Cloud revolution starting from the bottom up
The concept of cloud computing dates back to the 1960s, when computer scientist John McCarthy suggested that ‘computation may someday be organised as a public utility’. It has come a long way since then and, as Peter Reid discusses, it’s sky-high growth started from the ground up.
There has been much focus recently on cloud computing and its adoption (or not) by enterprise. Although most cloud vendors are understandably keeping their cards close to the chest, by all reports the enterprise uptake has been slow.
Having first-hand experience on both sides of the fence the problem, as I see it, is multi-faceted.
Enterprises are notoriously bad at costing internal IT infrastructure. For 20 years the IT department has sat comfortably in the corner of the office occasionally ducking in and out of that off-limits humming room with no windows, speaking a secret coded language of CAT-5 cables and firewalls. They have long enjoyed the place of an unavoidable cost of doing business, as a supplier of basic employee needs, thereby flying under the radar of accountability and business cost alignment.
When a cloud computing alternative is investigated, who is called upon to do the cost comparison? The IT Infrastructure department! With vested interests in their own survival they are unlikely to cost in the financial benefits realised by their own demise. The costs benefits of cloud alternatives to an enterprise are often understated, and don’t include the material benefits of reduced personnel, electricity, bandwidth, and expensive floor space.
Moving to the cloud takes effort, human effort, and that’s expensive both in raw hourly rates and opportunity cost that could be spent building new features into your products to keep ahead of your existing competition. The human effort required to move workloads to the cloud costs more than the immediate savings.
The Cloud has not been around long enough to outlive the incumbent hardware cycle. Hardware is purchased and depreciated on a three to four year capital expenditure and depreciation cycle. The sunk costs in existing hardware deployments need to be ridden out before new alternatives are considered.
Large enterprises already enjoy reasonable economies of scale in existing computing and virtualisation infrastructure. While they certainly can’t match the pricing of a cloud vendor, the price they currently pay is not different enough to motivate immediate corrective action.
The perceived security of having data physically located within the four walls of the organisation is a difficult mindset to overcome. "I like to be able to touch my data" is an emotional reaction akin to keeping money under the mattress that doesn’t stand up to technical debate, but is deeply rooted in our human nature and our attitude to apparent physical security.
All of these problems are temporary and will inevitably make their way through the process of organisational change. The movement of existing on-premise computing workloads to cheaper processing alternatives is economically inevitable. So with cautious uptake of cloud computing by enterprise, is all this cloud talk really just hype? Is there really a cloud revolution or is it just the Internet in new clothes? Halving an IT budget and moving unpredictable capital expenditure to predictable operating expenditure is certainly great for business, but it’s not that great a leap forward in human evolution.
Cloud is an enabling technology, a familiar tool wielded by a new set of hands for which traditional computing was financially out of reach. It’s here that utility computing is being leveraged to bring new opportunities and leaps forward in innovation. Unencumbered by legacy infrastructure or attitudes the new cloud-enabled industry is stealing away time and market share on the discounted cloud infrastructure deployed waiting for enterprise to arrive.
There is certainly a "Cloud Revolution" underway, and like all great revolutions it is starting from the bottom up, as demonstrated by the following examples:
Cloud Revolution – The New Cottage Industry
In a small office in the back of a house in Melbourne is a business taking on the big players in their own backyard. Running a photo library and acting as an intermediary between a carefully chosen group of photographers and a select genre of magazines and publications.
A new photo shoot has just been uploaded from Hungary to the hosting site and a notification email has been sent. The shoot is first quality controlled, categorised and submitted for key wording using one of the new "mechanical turk" cloud services that provide an electronic portal into large, on demand, pools of human labour.
The business of photo syndication is perfectly suited to an Internet only shop front where communication, marketing and product delivery are all electronic. Where reputation is based on service level and quality of product, success can be achieved by targeting and excelling at a very narrow vertical market.
The monthly outgoings are less than $AU150 including, hosting, CRM, campaign management, marketing, invoicing, accounting and laptop. With such low overheads it doesn’t take many sales to turn a profit. All you need is an eye for good photographers, a supply of good photo shoots and a contact list of regular customers with a need for your niche.
This is a window into the frontline of the new Software as a Service, "Pay As You Go" enabled cottage industry. Appearing to all intents as a large professional operation, leveraging the very same tools for operation, but provisioned at a smaller scale.
Unhindered by technological barriers to entry, cottage industries are finding a new resurgence on a level playing field with their much larger competitors. These new kids on the industrial block are unconcerned about size and don’t need internal economies of scale to be profitable.
Cloud Revolution – The Late Night Scientist
It’s late at night in January and an email just arrived that has someone very excited. A medical student has won an auction, but this is no eBay auction, it’s an Amazon EC2 instant auction. She has been preparing for this moment for over a year and will make or break her post-doctoral research paper.
She is continuing the valuable work done by her predecessors in the field of on Parkinson’s research and its relationship to dopamine levels in the brain. Previous studies were painstakingly conducted by carefully tracking, monitoring and documenting the lives of hundreds of thousands of patients presenting with dopamine affecting afflictions such as methamphetamine addictions over the course of 10-15 years.
Our scientist is hoping to show a relationship to other causes of dopamine depletion and to do it she’s has been scouring the huge catalogue of free and paid for databases from the likes of the WHO and Science Direct available in the Cloud. Bringing together datasets as wide as meteorology, geography, drug addiction, depression and death rates she has amassed 20Tb of data that needs to be processed to find correlations. Trial runs on small subsets have shown that it will take around 30,000 hours for one CPU to get through the full set. She can’t afford to wait the 3 years to run on her own machine, and limited by a $5,000 grant she can’t buy the hardware needed to do it herself. Instead she puts in a bid for 5000 Amazon EC2 Spot instances at 4c/hour.
Humming in the darkness under a football field sized roof in Ashburn, Virginia are thousands of computers running Amazon.com, Instagram, Reddit, Quora and Foursquare. But now it is late in the evening, many shoppers and users are asleep, post-Christmas sales are over and the GFC have all conspired to bring Internet traffic to a record low. One by one computers are being freed up into a pool until there are 5000 available and the deal is struck. Six hours and $1200 later and she has her answer.
This is an example of the new paradigm of data-intensive scientific discovery and it’s happening right now. Effectively time-shifting 16 years of research into six hours of processing by utilising data and computing power that already exists. While many organisations are battling with the concept of how to secure their data in the cloud, others have seen the opportunity and make their data freely available or as a chargeable service.
There are many problems that don’t need to be solved now, or even today. In fact some problems have remained unsolved for years but may now tackled using enormous amounts of otherwise idle computing capacity at prices previously unheard of to scientists. This new tool of human evolution will be used to map the neurons in the brain, solve the riddle of Parkinson’s disease, chip away at the list of cancers and discover unexpected relationships and correlations across massive datasets of medical information. And it’s all available to anyone with a hunch or a hypothesis they want to test.
Cloud Revolution – The Blind Entrepreneur
Profitable since the first quarter, 375 million page views per month, $4 million in annual revenue, 75 employees and $30 million in venture funding. Certainly sounds like a successful business, and it is.
I Can Has Cheezburger has leveraged the initial success of that hit web site by launching hundreds of other similar but slightly different sites based on the original. Many of these sites fail to attract traffic and are shut down within weeks, but every now and then one works, like "Fail Blog" or "Totally looks like". With many copy cat sites launching web sites daily, chasing the latest "meme" and clipping the ticket on advertising for every one of your page views there’s plenty of motivation to continue.
Traditional innovation business models involve coming up with a great idea, getting seed capital, driving the business for a year only to watch it fail and leave the inventor bankrupt for his troubles. CEO Ben Hu is a new breed of trial-and-error innovator powered by the "scale fast" and "fail fast" business model enabled by the Cloud. By constantly trying out new variants of sites and seeing what works, and more importantly what doesn’t, he is tightening up and lowering the cost of the innovation cycle.
Could a cringe-worthy blog on cat pictures really change the world? Quite possibly, yes. Mr Hu is disappointed with the way newspapers have been presenting news online and is using all the lessons learnt in publishing cat pictures along with his new $30M of seed capital to reinvent the world of online journalism. He will no doubt try many new ways to present news, most will fail, but eventually something is going to stick and we could then be looking at the next Rupert Murdoch.
We know from Richard Dawkins "Blind Watchmaker" that many small incremental changes combined with a process of selection will eventually turn an amoeba to a human. When applied to the Internet and powered by the pay as you go model of the Cloud, the rate of change can be dialled up to 11 and the consequence of failure is near zero. The result will be revolutionary and highly effective ways of presenting information over the Internet for the benefit of humanity, and especially Mr Hu.
Peter Reid is a development consultant for Kloud Solutions. He applies appropriate technologies to provide cost effective IT solutions to real world problems for his clients. he specialises in the finance industry and focussed on high quality, scalable, secure and fault tolerant systems. He has a keen interest in finance, economics, green technology and the limitless opportunity of an Internet powered by cloud computing.”
Paul Strassmann
December 19, 2011 at 11:33 pm
The importance of the Cloud Marketplace
It seems to me that this article could use further elaboration with facts. Here is something on cloud computing that could be of interest: http://pstrassmann.blogspot.com/2011/12/cloud-marketplace.html