Amazon is a formidable force but one cloud does not fit all sizes, especially within the traditional enterprise IT marketplace. It's no longer about 'why cloud' but rather 'which cloud.' This was the premise put forth by Jason Mendenhall Executive Vice President of Cloud at Switch. Switch is the creator of the SuperNAP, an enormous colocation facility (see Wikibon's Largest Data Center Infographic) that also delivers networking services and a diverse cloud community. Switch hosts more than 500 vendors, and Jason has visibility on some of the most forward-thinking cloud activities in the world.
Switch is developing an advanced infrastructure, which Mendenhall claims is "the world's best data center." Switch is a unique technology ecosystem that hosts multiple clouds and in essence is a platform for Amazon's competitors to participate in the market at scale. It is a robust fiber optic network that started with Switch's acquisition of Enron's broadband peering arbitrage data center. The Switch facilities can expand to 2.2M square feet of space, and its strategy is to consolidate and aggregate multiple CSPs in one secure facility and enable multiple providers to compete and add unique value in the marketplace by leveraging scale and cross-pollinating selected cloud services.
The main cloud competition for virtually all of Switch's tenants, and traditional IT suppliers, is Amazon's AWS. Amazon is expected to generate roughly $3B in AWS sales in 2013. Its attack on traditional IT suppliers has been well-documented, and the posture AWS has taken toward incumbent infrastructure vendors has been extremely aggressive. Amazon is getting serious about enterprise IT-as-a-Service (ITaaS), and traditional IT infrastructure suppliers and competing cloud service providers are being forced to respond.
On the one hand this is great for customers, because Amazon has popularized the cloud concept and is creating more competition. On the other, Amazon is pressuring IT organizations to respond; and while some Wikibon practitioners are moving to Amazon, some say they don’t want to put all their data in AWS, because it’s often too expensive and too risky.
The conundrum for the IT industry at large is that Amazon is both incumbent and disruptor. It has the largest share of the public cloud marketplace but at the same time it is moving faster than competitors, cutting prices and adding function at lightning speed. Switch believes that, in aggregate, its tenants represent the second largest cloud installed base in the market; pitting it and its ecosystem head-to-head with AWS.
Where is Cloud Adoption Today?
According to Mendenhall, cloud today is at a point in its development similar to where VHS adoption was in the early days of video. From an enterprise standpoint, we're still in Cloud 1.0. While many companies are experimenting with cloud, and many have cloud strategies, other than those early Web 2.0 companies that start lives in the cloud, most IT organizations are really just getting started. They may have virtualized internal data centers and begun to develop orchestration and automated management capabilities to constitute so-called private clouds, but it's early days with respect to developing true hybrid cloud strategies that leverage a public cloud component.
Further, Mendenhall feels the most interesting angle on cloud will be the hybrid model, where internal and external clouds are combined. Mendenhall sees two models of cloud emerging: The operating model and the technology model with customers building new applications that enable new business models on cloud technologies. Model 1 is "my mess for less" according to Mendenhall, but the more interesting developments are based on strategies to leverage public cloud platforms and autoscaling apps like mobile for, for instance, Big Data and analytics. Innovating enterprises are looking beyond hosted virtualization to leverage cloud as a technology to transform the way applications are developed and deployed as an agile strategic weapon.
When asked for transformative examples, Mendenhall specifically cited a healthcare situation in its ecosystem. Healthcare is a highly compliant and security-intensive environment where service providers and customers created a small interchange of clouds with layered services unique to their needs. The customers created a platform with a multi-vendor approach within their own secure environment that could provide different levels of service and capabilities for back office apps, emerging Web apps, storage workloads at scale, etc. By leveraging different cloud technologies and applying them in tailored ways, these customers were able to bring cloud technology to an industry that generally is perceived as anti-cloud.
He also cited Big Data as a transformative area. Mendenhall talked about two models: Mining public sources like Google or Facebook or Twitter and mining internal data. Switch sees the latter as where much of the action is. Customers are challenged to build the high performance infrastructure to handle the needs of Big Data so what they're doing is building cloud infrastructure to do the analysis and bringing data back into their internal organization once the analysis is done. This type of data movement is often problematic for cloud infrastructure, but Switch's approach according to Mendenhall is advantageous because clouds are physically proximate with very high bandwidth infrastructure between installations.
The bottom line on adoption, according to Mendenhall, is it's a spectrum where a variety of use cases and workloads are emerging; which ties into the premise of the call which is one cloud size does not fit all needs.
Is Amazon Unstoppable?
As indicated, Amazon the Gorilla is also Amazon the disruptor. When asked if his tenants and other IT providers can compete, Mendenhall admitted the prominence of Amazon but argued that, while Amazon will grow and its service points will continue to evolve, the AWS platform is not for everyone. He cited several issues that customers should evaluate with Amazon AWS, or any cloud, including:
- The network, often overlooked when data has to be moved around;
- Hybrid model challenges, specifically with respect to control and management across diverse cloud platforms;
- Location of data placement and transparency of where the data resides;
- Performance, and,
His angle on Amazon is that while AWS has a place in the enterprise, there needs to be choice in the market. Multiple types of competitors to Amazon are emerging, both within Switch and elsewhere, that will give customers choice.
Wikibon practitioners who have evaluated these parameters have reported mixed results. On the one hand they indicate that as a single service, Amazon is the most comprehensive and complete. They believe Amazon security is often better than their own internal security. Its support model and ecosystem are evolving to provide layers of support that extend AWS' own offerings.
However, many practitioners remain concerned about Amazon's willingness to go "belly-to-belly" and partner by providing greater transparency and control for customers. While Amazon has begun to acknowledge private and hybrid cloud strategies, much of its marketing has been somewhat negative on these concepts.
The bottom line on the competitive landscape is it is in flux, but as with all markets one vendor will not sustain a solely dominant position indefinitely. Amazon is unmatched in certain areas such as ease of accessing (for example) it's SLAs and obtaining other information on its cloud. Competitors often cite better SLAs, but many don't even allow public access to SLAs.
Amazon on the other hand is dogmatic in certain ways and is often not willing to provide customized solutions. It is building up its ecosystem of partners and this capability will evolve over time. As such there are clearly openings for competitive cloud offerings. In general, however, Wikibon believes that on the issues of pricing, functional rollout, and business models, while firms like Switch are providing critical infrastructure, most so-called cloud service providers are still ramping up and learning how to compete with Amazon.
Having stated this, clear alternatives are emerging. VMware's recent cloud announcement and the momentum behind the OpenStack movement are two examples that have impressive potential. The Wikibon community expects that Open Source software initiatives like OpenStack - with HP's commitment for example - and extensions of VMware's private clouds into hybrid models will grow to provide formidable alternatives to AWS. In particular both OpenStack and the VMware/EMC strategies are building out extremely diverse and robust ecosystems that Wikibon believes will gain critical mass and represent strong alternatives to AWS. What's more, Microsoft Azure in particular has done an excellent job of building out infrastructure to provide a competitive alternative to AWS, and the Google threat always looms large.
How Should CIOs Approach Cloud Generally and Amazon Specifically?
For the past decade, CIOs have been under pressure to cut costs, do more with less, and improve efficiencies. Infrastructure management has increasingly become non-differentiated heavy lifting. Importantly, Amazon and other cloud service providers have been innovating, investing, and growing, not shrinking their budgets. This brings forth a critical question for CIOs. Specifically "how can I continue to innovate with technology while at the same time running my own infrastructure?" For certain mission-critical applications the answer has been the risks associated with outsourcing to the cloud warrant continued investments to 'control' infrastructure internally. However the fact remains that for many workloads, infrastructure management and running an infrastructure-as-a-service operation is a "race to zero." It's virtually impossible for the vast majority of IT organizations to continue to 'compete' with cloud service providers at scale.
As such the writing is on the wall. Wikibon believes that by 2018, 80% of IT organizations will be pursuing a strategy that involves a public or hybrid cloud approach with a major emphasis on outsourcing infrastructure provisioning and management. Key considerations include choosing which applications can go to the cloud, processes for getting data in and out of the cloud, true costs of rental versus owning infrastructure, leveraging cloud for Big Data analytics and transforming skill sets.
Action Item: Amazon has changed infrastructure management permanently. It's aggressive entrance into the enterprise is creating competition and momentum that will drive costs down and improve processes globally. While outsourcing to Amazon, lock, stock, and barrel may make sense for many mid-sized and smaller companies and Web startups, most CIOs should view AWS as another arrow in the quiver of IT options. CIOs must recognize that cloud should not be a strategy to simply lower CAPEX but rather a way to transform organizational processes to improve speed and further integrate IT into the business transparently. By making infrastructure 'invisible' and frictionless, CIOs can focus resources on creating competitive advantage with technology rather than chasing the tail of keeping the lights on.
Footnotes: Watch the full Peer Incite with Jason Mendenhall.