One hundred and fifty billion dollars! That’s $150,000,000,000 or €107,635,000,000 or ¥14,458,000,000,000. In any currency we are talking about a lot of money. According to some estimates this represents the total projected revenues for Cloud Computing by 2013. Don’t you wish you could capture just a small percentage of that total market? Just think, a 2% capture rate would yield $3,000,000,000 or €2,152,700,000 or ¥289,160,000,000… still a lot of money.
Well we may be on our way as we see the evolution of Amazon S3 and EC2, Google Apps, Microsoft Azure and IBM’s LotusLive Connections. Even though Larry Ellison has been quoted as stating Cloud Computing is “gibberish”, now Oracle has even entered the mix. How are we to make heads or tails out of all this? What is the breakdown of the Cloud from a business perspective and what is the evolution from where we are today.
It all starts with two basic descriptions, “private” and “public” Clouds. There is a very important distinction here in that the road to implementation will be markedly different in each area. How Information Technology evolves between now and 2013 has everything to do with these terms. Kind of scary but even the U.S. Government is involved as the National Institute of Standards and Technology has published their definitions and findings.
In the Private Cloud world, large enterprise businesses will be looking for ways to evolve their current IT environment. And like a wave similar to electronic miniaturization when microchip technology finally came of age, IT will be changed forever. Enterprises will be trying to figure out how to model their internal IT operations after the Web and web based applications. There are a few model companies today who have already done the math, understand the value proposition of working this way and are full steam ahead in implementation.
Bechtel is one such large enterprise. In an article entitled “Around the Clock, Around the World“, they talk about how they are changing the future by using virtualization infrastructure today, “Bechtel’s Information Systems and Technology group developed a “virtual company” of dedicated servers, firewalls, and software programs to enable massive transfers of engineering data…” As a result of this progressive approach to managing information using private cloud technology, “Bechtel’s intranet, combined with work-sharing software and advanced network security, is making it possible for far-flung team members to communicate and tap securely into linked databases, CAD models, and other tools.” Bechtel relies on technology from Citrix to achieve this state.
The second and possibly more controversial category is the Public Cloud. The companies given the most publicity in this area are those highlighted at the beginning of this blog. Amazon, Google, Microsoft and IBM have the most notoriety. However, companies like RackSpace are emerging as well. There is quite a bit of swirl around how these monoliths will shake out in terms of winning the space. The end goal for these companies is to produce utility based Information Technology. Some would say that this is the commoditization of services heretofore called the IT organization. The truth is that there will be a mix of virtualized data center infrastructure (IaaS) and application delivery platforms (PaaS) starting with non-mission critical workloads and services.
Within this “Public Cloud” category is a subset that currently services the Small and Medium Business segment. These are the companies who have seen the hype and latched onto the taxonomy. What were at one time “Hosting Service Providers” now look at themselves as Cloud Providers. And why not? They have very similar business goals as the Amazons and Googles of the world… namely, the portability of services from on-premise to off-premise using a time based subscription model. Most of these companies are part of the Microsoft eco-system driving revenue for themselves and for Microsoft through the Service Provider Licensing Program. Why is this important to those who would play in the Cloud space? Because there are over 5 Million SMBs in this target market worldwide with an average employee count of 100. In each of these SMBs, a percentage would be considered knowledge workers who require business productivity applications.
Nasstar, a “cloud provider” in Europe is taking advantage of this new ideology and technology approach. They boast subscriptions for SMBs in London and the surrounding area with a growing contingent of customers.
Now to round out the discussion. With a typical subscription rate of $50 per month for productivity apps in the SMB, the projected worldwide annual revenues for the Hosting Service Provider community could be $30,000,000,000 or €21,577,000,000 or ¥2,891,000,000,000. And that is a lot of money too!
Whether Private or Public, Large Monolithic or Hoster (for SMB) one thing is agreed upon by all who are in the market….namely, there is only one way to achieve the scale needed to capture these revenues….Virtualize!