Rhm2ktmi's List: Cloud - Economics

• 451 Research's Economics Unit has developed a Private Cloud Price Index and is in the process of seeking quotations from managed service providers and orchestration software vendors to include in the index calculation. Like the public Cloud Price Index, quotations and costs from providers will not be published, but will instead be used as part of an averaging calculation – we want to identify the average price of private cloud in today's market.

• Big Blue has recorded encouraging double-digit growth in cloud with over $7 billion total cloud revenues recorded for 2014.  

  IBM has posted yet another decline in revenues, reporting fourth-quarter results for 2014 of $24.1 billion, a 12% decrease on the same period last year.

• ERP giant SAP sees an increase in cloud sales in the last quarter of last year and has big ambitions to boost the growth with SAP expecting cloud subscriptions to exceed software license revenue by 2018

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• With a connector now available to extract AWS spend data, the company sees cloud expenditure as an important consideration in IT financial management. But it sees its software's true value in using this data in context, alongside other sources accessible via its standard IT code model, to drive efficiency, reduce cost and support transformation
• Founded in 2007, Apptio provides IT financial management software that collects and analyzes financial data on IT budget and expenditure, with typical use cases being to drive cost efficiencies, reduce costs and justify transformational changes.
• VMware's ITFM, developed through its Digital Fuel acquisition, provides similar capability, but is generally focused on VMware-led cloud deployments.
• VMware, ComSci (acquired by Upland Software) and Nicus Software are the company's biggest competitors.
• KEDARit is another IT financial management software package, and BMC and CA have offerings
• Cloudability and Cloudyn provide cost reporting and analytics.
• Cloud Cruiser provides similar financial management capability, generally focused on cloud platforms

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• To examine the 'real world' cost of cloud over time, 451 Research has created a Cloud Price Index. Like a consumer price index, our Cloud Price Index will be made up of a 'basket of goods,' but in our case it is a specification of the services required to operate a 'typical' Web server application. Changes in the CPI over time will reflect how changes and differences in pricing in the cloud industry are reflected in real-world use.
• To evaluate a market as broad as cloud based purely on the prices of virtual machines and storage alone is foolhardy. The typical cloud provider doesn't just offer these basic services – it offers a huge range of services, including database, CDN and SaaS.
• So how can we measure changes in cloud pricing so that we have a benchmark to measure pricing now, and in the future? After all, the term 'cloud' is so broad, virtual machines just don't cut it.
• By defining a standard specification of a typical application, it's possible to measure changes in the typical price of an application. The CPI and VPI should be used to provide a benchmark to aid planning and decision-making. Enterprises, service providers, vendors, investors and partners should use the CPI and VPI, alongside other data and experience, to assess cost and value of the IaaS, PaaS and SaaS they offer and consume.
• We have defined two detailed architectural specifications that provide the basis of two price indexes
• • The Cloud Price Index: A multi-service three-tier cloud application, consisting of Linux Virtual Machines, object storage, block storage, relational database, NoSQL database, load balancing, access control lists and snapshot backup in a resilient architecture.  
  • The Virtualization Price Index: A single-service three-tier Web application consisting of differently sized virtual machines in a nonresilient architecture.

• The CPI and VPI are the average (mean) total prices of the appropriate bundle of goods calculated per hour. Results are shown broken into: 

   
   
  • The average for the hyperscale providers – AWS, Microsoft Azure and Google Compute. 
  • The average for the cheapest X providers for which we currently have quotations.

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• To examine the 'real world' cost of cloud over time, 451 Research has created a Cloud Price Index. Like a consumer price index, our Cloud Price Index is made up of a basket of goods, but in our case it is a specification of the services required to operate a typical Web server application.
• The Cloud Price Index: A multi-service, three-tier cloud application consisting of Linux Virtual Machines, object storage, block storage, relational database, NoSQL database, load balancing, access control lists and snapshot backup in a resilient architecture.
• The Virtualization Price Index: A single-service three-tier Web application consisting of differently sized virtual machines in a nonresilient architecture.
• Few companies could provide the specification requirements of the CPI.

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• RBC’s formula condenses cloud services into one unit price based on “total spend per GB of RAM,” which includes storage, compute, memory, I/O and other base features. That makes it easier to compare cloud pricing across vendors. Per a research note from RBC analyst Jonathan Atkin this week, the second half of 2014 saw less price cutting than the first half — which included a round robin of competitive cuts from Google, Amazon and Microsoft in March.

• Cloudyn, a company that made its name assessing companies’ workloads running in Amazon Web Services, now has $4 million in fresh funding from Titanium Investments, with an additional contribution from RDSeed.

• Given the arms race among public cloud providers AWS, Google and Microsoft Azure, a tool that purports to offer objective measure of performance and cost is valuable. Azure is not on Cloudyn’s list of supported clouds yet but that’s coming in the fourth quarter, the company said.

   

• Big companies use commodity contracts to ensure predictable prices for oil, wheat, electricity, metal and other crucial supplies that keep their businesses going. These days, a crucial supply for many companies is cloud computing power — raising the question of whether that too can be bought and traded in the same way as oil or oranges.
• Earlier this year, a Raleigh, N.C.-based cloud company called 6Fusion signed a deal with the Chicago Mercantile Exchange, the world’s biggest market for commodities and derivatives contracts.
• According to 6Fusion spokesman Ryan Kraudel, the WAC is akin to a watt of power because it provides a standard measure of output, which in turn removes barriers to trading cloud computing as a commodity.
• Kraudel says a spot exchange for bilateral contracts should be running by the end of the year, and that a derivatives market will be up and running by late 2015 or 2016.
• According to James Mitchell, a former commodities trader at Morgan Stanley, any traded good, no matter how standard it may seem, will be subject to changing definitions
• Mitchell, whose company Cloud Options has advised 6Fusion, points out that oil comes in a variety of standards — Brent Blend, West Texas, etc — and that orange juice contracts include a variety of conditions that let traders adjust the final price based on size, seeds and so on.

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• 6fusion and Switch SUPERNAP will initially focus on enabling enterprise   customers and cloud providers with unique economic transparency on   infrastructure usage and cost efficiency.
• Enterprise IT organizations   will use 6fusion technology to better understand their total cost of IT   consumption and compare internal cost efficiency against best-of-breed   public cloud operators inside SUPERNAP.

• Cloud operators, on the other hand, will use 6fusion’s technology to   facilitate an “apples-to-apples” transaction language with enterprise   customers looking to leverage cloud resources. 

   
• Ultimately, Switch SUPERNAP and 6fusion will enable macro insight into   IT infrastructure usage trends and patterns critical to business   planning and operations

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• When it comes to judging the true cost of cloud computing, many companies try to break down the cost of running their own on-premises data center and compare that with the cost of using Amazon's or Microsoft's cloud
• While the 122-year-old General Electric also is "all-in on the cloud," says GE Cloud chief operating officer Chris Drumgoole, its approach is dramatically different from Airbnb's. Unlike Airbnb, the 300,000-employee GE wasn't born in the cloud and must find a way to migrate a massive legacy application infrastructure. GE operates 34 company-owned data centers and runs more than 9,000 applications. It's now consolidating to five data centers and painstakingly evaluating which applications it will rearchitect and move into a private or public cloud, and which ones it will phase out.
• But cloud ROI calculations are difficult, even for a company as steeped in analytics as GE.

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• Capgemini is using Gravitant's CloudMatrix decision engine and portal within its cloud broker service. The Gravitant software is being used by the State of Texas, which is also Capgemini's marquee reference customer, to access IT services as part of a large cloud broker deployment
• The future state of IT will be characterized by hybrid IT environments mixing cloud and non-cloud infrastructure, but it will be one in which the workload defines the destination. Customers need a path to meet this need as the role of enterprise IT becomes that of service provider to the business.
• Given that premise, Capgemini talks less about VMs and pricing and instead about workloads and best execution venue.
• Capgemini recognizes that its traditional customers are moving from legacy insource or outsource to a new style of procuring applications and IT services – and that it will be a multi-player world.
• The broker service that Capgemini offers extends this to enable customers to source from a range of what it calls its best-of-breed suppliers
• Within the Dynamic Services portfolio, Capgemini can simply sell clients the tools, independent of process, and implement them.
• The platform, managed by Capgemini, then offers cloud service brokering between its cloud providers. The Dynamic Services portfolio includes app and service stores as the delivery mechanism, a service orchestration engine, service integration, cloud services brokerage and service aggregation. Service orchestration is provided by the Cloud Orchestration Platform (COP), which has been under development by Capgemini and VMware.
• Alternatively, Capgemini can replace the office of the CIO, using consultants to set up the blueprint for processes.
• In cloud-brokered services, Capgemini delivers a portal-based service store (membership access) to offer services from a master catalog
• For the decision engine, Capgemini is using Gravitant's CloudMatrix (and Capgemini has become Gravitant's biggest customer as a result).
• IaaS, PaaS and SaaS have turned service delivery into a very different animal from the one traditional systems integrators grew up with.
• By contrast, the Indian-heritage players TCS, HCL, Infosys and Cognizant are averaging 12-16% year-on-year growth. All have staked out roles as chaperones on the journey to new-style IT services rather than becoming cloud operators per se. Firms operating their own shared infrastructure cloud services – such as IBM, HP, Fujitsu and VMware – have less appetite to participate in the rush to cloud brokering, unlike the systems integrators and consultants and other firms such as Dell.

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• In the same way that Bloomberg provides traders with data on market performance, CloudHarmony sees its future in offering cloud brokers independently assessed data on cloud providers through its APIs, enabling them to make the optimum choice of best execution venue (BEV) based on performance, cost and features in real time.
• CloudHarmony rebranded itself about six months ago, and provides access to data via a range of services:
• • CloudSquare is a provider directory, allowing consumers to compare different features and price points of a range of cloud services from a range of cloud firms.  
  • CloudScores offers access to raw benchmarking data, including datasets on CPU, IO, network and application performance using more than 200 tests. Benchmarking data is available for more than 150 VMs from a range of companies across a range geographical locations.  
  • CloudGrade is a grade derived from the raw benchmarking data that measures CPU performance relative to a bare-metal (non-virtualized) baseline. The grade can be embedded in providers' websites.  
  • CloudReports provides access to reports based on the benchmarking tests performed. In the future, summarized versions will be free with a fee payable for full reports.  
  • CloudMatch will eventually offer tools to help consumers match requirements, including budget, to cloud vendors. Currently, it only allows consumers to check connectivity to cloud providers. 
   
   

    
• Cloud Spectator
• Krystallize
• CloudScreener.com, RISC Networks and Cloudamize offer cloud recommendation services
• RightScale and Enstratius could facilitate their clients' decisions via the inclusion of benchmarking data

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• Non-IT roadblocks continue to dominate the large- and midsize-enterprise journey to a cloud-ready infrastructure, with buy-in/resistance to change becoming the most common inhibitor in 2H 2013. Non-IT roadblocks are reported by 71% of enterprises, while IT-related roadblocks were common at only 19% of enterprises in 2H 2013. In addition, 18% of respondents experienced no roadblocks in reaching the next phase of cloud computing initiatives. There have been considerable changes in the composition of top non-IT roadblocks catalyzing the need for change management initiatives.
• Concerns over buy-in/resistance to change have ballooned to the top, replacing organization/budgetary inhibitors as a top non-IT roadblock, with citations increasing from 16% in 1H 2013 to 37% in 2H 2013. Organization/budget-related issues dropped to the fourth place, falling from 37% to 15% of respondents between the studies, consistent with more enterprises reporting the shift of cloud-specific budgets into core enterprise IT spending.

• Over the years we've spent a good amount of time testing and thinking about how to compare cloud services.
• Some services, like content delivery networks (CDN), managed DNS and object storage are relatively easy because they have few deployment options and similar features between providers.
• Comparing cloud compute or servers is a different story entirely. Because of the diverse deployment options and dissimilar features of different services, formulating relevant and fair comparisons is challenging to say the least.
• To do so, I'll present actual comparisons from testing we've done recently on Amazon EC2, DigitalOcean, Google Cloud Platform, Microsoft Azure and SoftLayer.
• compute instances from different services you are considering.
• Before comparing compute services, you should have an idea about the type of workloads you'd like to compare.
• For the web server workload, our focus was CPU, disk read and external network performance
• For the database server workload, our primary focus was CPU, disk read and write, memory and internal network performance.
• CPU cores-to-memory ratios are often where it is nearly impossible to match services exactly
• Once you've picked services and compute instances to compare, and workload to focus on - the next step is to choose benchmarks that are relevant to those workloads.

• The benchmarks we chose are SPEC CPU 2006 for CPU performance, fio for disk IO, STREAM for memory, and our own benchmarks (based on standard Linux tools) for internal and external network testing. More details about these benchmarks, and the runtime configurations we used are provided in the report.
• SPEC CPU 2006 is an industry standard benchmark for measuring CPU performance using 29 different CPU test workloads.

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• Nearly $40bn of SAP installed software will move to the cloud delivery model in the next two years, suggests research from IT services firm HCL Technologies. 

    

  A group of $1bn and above revenue companies plan to migrate 46% of their existing SAP on-premise environment to the cloud, according to the research. And they are doing so mainly to be more agile, not to save costs.

    
• “But I am not sure the SIs [systems integrators] are keeping up. Cloud is a different proposition. It is more about rapid deployment, less focused on configuration, and more about change management”.