage: A Business Model for Service Providers >>

The announcement that Salesforce is integrating directly with cloud-storage Box.net is the tip of the iceberg when it comes to the future of the cloud:

Techcrunch explains what Box.net is thinking:

CEO Aaron Levie says that this is the first step in Box.net's plan to give businesses a secure way to share their files across multiple services on the web. He says that many of the cloud services geared toward the enterprise don't work well together -- oftentimes you'll have to reupload the same content to multiple sites to share or edit it. Box.net wants to help unify these services by serving as the central hub for your uploaded files, which you can then access from these other web-based services. Levie hints that we'll be seeing more integrations with other services in the near future.

What we are witnessing is the future of enterprise IT infrastructure. We have been talking about programmatic access through RESTful APIs for some time now.  This move by Saleforce is an evolutionary step in how enterprise IT will manage its IT infrastructure - it will be a cross-cloud platform, with applications and open access to the storage cloud of your choice.

Security is not an issue, and the future is about cross-cloud collaboration.

Phil Wainewright says that Box.net wants to be the "Switzerland of Data" - he's right and wrong.  Cloud Storage, provided by the various service providers are going to be the "switzerland of data storage."  Vendor lock-in is going by the wayside.

ReadWrite is spot on when they say that "you can start to see how platforms will evolve into service networks - where enterprise users may subscribe and get access to applications that they pay for on a per use basis."

The biggest threat then, is to traditional software vendors, and applications like Sharepoint.  We will see heated debates on this very topic in the days and weeks ahead.

The phrase “razor sharp focus” is a tired cliché in our field, but you have to hand it to Google. They have just announced a “two-click data migration tool which allows employees to easily copy existing data from Exchange or Outlook into Google Apps.”

By building a tool to make this migration a “point-and-click” experience, they are hastening the defection rate for businesses looking for an alternative to Microsoft’s office suite. What’s more, three service providers - NuVox, Netfirms and IKANO - have already begun offering this tool to their customer base.

Google Apps Sync, as the migration tool is called, has already been put to use at enterprises like Genentech and Avago. Here’s some compelling Google propaganda:

It’s a case-study in business model disruption. The cost? One-sixth the price of Microsoft.

Of course we’re still in the “early days” and the jury is still out. Microsoft will surely counter with Azure, but you can see why Ray Ozzie is worried.

For Google, on the other hand, the state of cloud computing is promising. They claim around 1.75 million companies are running Google Apps. The enterprise, as Gray noted earlier, is ready for Cloud Computing. And why is this?  We’ve mentioned the economics before, but here is Google’s take on the benefits of Cloud Computing.

In a recent interview, Sajai Krishnan, CEO of Parascale, made some interesting observations about the needs of the cloud storage marketplace and how the offerings from Parascale met them.

Krishnan gives us his perspective of the cloud storage market and current opportunities in that space, primarily helping service providers build their own cloud storage offering to retain customers who might otherwise look to Amazon S3.

We welcome competition in this space.

While we agree with his assessment of the market, there are four claims that deserve a fact check:

CLAIM #1: ".. in terms of a cloud storage software solution, "pretty much" we are the only game in town"

That depends on how you define the phrase "pretty much." At Mezeo, we have focused on the service provider market from day one. And unlike Parascale, our software is in production with hosting providers - exhibit A: Softlayer.  Watch Softlayer CEO Lance Crosby discuss why he chose Mezeo >>

But don't take our word alone. Here's Simon Robinson, Research Director at the 451 Group:

Unlike the myriad other companies tackling this fragmented and nascent market, Mezeo is focusing its efforts on delivering a platform that enables service providers to deploy cloud storage services to their own customers. The company, which was created a year ago, already has engagements with several managed hosting service providers...

As it comes out of the gate with its first raft of cloud storage services, Mezeo simultaneously stresses that it's not another cloud storage services company. This may sound disingenuous, but on closer examination it's clear that there's a big difference between what the likes of ParaScale and EMC Atmos are doing and what Mezeo is offering. Ultimately, Mezeo is pretty much agnostic as to the specific flavor of storage; it's differentiation is its ability to help service providers quickly deploy a range of feature-rich storage services, adding value where none exists today, and utilizing incumbent capabilities where they do exist. With so much of the interest in cloud computing focused on service providers, we think Mezeo has emerged at the right time with a novel platform.

Download the full report at www.mezeo.com

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CLAIM #2: "...yes we do S3-type or REST protocols..."

NOT. ParaScale has no REST-style APIs. In fact, it is unclear if ParaScale is using any APIs at all.

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CLAIM #3: Krishnan claims his focus is on service providers

Not quite! If we examine ParaScale's pricing model, and listen to what he says, it's the same old CAPEX. 

The traditional "Pay-upfront" model is not cloud-friendly, while a "pay-per-use" model is. The major benefit of cloud storage is the economics of "pay-per-use," as we have stressed on this blog earlier.

Pay-up-front or pay-for-capacity (versus  pay-per-use) completely defies the economics of "Cloud Storage" which is all about "pay for use." Asking providers to have a cost model that is not aligned with their revenue model brings into question ParaScale's focus on and understanding of the service provider market.

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CLAIM #4: Krishnan states that hosting providers will have to deploy cloud storage solutions to take on Amazon S3 and Google.

There is one point we agree on: hosting providers will indeed have to deploy cloud storage solutions to take on Amazon S3 and Google. 

We have been blogging about this from the very beginning. Good to see Krishnan getting on board.

Here's to the competition. As the saying goes, let's stick to "just the facts!"

>> UPDATED: see Fact Checking the Fact Check

From Tier1 Research:

NaviSite, a provider of managed hosting services to the enterprise and SMB market, is doing what many hosting companies are doing these days: getting into cloud computing. NaviSite is using Mezeo Software's Cloud Storage Platform software as part of its effort to build out cloud computing services.

Dan Golding, Vice President and Research Director at Tier1 Research, says  "Cloud storage has quickly emerged as the most popular of the new cloud services."

At Mezeo Software, we're pleased with the rapid adoption of our platform in the service provider market across three continents.  Our success is validating our strategy that there is a significant margin opportunity in cloud storage, and that service providers will want to provide their own storage services.  Our purpose-built platform allows service providers to:

•    Leverage their own storage infrastructure to create their own storage cloud offering
•    Extend existing service offerings and applications with Web service APIs
•    Support large and complex data sets and file formats
•    Scale to support a large customer base with stateless architecture
•    Deliver secure file storage with 256-bit AES encryption

The platform is a Linux based software solution designed for deployment within a service provider's own environment. It attaches to the provider's existing storage infrastructure through any mountable file system, letting providers customize their level of service. As a stateless architecture, the platform scales linearly to support a large customer base.

In essence, we help service providers reduce that all important "time to value."

This is exactly what Golding means when he says: "Partnering for such solutions, instead of building them yourself, can significantly strengthen the hosting provider's product set and reduce time-to-market."

Navisite echoes this sentiment.

"A major advantage of cloud storage for our customers is the ability to have immediate access to highly scalable storage capacity without upfront capital expense," says Denis Martin, Chief Technology Officer at Navisite. "With Mezeo, we can quickly provide our customers the flexibility to scale up or down based on their needs without designing for peak capacity."

A recent SmartMoney article tells us that Ray Ozzie, Microsoft's chief software architect, is concerned  that cloud services could undermine the company's margins over the long term:

"The margins on (online) services aren't what the margins on software are... It will increase our profits, it will increase our revenue, but you won't have the margin."

According to the article, Ozzie also said that there was probably room only for a few players in the cloud. Because of the need for costly, large scale data centers to process and store computing tasks, very few companies would be able to afford the investment necessary to get economies of scale.

Also, it seems very convenient to assert that their can only be a "few" cloud players who must be "huge" companies.  What this means (according to Microsoft) is that it will only be a Microsoft/Google world of "cloud" services. We beg to differ.  It is the IT Service Providers who already have the core competencies required to deliver on the promise of cloud computing.  And while the profit margins might not be in Microsoft's software, they are present in cloud storage. In the recent meetings on Cloud Storage at the SNIA Cloud Storage Technical Work Group, one of the specific topics was cloud interoperability, a discussion that assumes multiple clouds by multiple service providers.

Wait, there's more. A few weeks ago, Ozzie shared a few more thoughts on the cloud.  Courtesy of the Seattle Times:

On cloud computing:
"Right now the way I've been framing things is in essence we are moving to a world of three screens and a cloud. That's the most succinct way that I can describe it. For the user experience we will all commonly consume solutions immediate to us, whether it's in media, entertainment consumer or business, that will be delivered to us in something the size of a phone, something the size of a PC, and something the size of a TV. There will be solutions that weave those things together, brought together by cloud on the backend."

On how Microsoft Office will change to adapt to cloud computing:
"We have to repivot to think not 'Is this the specific device?' but 'How do you deliver these scenarios across these devices.' We are rethinking Office. We aren't conceptualizing Office as a PC product anymore. There are scenarios in the realm of productivity that are very, very appropriate for PC such as viewing a spreadsheet. When you are trying to share something, the Web is a much more appropriate concept in terms of how to share because that's how people are brought together. They aren't brought together on the PC; they are brought together on the Web.

"When we're in meetings like this or when you're in a conference room, you have your phone with you, you don't have laptop in front of you, you don't have a browser in front of you. You might use the camera and take a snapshot, you might activate the headset and record. ... Every device will be appliancelike so you'll go buy it, you'll log in with cloud-based identity and profile of what belongs on that device comes down to that device."

Looks like Microsoft is re-evaluating the cloud user experience >>