Cloud Computing Evolution and Revolution

According to a post by Brian Finnerty in Network World, many analysts and ractitioners covering the ICT industry predict that 2010 will be the year of the cloud with the endowment of Salesforce.com reaching the $1 billion revenue mark, thus showing that organizations are accelerating adoption of the cloud (Finnerty 2010).

But as observed by Gartner in (Cearley, & Smith 2010, pp.3-4), cloud computing should not be viewed as an entirely new paradigm that is divorced from previous Internet and ICT innovations. Cloud computing today emerges from the synergistic intersection of the commoditization and standardization of the Internet as a global computing platform that was first envisioned by John Burdette Gage from Sun Microsystems in the phrase “The network is the computer”. The Web 2.0 combined several technologies that made the Internet an emerging enterprise ICT platform. On the server side, the widespread adoption of the Web services technology allowing easy publishing, access and integration of computing and infrastructure management services from diverse organizations was a determinant enabler. On the client side, Rich Internet Applications (RIAs) based on AJAX, Flash/Flex, or JavaFX programming languages permitted desktop-like applications within a browser, including local persistence for offline use, enriched graphics processing, and integration with local devices. Also, the massive development of broadband network access that boosted the “dot com” era enabled the actual processing of applications to take place on the next building or on the other side of the world without making much difference to the end-user. Without the technologies supporting RIA applications and broadband networking, cloud-based services such as Salesforce.com and Gmail would not have been possible. In addition, other advances such as hardware virtualization, multi-tenant architecture, parallelization engines and grid architecture were essential technologies favoring the emergence of cloud computing.

Putting them together brought a new style of computing and an industry phenomena that is driving market disruption and creating new opportunities for enterprises to exploit information technology. The discontinuity offered by cloud computing implies that the ability to deliver specialized services in ICT can be paired with the ability to deliver those services in an industrialized and pervasive way (Smith, Cearley et al. 2009, pp.3-8). The reality of this implication is that users of ICT-related services can now focus on what the services provide to them, rather than on how the services are implemented or hosted, similar to the way utility companies sell power to subscribers. The following illustration from Gartner shows the s-curve technology innovations map that led to the concept of cloud computing (Cearley & Smith 2010, p.4).

Illustration 3: Cloud Computing Evolution and Revolution (Graphic Courtesy of Gartner)

As such, cloud computing heralds the promises of an alternate delivery and acquisition model of ICT-related services that will change the way purchasers of ICT products and services contract with vendors, and the way those vendors deliver their offerings (Smith, Cearley et al. 2009, p.4). By shifting the ICT products and services procurement process from a license-based and on-premises buying model (which has dominated the ICT industry for so long) to a  service-contracting buying model, cloud computing offers a new game-changing alternative.

Cloud computing represents a new tipping point for the value of network computing. It is perceived in many ways as a broader metaphor for the Internet as it allows consumers and businesses to use remote applications from any computer plugged on the Internet without prior software installation. Its main promises are to deliver cost-effective computing efficiency, massive scalability, faster and easier software deployment. It is also associated with new programming models, new ICT infrastructures, and the enabling of new business models. A new generation of ICT services delivery —built on the advent of the Web 2.0, utility computing, virtualization, and automated provisioning breakthrough technologies—are considered by many ICT practitioners and analysts as disruptive innovations that will deeply transform the way the various actors of this industry do business on both sides of the fence—the established technology vendors, but also crucially, the technology users themselves.

In a memorandum of October 2005, Bill Gates set the tone in an allocution to Microsoft's top executives: “The next sea change is upon us” (Gates 2005), alerting the company that the rise of cloud computing is a serious threat to Microsoft's software business and that these revolutionary “services designed to scale to tens or hundreds of millions [of users] will dramatically change the nature and cost of solutions deliverable to enterprises or small businesses” (Gates 2005). In effect, Microsoft's dominance on the desktop market may fade in importance as people may no longer need to install software on their PC, but get an equivalent at a fraction of the price from online SaaS offerings like Google Apps.

Another prominent promise set forth by cloud computing is the economy of scale that can be achieved through the commoditizing of computing resources such as processor, memory and storage. A metaphor called utility computing—that can be interchangeably used for cloud computing—is compared to that of the industrialization of electricity power plants that sprung up throughout the US and Europe by the end of the 19th century, which provided cheap and plentiful electricity that submerged and shaped the world we live in today in just a few decades according to Nicholas Carr7, a well-known technology writer and blogger.

Looking at the metaphor of electricity is useful in understanding the technology needed to industrialize datacenters. It was only after the widespread deployment of the “rotary converter”, a device that transforms one kind of current into another, that different power plants and generators could be assembled into an electricity grid. Similarly, virtualization allows physical computing resources to be assembled into a computing grid platform. As mentioned previously, the term cloud computing is quite recent, but the technological components underpinning the concept have been around for years. For instance, distributed computing, cluster computing, grid computing, virtual machine technologies are not new. Each of these technological advances are distinct in some ways, even though there is a great deal of overlap between them. But what makes cloud computing different is the maturation of the Internet as a global ICT platform. A key catalyst for this innovation has been the commercial success of major Internet companies like Google, Amazon and Microsoft. It is Amazon, the online book retailer giant we know, who pioneered the first commercial utility computing offering called Amazon Web Services (AWS) in 2006. Since then, anybody with a credit card can rent a virtual machine on Amazon's vast datacenter facilities by the hour and run almost any kind of application on it. That is a paradigm shift.

Hype versus Reality

Hence, cloud computing has become an exceptionally hyped concept. Nowadays, computer and software makers are all exited about cloud computing that Gartner positioned at the Peak of Inflated Expectations on the Hype Cycle for Emerging Technologies in 2009.

In the report Hype Cycle Special Report for 2009, Gartner evaluates the maturity of 1,650 technologies and trends in 79 technology, topic and industry areas, which include cloud computing and green IT.

By looking at real benefits for those technologies, as opposed to hyped expectations, Gartner in (Fenn et al. 2009) sees a number of potentially transformational technologies happening in 2009 that will hit mainstream markets in less than five years, which include cloud computing and green IT, as the increase in high-density ICT equipment (server, storage and communication), the growing cost and scarcity of power, and the move toward a greener environment are requiring new technologies to meet the enterprise's growing needs. As shown in Gartner's Hype Cycle for Emerging Technologies in 200910, cloud computing is just at the tipping point of the Peak of Inflated Expectations curve, heading for the Trough of Disillusionment, meaning that, as time passes, impatience for meaningful and real value will begin to replace the original excitement about cloud computing.

In another report entitled Hype Cycle For cloud Computing, 2009, Gartner argues in (Smith, Kenney et al. 2009, p.4) that cloud computing is the latest superhyped concept in ICT, for which everyone has a perspective and an opinion, but the confusion is rampant and misconceptions abound, particularly with regard to cost cutting. This viewpoint is supported by another study conducted by Version One in June 2009, which found that 41% of senior ICT professionals actually don't know what cloud computing is and two-thirds of senior finance professionals are confused by the concept, highlighting the young nature of the technologies involved (Ebbrell 2009).

The Hype Cycle For cloud Computing, 2009 shows that many cloud computing technologies and concepts will see mainstream adoption in two to five years, with the exception of those that have been in use for some time, including grid computing, Web hosting, virtualization and SaaS offerings such as Salesforce.com for sales force automation that have reached the Slope of Enlightenment.

Nonetheless, an overwhelming number of cloud-related technology triggers are positioned at pre-peak. This is not so surprising according to (Smith, Kenney et al. 2009, pp.7-34) since many applications and technologies constitutive of the cloud computing phenomenon are new. Newer concepts, such as private cloud computing, elasticity, cloud-bursting and application platform-as-aservice (PaaS) are ramping up the Peak of Inflated Expectations in a myriad of innovative ways. Some other items will take five to ten years, including cloud-bursting and platform-as-a-service, for mainstream adoption to occur.

Also, in the same report, the Gartner Priority Matrix shows that some of the most impactful items include PaaS, virtualization, elasticity and private cloud computing. Companies that are conservative in their technology adoption (Type C organizations) may limit their focus to orange areas, whereas companies that are more aggressive technology adopters (Type A and Type B organizations) are most likely already using cloud computing technologies that will mature in less than two years, and may consider investing other cloud computing technologies and concepts first in yellow areas and second in gray areas.

Of particular interest to this study is the “Cloud Computing for the Enterprise” technology trigger that Phifer in (Smith, Kenney et al. 2009, pp.47-51) estimates will be adopted in between five to ten years, with a current penetration rate in the target audience of 1% to  5%14. The businessimpact is potentially significant to an enterprise, including reduced total cost of ownership (TCO), accelerated time-to-market and reduced costs for real estate, heating, ventilation and airconditioning (HVAC), as well as support personnel. Some enterprises already use some software-asa-service (SaaS) offerings like those from Salesforce.com. Fewer enterprises are using infrastructure-as-a-service (IaaS) offerings like storage as a service, and application platform-as-aservice (PaaS), which are frequently used on an ad-hoc departmental basis, without the knowledge or even consent of the ICT organization. Phifer also outlines a number of outstanding issues among which security, data ownership and reliability are of primary concern to enterprises reluctant to using cloud-based services. Today, only Type A enterprises willing to take on risk, will be willing to play in the cloud. However, even though these issues don't yet have adequate answers, cloud computing providers are rapidly addressing them; therefore, cloud computing should soon pose an acceptable risk for Type B enterprises.

The adoption of cloud-based services has been spotty until 2009, but will accelerate in 2010 as technologies and offerings of cloud computing mature. This trend should grow bold in the future, with small businesses and enterprises in developing nations taking great advantage of cloud-based services. Large enterprises will adopt the cloud at different paces, depending on their risk profiles.

These observations are consistent with another in-depth research held by the Burton Group in on the adoption of private cloud by enterprises, as this is on a different trajectory.

Market Forecast

The analyst firm IDC believes the depressed economic climate will drive more enterprises to consider and adopt cloud-based services. They predict that spending on cloud services will hit $US42 billion by 2012 (Maitland 2009). Similarly, IDC estimates in that the market of cloud-based services amounted to 5% of 2009's worldwide ICT spending, representing $17 billion. Following a double-digit growth of 25% a year, this market could reach $44 billion in 2013, representing 10% of ICT spending worldwide. In Europe, the analyst firm PAC, commissioned by the European Commission (EC), estimates in that the cloud based services market amounted to 4 billion euros in 2009, representing 1.5% of the total software and ICT consulting industry. This number could grow to 13% by 2015.

Illustration 4: Cloud Computing Market Forecast in Million € for the EU's 27 Member States (Graphic Courtesy of Syntec - ©PAC )

In France, the research firm Markess International estimated the total cloud computing and server hosting services market to represent over 2.3 billion euros in 2009, and expects a steady growth in the SaaS and IaaS segments, which seems to be even more in the today's scenario. :-)