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By Timothy Chou

hen someone asks you

what cloud computing
is, it may seem difficult
at first to explain it. But
by the time you finish
reading this, you should
be able to explain it to your Facebook friends. First
of all, everyone who shops on Amazon or searches
on Google or posts on Facebook is using the cloud.
These consumer applications are simple examples.

Volume 1, 2010: Issue 7

Network Cloud Services

What you may not have thought about is that every one of these consumer application cloud services uses network cloud services. In fact, the word
cloud comes from the fact that many years ago
those of us who built and sold client server applications, software and hardware used to draw a picture with the PC connected to a network and the
network connected to a server. Since none of us
actually understood how the network worked, we
drew a cloud and labeled it network and left it
at that. In those days companies built their own
networks, but today consumers and businesses use
network cloud services delivered by companies like
AT&T, Verizon, Masergy and Sprint.

Data Center
Cloud Services
Since the Network Cloud Service providers had to
build buildings that had high-quality
power and were physically

secure, it made sense for them to begin to offer

data center space for these emerging consumer
application cloud services. In the early days it made
more sense for Google to use Savvis to provide data
center space. Today, companies like Twitter, Facebook and OpenTable continue to rely on data center services provided by companies like Savvis, NTT,
Terremark, and others. Of course, anyone who becomes a student of the cost of computing comes
to realize that the cost of power is a big driver. As a
result, anyone who needs space for 100,000+ computers (e.g., Google, Amazon, Microsoft) is building
data centers located near low-cost and reliable
power.

Application
Cloud Services
So far weve focused on consumer application
cloud services, but for the past ten years the fastest-growing business applications have all been
delivered as cloud services. Since 1999, fifteen
companies that deliver business application cloud
services have become public companies. These fifteen include Concur (1999), Webex (2000), Kintera (2003), Salesforce.com (2004), RightNow
Technologies (2004), WebSideStory (2004),
Kenexa (2005), Taleo (2005), DealerTrack
(2005), Vocus (2005), Omniture (2006), Constant Contact (2007), SuccessFactors (2007), NetSuite (2007),
and OpenTable (2009).
Some of these companies have been acquisition targets. Webex was
acquired by Cisco in
March 2007 for $3.2B.
Blackbaud purchased
Kintera in 2008. Omniture acquired WebSideStory, and most
recently Omniture itself
was acquired by Adobe
in October 2009 for $1.8B.
An informal analysis of forty
of the Fortune 100 showed
only two companies that
did not have at least
one of these applications running. Of course
today, nearly all traditional application software companies like Oracle and JDA offer to manage
their applications as a service.

Volume 1, 2010: Issue 7

Platform Cloud Services

Compute & Storage

Cloud Services
The cover story in Business Week in November 2006
was titled "Jeff Bezos Risky Bet" [1]. The article focused on Bezos vision of transforming the Internet
retail giant into a cloud service provider. While he
may have known it would be a success, rumors
abound barely four years later as to how big the
business is. But its clear its been a tremendous success. Not only did Amazon's EC2 and S3 pioneer a
simple way to create, launch and terminate server
instances and storage objects, but also the transparency (and low price of less than $0.10 per hour)
open up numerous use cases. While pioneered by
Amazon, compute cloud services are now available from an ever-increasing number of players
including Microsoft, EMC, Terremark, Rackspace,
GoGrid, Joyent, Layered Technologies and many
many others.
Of course compute & storage services have been
used by high-growth, newly founded Web-based
companies. Examples include Gilt Groupe, which
auctions high-end fashions and in a few years grew
to a $300M business running all of its computers on
the Joyent compute and storage cloud services; or
Context Optional, which runs social media marketing campaigns on Facebook and hopes to grow
as fast. In a completely different application, Pathwork Diagnostics uses thousands of Amazon compute servers to run machine-learning algorithms for
a few months to produce better tumor diagnostics,
then turn the servers off. If you thought about doing
this the traditional way, the costs and capital outlay
would be prohibitive.
We are only at the beginning of whats possible.
In 2010, $3,000 will buy a single computer for more
than three years running in a high-quality data center 24x7, which is good. But $3,000 will also buy 1,000
computers for more than a day. No one has ever
had that capability before.

Volume 1, 2010: Issue 7

This brings us to the last group of cloud services.

Platform cloud services. Platform cloud services are
used by software developers to build new applications and by operations managers to manage their
application, compute and storage cloud services. Platform cloud servers for software developers
range from horizontal services like Microsofts Azure
or Herokus Ruby on Rails platform to the more vertical platforms like NetSuites SuiteCloud, Salesforces
force.com or even Facebooks platform. Horizontal
platforms offer a great deal of flexibility, but if you
know you want to leverage NetSuites schema to
build an MRP application, like Rootstock did, then
choosing a particular vertical app can significantly
speed the development and reduce the cost to
build new applications.
Platform cloud services also provide the operations
management specialists with a range of services.
This could include spam filtering from Postini all the
way to a new generation of software that could be
used to develop private compute & storage cloud
services. CAs 3Terra, cloud.com, Nimbula, and
Cloudera are just a few of the emerging new platform products.

A Next Wave
The last major wave of business computing was
known as client-server computing. It was driven by
a major shift in the economics of hardware and software and gave rise to many companies we consider today as the tech industry names like Intel,
Oracle, EMC and Microsoft. Names like CDC, Prime,
Data General and DEC have all but faded into the
past. This next wave of computing, cloud computing, is creating another major shift in the economics
of hardware and software. Who will we be talking
about ten years from now?

[1] Jeff Bezos' Risky Business, BusinessWeek November 13, 2006, http://bit.ly/8ZfR9k.