The virtuous cycle: The cloud drives innovation which drives the cloud

How long will it take the rest of us humans to catch up to what the cloud can do?

The reach of the cloud is unprecedented in technological innovation, save perhaps for Internet itself. Mobile users and the Internet of Things (IoT) rely upon the cloud for back-end functionality. Consumers use cloud-based services, from Amazon to Dropbox to Google to Microsoft, often without even realizing it. Enterprises use cloud-based applications like Saleforce.com, build applications to use cloud APIs, and are migrating their data centers into the cloud as well. Service providers, ranging from local telcos to international long-haul carriers, are seeing new business in providing direct cloud connectivity for enterprises, establishing and in retrofitting their networks with SDN and NFV to better accommodate cloud applications.

That’s only the beginning. We have entered an accelerating virtuous cycle: Today’s cloud applications and use-cases are spurring vendors and service providers to innovate. Those new innovations lower barriers and inspire more enterprises to use the cloud. The increased business sparks more innovation. The virtuous cycle is accelerating – with no end in sight, as established players and startups jump into this market.

Follow the Money

The best place to start when examining cloud innovation: The money trail.

According to Sean Hackett, Managing Director of 451 Research, “You should look at spending and adoption largely being driven by the enterprise. I think IT is exerting a little bit more control because the nature of the application and workload has changed a bit. Definitely the competitive landscape has changed with incumbent systems integrators and managed services providers looking to co-op the definition of cloud and move into the market. There is a change underway: If you follow the money and you look where enterprises are spending, they're definitely moving more revenue from on-premises to off-premises. Most of that money is really, from a cloud context, being navigated toward hosted private cloud which is a fairly rough definition of what I would think of as a traditional cloud environment.”

Dan Pitt, Executive Director of the Open Networking Foundation, also seesglobal telcos investing in private clouds. “They want to host enterprise services, starting with elastic cloud provisioning, to enable offload into their clouds.” He also sees investment in software-defined networks, where telcos “will start a new greenfield business with new technology to offer an enterprise-class cloud that's technically a little bit separate from their current network. And so that's how they're getting experience. They're starting small.”

Pitt also looks at data center web-scale operators: “They're investing in white-box and bare-metal solutions for servers we see in storage and now for networking in terms of switching and in terms of routing.”

Vendors too are investing, says Pitt, “Where are the vendors investing? Semi-proprietary switching and routing. Everyone is saying, oh, SDN is the big thing so I have to be on the bandwagon. I have to go to my customers and say, yes, I've got SDN solutions. But if you dig a little bit below the surface, you'll see there's still a lot of proprietary technology. Some of it is necessary because there's a lot of brownfield installations and their customers cannot change as rapidly as the technology might change. But they're starting to introduce some of the new technologies.

Pitt sees a lot of money in glass fibers and photonics. “There's been a lot of investment in packet optical integration. The carriers love it. The optical vendors are doing a great job with this. They're still using some of the legacy protocols through existing equipment, but they're also putting in new OpenFlow controls down in their control plane. And in a few cases they're taking it down to the optical element itself.”

Moving from building networks to thinking broadly about IT is another area of investment, said Chris Rezentes, the Asia/Pacific Regional Manager for Verizon. “The change from building network to new IT solutions means you still need network experts that know the network, but you need also those folks that have the IT experience to make things more efficient and reduce your cost and having the new ideas for revenues. That impacts where investment is going as well. At Verizon we're not seeing as much investment in global networks. We have the global network out there already. So you're seeing a shift away from that to more of the IT solutions and internal investment on that area.”

Rezentes continues, “Our experience when we've been meeting with those application providers, like the Microsofts and the Amazons, they were explaining that they're running into the same situation that we are. We have the experts that know our network and they have the folks that know their cloud applications.

Security is another investment area, says Rezentes, because of enterprise customer concerns. “You have a lot of customers asking, is the Internet safe? Because they haven't been hacked yet they're willing to go with public internet and no security or firewall. And when they're hit, then it's oh, wait, now we need to change our way of thinking. We're still a little bit in that phase, although there is more awareness on the security side. But companies need to be willing to invest. What to invest in?That may be the million-dollar question really.”

Enterprises want their IT partners to help drive business efficiencies, rather than emphasize network infrastructure, said Amit Sinha Roy, Vice President of Tata Communications, and that shift is also driving vendor investment. “”Enterprises want to push out the infrastructure as far as possible, as far as regulation and security allows and as far as the confidence they have in their service provider, be it the cloud or the network for a telco. The enterprise is facing the same issues, and more, of getting the people who can perhaps maintain and grow and drive that system, and even design and architect the solution. That's going to keep driving forward in terms of offloading and investing further into these relationships.”

The Cloud and the Pragmatic Enterprise

Why are enterprises so focused on the cloud? According to EvKontsevoy, Director of Product at Rackspace, it’s a trap. “Companies like Google and Amazon, because they have a lot of really, really smart computer science people, they come up with a way to do computing a lot cheaper. And enterprises looks at these companies and say, oh my God, I want to be like Google. I want to be spending only 20 percent of what I'm spending right now on all of my computing needs. And here's a cloud provider, they're promising me exactly that.”

Achievable? Yes in theory, but not in practice, says Kontsevoy. “What they're forgetting is that, yes, actually they might get some rough approximation to Google infrastructure, but they're not getting anywhere close to Google workforce. No one has developers like Google, and no one runs security like Google. Very few companies can get even close, but it's actually a combination of the two that gives you that famous Google efficiency.” Therefore, he says, “They're running the same legacy apps, they're employing the same people who are simply not building true cloudy, self-healing, self-discovering applications.”

Kontsevoyadvises keeping things simple: “If you want to be cloudy, you need to have cloudy people and you need to have cloudy infrastructure. Cloud infrastructure is not that hard, but cloudy people — that's actually what most companies do not have. Someone needs to tell enterprises they don't need to load balance, and they don't need to use complicated technologies. Just be pragmatic!”

Applications: Big Data, Analytics, and More

One enterprise benefit of being in the cloud is architecture and reach – the cloud is everywhere, the data center is not. Another is the shift of many expenses to OPEX from CAPEX, and in many cases, better fitting ongoing expenses to current demand, without needing to scale up data centers to handle peak demand. For many organizations, however, it’s not just about technology and infrastructure. High-quality of cloud-based applications are irresistible for line-of-business workers.

Angus Robertson, vice president at Hubble, talks about customers signing up to use his company’s Web-based financial analytics platform. “One of our customers, a sports promotion company, has many different Excel spreadsheets.Whenever management wanted to understand the revenue streams from an individualsports event, they got three different answers. It's such a simple question but they get three different answers! By integrating the different data from their ERP, from Google Analytics, and from DIRECTV on pay-per-view, at a glance they can see very visually, very clearly what any particular event or fight they got the revenue for.”

And that’s just one example, says Robertson: “In terms of big data and cloud, there's a lot of change happening here and it's having a pretty significant effect on some of the initial start-up companies out there and how they're re-defining how the overall enterprise is functioning.”

That’s exactly the case, says Dave Hawley, Global Product Manager for Hewlett-Packard, and that points to the challenges. “As an infrastructure provider and a services provider to enterprise customers, we're seeing people struggling with the challenges of implementing cloud, big data solutions, addressing security and mobility issues.”

“We're seeing the consolidation and convergence of infrastructure, storage, servers, networking, which is really fundamental to building the cloud. The edge of the storage network: Is it the memory, is it the local disk, is it the centralized disk farms, this can depend on the application running?” All of them, of course, Hawley said. “The same with the network; is it the virtual machine edge, accelerated NIC card, the chassis or cartridge server fabric or is it the top-of-rack or traditional network fabric? All of these things are driving a merger and consolidation of the different -- blurring of the different layers.”

Hawley continues, “Another area where we're seeing a drive to the cloud is with virtualization constructs of each of those elements. The cloud provides a orchestration layer to direct and move those resources around to where they're needed and apply them in the best possible uses. There’s also the software defined data center, so what are the programmatic interfaces that enable each one of those layers. “

The cloud can also streamline purchases of technology services, points out Mark Showalter, Senior Director Corporate Marketing at Infinera, which sells optical network transports to carriers. “One of our customers, Pacnet, which is now part of Telstra, has implemented our open transport switch for a transport-enabled SDN solution. And one of the things they ran into as we worked with them to develop this service is we were able to set up a Web interface so that a customer could look at their network points and decide, ‘I want to go between point A and point B and I need this amount of bandwidth.’ And then they're provided pricing on it and they can click and order the service. Sounds pretty cool; everybody's been talking about that forever.”

Thanks to the cloud, such an ordering system can now be designed, said Showalter. “We found in working with Pacnet on this was that it couldn't be that automated. We had to insert a step in the ordering process where the system said, ‘stop, you need purchasing's approval to make this happen.’ That’s one example of how it's possible for us to get all of our information technology to become cloud enabled and the software to become cloud enabled.”

Showalter cautions, “There's still a lot of process work that we have to do on the back end of these enterprises to really enable a transformation completely to the cloud. We’re seeing service providers today around the world struggling with how they can adopt this new model and move to rolling out cloud services. But they all see it needs to happen because they see all of their customers moving in that direction. The only question is how long will it take the rest of us humans to catch up to what the cloud can do.”

Hubble’s Robertson emphasized the ultimate beneficiary of the cloud: “It's all about empowering the end user. That end user, whether they're in an enterprise or just an individual, needs to be able to get what they need, when they need it, while feeling comfortable about their privacy, their security, the performance of the service.”

Common Definitions and Standards

Enterprises want cloud services and cloud connectivity – but it’s hard to shop for services if every vendor uses its own terminology, and if there are no interoperability standard to help define those services.

Two strong advocates for such standards are the MEF and OpenCloud Connect (OCC). The latter is the industry organization behind the OpenCloud Project, and the chair of that project, Sebastien Jobert, is also Director of Engineering with Iometrix. He explains, “This is the beginning of a cycle, of a migration cycle; certainly not the end of the cycle. Let’s focus on the migration of business-critical application to the cloud, maybe in a context that is not necessarily a greenfield, but where there are legacy applications running for larger enterprises.”

Jobert continues, “OpenCloud Connect has a similar ambition for cloud services, to define a common terminology and define basically trusted, carrier-grade cloud services that will help this migration of business-critical application to the cloudin a technology-agnostic manner. You can build your cloud service based on OpenStack, open source or other solution if you want — as long as we have a common understanding of the services and that the solution that you deliver as a cloud service provider meets the requirements and is fully understood by the enterprise that is buying the service, that's sufficient to help the enterprise migration.”

Jeff Schmitz, chairman of OpenCloud Connect, built on Jobert’s comments: “OCChas 28 companies, cloud service providers, service providers, traditional service providers, equipment manufacturers, and even test manufacturers like Spirent where I work,” he said, “where we’re emulating the traffic that goes over these services, both legitimate and malicious traffic.”