Cloud to suck money out of market, report says

[Ray]

Do you share this view or have a different perspective?

Cloud to suck money out of market, report says
http://news.cnet.com/8301-13505_3-10394966-16.html

"A recent survey suggests that CIOs are loosening the purse strings on
IT spending. IT vendors may want to hold off their celebrations,
though, because much of the spending appears to be headed for
deflationary forces like cloud computing, virtualization, and their
kissing cousin, open source.

An economic rebound never looked so dire."

-RD

[Ray Nugent]

Not sure how open source is going to suck $ out of the recovery. It's free. Cloud will ultimately save a CIO money but will likely ignite a wave of upgrades in storage, networking and possibly CPUs that have better virtualization support first. Finally there is going to be a huge demand for people skilled in Cloud and as you can tell from this list, there aren't a lot of them yet.

Ray (the original one)

---

From: Ray <ray.d...@gmail.com>
To: Cloud Computing <cloud-c...@googlegroups.com>
Sent: Wed, November 11, 2009 4:56:16 PM
Subject: [ Cloud Computing ] Cloud to suck money out of market, report says

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[Alejandro Espinoza]

Ray,

I think it is going to stimulate the market, but cloud computing won't be all that stimulates spending in IT. I think Windows 7 will also stimulate the market, and following Apple's strategies, I think they will also start hitting on Enterprises heavily so we will see stimulus from their part too.

I do disagree on the " cloud computing, virtualization, and their kissing cousin, open source." The most successful providers of cloud computing are closed source. Also the most successful virtualization are also cloused source.

But I do believe that Open source in its own, will stimulate the market too.

Regads,
Alex.

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[Rao Dronamraju]

How much money cloud is going to suck?...The projected market size by IDC is
around $42 billion by 2012. US economy is $12 trillion economy per year. So
it is not a whole lot of sucking. So I do not think $42 billion can have a
deflationary effect on such large economy.

Another interesting point in the article...Redhat stands to benefit from the
cloud?...why because of KVM?....They do not even have anything that even
comes close to what VMware, HP, IBM, MS and Citrix have interms of cloud
management and other value adds, which is lot more important than almost
FREE hypervisors. They are probably a bit better off than Eucalyptus and
Open Nebula.

[Ray Nugent]

Open source is an enabler. While it may displace some entrenched enterprise products over time it also opens up new possibilities and new architectures that then get funded.

Ray (the original one)

---

From: Alejandro Espinoza <aesp...@structum.com.mx>
To: cloud-c...@googlegroups.com
Sent: Wed, November 11, 2009 5:11:45 PM
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report says

[Khazret Sapenov]

On Wed, Nov 11, 2009 at 8:19 PM, Rao Dronamraju <rao.dro...@sbcglobal.net> wrote:

...

 Another interesting point in the article...Redhat stands to benefit from the
cloud?...why because of KVM?....They do not even have anything that even
comes close to what VMware, HP, IBM, MS and Citrix have interms of cloud
management and other value adds, which is lot more important than almost
FREE hypervisors. They are probably a bit better off than Eucalyptus and
Open Nebula.

Though they are well positioned on enterprise market due to considerable penetration rate.

I think RH's strategy is just to cut middlemen in some niches, by providing 'native' solution.

[Ray DePena]

Ray,

I think that's the point - it's free - hence $s aren't being spent on an OS

-RD

--
Ray DePeña
Director, Stealth Startups
Strategic Business Advisor

http://www.linkedin.com/in/raydepena
Sacramento, CA 95630
(916) 941-5558

[Alejandro Espinoza]

Ray,

Open Source does generate Money. Look at at Red Hat, Novell and Google. They are making money on it. Android is open source and people are buying a lot of them lately.And with all the new projects comming out of the Open source world, like Open Nebula and Xen, there is money in there too.

It might not be a huge stimulus compared to what cloud computing will, but it is significant.

Regards,
Alex.

On Wed, Nov 11, 2009 at 5:08 PM, Ray Nugent <rnu...@yahoo.com> wrote:

[Ray DePena]

The better point of comparison would probably be IT, not the entire US economy.

[Ray Nugent]

Stand alone virtualization products are a temporary state of affairs. The functions provided by a stand alone hypervisor are rapidly migrating to silicon and OS. A couple more product cycles and VMware my no longer be relevant.

Ray (the original one)

---

From: Khazret Sapenov <sap...@gmail.com>
To: cloud-c...@googlegroups.com
Sent: Wed, November 11, 2009 5:29:22 PM
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report says

--

[Jan Klincewicz]

<<Also the most successful virtualization are also closed source.>>

That would be (VMWare) in the commercial space, not in the Cloud (where Xen is dominant) ..  VMWare has a lot to fear from Cloud (and I mean REAL Cloud, ie. Public, not make-pretend cloud.)    I think this is where the author is going.  Public Cloud will likely use Open Source wherever possible which will put a dent in the revenues of vendors of competing products whose brands (and wining and dining saleseforces) mean something.

Where the author is wrong, is that this prediction is at least five years too early.

Cheers,
Jan

[Ray DePena]

Alex,

Don't disagree that in the traditional IT view Open Source generates money.  We'll see how well it translates in a cloud environment.

-RD

[Jan Klincewicz]

@original Ray

To be fair, VMware adds a TON of value to the hypervisor.  When you compare the suite of tools vs. XenServer or Hyper-V, it is a different league.  Where Citrix and Microsoft are trying their best to make hypervisors commodities, VMware is preaching the opposite.  I think they are wrong, essentially, but that is besides the point. If you run a highly virtualized Data Center you want your CIO to spring for the expensive stuff.

IFF True Cloud Computing (Public) takes off, I agree the relevancy of Bells-and Whistles Vsphere are toast.  On the other hand, if Data Centers masquerading as Clouds under the auspices of "PRIVATE", then business is as usual, and premium, proprietary feature-rich stuff like VMware and Windows 2008 will still rule.

Then again, as you give it a COUPLE more product cycles, that equates to about 10-15 years, and is probably pretty accurate.  

--
Cheers,
Jan

[Rao Dronamraju]

I won’t be surpised if Cisco, EMC/VMware will put together a quick comprehensive cloud management solution with their Vblock stuff. Because management will be the major differentiator for them vis a vis HP, IBM & MS and also the pre-configured packaged solutions will have to come with management otherwise it will be like a car without a steering wheel.

 

Btw, where does all this leave Dell?...the Lone Ranger….is Perot the Tonto?....

also what about Oracle/Sun?...With Larry saying cloud is water vapor…Sun is out of the clouds?...but no sun shine?...

 

---

[Ray Nugent]

The post seems to imply that spending appears headed to open source.

much of the spending appears to be headed for
deflationary forces like cloud computing, virtualization, and their
kissing cousin, open source.

---

From: Ray DePena <ray.d...@gmail.com>
To: cloud-c...@googlegroups.com
Sent: Wed, November 11, 2009 5:21:12 PM
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report says

[Ray Nugent]

Alex, yes, that was my point.

Ray

---

From: Alejandro Espinoza <aesp...@structum.com.mx>

To: cloud-c...@googlegroups.com
Sent: Wed, November 11, 2009 5:21:16 PM
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report says

[Ray Nugent]

One would hope. But then there are the vCloud Express clouds that seem to be growing. So it's not a done deal yet...

Ray

---

From: Jan Klincewicz <jan.kli...@gmail.com>
To: cloud-c...@googlegroups.com
Sent: Wed, November 11, 2009 5:48:19 PM
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report says

[Ray Nugent]

I would not rely on Cisco to add much value in the management arena. 20 years of CiscoWorks is proof enough that they have no clue how to do management in a data center, much less a cloud. EMC is pretty storage centric and VMware? Well, let's just say there's going to be some opportunity for innovation in that space.

Ray

---

From: Rao Dronamraju <rao.dro...@sbcglobal.net>
To: cloud-c...@googlegroups.com
Sent: Wed, November 11, 2009 6:16:00 PM
Subject: RE: [ Cloud Computing ] Cloud to suck money out of market, report says

[Ray Nugent]

Jan, relative to other hypervisors I would have to agree (although I always think of vSsphere as kind of primitive compared to other systems management software). I was thinking of somewhat shorter product life cycles so maybe I should recant my original prediction and restate it as one.

Ray

---

From: Jan Klincewicz <jan.kli...@gmail.com>

To: cloud-c...@googlegroups.com
Sent: Wed, November 11, 2009 5:58:17 PM

[Rao Dronamraju]

They are partnering with BMC. BMC can do a great job for them.

[mbryan]

This concept does not take into consideration that by moving your apps
into the cloud, you have to get access to it. This means you will have
to spend money for connectivity. The bigger the apps, the more your
end users have to go to the cloud, the bigger the pipes. CIO will have
to find the best way to connect their networks to the cloud,
especially if they have multiple locations.

Management was also mentioned in some of the responses; however, we
must consider security as being a key component. Imagine that you
spend huge dollars moving your apps to the cloud and only to
experience a security breach. I wouldn't want to be the CIO who has to
deal with the ramification from such a breach. They will have to spend
money for security...this spend depends on the importance of the data/
apps to the company's financial and operational success.

Personally, I like the idea of being able to get to any of my apps
from any device (PDA, mobile phone, netbook, etc.) any where in the
world; if I have a connection, especially if I don't have to worry
about updating my OS every year to the new version.

You may not spend the money in the traditional sense as you due today
in the IT world, but you will be spending the money.

Just my two cents on the subject.

On Nov 11, 7:56 pm, Ray <ray.dep...@gmail.com> wrote:
> Do you share this view or have a different perspective?
>

> Cloud to suck money out of market, report sayshttp://news.cnet.com/8301-13505_3-10394966-16.html

[Gene Zacckey]

Good points.

So, the fact that the money will continue to flow is inevitable. I guess
the question is where to place your money.

I always look at where the business needs to go and put my money there.
It's just like when VMWare was supposed to save so much money. We all knew
it wasn't so, but you did wind up with a more adaptable infrastructure. So,
in my case the touted savings were often offset by additional management,
training, conversion and other costs. But in the end I had a much more
reliable, scalable environment, and it did yield some cost avoidance. I see
similar things happening in the cloud. You'll need less of this and more of
that. Just make sure you're headed in the right direction to support your
company's growth. And make sure that your cloud provider has a lot of skin
in the game, since your butt is completely exposed when you make large,
expensive changes.

So, from my standpoint, virtualization and clouds are not necessarily
deflationary expenditures but a reassignment of financial and personnel
resources with the projected result being better service capabilities.

-----Original Message-----
From: mbryan [mailto:mbry...@gmail.com]
Sent: Wednesday, November 11, 2009 11:47 PM
To: Cloud Computing

[Rao Dronamraju]

"It's just like when VMWare was supposed to save so much money. We all knew
it wasn't so, but you did wind up with a more adaptable infrastructure. So,
in my case the touted savings were often offset by additional management,
training, conversion and other costs. But in the end I had a much more
reliable, scalable environment, and it did yield some cost avoidance."

I think you are talking about server consolidation in general, am i
right?...The average server consolidation that I have seen is around 10:1.
So if someone was buying 100 server and are now buying only 10, wouldn't you
save heck of a money?...Yes there will be costs in the short-run as you
mentioned. But considering that, once you have consolidated, the cost
savings are for long-time, whereas the costs are one time costs. So in the
long run you should benefit. Same will be with clouds. This in addition to
what you say "in the end I had a much more reliable, scalable environment"

[Nik Simpson]

Rao Dronamraju wrote:
> I won�t be surpised if Cisco, EMC/VMware will put together a quick

> comprehensive cloud management solution with their Vblock stuff. Because
> management will be the major differentiator for them vis a vis HP, IBM &
> MS and also the pre-configured packaged solutions will have to come with
> management otherwise it will be like a car without a steering wheel.
>
>

I very much doubt that anyone will use V-Blocks for large scale, public
cloud data centers, too expensive and sophisticated. It's a much better
fit for internal corporate clouds where price isn't so much of an issue
and things like support and maintenance are key.
>
> Btw, where does all this leave Dell?...the Lone Ranger�.is Perot the
> Tonto?....

I think Dell's is betting that cheap (both to buy and run) and cheerful
will rule the cloud data centers when it comes to servers. They have a
whole division dedicated to doing custom designs for large cloud
projects, where do you think those 100,000s of servers in Microsoft data
centers come from?


--
Nik Simpson

[Alan Ho]

VMWare + EMC is definitely going to be focused on the management layer. Look at what VMWare was before the EMC acquisition ? Now VMWare is the market leader in hypervisor management layer. With the launch of vCloud Express, VMWare wants to be defacto "multi-datacenter" management layer.

The question that I have for the group - who will become the defacto SaaS management layer ? (The answer is obvious -> Windows 8)

Regards,
Alan Ho

On Thu, Nov 12, 2009 at 11:55 AM, Nik Simpson <n...@alaweb.com> wrote:

Rao Dronamraju wrote:
> I won’t be surpised if Cisco, EMC/VMware will put together a quick

> comprehensive cloud management solution with their Vblock stuff. Because
> management will be the major differentiator for them vis a vis HP, IBM &
> MS and also the pre-configured packaged solutions will have to come with
> management otherwise it will be like a car without a steering wheel.
>
>

I very much doubt that anyone will use V-Blocks for large scale, public
cloud data centers, too expensive and sophisticated. It's a much better
fit for internal corporate clouds where price isn't so much of an issue
and things like support and maintenance are key.

>
> Btw, where does all this leave Dell?...the Lone Ranger….is Perot the
> Tonto?....

I think Dell's is betting that cheap (both to buy and run) and cheerful
will rule the cloud data centers when it comes to servers. They have a
whole division dedicated to doing custom designs for large cloud
projects, where do you think those 100,000s of servers in Microsoft data
centers come from?


--
Nik Simpson

[Rao Dronamraju]

"I very much doubt that anyone will use V-Blocks for large scale, public
cloud data centers, too expensive and sophisticated. It's a much better fit
for internal corporate clouds where price isn't so much of an issue and
things like support and maintenance are key."

By all indications the markets are in Private Clouds in the near future
(atleast 1 to 3 years), Next it is Hybrid, which means it is split between
Private and Public. That is why, HP, IBM and Cisco+EMS/VM+MS+BMC have
positioned themselves for Private Clouds primarily.

"where do you think those 100,000s of servers in Microsoft data
centers come from?"

That isn't my question. My question is with respect to mergers, acquisitions
and alliances. HP, IBM, Cisco+EMC/VM+MS+BMC have beefedup their Server,
Networking, Storage and Software portfolio. Dell seems to be relying on a
"niche" government and healthcare outsourcing and contracting player. What
about Dell's networking and storage strategy?...Sure they can partner with
Cisco and EMC but when they compete with Cisco+EMS/VM+MS+BMC in some
accounts who gets the preference?.....

-----Original Message-----
From: Nik Simpson [mailto:n...@alaweb.com]
Sent: Thursday, November 12, 2009 1:55 PM
To: cloud-c...@googlegroups.com
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report
says

Rao Dronamraju wrote:
> I won't be surpised if Cisco, EMC/VMware will put together a quick

> comprehensive cloud management solution with their Vblock stuff. Because
> management will be the major differentiator for them vis a vis HP, IBM &
> MS and also the pre-configured packaged solutions will have to come with
> management otherwise it will be like a car without a steering wheel.
>
>

I very much doubt that anyone will use V-Blocks for large scale, public
cloud data centers, too expensive and sophisticated. It's a much better
fit for internal corporate clouds where price isn't so much of an issue
and things like support and maintenance are key.
>

> Btw, where does all this leave Dell?...the Lone Ranger..is Perot the

> Tonto?....

I think Dell's is betting that cheap (both to buy and run) and cheerful
will rule the cloud data centers when it comes to servers. They have a
whole division dedicated to doing custom designs for large cloud
projects, where do you think those 100,000s of servers in Microsoft data
centers come from?


--
Nik Simpson

[Rao Dronamraju]

“The question that I have for the group - who will become the defacto SaaS management layer ? (The answer is obvious -> Windows 8) “

 

A very interesting question. Since management all these years/decades has been an IaaS management solution, SaaS/Application management is a wide open area.

Watchout of Oracle to make a run in this area. They used to have OEM (Oracle Enterprise Manager), not sure how well it has morphed into managing not only data bases but also their software portfolio.

Microsoft is another contender. I am not sure here, if MS manages their highly successful SharePoint and other software with their System Center.

BMC can jump into this.

SAP is another possibility.

HP with its OpenView might also venture into this area. Not sure about IBM’s Tivoli. Lost touch with it long time back.

Dell with its OpenManage?...don’t know.

I always wondered why Sun never focused on a management solution.

So this is a wide open area and wil be interesting.

 

 

---

From: Alan Ho [mailto:karl...@gmail.com]
Sent: Thursday, November 12, 2009 7:04 PM
To: cloud-c...@googlegroups.com
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report says

 

VMWare + EMC is definitely going to be focused on the management layer. Look at what VMWare was before the EMC acquisition ? Now VMWare is the market leader in hypervisor management layer. With the launch of vCloud Express, VMWare wants to be defacto "multi-datacenter" management layer.

[mbryan]

Not sure about Oracle as the lead for app management in the cloud.
Larry Ellison says Cloud Computing is vaporware. He doesn't see the
value because "there is nothing new" about it. Yet his company may
stand to gain a lot from the concepts of Cloud Computing. He did buy a
storage company call Pillar. As more people move to use more apps. in
the cloud or even if they keep apps on-site; there is more demand for
storage. People are saving a large amount of data on their computers,
etc. There comes a point where the ROI on pay as you go (expense side
of the book) outweighs the capital ROI.

Also, with some smart marketing people, his company can push that
storing data and apps. in the cloud is safer than on-site where the
number one cause of disaster at a business site is not, things such as
hurricane, earthquake, etc...it's a normal everyday occurrence like
fire or result of putting out a fire.

Another thing in which area/business segment are you talking about
when you say leader in apps management? At the upper end of the
business world, you find most of the companies want to keep things in
house...more control. At the lower end, you find they may buy
management but want to pay little for it (Google would fit here if
they offer management; even though they use their Reseller program
for this...it's not a one stop shop offer). The sweet spot would be
the mid-size companies who may not want to spend money for in house
equipment (capital) paying or for staffing on-site to maintain it.


On Nov 12, 8:43 pm, "Rao Dronamraju" <rao.dronamr...@sbcglobal.net>
wrote:

> "The question that I have for the group - who will become the defacto SaaS
> management layer ? (The answer is obvious -> Windows 8) "
>
> A very interesting question. Since management all these years/decades has
> been an IaaS management solution, SaaS/Application management is a wide open
> area.
>
> Watchout of Oracle to make a run in this area. They used to have OEM (Oracle
> Enterprise Manager), not sure how well it has morphed into managing not only
> data bases but also their software portfolio.
>
> Microsoft is another contender. I am not sure here, if MS manages their
> highly successful SharePoint and other software with their System Center.
>
> BMC can jump into this.
>
> SAP is another possibility.
>
> HP with its OpenView might also venture into this area. Not sure about IBM's
> Tivoli. Lost touch with it long time back.
>
> Dell with its OpenManage?...don't know.
>
> I always wondered why Sun never focused on a management solution.
>
> So this is a wide open area and wil be interesting.
>
>   _____  
>

> From: Alan Ho [mailto:karlu...@gmail.com]
> Sent: Thursday, November 12, 2009 7:04 PM
> To: cloud-c...@googlegroups.com
> Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report
> says
>
> VMWare + EMC is definitely going to be focused on the management layer. Look
> at what VMWare was before the EMC acquisition ? Now VMWare is the market
> leader in hypervisor management layer. With the launch of vCloud Express,
> VMWare wants to be defacto "multi-datacenter" management layer.
>
> The question that I have for the group - who will become the defacto SaaS
> management layer ? (The answer is obvious -> Windows 8)
>
> Regards,
> Alan Ho
>
> On Thu, Nov 12, 2009 at 11:55 AM, Nik Simpson <n...@alaweb.com> wrote:
> Rao Dronamraju wrote:
> > I won't be surpised if Cisco, EMC/VMware will put together a quick
> > comprehensive cloud management solution with their Vblock stuff. Because
> > management will be the major differentiator for them vis a vis HP, IBM &
> > MS and also the pre-configured packaged solutions will have to come with
> > management otherwise it will be like a car without a steering wheel.
>
> I very much doubt that anyone will use V-Blocks for large scale, public
> cloud data centers, too expensive and sophisticated. It's a much better
> fit for internal corporate clouds where price isn't so much of an issue
> and things like support and maintenance are key.
>
>
>

> > Btw, where does all this leave Dell?...the Lone Ranger..is Perot the

> > Tonto?....
>
> I think Dell's is betting that cheap (both to buy and run) and cheerful
> will rule the cloud data centers when it comes to servers. They have a
> whole division dedicated to doing custom designs for large cloud
> projects, where do you think those 100,000s of servers in Microsoft data
> centers come from?
>
> --
> Nik Simpson
>
> --
> ~~~~~

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[Gene Zacckey]

I do believe we are basically saying the same thing.

For this discussion, let's say you have a 1000 physical servers and in the
end you may have a 100 physical servers. Of course you still have 1000
servers and they need to be managed differently, maintained, and licensed.
I believe in our internal valuation, about 4 to 1 was the breakeven point
from strictly a cost perspective. The training and maintenance costs are
more than onetime expenses since now in addition all the previous server
knowledge there are new skills that must be learned and maintained
perpetually. Our savings revolved mainly around avoiding increases in HVAC,
server space, and all the other physical/environmental support for servers.
Certainly, this is a good/green thing, slows IT budget growth and enables
you to put the money on building new business support services. Our data
center eventually opened up space (through virtualization, blades,..) which
allowed us to bring in more business. So, new revenue opportunities came
from this technology. But the overall technology budget was about the same,
just focused differently. It's like closet/garage space in your house. You
clean it out, ebay some stuff, install a new storage system, pack it more
efficiently, then you just fill it up again as you collect more stuff.
Unless you made some real money on ebay, you may have broken even but you
have a more efficient system in the end. Plus, that money you made on ebay
went to cover the cost of the new storage system and your time. Then if you
still had money left over it went towards that new 60" LCD TV. Maybe it's
not a perfect analogy but it demonstrates my point.

Clouds will open up all sorts of new opportunities. Businesses will spend
money to access these opportunities for strategic and tactical advantage in
the marketplace. SMBs will be able to compete more effectively with the big
guys since the barriers of entry into big IT are reduced. This will result
in more pressure on the big guys who in turn use their bigger budgets to
gain some sort of advantage.

From my perspective, technological growth, in general, yields more effective
business use of overall IT dollars more than any actual immediate cost
savings. Applied wisely and quickly, this technology can provide a
significant advantage to an organization.

[Ray Nugent]

Except that's not how it will work. If you start with 1000 physical servers you'll end up with 8000 virtual servers. You still have the same power/hardware/real estate but lots more "machines" so it slows down your spend in those areas. But you now have a heck of a management challenge wrangling all those VMs in an environment that  is much more dynamic.

Ray

---

From: Gene Zacckey <gzac...@ptd.net>
To: cloud-c...@googlegroups.com
Sent: Thu, November 12, 2009 7:10:41 PM

[Jan Klincewicz]

Most of the companies below have either point products that do a specific thing, or a plethora of goods cobbled together primarily through acquisition.  I can't imagine any of those "morphing" into a reasonable management platform for CC. 

Certainly, all the piece parts exists.  Perhaps "best of breed" will be preferable than an integrated "jack of all trades."

*********************************************************************************************************************************************

Watchout of Oracle to make a run in this area. They used to have OEM (Oracle Enterprise Manager), not sure how well it has morphed into managing not only data bases but also their software

portfolio.

Microsoft is another contender. I am not sure here, if MS manages their highly successful SharePoint and other software with their System Center.

BMC can jump into this.

SAP is another possibility.

HP with its OpenView might also venture into this area. Not sure about IBM’s Tivoli. Lost touch with it long time back.

Dell with its OpenManage?...don’t know.

Cheers,
Jan

[pavan kumar maddali]

Are there any system monitoring tools in the public domain (or commerical licensed versions) that we can use to monitor the server utilization and bring up servers as the load increases and instantiate servers in a dynamic manner? what would be the good threshold values for the utilization to start the next set of server images for scaling up?

---

From: Rao Dronamraju <rao.dro...@sbcglobal.net>

To: cloud-c...@googlegroups.com
Sent: Thu, November 12, 2009 7:52:01 PM
Subject: RE: [ Cloud Computing ] Cloud to suck money out of market, report says

[Ricky Ho]

Over the past year, Amazon has added a set of important features that lessen a number of concerns for large enterprises.

I tried to put together a overview summary of what they provide today.
http://horicky.blogspot.com/2009/11/amazon-cloud-computing.html

Let me know if you see anything missing or incorrect !

Rgds,
Ricky

[Rao Dronamraju]

btw, I forgot ever obscure CA as a mangement solution provider. They have acquired recently Cassat, and Cassat is an IaaS technology. They are also into security.

 

There is a joke about CA and its management products. They had a product called TNG – The Next Generation.

Then they came up with TND – The Next Debacle.....no just joking,…The Next Dimension.

 

---

[Rao Dronamraju]

In all fairness to Redhat, they seem to be making amends......

Red Hat delivers stand-alone hypervisor, management tools
http://tinyurl.com/yb6te69

-----Original Message-----
From: Rao Dronamraju [mailto:rao.dro...@sbcglobal.net]
Sent: Wednesday, November 11, 2009 7:20 PM
To: cloud-c...@googlegroups.com
Subject: RE: [ Cloud Computing ] Cloud to suck money out of market, report
says

How much money cloud is going to suck?...The projected market size by IDC is
around $42 billion by 2012. US economy is $12 trillion economy per year. So
it is not a whole lot of sucking. So I do not think $42 billion can have a
deflationary effect on such large economy.

Another interesting point in the article...Redhat stands to benefit from the
cloud?...why because of KVM?....They do not even have anything that even
comes close to what VMware, HP, IBM, MS and Citrix have interms of cloud
management and other value adds, which is lot more important than almost

FREE hypervisors. They are probably a bit better off than Eucalyptus and
Open Nebula.

-----Original Message-----
From: Ray [mailto:ray.d...@gmail.com]
Sent: Wednesday, November 11, 2009 6:56 PM
To: Cloud Computing
Subject: [ Cloud Computing ] Cloud to suck money out of market, report says

Do you share this view or have a different perspective?

Cloud to suck money out of market, report says

http://news.cnet.com/8301-13505_3-10394966-16.html

"A recent survey suggests that CIOs are loosening the purse strings on
IT spending. IT vendors may want to hold off their celebrations,
though, because much of the spending appears to be headed for
deflationary forces like cloud computing, virtualization, and their
kissing cousin, open source.

An economic rebound never looked so dire."

-RD

[Erik Sliman]

Economically, increased efficiency increases economic growth.  If this weren't true, then we'd all be wearing one of our 3 pairs of clothes as we worked 12 hours a day on our farms doing chores. 

IT has always increased efficiency, lowering costs, thereby increasing productivity, both within itself and in the business it serves.  This has been its primary role; and yet, IT is still here, with a budget. 

Years ago, there was a lot of concern about jobs that would be lost because of programming and other automation.  Yet, this proved to reallocate resources, as it frees up time, permitting companies to be more competitive and utilize its human resources better.  There is an insatiable demand for increase productivity.  Yes, it can lead to structural changes due to skill set requirements changing.  Overall, though, it proved to be fuel for growth, leading to very low unemployment during the 1990s. 

It is a different question to ask whether or not the individual can continue to add value with their newly freed up time.  Ditto for skill classifications. Can farming continue to produce value to the overall economy and society?  Over time, there can be shifts that reduce the investment in one basket to increase another.  As a % of GDP, farming has certainly dwindled, primarily because per worker productivity has grown dramatically over the past 100 years.  Yet, due to per farmer productivity being so high, food production continues to increase, as we sell to the world. Ultimately, freeing up human resources from farming has permitted us to produce other things, like cell phones and computers. 

It is not clear if IT is about to become less relevant in the decade ahead (read "decreased budget").  Business units can increasingly purchase technological solutions without the IT department being in the middle.  If this is happening because of increased efficiency, it is a very good thing for the growth.  Just like the previous three decades, this efficiency could indirectly be good for IT.  It isn't clear yet whether or not IT is ready to become less relevant, continue to be important, or perhaps become even more important through transformed purpose. 

To the extent IT can control its fate in this matter, the one thing it can do to accelerate its own demise is oppose efficiency.  That is like trying to route traffic down your two lane side street because you are afraid of losing traffic to the new bigger street.  It will become a bottleneck.  People will figure it out and communicate it to each other.  They'll jump on the bigger road that you don't control. 

The best thing IT can do to increase its importance in the decade ahead is to continue to add value to the businesses it serves, decreasing costs and increasing capability, perhaps driving cloud computing and other improvements, looking for ways to increase business value with these new capabilities.  At the same time, it can try to take on new responsibilities to replace the ones that no longer require as much funding, improving online customer communication and global internal collaboration, for instance. 

IT has an opportunity to increase its role in business strategy and innovation.  It can help drive growth, rather than just increase the productivity of those who normally drive it.  It can play a better role as a business partner, and a stakeholder in the company's success, rather than just a back-end producer.  This has been evidenced in the financial industry, where innovation and new products such as derivatives are created by information systems, a new level from just processing account information and basic transactions. 

Erik Sliman
OpenStandards.net

[Ray DePena]

The low unemployment of the '90s could just as easily be attributed to loose and easy financing.

If traditional IT was all that efficient, cloud computing would be all but a whimper.  It was the gross inefficiency of 10% server utilization and other inefficiencies that led to a more efficient business model in cloud.

That said, if you have a nice shiny cloud, why keep IT around?  (Not that any of this will happen overnight).

-RD

[Gene Zacckey]

I probably wasn’t that clear in my last post, but it seems you’re agreeing with my closet analogy.  You make space and you just fill it up again with other stuff.  In the case of virtual servers you freed up physical server space then just added more servers to provide more services to the business.  So, you went from 1000 physical to 8000 virtual and now you’re providing more services to the business without having to add more physical space.  So, you’re doing more with the same real estate than you did last year and of course your costs continue to grow with management and licensing.   Complexity typically adds cost, but building a new datacenter is in a whole other level of cost.  As the business leader if they would rather build a new datacenter or add services. 

 

I believe Erik Sliman’s post is right on the mark when he states that businesses have an insatiable need for increased productivity.  Once you make efficiencies within IT they’ll fill any capacity immediately if it helps them improve the business.   In addition to productivity they’re also looking for any completive advantage they can get.  Which also goes to the point that Erik makes about IT groups looking for opportunities to help drive business’ competitive strategy rather simply be a supplier of productivity tools and services. 

 

 

 

From: Ray Nugent [mailto:rnu...@yahoo.com]

Sent: Thursday, November 12, 2009 11:35 PM
To: cloud-c...@googlegroups.com

[Gilad Parann-Nissany]

Great post Ricky.

One question: why do you put "content delivery network" in SaaS? Maybe its PaaS?

Regards
Gilad
__________________
Gilad Parann-Nissany
CEO, Founder
http://www.porticor.com/

[Gene Zacckey]

Erik,

 

Excellent commentary which covers this topic very well.  I couldn’t agree with you more. 

 

Now let’s stop calling ourselves IT leaders and start calling ourselves something like strategic business leaders.  As you indicated, technology is part of all business process so there’s becoming less of a need to specifically call it out.  Obviously, clouds would be an enabler for this type of transition.  But this is all just a guess at this point.   We’re part of the story, so it’s like reading and writing a book at the same time.  I can’t wait to see how the next chapter ends.

 

 

Gene

 

 

 

From: Erik Sliman [mailto:eriksl...@gmail.com]

Sent: Friday, November 13, 2009 11:51 PM
To: cloud-c...@googlegroups.com

[Jan Klincewicz]

Do you suppose the statisticians have counted all the undocumented aliens working illegally to make those farms so productive ? 

Funny you should select the farm analogy, since it is possibly a harbinger of things to come for IT.  Over the years, agriculture has consolidated from many family farmers (with their three pairs of locally produced clothes) to an oligopoly dominated by ConAgra,  Archer Daniels Midland, Monsanto and a few others.  The brutal efficiency of "factory farming" ensures that the agricultural field will employ as little human labor as possible, and when it does, to pay the smallest wages, without benefits, typically to non-citizens.  So this frees our native workforce up to make cell-phones and computers ??   Are they commuting to China and Taiwan ??

If IT consolidates as farming has, but without the necessity of labor being close to the actual earth on which it derives its profits it will seek to employ the cheapest labor possible.  However, unlike farming where there is still  a necessity for employees to be in physical proximity to their land, IT can cherry pick from among any workforce with electricity and a modicum of literacy.

<<This has been evidenced in the financial industry, where innovation and new products such as derivatives are created by information systems, a new level from just processing account information and basic transactions. >>

!!!!! DERIVATIVES !!!!!!

New products such as Derivatives have helped drive us to the highest unemployment rate since the great depression, while making billionaires out of a handful of hedge fund managers.  These are specifically the types of high-tech high-risk snake-oil that drove our economy into the tailspin for which it is just beginning to emerge.

I'm sorry Eric, but I think you might want to go back and look for some new analogies.  I guess I sound like a modern-day Luddite, but the capacity for greed, and the lack of compassion displayed by the Financial Industry as well as Big Agra do not bode well for the future of the North American IT worker (or workers of any sort, for that matter.)

<<As a % of GDP, farming has certainly dwindled, primarily because per worker productivity has grown dramatically over the past 100 years.  Yet, due to per farmer productivity being so high, food production continues to increase, as we sell to the world. Ultimately, freeing up human resources from farming has permitted us to produce other things, like cell phones and computers. >>

--
Cheers,
Jan

[Jan Klincewicz]

@Gene:

There is nothing to prevent anyone from calling themselves anything they want.

There are, however a number of individuals here and elsewhere (who have incredibly deep understanding of technologies) who do not know the difference between an Income Statement and a Balance Sheet.  The fact is that most IT skills are separate and distinct from most business skills.  The people who decide to lease or buy, expand to overseas markets or stay domestic, merge with or acquire other companies, etc. come from a very different background than those who design Storage Area Networks.  Knowing how to Manage a VM farm does not necessarily translate to the core activities of running a bank, retail chain or chicken farm.

Technology is an enabler, and an incredibly important one at that.  I agree individuals with the skills to understand core business needs and provide the technological means of supporting them will remain relevant and valued.  Day-to-day Network Administrators whose only value to the company is keeping infrastructure alive to support the applications that the business leaders rely on to provide value to the core business at hand will not be invited to Board meetings.

<<Now let’s stop calling ourselves IT leaders and start calling ourselves something like strategic business leaders

>>

Cheers,
Jan

[mij...@sbcglobal.net]

Gene,

This post not only is rich in ideas, but it germinates new meanings to cloud computing model and its' contribution to wealth to our society. It overhauls the concepts of. DC and IT to take them out of the rut of stagnant productivity. Actually the productivity will soar to levels much higher them.

Your comparison with agriculture productivity exploding through technology is spot on.

I am traveling so my Storm 1 BB keyboard is not comfortable. I will write more later.

Fantastic contribution.

Mihai

Sent from my Verizon Wireless BlackBerry

---

From: "Gene Zacckey" <gzac...@ptd.net>

Date: Sat, 14 Nov 2009 03:37:57 -0500

[Erik Sliman]

@Jan

IT is economically prone to shrinking as a % of spending like farming only if it does not expand its role in the business.  You are right on about ConAgra, Monsato, AMD, etc,...  Interestingly, AMD has expanded in resent years to become a producer of bio-fuel. This is similar to how IT can expand its role to counter our contraction.  Of course, our analogy hopefully won't extend to include the limitations on land space that have turned biofuel into a substitute for food. 

I knew someone would hate the derivatives analogy because of the financial crisis.  I've used that analogy for years before the crisis, and the analogy is still valid.  It is an example of information systems going from supporting the business model to helping shape the business model.  Regardless of whether or not in the case of derivatives that business model turned out to be a good or bad thing, it demonstrates that we have the ability to create new services that transform an industry.  Try another use case if it is more palatable, like eCommerce or online advertising.  Becoming creators of the business model instead of just supporters is our silver lining, and the reason that increased efficiency from cloud computing and open soure can help lay the foundation that ultimately leads to a growing budget for IT. 

The only sure challenge today is that skill set category needs will change.  If you are currently a data center technician, I recommend either becoming an expert at cloud technology, or building your skill sets to become less dependent on the data center.  If you are an application developer, become a pipeline of innovation and solution providing to help the business increase market share and enter new markets.  If you are an IT manager, become integrated with the business, finding ways to tap the creative talent in your department to help the business reach its strategic goals. 

[Tim M. Crawford]

This thread is bringing up some very good and relevant points that we all need to be keenly aware of.

@Jan

I completely agree that many IT folks are not a place where they clearly understand the business value of the functions they manage. However, I do think that is starting to change. The question is: Is it changing quickly enough. If you ask the business leader, the answer is a resounding no. But it goes well beyond just knowing business basics of Income Statements, Balance Sheets and Cash Flow Statements. We (as IT Professionals) need to understand the business that our company is in and the roles that each of the business functions serve. For example, what can be done to increase the bottom line to the company? Yes, IT needs to run as efficiently as possible. Today, many organizations are still not fully taking advantage of opportunities to run more efficiently. That doesn't necessarily mean a loss of jobs. It means shifting focus from non-strategic functions to business-strategic functions. Then we can move to more interesting...and valuable business value.

I agree with the point that we can call ourselves whatever we want. That won't bring the respect and credibility that we seek. There are many, many opportunities that IT organizations can take to start to change the tide.

Tim

____________________________________

Tim M. Crawford

+1.650.804.1300

tim.cr...@gmail.com

http://timcrawford.org/

[Jan Klincewicz]

This is very true.  Even DC experts like HP who consolidated something like 50 down to 6 are looking at rows and rows of empty racks because of power and cooling limitations (and yes, they make and have water-cooled racks, low-power blades and an army of experts on Data Center power and HVAC.)  Unlike your garage, you can't necessarily utilize all the space in your data center just because you got rid of some gear.

 Management of VMs is really not such a big deal (especially if you have virtual I/O so MAC addresses and Word Wide Names are no longer physical limiting factors for moving VMs around among hosts.

Except that's not how it will work. If you start with 1000 physical servers you'll end up with 8000 virtual servers. You still have the same power/hardware/real estate but lots more "machines" so it slows down your spend in those areas. But you now have a heck of a management challenge wrangling all those VMs in an environment that  is much more dynamic.

Cheers,
Jan

[Gene Zacckey]

I believe this praise belongs to you Erik.  Just a case of mistaken identity. 

[Gene Zacckey]

Agreed, there will always be a need for the hard core day-to-day technologist.  Kind of like the surgeon vs. the hospital administrator.  Both MDs, but with  a very different focus. 

 

I was thinking more of the Sr./advisory level architects, who will need to have a foot in both worlds.  Where they must be experts in technology and a strong understanding of not just how the business operates but of the external market pressures.  Just a prediction at this point.    You see this a lot with external providers, much less with internal IT groups.    

[Ray Nugent]

Jan, managing 8000 anythings is always harder than managing 1000 anythings. The liberation that cloud brings also serves up some chaos (just like the first corporate web servers did in pitting IT, Marketing, Sales and Engineering against each other for control of the web site..) The 8000 VMs now have myriad masters who step all over each other. We've seen this quite a bit as the first wave of virtualization takes root. Add cloud and the picture gets even, uhh, cloudier?

Ray

---

From: Jan Klincewicz <jan.kli...@gmail.com>
To: cloud-c...@googlegroups.com
Sent: Sat, November 14, 2009 1:30:42 PM
Subject: Re: [ Cloud Computing ] Re: Cloud to suck money out of market, report says

[Jan Klincewicz]

I understand that CC will not decrease the relevance of IT to Enterprises.  That never was my point.  As Tim states, successful IT professionals will require more than basic understanding of the mechanics of business just as the providers will need to understand more than the fundamentals of architecure, networking and storage.  As Eric states, IT will need to grow in its role as an enabler to creat new forms of commerce, and novel business.

I still think the "derivatives" analogy is a poor example, as it illustrates exactly how bad things can be when reliance on technology is allowed to supersede human intelligence.  When an entire industry trusts flawed code based on specious logic catastrophes can and will happen. Credit swaps and sub-prime mortgage bundles continued despite ample warning signs that sufficient risk factors were combining in a way programs and processes had not envisioned.

It seems no one addressed the issues I raised about CC (when and if it finally does become a predominant means of IT delivery) with regard to the IT workforce in general.  While, yes, IT workers will need to evolve to understand how to apply technology to commercial and organizational challenges, this is not a robust standard in either Business or Computer Science curricula.  Even if it were, there will be far fewer "strategic" workers necessary when the "plumbing" is farmed out to providers.  With the exception of workers to swap out failed disks and cables, nearly everything in a data center today can be done "lights out."

The days of going to MSCITP boot camp and snagging a secure $70K job are numbered.  I guess majoring in Mandarin is an option, but India has 18 distinct languages.

Cheers,
Jan

[Miha Ahronovitz]

@Eric,

Here are some relevant quotes from your extraordinary 2 posts.

(1) "IT has an opportunity to increase its role in business

strategy and innovation. It can help drive growth, rather than just
increase the productivity of those who normally drive it. It can play
a better role as a business partner, and a stakeholder in the
company's success, rather than just a back-end producer."

(2) "IT is economically prone to shrinking as a % of spending like

farming only if it does not expand its role in the business."

(3) "The best thing IT can do is .... looking for ways to increase

business value with these new capabilities."

What Eric means , IMO, is that simply lowering costs (cost per
transaction, per GB, per instances of nodes, per employees cost per
whatever unit you want) is not enough. IT should generate new business
inconceivable before. His examples include derivatives trading. There
is no way to do derivative trading without a computer and specialized
software, but think about it. Each trader made 10x to 100x more money
than just trading simple individual stocks. Sure, we had the accidents
and abuses, but this is not the the reason why derivatives are not a
fantastic new business tool. It took a while to understand them and
regulate this trading. But once legally operated, money will move
more quickly in the right places. This is a macroeconomic benefit
creating wealth, perhaps fueled by the profit oriented traders, in
other words, fueled by a much higher productivity. Not all traders
qualify as thiese new instruments demand new skills.

The same applies to the creation of mega eCommerce sites (Amazon) or
linking search with razor sharp advertising (Google). The same will
apply to the clouds in IT and this is why:

DC and IT, once the engine for moving up productivity, are on a
plateau stage now. The model one-DC-per-enterprise with ten or
hundreds of administrative staff and a CIO that limits himself to just
putting off fires and who needs months to generate a cost report on
utilization and costs distribution real time. We don't know who used
the computer system yesterday or today, for what and why and how much
it cost per individual user to per day or per hour. The business model
is: we supply a the applications our employees need. We do this
repetitively, ad -infintum. Full stop. But how do we create a new
business to increase the productivity of the employees, like the
derivative industry or eCommerce ?

We can not make every CIO or system administrator a new Steve Jobs,
but the very simple invention called cloud computing, with a key
ingredient called billing, offers already significant opportunities to
optimize and discover new ways to produce more with the same number of
people. This does not mean the employment will decrease. It means we
will produce more per employee. This will want us to engage more
people because of the new higher productivity must scale up. It is
pure narrow mindedness to consider any automation and new paradigm
that create higher productivity will make people loose their jobs. The
contrary is true.

I am looking at jobs lost in this recession. I see around me very
capable workers, creative minds laid off their jobs. I also see scores
of capable engineers and professionals who are frustrated. They feel
that can contribute more, they have ideas, nevertheless, all they do
they worry not to loose their jobs. They have their creativity
castrated by a system that does not have the notion that work is
giving opportunities. and high end retributions, not only at
subsistence levels

The notion of jobs is our politicians – and some business - heads are
visions of huge factories and construction companies offering routine,
repetitive, low paying jobs and we know that the global economy will
seek low labor cost area for these jobs. We want - just like the
derivative traders - to be given the opportunity to make more money
than we do today, and have motivation by creating with tools we never
had before, inside a new system designed to make everyone more
productive than we are today.

We must take off from the current DC and IT plateau, rut, and go to
the next level.

The cloud computing is such a new tool for progress and wealth
creation as I describe above.

Imagine all people now using a DC and IT service will have to pay per
use. Then, the CIO instead of administrating a cumbersome DC or IT
center budget, will administrate the pay-per-use budgets of each
contributor / user. This make everyone accountable. but the forward-
looking management team has tools to know precisely where the efforts
must be directed. There will be a meaningful dialogue between a
private contributor and management. For example, user X is not happy
with his/her pay-per-use budget and asks for more. He can get this
easily if he writes a justification. The same costs can be allocated
per projects and per customers or any classification important for
bottom line. The justification will be a very simple de-facto business
plan for new initiative, although no will call this a business plan.

The pay per use ceases to be just an accounting event. It facilitates
a direct dialogue between individual contributors and management.
There also must be a bonus system rewarding employees who took the
risks in delivering the results. Bonuses are not only a standard
retribution for large groups of people - but could be allocated
ADDITIONALLY to the individual level. Bonuses for groups must
continue to exists to facilitate team building for new ideas. And, the
bonuses will be paid from future profits, from the newly created
incremental wealth, not from the existing budgets.

All of the above is for larger enterprises. Clouds will make easier
for new start-ups , of a kind of business impossible to exist before .
For example , a computational genomics service with data analysis,
that operate on a pay-per-use model, This is impossible today, unless
one works for a very large company.

Not everyone has the risk tolerance to start a new business. We should
create corporations where we unleash the potential for all people. We
must have computer enabled high productivity entrepreneurs inside a
company able to make $300K or even more per year, why pay only the
top sales people these levels of retribution?

The challenge from Eric email is to transform the anxiety,
fearfulness, paralysis of what is our current system offers as
retribution for our talented contributors, - like most readers of
this post - to reinvigorated, enthused worker and entrepreneurs with
hopes restored beyond the wildest dreams.

After all, this is what the myth of American success is. We and our
ancestors did not come to America to be laid off and humiliated. We
came here to work knowing that opportunities are nowhere else. The
mere fact that this forum exists, it shows we can do it.

Yes cloud computing is hope to people, and it is not just a
technology. This was not obvious before.. It is now a discovery,
facilitated by Eric's post.

cheers

Miha

> On Wed, Nov 11, 2009 at 7:56 PM, Ray <ray.dep...@gmail.com> wrote:
> > Do you share this view or have a different perspective?
>
> > Cloud to suck money out of market, report says
> >http://news.cnet.com/8301-13505_3-10394966-16.html
>
> > "A recent survey suggests that CIOs are loosening the purse strings on
> > IT spending. IT vendors may want to hold off their celebrations,
> > though, because much of the spending appears to be headed for
> > deflationary forces like cloud computing, virtualization, and their
> > kissing cousin, open source.
>
> > An economic rebound never looked so dire."
>
> > -RD
>
> > --
> > ~~~~~
> > Posting guidelines:

> >http://groups.google.ca/group/cloud-computing/web/frequently-asked-qu...
> > Follow us on Twitterhttp://twitter.com/cloudcomp_groupor
> > @cloudcomp_group

> > Post Job/Resume athttp://cloudjobs.net

> > Buy 88 conference sessions and panels on cloud computing on DVD at
> >http://www.amazon.com/gp/product/B002H07SEC,

> >http://www.amazon.com/gp/product/B002H0IW1Uor get instant access to

[Miha Ahronovitz]

"If you are an IT manager, become integrated with the business, finding ways to tap the creative talent in your department to help the business reach its strategic goals. "

This must happen. But who can facilitate it? The change should start at the top management level  and the bottom direct contributor will respond. Without the proper enterprise climate, the very good advise above becomes a source of anxiety and laissez-faire as such efforts today lead to pure impotence and anger.

miha

---

From: Erik Sliman <eriksl...@gmail.com>
To: cloud-c...@googlegroups.com
Sent: Sat, November 14, 2009 11:17:59 AM
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report says

[Miha Ahronovitz]

@Gene

Correct and sorry for the confusion. But I read without exceptions all your posts They cross-pollinate and are  a pleasure to read.

m

---

From: Gene Zacckey <gzac...@ptd.net>
To: cloud-c...@googlegroups.com

Sent: Sat, November 14, 2009 3:54:47 PM

[Jan Klincewicz]

@Eric:

I am not proposing that technological advances are a bad thing.  I am just trying to shed light on the simple fact that in our web of existence, there seem to be equal and opposite reactions to actions.  As you point out, creating bio-fuel reduces availability of certain crops for food (or animal feed) affecting meat prices.  Also, according to some sources, the lack of infrastructure (similar to oil or gas pipelines) means production and transportation of biofuels is very costly, and may , in fact, have a negative footprint.

ECommerce and online advertising has enormous effects on brick-and-mortar stores, state tax revenues, and traditional media.  One can always make the "buggy whip" argument, but the displacement of horse-drawn vehicles by motorized ones is a very different ratio.

As one who shops on Amazon and eBay more than Wal-Mart and Best Buy, I know I am depriving my state of badly-needed tax revenues and traditional stores of profits. (I still read the local Philly Paper and The Wall Street Journal each day to ease my conscience.) 

I know I am at risk of being called a Marxist here (just for describing, but not necessarily proposing change to) an existing socio-political-economic phenomenon.  As consolidation occurs in industries, there is not necessarily a proportionate increase in employment just because of efficiencies created thereby.  In fact, the opposite tends to be true, and at no time in history, has there been so much opportunity for organizations to effectively employ a workforce outside its national borders.  This is an entirely unprecedented phenomenon, comparable only perhaps to the widespread use of African slaves by Europeans (and others.)

I do not suggest that evolution of IT in and of itself in any direction is a bad thing, but I do think it shortsighted to ignore the implications it brings, or to suggest that the career opportunity picture in the industry is any rosier than that of North American farmers at the turn of the 20th century.  The ROLE may increase in importance, but the BENEFITS will be enjoyed by a smaller audience.

*****************************************************************************************************************************************************************************************************************

IT is economically prone to shrinking as a % of spending like farming only if it does not expand its role in the business.  You are right on about ConAgra, Monsato, AMD, etc,...  Interestingly, AMD has expanded in resent years to become a producer of bio-fuel. This is similar to how IT can expand its role to counter our contraction.  Of course, our analogy hopefully won't extend to include the limitations on land space that have turned biofuel into a substitute for food. 

I knew someone would hate the derivatives analogy because of the financial crisis.  I've used that analogy for years before the crisis, and the analogy is still valid.  It is an example of information systems going from supporting the business model to helping shape the business model.  Regardless of whether or not in the case of derivatives that business model turned out to be a good or bad thing, it demonstrates that we have the ability to create new services that transform an industry.  Try another use case if it is more palatable, like eCommerce or online advertising.  Becoming creators of the business model instead of just supporters is our silver lining, and the reason that increased efficiency from cloud computing and open soure can help lay the foundation that ultimately leads to a growing budget for IT. 

The only sure challenge today is that skill set category needs will change.  If you are currently a data center technician, I recommend either becoming an expert at cloud technology, or building your skill sets to become less dependent on the data center.  If you are an application developer, become a pipeline of innovation and solution providing to help the business increase market share and enter new markets.  If you are an IT manager, become integrated with the business, finding ways to tap the creative talent in your department to help the business reach its strategic goals.

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Cheers,
Jan

[Gene Zacckey]

Sometimes a new way of thinking starts with changing your name and position statement.  We see it all the time in IT and in just about every other aspects of our lives.  Cloud, SaaS, and SOA are all titles given to a new model of delivering business services.   The names are just the spearhead of a marketing campaign to enhance its exposure to high level decision makers.  It gets people thinking differently about the value you provide without the need to go into all the technical details.

 

I’ve always tried to have my teams understand the business pressures of the organization.  That means continually sharing financial, strategic and marketplace realities.  It doesn’t need to take any significant time, but you’ll see a difference in the systems admin, software engineer, and systems analyst and the way they make decisions.  There’s also less frustration on the part of the technical person when they understand why one option is picked over another.  It also provides a more focused path for career development.  If they understand the bottom line potential for these new service delivery platforms, they will focus on the correct technologies to advance both their career and the success of the business.  From a manger’s standpoint, it also makes it much easier to lead an organization that is always focused on delivering value by balancing the best technical solution with financial, customer, and other business realities. 

 

Obviously, high level people need to be more business-strategic than others, but I feel everyone should be able to deliver an elevator speech of their company and how their job provides value. 

[Rao Dronamraju]

""IT has an opportunity to increase its role in business
strategy and innovation. It can help drive growth, rather than just
increase the productivity of those who normally drive it. It can play a
better role as a business partner, and a stakeholder in the company's
success, rather than just a back-end producer.""

So let us say, IT folks in a company like Coca Cola will transition from
being EAs, SAs, Network Admins, Systems Admins, Managers/Directors of
Operations to becoming folks who are going to focus on innovating new soft
drinks, may be figure out the Coke formula and invent a better formula:-).
In addition from a strategy perspective they will involve themselves in
Financial Management of the company, Supply Chain management and strategy,
Accounting, Marketing of Coke worldwide etc.:-)

""IT is economically prone to shrinking as a % of spending like
farming only if it does not expand its role in the business.""

It HAS been increasing its role in business quite a bit. For instance, the
entire Business Intelligence is all about giving better intelligence to
business decision makers in all other areas of a company including Sales,
Marketing, Customer Relations etc. Infact all most all the modules of SAP
help business functions ranging from Sales, Materials Management, Logistics,
FICO, Supply Chain Management etc. None of these are IT functions. They are
all business functions.

""The best thing IT can do is .... looking for ways to increase
business value with these new capabilities.""

It has been doing this for over 5 decades. Whether it is Super Computers and
Mainframes application in businesses like Military, Weather, Drug Dsicovery,
Medicine, Aerospace, Utilities etc etc. IT IS PRIMARILY THERE TO RUN THE
BUSINESS APPLICATIONS WHICH IN TURN PROVIDE BUSINESS VALUE. IT HAS BEEN
DOING THIS FOR DECADES.

The question is not whether IT provides value or not to a business
organization. The question is whether the business needs to OWN IT for the
business value it provides. If it is CRITICAL ENOUGH, it will stay with the
business, if it is not CRITICAL ENOUGH for the business, it gets outsourced.
So the strategy is to make IT a CRITICAL FUNCTION for a business. The one it
cannot live with. Just like we cannot live with Military, Police,
FireServices, Oil etc.

-----Original Message-----
From: Miha Ahronovitz [mailto:myinne...@gmail.com]
Sent: Sunday, November 15, 2009 8:19 AM
To: Cloud Computing

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[Tarry Singh]

There's huge uptake of the three indeed and especially since the east -- anything after West Europe for this matter -- is suddenly finding lots of attention/space in their wallets to do clouds, virt and indeed open sauce. I am more involved in the emerging markets with some really big deals where the corporate enterprise will find it very hard to penetrate. The age of corporate/proprietary software is being put to test and gradually over time this will evaporate as more and more customized appliances, built on open source, will come into the markets.

Kind Regards,

Tarry Singh
CEO/Founder, Avastu
Research-Analysis-Ideation
"Start your company with your ideas. Today!"
Amsterdam, The Netherlands
Business Cell: +31630617633
Private Cell: +31629159400
LinkedIn: http://www.linkedin.com/in/tarrysingh
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On Thu, Nov 12, 2009 at 1:56 AM, Ray <ray.d...@gmail.com> wrote:

Do you share this view or have a different perspective?

Cloud to suck money out of market, report says
http://news.cnet.com/8301-13505_3-10394966-16.html

"A recent survey suggests that CIOs are loosening the purse strings on
IT spending. IT vendors may want to hold off their celebrations,
though, because much of the spending appears to be headed for
deflationary forces like cloud computing, virtualization, and their
kissing cousin, open source.

An economic rebound never looked so dire."

-RD

--
~~~~~

[Erik Sliman]

@Jan

I don't intend to paint a perfectly rosy picture.  Structural changes are not without pain.  The only points I'm making are that (1) opposing efficiency will hurt IT more than help and (2) the efficiency can ultimately increase the budget of IT to the extent it becomes a catalyst for new growth opportunities, responding to the original question in this thread.

Whether or not that budget will be increasingly spent on foreign labor versus domestic is another question entirely.  I will say that offshore outsourcing predates cloud computing, and is happening pretty quickly today. 

(I only read the online version of the WSJ.)   :)

[Ray DePena]

Erik,

My apologies if this doesn't come across the way I intend.... (not negatively)

It's interesting you mention derivatives.  Many others say the same, and I wonder whether it's because we've run out of better innovation analogies.  The fact that dozens don't immediately come to mind is of concern.

Obviously, I could be wrong, but derivatives to me seem to be a good example that the financial services industry is potentially maxing out in "positive" innovation and increasingly leaning towards questionable vehicles and tactics.

Sometimes people will jump on this innovation bandwagon pointing out the Internet or cell phones (both of which have been around over a decade).  Others point to Facebook or Twitter (both having monetization challenges).

One of the few that comes to mind is Apple, perhaps Google, but unlike Apple, many of Google's innovations have not translated to the bottom line (as of yet).

While there has been an explosion of innovation in the last 30 years, in recent times, it just seems to me that it has been on the decrease.  Not sure if that's due to risk aversion by angels, VCs, banks, etc. or just my perception.

And when there has been innovation, my perception is that the immediate reaction by business leaders is how we can use this to get rid of headcount.  Rarely have I encountered companies with a retrain philosophy.  They assume once retrained the employee will leave for better market pay, so they rather dump and rehire someone who is already trained.  Better yet, offshore - ala recent comments by Unisys leadership on CC.

I for one, am open to different views, I'd love to see dozens of examples of recent significant innovations that can transform the marketplace and drive our economy out of its funk.

-RD

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[Ray DePena]

From the looks of it, the only thing the Fortune 500 can't seem to live without is an overpaid CEO - everything else can be outsourced.  ;-)

[Jan Klincewicz]

I certainly hope I did not give the impression that I am somehow "opposed to efficiency" in IT.  I have witnessed (and hopefully contributed to) efficiency in IT throughout my career.  I am not positive, though, that efficiency necessary will result in increased budgets for those who provide it. 

As Ray above states "And when there has been innovation, my perception is that the immediate reaction by business leaders is how we can use this to get rid of headcount." 

The very same folks who introduce and deploy virtualization, for example, are the ones who are getting displaced because their organizations no longer need the headcount they did prior to adopting it.  I recall a day when chip engineers refused to contribute to the development of chip-designing "expert systems" because they KNEW the ramifications of doing so.

Outsourcing may have pre-dated Cloud, but to think CC would not act as an accelerant once the machines move outside to competitive providers bidding against one another for the business is to ignore history.

Entire industries will seek a lowest common denominator in competitive situations, which while driving UP efficiency, will often drive DOWN the quality of the products they offer.

Let's stay with the agricultural / food analogy a moment.  Who doesn't enjoy a nice Dry-Aged steak once in awhile as a special treat.  Why is it Morton's can provide such an intense beefy flavored Porterhouse that you can't match at home even on an expensive wood-fired grill ?  

Prior to the early 1960's ALL steaks in America were dry-aged.  Some food techies discovered that by vacuum packaging whole primals in plastic, the meat could soak in its own blood, and tenderize by virtue of the enzymes in those juices, connective tissue is broken down, and the meat is tender in a few days vs. the 14-28 required for the traditional dry-aging process.   An additional benefit is that the meat does not lose 20-25% of its weight in the aging process.  The industry has discovered an efficient process (much less time) that is instantly profitable (significantly less loss) so every should rejoice, right ??  Except steak lovers, who now have metallic, bloody, bland beef on which to dine.  After a generation, this dumbed-down product becomes the norm, and tasty dry-aged examples become museum pieces affordable only to the privileged few.

Don't even get me started on those damned Purdue Dolly-Parton-esque Oven Stuffer Roaster chickens !!!!

What I'm saying is that CC has the POTENTIAL to "dumb-down" IT by offering efficient, cheap, generic XaaS, and that will become the norm except for the rare organizations who will pay extra for "boutique" service .. like going to a kosher butcher. After a generation, the bar is low due to lowered expectations.  This is one reason our society generally rejects monopolies.

Innovation is not inherently good or bad.  Derivatives are wonderful for those who profit from them.  Others ... not so much.  Innovations that produce no real value (other than to short-term profit takers) will still occur. I just don't care to applaud them.

Cheers,
Jan

[Jan Klincewicz]

So that is why banks hire private armed security guards to carry their cash deposits around instead of keeping full time armed personnel do this once-per-week task ??  Why Amazon ships stuff Fedex even though their core business is to ship stuff that they sell ??  Why countless businesses rely on public sewer, water and electric when they could build their own treatment plants, generators or dig wells ?

Conversely, I guess this is why the C-level executives rarely are bought in from temp agencies on a part-time basis ....  What a concept !!

So the strategy is to make IT a CRITICAL FUNCTION for a business. The one it cannot live with. Just like we cannot live with Military, Police, FireServices, Oil etc.

--
Cheers,
Jan

[Miha Ahronovitz]

"Obviously, I could be wrong, but derivatives to me seem to be a good example that the financial services industry is potentially maxing out in "positive" innovation and increasingly leaning towards questionable vehicles and tactics."

Ray,

The derivatives are a good tool. And they are here to stay. We must get rid of this Pavlovian association derivatives = crooks. The reason was they were not understood well at the beginning and we did not have the computing skills to control these markets. Being a crook is one thing, derivatives is another. We tend to blame the recession to derivatives. With or without derivatives, the recession would have occurred anyway.

And the derivatives markets will continue to develop and bring efficiencies in the system. It is not the fault of the derivatives. Who invented the derivatives, had buyers for them.

Miha

[Erik Sliman]

@Gene

Well said!   

@Ray

I hear you. I agree with your post.  Innovation, overall, is hurting in the industrialized world today. 

I did indirectly reference Google in one post where I mentioned online advertising as another example of IT innovation.  I kind of like the derivatives analogy because it is a true innovation, rather than just an online version of something that existed beforehand.

I tried to not defend derivatives because that instantly becomes off-topic on this thread, but since people keep coming back that they don't love the analogy...  Derivatives have received a bad rep because of how credit swaps complicated helping people prevent foreclosure.  I understand that.  But, derivatives didn't give mortgages to people who clearly didn't have the ability to make the payments once their mortgages reset.  People did that.  Also, credit swaps is only one of many types of derivatives.   

Ironically, despite the press pointing out how derivatives can be used to increase risk, they are used quite a bit to lower or manage risk.  Insurance companies that cover hurricanes, for instance, can purchase weather derivatives that pay out when hurricanes occur.  This makes it possible for them to remain solvent when there are an unusually large number of hurricane payouts. In other words, insurance companies can sell us insurance because they can buy it in the derivatives market. 

Other companies invest in them to offset vulnerabilities to price sensitivity to commodities they depend on or currencies they trade in.  I can go all day listing examples of how companies use derivatives to decrease risk, basically creating highly customized insurance.  This long list of risk mitigation requirements is part of the reason the derivatives market is estimated at $600 trillion.  That's no small innovation, and makes eBay look boring. 

As for great new innovations, I'm still waiting for interactive 3D virtualization to become mainstream.  *SIGH*  And how about those customized Internet agents we're supposed to send out to do our bidding?  It seems like you have to be an eastern European criminal to own one. 
 

On Sun, Nov 15, 2009 at 3:20 PM, Ray DePena <ray.d...@gmail.com> wrote:

[Gene Zacckey]

Miha,

 

If top management is not receptive to IT/non-IT mingling then things are tougher.  Maybe a little marketing and sales will help, but you can only push so much.  Always understand the political risks.  This is not an area for IT managers to go unwittingly.  It’s best to cultivate a mentor or contact from the “inner circle” to help with the political maneuvering in an unwelcoming environment.     

 

The question you may ask yourself is, why would I want to push something that is not being request by top management.  I would suggest you may not be positioning your solution/advice properly.  If you’ve listened/researched to their business needs/goals and aligned your suggestions to those goals, I’m not sure why some of your suggestions wouldn’t be entertained.  Remember to always answer the WIIFMs (Whats In It For Me) for the person/people to whom you are talking. 

 

When they turn you down, assess why your proposal wasn’t accepted and move on to the next one.  Stay involved and continue to build your network.  Remember, you’re doing this to help you, your team and the company. 

 

I know this is more about career development than Cloud technology, but I see this emerging platform as potentially one of the next major selling points for internal IT groups.  What happens to you and your team if all of a sudden Cloud technology becomes mainstream and external providers are the only option since your infrastructure isn’t ready.  Technology, like picking investments, is not about avoiding losers, it’s about having a winner in your portfolio.

 

Gene

 

From: Miha Ahronovitz [mailto:mij...@sbcglobal.net]
Sent: Sunday, November 15, 2009 9:44 AM
To: cloud-c...@googlegroups.com
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report says

 

"If you are an IT manager, become integrated with the business, finding ways to tap the creative talent in your department to help the business reach its strategic goals. "

[satish rege]

I am getting lost on this thread as to what people think IT can deliver. The basic function of IT (Information Technology) is to "take data and convert it to information and deliver it where it is needed, when it is needed, how it is needed".  Please use intuitive definitions of data and information. 

To be able to deliver IT services, the people delivering IT need to be "subject matter experts in IT". If they are expected to conceive and deliver a complicated financial product like "derivatives" ( comment from Miha) then they will have to be subject matter expert in financial products or if they have to deliver new formula for coke (example from Rao) then they will have to be subject matter expert in chemistry or food technology. While people can change their fields or be experts in two fields, it is not common, nor does it happen overnight. Finally, the credit for such products may not go to IT, but to financial product department or food technology department, where the concept will be vetted and productized. IT is only a tool that makes the function happen and helps to "optimize" the delivery.

The fundamental idea of Cloud it seems to me is - deliver the data to information transfer function (IT) with high reliability, availability, security etc. at a cheaper price than what a company can do in house. Here the cost or price may not only be calculated in dollars but also headaches, human resources problems etc. that a CEOs/ COOs/ CIOs have to face. When the price is "right" and the service is delivered at a better value than various expected criteria (e.g. availability) more users choose the service.

In this sense IT can grow only by delivering more "data to information transfer functions"  to more users at a price that they feel comfortable paying. It may be internal IT (traditional) or external IT (Cloud services) depending on (again) the services provided, user satisfaction and perception about various aspects of the service and what it costs. The question is - Who is likely to invent these functions. Non-IT, IT or both? Most likely answer is "both" with collaboration.

In terms of the "criticality" issue discussed, it always "feels good" to own rather than depend externally for a service. Having ownership give control. Sometimes it may not be optimal either from financial viewpoint or from the quality of delivered service viewpoint, or even from a "control" viewpoint to keep a service internally. In Manhattan, rather than owning a car for transportation, people take public transportation services. Of course, the rich depend on limousines. Why?

Do Cloud Services in computing/ IT will have the "Manhattan public transportation services" analogy for certain set of users? What will happen in time as number of Cloud service providers increase?

-satish

[Ray DePena]

@Miha,

Quite frankly, I'm more interested in U.S. innovation than derivatives which was just an analogy, though I have to point out that if senior economists like Greenspan can stand before Congress and testify that they don't understand derivatives, then one must proceed with caution.

On the innovation front, I thought I'd separate that from this discussion so I started another thread.

Aside from derivatives, can you think of other wide ranging innovations having a major positive impact on the economy? 

-RD

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[Ray DePena]

Maybe it's just me, but I'm having a difficult time conceptualizing a non-C-Level function that is so critical that it can't be outsourced or offshored.

Oh wise and knowledgeable CC Google Group, I will offer our bountiful harvest for your wisdom.  Please list functions so critical that they cannot be outsourced.  :-)

-RD

[Miha Ahronovitz]

Yes. Using financial instruments (note I call them not derivatives)  to finance new start-ups. The Government issues a bond against which VC companies can guarantee  cash for funding say 10,000 new start ups.  The best way out from recession is to have at least 1,000 survivors. It is an idea many people do not agree, as most people are naturally born risk averse.

Ray you can improve my idea, if you propose 100,000 new start ups and 10,000 survivors :-)

It would be nice if I had the solution that Greenspan didn't

:)

[Rao Dronamraju]

Actually any function that needs human interaction/customer interface on a day-to-day basis is not easy to outsource. For instance, service functions are more difficuilt outsource than R&D etc.

 

But if you look in the medical field, even Nurse functions are not outsourced let alone Doctors, all of them are non C-Level.

 

Actually I think even C-Level functions can be outsourced. Not a big deal, I can bring in many C-Level executives from many countries that can do the job as good if not better then the C-Level executives we have today. Give me the opportunity and I will prove it!. The CEOs just won’t let you do it. They will not even agree to proof of conceptJ…the Efficiency and Cost Cutting theory just goes out the door!.

 

---

From: Ray DePena [mailto:ray.d...@gmail.com]

Sent: Monday, November 16, 2009 5:25 PM
To: cloud-c...@googlegroups.com

[Jan Klincewicz]

"Can" vs. "should" is a big deal .. especially in technology.  Any ideas as to who the SECOND largest customer of the Hollerith  Tabulating Machine Company (precursor to IBM) was after the U.S. Census ??  Any ideas as to what end this newly-found compute power was used ?

Oh wise and knowledgeable CC Google Group, I will offer our bountiful harvest for your wisdom.  Please list functions so critical that they cannot be outsourced.  :-)

Cheers,
Jan

[J. Andrew Rogers]

On Mon, Nov 16, 2009 at 5:31 PM, Miha Ahronovitz <mij...@sbcglobal.net> wrote:
> The Government issues a bond against which VC
> companies can guarantee  cash for funding say 10,000 new start ups.  The
> best way out from recession is to have at least 1,000 survivors. It is an
> idea many people do not agree, as most people are naturally born risk
> averse.
>
> Ray you can improve my idea, if you propose 100,000 new start ups and 10,000
> survivors :-)

The quality of the population determines survival rate, which is not
invariant as a function of population size. Exponentially increasing
costs for exponentially decreasing marginal returns is not a formula
for success. The absolute number of successes won't vary all that much
no matter how many startups get funded beyond a pretty low threshold.
It is difficult finding a population of 1,000 startups that are
legitimately worth investing in, never mind 10,000.

There are a legitimately solid startup ventures that have a hard time
getting funded (usually the most technically sophisticated,
ironically), but that is the rare exception rather than the rule.


--
J. Andrew Rogers
realityminer.blogspot.com

[Ray DePena]

Wouldn't it be nice if we (in this group) were truly creative and innovative enough to come up with a model that:

1. Didn't require government or VC funding.
2. Increased the efficiency so that it has a better than 10% survival rate.

Perhaps startup factory with specialists that incubate ideas and get them to a more stable infant stage for their owners to run with?

-Ray

I'm thinking of a neonatal intensive care unit - it's not run by amateurs, but pros, until the baby is mature enough for the 1st time parents to take home.

[Ray DePena]

That's a good point Rao.  I wasn't thinking about other industries, but it's a good example for the time being.

Though nurses are brought here from other countries, and telepresence is enabling everything from remote diagnostics to remote robotic surgery.

But we don't have to get that fancy, painting a house, mowing a lawn, trash collection, etc. are all local.

As for CEOs, I often wonder what Toyota or Honda's CEO could do with GM....can't imagine that they would do worse....

-RD

[Gene Zacckey]

 Rao,

 

I would like to offer that ownership of your company’s identity should not be outsourced.  Whatever it is that makes your organization unique should be owned by the company.  If your company delivers IT services then the CTO and most of the lead technical personnel (architects, product/service/solution owners,..) should not be outsourced.  Because those people are responsible and accountable to the company for what makes it unique in the marketplace. 

 

To build on your hospital example, a hospital does not market it’s great IT department to patients, so many hospitals outsource their IT and sometimes the CIO role.  You’re not likely to find a permanently (there are occasionally interim personnel) outsourced Chief Nursing Officer, Chief of Staff, or other C-level hospital personnel.  Hospitals are in the business of delivering healthcare, so that’s the aspect they want to own.  That’s how they brand themselves.  You don’t want someone else to own your identity. 

 

From an departmental IT perspective, I’ve outsourced many tasks, but there is always someone internally that owns the solutions.  It may be a project manager, product manager, lead architect, or IT manager, but they own and are accountable for the overall solution. It’s those solutions that demonstrate your value to the organization.  Employees are invested in the success of their organization.  Outsourced personnel are ultimately responsible to the outsource provider.   

 

Therefore, I feel that the roles that help define your organization (company, department, or business unit) are not good candidates for outsourcing.

[Eryndlia Mavourneen]

That sounds good, but the nature of high-tech startups is that they are extremely competitive.  By the time the baby is old enough to leave the nursery, someone else has stolen the idea and is running with it.  Being the first to get an idea in motion (and to market) is often the only way to make the big bucks the VC guys are looking for.  Also, substantial funding generally is required just to get a high-tech idea off the ground, what with equipment, tools & software, additional talent, etc.

This is not to say that some companies don't start off with less funding.  We all have seen it in the person of Bill Gates.  That was a fluke, however.  From my experience, minimal funding in an incubator is not enough for the really innovative ideas.  [Bill Gates' DOS operating system was not innovative -- just timely and with a very sharp negotiator for an owner.]

Eryndlia

Ms. Eryndlia Mavourneen
(404) 915-4463 cell
eryn...@gmail.com

Sent from Woodbridge, Virginia, United States

[Ray DePena]

Is this an indictment on the current state of innovation?

"It is difficult finding a population of 1,000 startups that are
legitimately worth investing in, never mind 10,000."

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[Rao Dronamraju]

Here it is, Warren Buffet heard Miha…."10,000 Small Businesses,"

 

http://money.cnn.com/2009/11/17/smallbusiness/goldman_sachs_warren_buffet_small_business/

 

 

---

[Jim Starkey]

I think it's a serious mistake to think that innovation alone is
sufficient for a startup to succeed. Success requires a product
(presumably the result of innovation), a market, a management team,
financing, and a healthy dollop of luck. Venture, or any other rational
investor, needs to screen to product, market, and management team, and
hope for luck. The luck part is where the risk should be.

I think you'll find that in a rational (i.e. non-bubble) startup market,
the gating factor is the availability of skilled management, not
innovation or financing. MySQL, for example, had a low end product that
couldn't have succeeded in traditional business models, but had superb
management, intelligent and long sighted investors, and a colossal
amount of luck (right time, right place, a marginally adequate product,
but one they couldn't sell).

Your strategy to throwing money over the wall hoping it lands on fertile
ground will produce nothing but trouble for legitimate startups by
accentuating the risk of doing business with startups and confusing the
market with unworkable technology that never should have been funded in
the first place.

Ray DePena wrote:
> Is this an indictment on the current state of innovation?
>

> "It is *difficult finding a population of 1,000 startups that are
> legitimately worth investing* in, never mind 10,000."

> realityminer.blogspot.com <http://realityminer.blogspot.com>

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--

Jim Starkey
Founder, NimbusDB, Inc.
978 526-1376

[Ray DePena]

Weren't LinkedIn, Craigslist, Twitter, Facebook, Mint, and other such startups begun with relatively small initial investments?

From what I've seen VCs usually show up (to capitalize) after the small startups begin getting traction.

This is a CC group... startups can launch without much (if any) equipment, hw & software, etc.

Perhaps we're just thinking of different kinds of startups?

I'm just thinking that a process that facilitates the startup process in those early stages may enable the launch of more startups and potentially provide enough groundwork to get some traction.

I'm no expert, I'd just like to hear some ideas on how it could work.  There were 10,000 reasons why we couldn't go to the moon, but we did.

It's easy to find reasons why something won't work, but how creative and innovative can we be to make it work?

-RD

[Rao Dronamraju]

Gene,

 

I think you have a very good point. Generally, core competencies and intellectual property/identity is not outsourced.

 

---

[Ray DePena]

@Jim,

Wasn't clear as to whom this was addressed, but you highlighted one of my main points (bolded), which is why I gave the example of a neonatal intensive care unit (NICU) caring for premature babies until the baby is stable enough.

The NICU is staffed with skilled professionals that specialize in that area.  This increases the survival rate of those babies.

Now just imagine if instead of such specialization, anyone with a premature baby ran their own NICU.  I would venture to guess that the survival rates of those babies would plummet.

I have no data or expertise to back up my next statement, but I suspect that the high failure rate of startups is as you pointed out - lack of skilled management.

As for the throwing money over the wall comment, I'm guessing that was directed at Miha, as my commentaries have been along the lines of bootstrapping.

I'm envisioning a model that involves joint collaboration between the private and education sectors with government support.  

My point being that in a $14T? dollar economy with 300M+ citizens we should be spurring innovation and driving it through an incubator that increases the chances of survival and creating jobs.  If we can't even find 1,000 startups worth investing in, I think we may be facing an innovation deficit.

Right or wrong, Miha has posed his ideas for job creation, I've added a few of my own comments, I'd be interested in hearing yours and others.

-RD

> Ray DePeña

--
Ray DePeña

[Stuart Charlton]

Big +1

Or as Nassim Taleb would say: "Maximize the amount of serendipity in
your life"

Sent from my iPhone

>> Ray DePeña

[Erik Sliman]

@ray
You are right that specialization of labor is important for productivity, and thus growth.  In a new business model, I'd ask, how does it increase specialization of labor, as well as how does it differentiate.   

I don't know if things have changed, but long ago I learned that the #1 cause of failure for startups is lack of capital.  I was also taught that 50% fail in the first year.  Of those that survive that year, 50% die the second year. 

I've concluded a few things about technology startups since then.  The best technology rarely wins when competing with marketing muscle and critical mass like Mircosoft.  On2 clearly had the best streaming video technology in 2001 that blew away Windows Media Player and Real at bandwidths like 600 kbps.  That didn't stop web sites from purchasing media servers from Microsoft and Real like they were the only two options on this planet.   

The other principle I've learned is that new technology doesn't always quickly replace old technology despite being a lot better.  Object database have been superior to relational databases since the mid 1990s in performance, scalability and maintenance of complex object models.  Yet, the market is still dominated by Oracle, DB2 and SQL Server and object-relational mapping.  Only recently have object databases really begun to displace relational.  Apply this principle to a startup with a high cash burn rate, waiting for their technology to become popular.  Eventually, they begin to hope a large company like IBM will buy them.  The two year boom they were hoping for is beginning to look a long way off. 

On the flip side, growth can kill a startup, ironically.  You have to be able to scale, or customer service and innovation won't be able to keep up.  You could lose contracts because you can't produce enough in the time period required.  A competitor will pick up those contracts, costing you market share. 

Of course, the more capital you have, the quicker you can scale, hire better skilled management and expand marketing, increasing your chances of success.

These principals make it difficult on both the investor and the startup.  How much capital will it take before it can become profitable?  How long before it can gain the necessary market lead, share or just plain sustainability? 

Can you describe your thoughts on Private, Education and Government investment in innovation? 

Education has played a long-term role in basic research.  Do you envision their role changing, or are you imagining a better long-term model?  To better frame this discussion, what is the time frame for having this incubator creating jobs?  

Government's best historial contributions to innovation have been "accidental" in that they weren't delibaretly trying to help the entire economy and the businesses that ultimately benefited from it.  The cold war resulted in investment in NASA, which created technologies that advanced our economy and society as a whole.  Today, with the scientific community being increasingly global, even NASA is looking to partner with China.  How can we create domestic innovation today, or at least domestic jobs? 

[Rao Dronamraju]

“Right or wrong, Miha has posed his ideas for job creation, I've added a few of my own comments, I'd be interested in hearing yours and others.”

 

The problem is not with job creation. The problem is with the mafia in pin-striped suites who will export them anyway.

You create jobs through startups, the startup will be eventually acquired by a bigwig company and then they are exported almost immediately.

Oh!, I forgot they ofcourse will make sure to let you know how efficient and cost-effective they have been and also they will let you know their purse/loot that they got for doing it.

 

---

From: Ray DePena [mailto:ray.d...@gmail.com]
Sent: Wednesday, November 18, 2009 8:43 PM
To: cloud-c...@googlegroups.com
Subject: Re: [ Cloud Computing ] Cloud to suck money out of market, report says

 

@Jim,

[Ray DePena]

@Rao, @Erik,

You both posed good points as to how we keep those jobs in the U.S.

Rao,

I don't dispute that jobs are offshored.  That's a complex issue that others may be better suited to address.

What I'm suggesting in the face of that reality is that the jobs engine should be structured to create them faster than the pace at which they're being offshored (kind of having the water running in the tub even though the drain is open).

Erik,

While we are using the same terms and concepts, we're thinking of different things.
I'm not envisioning startups that become the next MS, Oracle, HP, etc. (though that would be nice - that sort of combination of luck, timing, etc. is beyond the scope that I envision).

There are tens of thousands of small companies that are self-sustaining and I believe its something around 70% of all American workers work for a company with less than 100 employees.

I'm also not thinking of the VC model with multiple rounds of financing and millions at stake.  Yes, those big bets may have big rewards or fail due to lack of capital, mismanagement, etc.

I'm thinking of thousands of startups most of which will end up with no more than 100 employees if successful, perhaps a few thousand employees for 10% of the thousands of startups?

Whether we like it or not, U.S. jobs are being exported.  The question is what will we do about it?  One option would be to seek to make changes that reduce the exporting of jobs or make it less attractive to business.  The other route would be to create a model that makes the U.S. the jobs creation engine of the world.

So to answer Erik's question(s), "Can you describe your thoughts on Private, Education and Government investment in innovation? How can we create domestic innovation today, or at least domestic jobs?" 

Here is what I was thinking.  Creation of hybrid (education & private sector) incubators, located at educational institutions (not just at the Iveys), but all business and engineering colleges around the country. 

These incubators would be predominantly staffed with senior and grad students performing the research, innovation, vetting of ideas and concepts, though governed by business / management professionals.

The concept being not just to graduate students, but to graduate viable small businesses with them which they can nurture and grow in partnership with the private sector.

IBM has such a model.  They create small strategic business units (less than 100 headcount) that are standalone with the support of HQ, and test out concepts.  If it succeeds, it is folded into the standard operations of the company.  If it fails, the lessons learned are applied to the next internal venture.

Admittedly, they are seeking to create billion dollar+ ventures, and make large investments.

I'm proposing an SMB model of the same on a much smaller scale, with less investment required, by a community (students) used to bootstrapping, with the support of private sector companies which stands to benefit from small R&D investments in such incubators (which otherwise they would be unable to afford as SMB don't have large R&D departments).

The government can serve as a facilitator in the same way that they support student loans to support education.  They can facilitate (through SBA) lending in a shared risk/reward model with the private sector, educational institutions, and students.

Successful enterprises would yield returns to all of those institutions which can be reinvested / harvested. 

• SMB companies (up to 5,000) employees benefit from greater incubation of ideas, R&D, potential return on those investments.
• Educational institutions benefit from greater alignment to business and engineering resources, better trained and educated students, shared access to capital.
• Graduating students benefit from better application of their education, mentoring, employment, networking, etc.
• Government benefits from better trained, more innovative workforce, and potential return on investments.
• Economy benefits from greater innovation (labs), employment, etc.
  

Recently I've been working closely with academia, SMB and small startups.  Each has a problem the other can solve. 

Let me know what you guys think.

P.S. My previous position was offshored to one of the BRIC countries some 10 months ago so I can relate as I'm still "between opportunities" so hopefully you won't mind the plug below (It seemed like the right place for it with all this talk of offshoring and jobs creation).

If anyone would like to assist in my search, I'm seeking roles such as the ones below that leverage my strengths in strategy, planning, communications, and leadership.

• Portfolio, Program Management (IT sw / hw / svcs or marketing)
• Marketing Management (Strategy, Offering, Program, Channel Enablement)
• Alliance / Partner Management
• Business Development (not sales) - This is the difference
  .

Best Regards,

Ray DePena, MBA, PMP
http://www.linkedin.com/in/raydepena

[Jan Klincewicz]

The problem is not with job creation. The problem is with the mafia in pin-striped suites who will export them anyway.

@Rao:

Not all the jobs are being EXPORTED per se, but I am a member of an "Alumni Group" of a large IT vendor, and get dozens if not hundreds of listings per day for "6 month - 2 year contract opportunities" to fill roles which previously belonged to full-time employees with benefits and pensions.  While these workers remain domestic, out of necessity for local resources, the onus is on them to provide their own healthcare, IRAs etc. and have literally no job security.

Granted, the days of "job security" are probably long gone, but one day, these contractors will be sucking up Social Security and Medicaid because corporations bolstered their stock prices by shedding headcount.

Cheers,
Jan

[Jan Klincewicz]

I'm thinking of a neonatal intensive care unit - it's not run by amateurs, but pros, until the baby is mature enough for the 1st time parents to take home.

Can you think of any intensive care units (or other medical facilities) that ARE run by amateurs?  I have several articles of clothing that admonish me to "Professionally Dry Clean Only."  I have yet to meet an amateur dry cleaner.

Cheers,
Jan

[Tim M. Crawford]

That is true that some technology jobs have been sent offshore. However, that tide is changing. As global labor rates start to equalize, the attractiveness of offshoring will wane a bit.

It's also important to consider why jobs are sent offshore. Simply put, it's a value equation. If you can do the same thing for less, why wouldn't you? We do that in our everyday lives. We make value decisions on where we purchase products and services.

The challenge for us is to make ourselves unique and increasingly valuable. By doing so, it increases the value we provide and reduce the likelihood of being sent offshore. So, the key is in continual improvement and innovation to stay ahead of the curve.

-t

____________________________________

Tim M. Crawford

+1.650.804.1300

tim.cr...@gmail.com

http://timcrawford.org/

[Pietrasanta, Mark]

Almost true – for straight commodities, we go for price.  For everything else, price is only one factor, and as you say, overall value is the main point.

 

The big off-shore question is whether software engineering is a commodity or not.  No need to debate that here, as it’s a subjective issue, but an interesting one.

 

Is there a parallel for Cloud Computing?

[Rao Dronamraju]

 

“Simply put, it's a value equation”

 

Yeah!...you said it….simply put. Very simplistic thinking…What is value?...

For instance, China can perpetually keep the value of its Yuan low and consequently its goods and services will be low.

So the VALUE EQUATION has been skewed/changed heavily. China has been doing this for a decade. Other countries have also and will also do it.

 

About “value” and this is also related to what Erik wrote some time back about efficiency and productivity.

For instance, in the textile industry in North Carolina had 100,000 people with modern machinary producing 3 shirts.

The same thing is being done now by 3 million people in China producing 10 shirts with lot less modern machinary.

So it is not efficiency at all, you are basically using more CHEAP LABOR (more number of people) with less efficient machinary.

Same is the case with IT, you are basically using CHEAP LABOR…not VALUE LABOR.

 

In addition, the whole economic theory behind this based on, buy cheap (from others – foreign goods & services)  and (you) sell high the goods and services you produce.

So if value equation over time balances the value on both sides, as wages increase, your fundamental assumption/equation will break.

You might say not in my life time, so I don’t care.

You have to perpetually keep OTHERS at a lower standard of living in order for others to support YOUR higher standard of living.

If this does not happen by engineering an economic system or through innovations or what ever, we go to war to impose it.

Watch out China might learn the same tactics/strategy from us/US.

 

As said before, if you want to stop wars, start the troop deployment with the politicians & beaurocrats (the guys who make decisions of war on the civilian side) and the generals first.

Similarly, you want to stop offshoring, start with the guys who initiate it.

Both wars and offshoring will stop.

 

 

---

[Rao Dronamraju]

http://news.cnet.com/8301-13772_3-10400362-52.html

 

 

[Ray DePena]

@Tim,

While I worked for a technology company, I didn't hold a technology job per se.

As to the value equation, perhaps.  I'd say that it's more of a cost equation than one of value. 

While we as consumers make cost/quality trade-offs, I saw less evidence of that in outsourcing.  The cost side was scrutinized much more closely, and the quality side barely considered at all.

If you're the type of shopper that always buys lowest price regardless of quality, that would be the analogy.  At least as I experienced and observed it.

As to global rates 'starting to equalize', I don't see that happening for many, many years.  Places like India, China, and Brazil have large populations, and India and China graduate engineers at staggering rates relative to the U.S.  I've heard it said that in something like 10 years China and India will have more engineers than the entire population of the U.S.

10 years ago I heard the same pay 'starting to equalize' comment.  I have no doubt that it will some day, though not anytime soon in my opinion.

-RD

[Jim Starkey]

Erik Sliman wrote:
>
> The other principle I've learned is that new technology doesn't always
> quickly replace old technology despite being a lot better. Object
> database have been superior to relational databases since the mid
> 1990s in performance, scalability and maintenance of complex object
> models. Yet, the market is still dominated by Oracle, DB2 and SQL
> Server and object-relational mapping. Only recently have object
> databases really begun to displace relational. Apply this principle
> to a startup with a high cash burn rate, waiting for their technology
> to become popular. Eventually, they begin to hope a large company
> like IBM will buy them. The two year boom they were hoping for is
> beginning to look a long way off.
>

Could you explain why you think they are superior to relational
databases? And which are the ones that are displacing relational?

Quite a few OO database companies got started during the great OO
bubble, when VCs at OOPSLA outnumbered developers 3:1, but most consumed
their initial investment and died, consolidated, or both. The idea,
however, lingers. Why, I don't know, particularly since the model isn't
well suited to the aggregate operations required for low latency,
distributed access.

One of the great mysteries in computing is why database guys don't "get"
OO programming (virtually all [other] relational systems are written in
what is cynically called C+), and why object guys don't "get" issues of
concurrency control. The JDBC guys did a reasonably good job of trying
to bridge the gap, but seem generally loathed by both camps. Go figure.

Personally, I think that distributed objects are a dandy substrate for
an elastic RDMS. So in one sense, I have a foot in each camp. The
perception from the other camps, however, is that I have neither feet on
the ground at all. Oh, well.

Anyway, it's been sometime since I've a had good OODBMS
proselytization. Please give it your best shot.

[Miha Ahronovitz]

MySQL, for example, had a low end product that
couldn't have succeeded in traditional business models, but had superb
management, intelligent and long sighted investors, and a colossal
amount of luck (right time, right place, a marginally adequate product,
but one they couldn't sell).

Constriction breeds constriction. A small-mind breeds small-thinking. If you don't see enough room, or if you don't see enough opportunity, you're not going to try too hard, if at all.

From outside it seems luck. Sure there is one way to call it. Luck rarely comes if one doesn't believe in it. Being cynical is a result of chronic skepticism and way to embitter our lives... We must have faith in what we do.

Miha

.

[Murray Spork]

Apologies in advance if this link was already posted on this thread (I have
not been paying close enough attention) - but I think Dr Rogers testimony to
a House committee back in 1993 (in response to Clinton plans to stimulate
investment in tech innovation) is still highly relevant to this conversation

http://www.cypress.com/?rID=34993


My favorite quote (from Don Valentine actually)

"To Washington I say, please do not help us. The world of technology is
complex, fast changing, unstructured, and thrives best when individuals are
left alone to be different, creative, and disobedient. Go help the Russians.
They are a Third-World technology state. Go help all the people who know how
Œpork' works, and who want to be taken care of. But please do not help us:
Anyone who thinks corporate taxes promote employment does not understand the
problem."

>> Ray DePeña

[Miha Ahronovitz]

Jim S. writees;

> MySQL, for example, had a low end product that
> couldn't have succeeded in traditional business models, but had superb
> management, intelligent and long sighted investors, and a colossal
> amount of luck (right time, right place, a marginally adequate product,
> but one they couldn't sell).

Constriction breeds constriction. A small-mind breeds small-thinking.
If you don't see enough room, or if you don't see enough opportunity,
you're not going to try too hard, if at all.

From outside it seems luck. Sure there is one way to call it.

Luck rarely comes if one doesn't believe in it. It is circle,like the
chicken and the egg
Being cynical is a result of chronic skepticism." We" see no
opportunities, because we think small.
"We" prefer being comfortable and sarcastic

" Hahahah, look at their far-fetched ideas! How naive, how stupid..."

What made MySQL management superb execution is faith in what they did
and consistency.
F_A_I_T_H. Faith in what one does because the opportunities are so
clear in their eyes.

Miha

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[Rao Dronamraju]

“As to global rates 'starting to equalize', I don't see that happening for many, many years.”

 

It may never happen. If I know that you CANNOT LIVE WITHOUT what I produce and I CAN LIVE WITHOUT what you produce, I have a perpetual revenue producing machine.

True efficiency and productivity comes out of replacing human labor with machine labor.

Replacing 1 person’s work with 10 others is not efficiency or productivity.

 

This is why we (in fact all societies) should spend trillions of dollars in automating all human labor into machine labor. Computers/IT/CC will be the brain behind this.

This way, nobody need depend on any other human being’s labor for their better standard of living.

I know people might call it an utopian idea. But 50 to 100 years back connecting a world with internet/web was utopian. Going to moon or mars was utopian.

 

In addition, imagine the number of jobs it creates.

--
~~~~~
Register Today for Cloud Slam 2010 at http://cloudslam10.com

[Erik Sliman]

@Ray

You sound like you have a realistic plan that could do us good. 

Can you characterize the types of businesses you are imagining?  Service?  Manufacturing?  Which sectors and industries do you think would be ideal? 

I wonder if the new companies would ideally be unique (original idea), or perhaps a development of a repeatable business model (retail, performing a trade, manufacturing).  If the latter, how would they be innovative?

I recently heard the CEO of the company that makes the Tostitos salsa labels, hearing how they were founded in the 1990s with three people and only one press.  They have multiple presses today, millions in revenue, and enjoying healthy growth with their one plant in the heart of America. It was inspiring to learn that the simple model of building a business from the purchase of one machine and building out from there is still possible.   As for innovation, they are enjoying growth with digital printing and newer types of liners, creating a differential advantage over their larger competitors.  Overall, though, I'd describe it as a repeatable business model rather than an innovative one - buy press, make money from it, buy more presses, hire more people.   

How do you believe the model you propose will increase innovation?  I understand the concept of utilizing educational research. I'm just trying to understand what kind of research would benefit startups rather than large corporations. 

Because I've seen software companies born from college projects, I can imagine this working in the software industry.  If that is true, then why not via Web 2.0 collaboration rather than through a college?  JBoss sold for half a billion, and MySQL sold for a billion. 

Erik

[Roland Rambau]

Jan,

Jan Klincewicz schrieb:

> I'm thinking of a neonatal intensive care unit - it's not run by amateurs,
> but pros, until the baby is mature enough for the 1st time parents to take
> home.
>
> Can you think of any intensive care units (or other medical facilities) that
> ARE run by amateurs?

let me just add here that this is NOT due to market forces - the professionalism
of e.g. intensive care units is strictly controlled by regulations and by
quite narrow administrative controls. ( And that is why people from other
countries come to those places where this controls exist. )

> I have several articles of clothing that admonish me
> to "Professionally Dry Clean Only." I have yet to meet an amateur dry
> cleaner.

not so sure here but I also suspect that this is because the handling of those
chemicals in quantity is strictly licensed and controlled ...


So when drawing parallels between computing and this examples, be careful
what you ask for

-- Roland

>
> On Mon, Nov 16, 2009 at 11:47 PM, Ray DePena <ray.d...@gmail.com> wrote:
>
>> Wouldn't it be nice if we (in this group) were truly creative and
>> innovative enough to come up with a model that:
>>
>> 1. Didn't require government or VC funding.
>> 2. Increased the efficiency so that it has a better than 10% survival rate.
>>
>>
>> Perhaps startup factory with specialists that incubate ideas and get them
>> to a more stable infant stage for their owners to run with?
>>
>> -Ray
>>
>> I'm thinking of a neonatal intensive care unit - it's not run by amateurs,
>> but pros, until the baby is mature enough for the 1st time parents to take
>> home.
>>
>>
>> On Mon, Nov 16, 2009 at 5:31 PM, Miha Ahronovitz <mij...@sbcglobal.net>wrote:
>>
>>> Yes. Using financial instruments (note I call them not derivatives) to
>>> finance new start-ups. The Government issues a bond against which VC
>>> companies can guarantee cash for funding say 10,000 new start ups. The
>>> best way out from recession is to have at least 1,000 survivors. It is an
>>> idea many people do not agree, as most people are naturally born risk
>>> averse.
>>>
>>> Ray you can improve my idea, if you propose 100,000 new start ups and
>>> 10,000 survivors :-)
>>>
>>> It would be nice if I had the solution that Greenspan didn't
>>>
>>> :)
>>>

>>> *From:* Ray DePena <ray.d...@gmail.com>
>>>
>>> *To:* cloud-c...@googlegroups.com
>>> *Sent:* Mon, November 16, 2009 3:15:51 PM
>>> *Subject:* Re: [ Cloud Computing ] Cloud to suck money out of market,

>>> Ray DePe�a

>> Ray DePe�a

>> Director, Stealth Startups
>> Strategic Business Advisor
>>
>> http://www.linkedin.com/in/raydepena
>> Sacramento, CA 95630
>> (916) 941-5558
>>
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>
>
>

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