Cloud computing is still more attractive to venture capitalists than it is to enterprise IT buyers, and that's unlikely to change in 2010. As IT buyers warm to the idea and implementation of cloud computing, 2010 is going to prove to be a very big year for cloud-computing M&A as big-fish vendors like VMWare, Microsoft, IBM, and Oracle round out their cloud product portfolios with little-fish innovators.
Computing (and M&A) heads for the cloud
Some, like Oracle CEO Larry Ellison, suggest that cloud computing is simply a fad, one that attempts to solve many of the same problems that SOA, EDI, etc. already attempted to fix.
Tell that to the buyers. Gartner expects the cloud-related SaaS market to top $8 billion in 2009, which suggests that real customers paying real money.
They may not be paying enough, however, to support the mushrooming cloud vendor marketplace. Not yet.
Industry insiders are predicting a shakeout as pre-recession venture funding runs out for many of the early cloud vendors, forcing them into the arms of buyers or bankruptcy courts.
This is the inevitable separation of wheat from chaff, and it's a very good thing for an industry that has been long on hype and short on delivery to date.
But don't confuse the hype with vaporware. And don't for a minute think that any of the big (or small) vendors has a complete offering yet. As IDC research director Dan Yachi posits:
Cloud computing is more than just buzz. It is here to stay and is expected to take increasing shares of total IT spending worldwide. From a VC perspective, the even better news is that cloud computing is still far from maturity. There are many technology gaps that are not yet filled, especially in the areas of cloud enablement, management, monitoring, and security. In particular, VCs can find investment opportunities in start-up companies that develop solutions for hybrid cloud, which is expected to experience increased demand over the coming years.
Cloud computing offers real advantages, and has attracted a significant array of pent-up demand. Start-up vendors like Cloudera, VMOps, Rightscale, and others are inundated with requests for pilot projects as enterprise IT dips some very big toes into the cloud-computing water.
Indeed, it is start-ups like these that will help bridge the gulf between cloud hype and cloud practice in 2010, as the big vendors round out their offerings with the start-ups' technology.
Who will be bought? Those that solve real-world IT problems, not simply those that offer enterprises the ability to build private clouds or give them an on-ramp to public clouds.
Take VMOps, for example. The company's product suite enables service providers and others to build out private clouds. Where it becomes particularly interesting, however, is in the details.
While it sounds great to build a private cloud within an enterprise, the reality is that its resources will be funded by a number of different groups. There's no such thing as a common pool of funding in big enterprises. Among other things, VMOps has management tools for handling billing/resource allocation within private cloud deployments.
This sort of real-world understanding makes its cloud tools much more practical and, hence, much more interesting than those from competing vendors that may solve the technical difficulty of building a cloud but overlook the practical problems of managing it on a day-to-day basis.
Or, as Appiro predicts for 2010, "The real innovation will be in the business of cloud computing, not the technology."
This is why 2010 will be the year when the big vendors buy up innovative start-ups, in terms of both technology and business acumen, that help to make cloud computing reality, not theory, as cloud computing leaves the labs and becomes accepted practice in forward-looking enterprises.
It's a trend that should make enterprise IT very happy...and venture capitalists even happier.
In the cloud, no one cares about your software license. That is one of the most liberating--and frustrating--things about cloud computing.
Depending on your perspective, it either opens up computing or closes it off. Customers don't seem to care one way or another, happily shoveling data into cloud services like Google, Facebook, and others without (yet) wondering what will happen when they want to leave.
Cloud computing may just be the Hotel California of technology.
Google Trader
(Credit: Google)I say this because even for companies, like Google, that articulate open-data policies, the cloud is still largely a one-way road into Web services, with closed data networks making it difficult to impossible to move data into competing services. Ever tried getting your Facebook data into, say, MySpace? Good luck with that. Social networks aren't very social with one other, as recently noted on the Autonomo.us mailing list.
For the freedom-inclined among us, this is cause for concern. For the capitalists, it's just like Software 1.0 all over again, with fat profits waiting to be had.
The great irony, of course, is that it's all built with open source.
In this cloud computing/Web 2.0 world, infrastructure needs to be cheap, flexible, and plentiful. Open source delivers all three.
Hence, we've seen companies like MySpace tripping all over themselves to open up parts of their platforms in order to make themselves more appealing to developers. As ReadWriteWeb wrote of Facebook back in 2007, however, such developer outreach has not opened up these Web platforms in the sense of providing useful off-ramps to services like Twitter, Digg, Facebook, etc. It has simply created more on-ramps.
Cue the nefarious Microsoft theme song.
Rather than wringing our hands over this, I think there's an opportunity to create amazing amounts of good (and wealth) in this open/closed Web. Frankly, the longer we're in this, the less it's going to matter whether the code is open or closed because, as Tim O'Reilly has been saying for years, data is the heart of the Web, and even open data isn't going to hurt a successful vendor's network effects.
Take Google Trader, an interesting new SMS application that helps people buy and sell goods through text messaging. As The Economist notes, however, one of Google Trader's most interesting applications is in helping to foster free markets in emerging economies:
Lastly there is Google Trader, a text-based system that matches buyers and sellers of agricultural produce and commodities. Sellers send a message to say where they are and what they have to offer, which will be available to potential buyers within 30km for seven days. Mr Makawa says his father used the service to look for a buyer for some pigs, which he sold to pay school fees. These services cost 110 shillings ($0.05) a time, the same as a standard text message, except for Google Trader, which costs double that. In their first five weeks the services received a total of more than 1m queries.
I'm not familiar with the economics of SMS, but I'm guessing that Google gets a cut of the messages its application generates. The more useful Google Trader becomes, the more SMS it generates, the more commissions Google collects.
For the entrepreneurs using Google's service, they could possibly care less whether Google Trader is open source, but Google might. Open the source (and the API to the service), and let a thousand add-on development projects bloom. The more useful and feature-rich the Trader application, the more SMS, the more...you get the picture.
Take me to Google, Earthling.
The key is to create an open Web platform, one into which a diverse array of mobile software services can tie. This is one reason Google is such an advocate for open source. Android and other projects bring more people to the Web, a Web that Google monetizes through proprietary services like AdWords.
The community is critical to building upon the platform, but the money is in control of the platform and provisioning of services therefrom.
Just ask Amazon.com. According to ZDNet, Amazon's Elastic Compute Cloud (EC2) service makes roughly $220 million per year. That's a lot of cash, and is a function of EC2 sitting at the heart of a growing developer community, one that builds upon Amazon's open APIs to the service.
Some companies like Cloudera and Red Hat will make piles of cash providing the infrastructure for this cloud-computing gold rush. But the biggest money of all will be those that can build platforms in the cloud, platforms that depend upon open source but which aren't open in the traditional open-source license sense of the word.
That traditional licensing world is dead. Open-source licensing has become an on-ramp to closed data services, hardly what its creators envisaged. In fact, proprietary cloud vendors are almost certainly going to become the biggest cheerleaders for open source, because it means more developers creating more on-ramps to the cloud.
Even if such providers create effective exits, it's unlikely that consumers and businesses will actively use them...
...just like in the Software 1.0 world.
Follow me on Twitter @mjasay.
As cloud computing edges its way into the enterprise, the open-source Apache Hadoop project may well prove to be the poster child of the movement. Hadoop effectively gives enterprises the power of Google or Yahoo Web indexing for free, or for the cost of a CloudEra subscription if you want to involve Hadoop's core developers in your rollout. Credit card giant Visa is an early corporate adopter of Hadoop, and points to a bright future for the open-source project.
I caught up with Visa's Joe Cunningham, head of the technology strategy and innovation group, to talk about the company's adoption of Hadoop.
Q: What got you interested in Hadoop initially and how long have you been using Hadoop?
Joe Cunningham: It's early days for us here at VISA for Hadoop. It's still very much classified as a research and development activity.
My role is the head of technology strategy and research and development for the company. Our task is to look outside the company for interesting technologies on the landscape and identify potential opportunities for those technologies to add value to either the VISA business of VISA technology and then bring them in and play with them in our lab research environment until they are ready for mainstream or commercial activity.
Hadoop is one of those technologies we've been looking at for about a year and we think it offers certain value as an augmentation to existing systems and capabilities VISA has.
Q: How do you use Hadoop at VISA? What made you think it could be the best solution for what you're trying to accomplish?
Cunningham: The most important thing to remember is VISA obviously has a heritage of offerings--very large, very scalable, very reliable, and very secure services to the payments industry. And we're continuously trying to innovate and make those services more valuable to our clients and ultimately to cardholders.
We have a data challenge we attempt to meet every day in terms of the number of transactions we handle and therefore we think there's an opportunity to look at the skills VISA already has in the data analytics space with the power of Hadoop to handle very, very, very large volumes of data.
To put that in context, we handle approximately 200 million transactions a day at VISA. That works out to be about 8,000 transactions a second, and with that comes huge volumes of data and Hadoop offers the potential to harness some of that along with some of our existing capabilities to extract more value from those transactions.
Q: Are there particular directions in which you'd like to see Hadoop evolve?
Cunningham: I think we're interested in looking at Hadoop and looking at its evolution over time. We're certainly interested in how the Hadoop community continues to operate in this open-source environment.
My specific interest is how can Hadoop evolve from the alpha beta environment in which it is today to the mainstream and how can we continue to integrate it as a mainstream technology with all the existing platforms we have here at VISA.
I'll give you two examples. The operations management space is very important to us: how we guarantee the reliability and security of our systems and how Hadoop can be merged or integrated into that environment. And secondly, and I guess this is a common question, but how can we enable SQL-like access to some of the data via the Hadoop file system or via the Hadoop engine?
Q: Given that it's still early days for Hadoop at Visa, it's interesting that you're speaking at the upcoming Hadoop World conference, along with JP Morgan Chase, China Mobile, and other Hadoop users that may be further along the adoption curve. What are you going to be talking about?
Cunningham: I plan to talk about the application stream, so I'll be taking a business-focused view of how we see Hadoop offering value to Visa. If there are tech junkies in the room, they are probably not going to be as interested in what I talk about.
I plan to spend a little bit of time showcasing Visa's technology today to set the scene. I will talk a little bit about our research and development function and how it works with the rest of Visa. Then I'll spend some time expanding on what I call our information products business.
The information products business for Visa offers services to our clients that are, obviously, information-based. So, some of the use cases where we see Hadoop potentially offering value in the future are in the areas of transaction analysis (particularly for risk products and the modeling of risk scenarios), fraud analysis (assisting our clients in potentially managing fraud more carefully), and in the loyalty space where Visa offers services on behalf of our clients to cardholders.
There's an opportunity for us to combine the power of Hadoop with data analytics capabilities that Visa has to augment those services and products on behalf of our clients.
In fact, that's an area that I'm hoping to learn a lot at the event. In some industries, Hadoop is very much mainstream but for some others, it's still emerging and I'm trying to understand whereabouts on that hockey stick or [Gartner] Hype Cycle Hadoop is, or whether Hadoop is already mainstream and it's just a matter of us catching up.
It's always good to gauge and plot that evolution. I think you need to get to these events and talk to other companies and key leaders in the community to really understand where we fit and what we should be doing next at Visa.
For those interested in attending Hadoop World in New York, the organizers are giving Open Road readers a 25 percent discount if you register by September 24.
The Internet largely abolishes scarcity in digital goods, shifting competitive advantage to those that can profit from abundance, not scarcity, like Red Hat, Google, and Facebook. For this reason, the more Hadoop grows as a community, the better the business opportunity for Cloudera, the start-up that distributes a commercial version of Hadoop.
Let me explain.
As CNET's Tom Krazit explains, "Hadoop is essentially an open-source version of the software Google uses to run its Web indexing servers." Yahoo also uses it internally for roughly the same reason, and has released its own open-source version of Hadoop to nudge adoption by other firms and to encourage contributions to the Hadoop project.
As Savio Rodrigues points out, however, Hadoop is already getting significant contributions from outside Yahoo. While initially dominated by Yahoo employees, Rodrigues points to recent data that indicates that 70 percent of Hadoop's community isn't employed by Yahoo.
That's great progress for Hadoop, and it's also great for Cloudera, the company that aims to make Hadoop relevant and useful for companies that lack the scale of a Google or Yahoo. Cloudera actively contributes to the Hadoop project, but perhaps its greatest contribution is in providing a commercial distribution of Hadoop.
The more contributors to Hadoop and the more complex it becomes, the greater the need for a Cloudera to provide a conservative, trusted distribution of Hadoop for enterprise customers. In other words, the greater the abundance of community around Hadoop, the more enterprises need scarcity: one throat to choke for their Hadoop deployments, not many.
As Yahoo and others contribute heavily to Hadoop, in short, they're also contributing to the likelihood of Cloudera's success.
Follow me on Twitter @mjasay.
I thought of just Tweeting a few of these news bits, but some deserve to be blogged. Alas! I lack the time today but....
- Joomla has surpassed 10,000,000 downloads. It's hard to describe just how impressive this is, and particularly given the fact that these have come in the past four years, and after a fractious fork from Mambo.
- The University of Southern Mississippi and the Department of Homeland Security's Science and Technology Directorate have launched the Homeland Open Security Technology (HOST) program, along with Open Source Software Institute (OSSI) and the U.S. Navy, to invest $1.5 million in the development of open-source technology.
- A new report from Gartner suggests 42 percent of CIOs surveyed chopped their IT budgets in the first quarter of the year. Less budget almost certainly will mean more open source.
- MindTouch (Disclosure: I am an advisor to MindTouch) CEO Aaron Fulkerson asks what's the big deal with Google's new Wave collaborative platform, given that wiki technology (like MindTouch's Dekiwiki) has been "waving" for years. Rafael Laguna, Open-XChange CEO, agrees. I still think Wave is cool.
- Speaking of Google, the company recently launched Page Speed, an open-source Firefox add-on that "web developers can use...to evaluate the performance of their web pages and to get suggestions on how to improve them. Google continues to demonstrate ever-stronger commitment to feeding the open-source community.
- Given that no one has yet settled on the optimal open-source code contribution model, MySQL developer Brian Aker discusses the Drizzle fork of MySQL and how he and the project team is handling third-party contributions to it. Very interesting insight into code contribution policies, copyright assignment, etc.
- Acer, meanwhile, is crippling its Android Netbooks by having them dual-boot Windows. I don't have anything against Windows (well, that's not really true...), but this seems like an exercise in futility. If customers want Windows, give it to them. If they want the lower price (and different experience) of Linux, give that to them. But don't give them both, or they'll likely revert to Windows out of sheer habit.
- Cloudera CEO Mike Olson indicates that Web applications are just the beginning for Hadoop. Indeed, Cloudera's easier-to-use commercial version of Hadoop is doing so well that Cloudera had to raise another $6 million just to keep up. Fortune, for one, thinks that Hadoop might be perfect to help power the electrical power grid.
- Back in Redmond, Microsoft is coming under increased pressure from the European Commission, reports The Register, which may force Microsoft to offer rival browsers with Windows. Microsoft probably feels pretty beleaguered, but Roy Schestowitz offers up some data that indicates it's spending its free time pressuring European groups to side with it. It doesn't seem to be working.
- Finally, Oracle executives didn't mince words in a town hall meeting with Sun employees, stipulating that some tough choices will be made about Sun technology and personnel. Indeed.
The industry's premier Web players--Google, Yahoo, Microsoft, and Facebook--agree on at least one thing: the future is cloud computing, and Hadoop is the engine to power the cloud.
Cloudera, the company set up to harness the power of Hadoop for the enterprise, on Monday released its first commercial product, the Cloudera Distribution for Hadoop.
The Web, and how enterprises use it, will never be the same.
If I sound a little giddy, it's because I am. I think that Cloudera's distribution for Hadoop is one of the biggest things to happen to the enterprise ever because it opens up the world's biggest processing engine, the Web, to the average enterprise. As Ashlee Vance wrote recently in The New York Times, "the analytical powers of Hadoop can benefit a whole new class of businesses," ranging from companies specializing in biotechnology to oil and gas.
Hadoop makes the Web digestible for the enterprise. Or, rather, it makes the enterprise digestible by the Web. It derived from Google's innovative work with MapReduce, the technology that enables Google's massive Linux server farm to run efficiently and at peak performance.
When Yahoo discovered what Google was doing with MapReduce and Hadoop, it put a massive development team on the project to remove any advantage Google might have had by its early adoption. The story, which you can watch on YouTube, is pretty amazing.
Doug Cutting, the brilliant engineer behind Hadoop but also the open-source Lucene search engine, didn't open-source Hadoop in order to win plaudits with open-source monastics. In talking with Cloudera, it's clear that Cutting's purpose was simply to show other developers how to do Hadoop right, and the currency of development is code, not talk. So he open-sourced it.
Millions of dollars of investment by Google and Yahoo later, you can download Hadoop for free, including Cloudera's enterprise distribution, which offers a complete system to handle the processing and storage of big data. It's like putting the Web at your company's beck and call.
Best of all, Cloudera, in quintessential open-source fashion, charges customers for support and other add-on value. The price of entry, therefore, is $0.00.
Cloudera just raised $5 million in a Series A funding round led by Accel Partners and including open-source luminary Marten Mickos. But the real money should come as enterprises put the Web to work using the Cloudera Distribution for Hadoop.
You can view a screencast on how to configure the distribution online. Or you can simply download the software and get started. That's the power of open source,and particularly the power of open-source Hadoop: harnessing the power of the Web, with Cloudera available to facilitate--and not slow down--the process.
Follow me on Twitter at mjasay.
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