A quick observation on cloud economics

I just finished reading about a panel on cloud economics and the enterprise. One quote in particular stood out:

“I’m not sure there are any unit-cost advantages that are sustainable among large enterprises”

A few years ago some friends of mine had a startup publishing medical journals online. They started off by getting two fractional DS3 lines from MCI and Sprint to their office building. In the basement were a few racks of servers, storage arrays and it was off to the races. Today if someone came up with a plan of that nature, people would look at them funny and say “get a few racks from a colo provider.”  In another few years, I think the phrase is going to change to “get the compute and storage in the cloud.” The cost argument assumes today’s practice on tomorrows infrastructure. Next-generation business logic jobsets are going to be written for cloud frameworks, services and primitives, which should be more aligned with cost structures that make cloud computing more efficient per unit cycle of compute or unit bit of storage.



3 Responses to A quick observation on cloud economics

  1. Director of Chump says:

    The quote that you cite is a bit interesting, because Joe (from AT&T) is simply channeling a common phrase that the AT&T CEO and CTO have been saying for over a year: reducing unit-cost.

    Also, if you look at what cloud providers are bringing to the table, you can see which ones are on top of their game. The traditional “cloud” services of providing a server instance is great for transitioning 1 to 1 a server in a datacenter to one in a cloud infrastructure. At best, that functionality can serve to reduce a customers datacenter footprint, opex, etc. However, things need to go far beyond simply just providing a small/medium/large server instance. Google appears to be the most visionary in this space providing just an API and not having the user worry about the back-end scaling concerns.

    One would think that with AT&T’s penetration into so many of the larger enterprises, why haven’t they gone out and attempted to indoctrinate customers with cloud migration. Not only eliminating customer data centers but also attempting to educate them how to write applications within the cloud. I know they can do it, because they did similar functions in the past when they convinced (and educated) customers to migrate from private ATM/FR links to use MPLS L3VPNs in the late 90s early 2000s. Perhaps they simply lack the vision or talent in the software & systems department.

    • Enterprises are tricky. They are full of legacy apps that won’t magically transition to PaaS. And their internal IT isn’t very visible to the outside world. In other words, the enterprise cloud transition will take a long time and most people won’t know that it’s happening.

      That being said, one should be careful about underestimating cloud service providers focused on the enterprise market. (And the dark horse impact of enterprises on the PaaS landscape.)

  2. […] just wanted to share a comment that I recently posted to Vijay Gill’s blog, regarding cloud […]

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