Their mission statement sort of sums it up nicely what they are trying to do.

“To produce the ubiquitous OpenSource Cloud Computing platform that will meet the needs of public and private clouds regardless of size, by being simple to implement and massively scalable.“

As the two (currently identified) deliverables of this initiative they will deliver a OpenStack Compute and OpenStack Storage for companies to provision and manage large private cloud and storage clusters respectively and being generally available by October 2010.

This seems like a amalgamation of Rackspace’s Cloud Files filesystem that it has already been providing to its current customers and NASA’s Nebula Cloud that has been designed to managed large datasets.

Rackspace has been the primary provocateur behind this initiative. Novel as this idea is and I sincerely hope that the industry for once comes together to define a common standard that all of them can stand behind. That said, I think the true motivation behind it might be driven by some of the posture of other bigwigs in the Cloud.

1. Primary among them would be the increasing acceptance of Amazon EC2, S3 APIs as standard, in the absence of one. CEO of Eucalyptus, the first open source cloud vendor, Marten Mikos mentioned as much in his recent panel talk in Structure 2010.
2. The coalition of Cisco, EMC and VMWare, coming up with their Vblock infrastructure building blocks. This coalition is causing more corner office meetings in Armonk, Palo Alto and Redwood Shores.
3. Microsoft Azure getting ever so closer in the review mirror – as I alluded to in my earlier post.

My personal take:

If the cloud, as it is, has caused enough of unknowns to companies, thereby holding them back from embracing it – making it open source just makes it  worse. It still does not resolve the current concerns around security, portability unless the big players come together on standards. CIOs now have to add a few more layers of due-diligence to make an educated decision. Also if Rackspace, Intel, Dell (all B players in Cloud so far) are combating competition, just making something open source does not make it a game changer.

Rackspace has been primarily a public Infrastructure-as-a-Service (IaaS) cloud provider with over 80K+ customers (according to their website) and second only to Amazon Cloud Services.

The pure-play Infrastructure-as-a-Service (IaaS) have run into some roadblocks with security concerns and consequently the Private/Hybrid Cloud rhetoric is gaining a lot of momentum. Rackspace, and so also Amazon, has had to come up with a Private – Dedicated Cloud offering for enterprises that are holding back from crossing the Public Cloud bridge. Without the large enterprises moving to the Cloud, keeping up the current rate of growth is impossible. Private Clouds while it allays the fear to a certain extent leads to diminishing returns in the economies of scale Cloud vendors seek to establish.

The Infrastructure-as-a-Service (IaaS) vendors have also been venturing to move up the stack and build vertically integrated stacks. For e.g. Joyent a pure play IaaS player until recently has started building out its platform to support application development on top of their infrastructure.

Back to the OpenStack initiative. As a optimistic technologist, I would love for this OpenStack group to succeed atleast in forging standards for Clouds.  For that to happen they should bring under their umbrella some of the good work being done by DMTF, Cloud Security Alliance et al, in driving standards for interoperability, portability and security of clouds. Given that Rackspace is a big VMWare partner (lead in the DMTF process), it should not be difficult to fold the DMTF initiative into this OpenStack process.

Currently, the OpenStack is just starting with Cloud Storage and Cloud Compute. Given that this is a open source framework which seemingly will have many more vendors pledging their support would do well to include additional things like

1. APIs to support metering, chargeback for thirdparty billing services.
2. Support industry vertical clouds (healthcare, insurance, retail) and the related compliance mandates.
3. Support standards based Identity Management (OpenID, OAAuth)

Given that HP, Oracle, Google, SAP, IBM, Microsoft have not voiced their allegiance (or not) about this initiative – the success of it is anything but guaranteed at this point.

After being a me-too announcement of a Cloud Computing platform, Microsoft Azure, comprising of both Infrastructure-as-a-Service and Platform-as-a-Service, has seriously changed gears in the recent months. While always being a proponent of the Private/Hybrid Cloud movement, Microsoft has signed partnerships with large software companies and service providers  as shown by their recent announcements

• Infor, 3rd largest business applications company with 70,000 customers across 100 countries,  committing to standardize its cloud offerings on Microsoft Azure
• Ebay, announcing today, that is going to fit its data center with Microsoft Azure appliance
• Dell, HP, Fujitsu to provide Azure Cloud in the data centers they manage.

If I am Amazon.com, Rackspace and also Salesforce.com to an extent, I would be starting to take Microsoft seriously.

Amazon, Rackspace and GoGrid are pure-play Infrastructure-as-a-Service providers. While pure-play infrastructure is appealing initially for its platform agnostic nature, it still requires that customers to do a lot of work. They have to build and maintain their own platform or lease a platform from another platform-as-a-service provider. An application company or an IT organization cannot continue to shoulder the burden of managing disparate service providers, their SLAs and keep getting ping-ponged for solving an issue. In my opinion, eventually these platforms will converge, atleast the infrastructure and platforms. Amazon, Rackspace, GoGrid will have to either acquire one or more platforms and move up the stack to provide a complete platform. SaaSGrid, Engine Yard and LongJump seem like good acquisition candidates for Cloud Infrastructure providers as they move up the stack to platforms across .NET, Ruby on Rails and Java.

Salesforce.com has a different challenge. They have a proprietary platform with a non-industry standard database which creates challenges for companies that build their products on them – as I alluded to in my Platform-as-a-Service post. Also the fact that they might compete on the product side with some of the companies that build product on their platform is  something companies would be vary of. Their recent announcement of the partnership with VMWare addresses the proprietary platform constraint, but we’ll have to wait and see how successful it will be.

So given this, Microsoft, with the cloud cover off its platform, consisting of Tools/SDK for application development, Windows Azure the compute platform, SQL Azure database, AppFabric for Business Process, Identity Management and now Azure Appliance along with the ability to create Hybrid cloud platforms seems ready to rumble. The fact that they will also have support for bare metal VM shortly will open it up for non-microsoft based application as well.

For a company that started out as a furniture reseller (I bet you did not know that !), they made successful transition into memory disk drives and eventually becoming the leader in Network storage platforms. They followed it up with entry into new areas of information management, i.e, Content Management with Documentum and Security Management with RSA acquisitions. In what is considered as a master stroke they acquired VMWare when very few people knew about Virtualization. Now with all the Cloud Computing push the world is into, VMWare is positioned squarely in the middle of it. At this point EMC still retains a majority stake in VMWare. No other technology company including  Cisco , IBM or Oracle, the other serial acquirers, can claim to having successfully integrated and multiplied the potential of an acquisition as has EMC.

Today with Greenplum acquisition, EMC took another major stride. The acquisition gives EMC entry into what is soon becoming a hot area – Cloud based Business Intelligence. Greenplum offers a MapReduce based Datawarehousing and Analytics database based on a PostgreSQL kernel, and a column oriented database designed to work at massive scale on commodity hardware.

MapReduce is a framework designed by Google based on the functional programming constructs of Map and Reduce. The concept behind it is to chop the large datasets into smaller chunks and distribute it across distributed filesystem and assigned to multiple worker nodes and to combine the results to deliver the answer to the original problem. The most popular open source implementation of this concept is the Apache Hadoop MapReduce project.

Greenplum on its website claims amongst its customers  -  Sony, Sears, Skype, Vodafone, Alibaba.com, Nasdaq and interestingly Sun. Although not listed on its website Ebay uses Greenplum for its much publicized multi-petabyte datawarehouse, one of the largest in the world.

This acquisition puts EMC squarely in the cross hairs of Oracle, IBM, Netezza in the database for Datawarehousing. Take that Oracle for getting in Storage business as part of Sun acquisition. This also puts other Cloud DB companies like Vertica, Aster Data, Par Accel on the acquisition block.

In an interesting twist to the story, Greenplum website lists Sun Microsystems as one of its investor (and a customer). With Oracle now owning that investment, makes for a interesting discussion.

Would HP be the next to acquire a DB vendor? Would Oracle acquire another storage vendor to get back at EMC?

Amongst all the hundreds of products Microsoft has, no two products fit in so well with the Cloud as Microsoft BizTalk and Microsoft Identity & Access Management (most widely known as Microsoft Active Directory). Both BizTalk and Active Directory have been unquestionable leaders in their respective space in solving the complex problem of Data Integration and Identity Management respectively. With the world of software becoming more of a niche solution SaaS/ Cloud Services market, if anything, those very  problems of Data Integration and Identity Management has exacerbated. While other products Microsoft is trying to adapt to the world of Cloud are rapidly transitioning, these two, I feel, can really put Microsoft right in the thick of the Cloud movement and make them a critical cloud player.

Microsoft BizTalk started in the early days of B2B data interchange movement  in the late 90s when XML was becoming the de-facto standard for sharing data. BizTalk became the torchbearer for SOAP (Simple Object Access Protocol) and helped companies with complex data integration involving ERP, Manufacturing, Warehouse Management and Financials. The offering evolved over time to include a robust process orchestration framework and support for a large set of standards like EDI, SWIFT, Rosettanet. It could do all those over HTTP/HTTPS without needing expensive proprietary networks and do so across heterogeneous technologies. Look at the SaaS/Cloud landscape now. Almost every solution adoption essentially includes data integration to other SaaS/Cloud applications or on-premise solutions. With Microsoft not extending its  pre-Cloud leadership into cloud small vendors like Boomi, Cast Iron Systems have been able to get some traction in the large data integration market. The IBM acquisition of Cast Iron further illustrates the critical nature data integration has assumed in the new Cloud-based scheme of things.

Microsoft Active Directory on the other hand has been synonymous with the whole Identity Management/Directory Services space – much like Band-Aid has been for adhesive bandages. Regulatory Mandates like SOX, PCI-DSS, Segregation of Duties have made Identity Management an imperative. Majority of the Global 5000 companies have Active Directory deployed to govern their Access and Identity Management across their global enterprise. With the ability to define Sites, Trees (cluster of sites) and Forests (cluster of trees) to model large hierarchical organizations into domains, sub-domains and assign and manage access policies. Although they started with Windows based networks, they eventually expanded to support Unix based platforms as well. Active Directory has prominently figured as a prime candidate in any/all Identity Management technology RFPs. In most cases, it has not been a question of if it was a good fit, it was more a question of if it affordable? Incidentally, that is one of the fundamental premise of most Cloud based offerings – taking solutions that were until now only affordable by large companies and making them available to small and medium businesses by leveraging economies of scale. With increasing number of Cloud based vendors supporting SAML/SPML based authentication/provisioning and allowing companies to centralize their authentication, extending their corporate Identity Management solution to incorporate Cloud based offerings. Without Microsoft eager to step in has allowed smaller companies like Symplified, Ping Identity, Conformity to position themselves as the leaders in this critical market.

So Microsoft – here is a market that is begging to be served and yours to lose. While you still have work to do to make your to Azure Platform, Business Applications, Office Suite widely adopted in Cloud, BizTalk and Active Directory are the need of the hour and are ready to go. So waste no more time – let them free and watch them soar in Cloud.

In my discussion with Sinclair Schuller, the CEO of Apprenda, a couple of weeks ago, it became clear that they were going to do everything at their end to move the needle in terms of getting increased SaaS adoption. He strongly felt that this would encourage the ISV community looking to build SaaS applications to take the plunge. I think it is a great strategy accelerate the adoption of this platform and validate their offering.

SaaSGrid over the last year has continuously demonstrated their agility in making the necessary course corrections to their strategy inline with the evolution of the nascent Cloud Computing world.They started out as a pure-play SaaS Platform-as-a-Service for .NET applications. They then went on to add robust multi-tenancy capability, usage tracking and billing to the core platform. ISVs could then just focus on their core competency – i.e., building their product and serving their customers. To accommodate the varying needs across ISVs they expanded the delivery to model to include a platform-to-go. In doing so they have essentially made their platform agnostic to the underlying Infrastructure provider and affording their clients the ability to switch infrastructure providers (Amazon EC2, Rackspace or even Azure) without having to change their code. And for those that are not yet ready or have constraints using Public Cloud, they could take the same platform and build a SaaS application run it in their Private Cloud until such time.

The goal behind releasing SaaSGrid Express, as Schuller tells me, is to allow small companies start building their product, do private betas and start generating revenue with no overhead of platform licensing costs. And then when they think they are ready to support a large customer base they can transition to the flagship SaaSGrid platform.

One of the big challenges with Platform-as-a-Service offerings has been the lack of easy migration path for the existing applications to Cloud without rewriting a significant chunk of it. Vendors like SaaSGrid seem to have recognized the issue, and the consequential resistance to adoption, and are fast bridging that gap with capabilities around multi-tenancy conversion, in-built usage tracking, infrastructure vendor neutrality and providing them with ability to deploy existing on-premise in cloud.

What next?

While Apprenda has been primarily focused on ISVs in their messaging and focus, I think the whole legacy applications owned by IT organizations presents a large opportunity in the non-COTS applications world. Application Platform on the .NET side has been the sole domain of Microsoft until now. But as Microsoft continues to struggle to get meaningful traction on its Azure strategy, Apprenda would do well to take a leaf out of the books of the open source vendors like SpringSource and JBoss and build an engaging community around the platform. Starting with this community edition product announcement foster an ecosystem that will accelerate, evangelize and add to the footprint of the platform.

Download SaaSGrid Express on the Apprenda site.

SaaS companies, it seems like, took the easy route and started using the model that has been a staple of hardware industry (100GB hard disk costs $50 and 500GB costs $100) or the Storage Container vendors (100sqft – $10/month, 250sqft – $25/month). It worked great for hard-disk vendors as they operate in volume business, the more SKUs they sell the more money they make. Hard-disks have limited shelf-life, SaaS software is different. Also it is fine if you want to be in the commodity storage business like the cloud-based storage vendor Amazon S3. With SaaS, it is not so much the software that your are selling, it is the relationship. You are essentially a trading partner who the client relies on to run his business. The last thing SaaS vendors want to do is to look like wireless service providers – bargain basement prices for initial storage quota then the overages kicking in.

With that said, what should the SaaS company do with all the costs incurred? Should they absorb them as Cost-of-Goods Sold (COGS)?

Tactically, yes. They are COGS that need to be absorbed, but I take a different view and look at it as an investment. For one, you take one thing off the contract that the client has to constantly keep track of to avoid being slammed by overages. This, if anything, will allow them to use the system unfettered. The SaaS sales is predicated on the land-and-expand model, where you sign customers up for a small subset of use-cases that you can solve, while continuing to sell the long term vision. This keeps your sales cycle small and also affords a quick ROI for customers. With that as key focus, the last thing you want is, for customers to use your system partially and conduct business offline or in another application.

I would strongly encourage SaaS vendors to take a leaf out of the large malls operators’ thinking – they ensure abundant free parking and let customers spend as much time at the mall as they wish. The more time they spend at the mall, the more the cash counters ring. Last thing they want is customers going to another mall just because they could not find parking space.

So how could a SaaS vendor benefit from relaxing space quotas ? ( Did I mention I have a particular disgust for this word? Coming from India where every job opportunity, school admission, membership has caste based quotas perpetuated by politicians in lieu of vote banks) .

Here are some strategies to adopt.

1. One of the key advantages of going to a SaaS model is the continuous access to the user behavior that it affords. If you have lived through the old on-premise build-and-throw-across-the-wall model, you can appreciate the value of having access to the end customer without filters. You are not just going to have access to customers, you are also going to see what they are doing as opposed to what they think they are doing. This is a product manager’s dream. To draw upon the user’s behavior to determine the roadmap. So measure, monitor and rationalize the usage. You will find nuggets of information that will help you identify revenue opportunities in your product that will more than compensate for the lost space costs.
2. As an extension to 1, based on the data insights, introduce features like Surveys, Viral marketing opportunities to increase engagement, increase demand for your products. Your marketing team might be paying millions to get this kind of information to base their campaigns. No better source that the user community that is already using the system. Engage with the users based on the view you get to conduct Day-in-a-life, Case Studies, ROI studies. All these are real proof for the value your system delivers resulting in increased demand.
3. Companies are still document happy as it is the most easily transportable container of information. So don’t be surprised if you see companies consuming a lot of space quota (spare the itch to bill them for it) using documents in lieu of using the application to its fullest. Identify the causes and there might be additional opportunities to expand your product footprint.
4. Identify the value that your customers can derive from aggregate information across their industry or target industry. The more the usage, the more diversity in the data you will see. Unless you are one of those expense or task management applications (sorry no disrespect). Diverse data gives you good basis to make product decisions.
5. Guess what people would want when the data gets un-manageable?. Tools and capabilities to mine them. There is the opportunity to build out new high value capabilities (and upsell – Ka-Ching!) that could bring new user-base into your application. Think Executive Dashboards. If you did not know, the corner offices pay big bucks for everything. If you don’t believe me ask – Dennis Kozlowski and John Thain.

That is my rant on this topic. Would love to hear what others think. I would be happy to discuss more in detail with anyone interested.

With all the talk about the cloud, and an increasing understanding of its value and importance, there are elementary steps that must be taken before migrating your application to the cloud. For advanced developers, these may seem second nature, but with today’s technological platforms that enable easy migration, it has now become possible for beginner and intermediate developers to use the cloud. These tips can be beneficial for them.

1. Is your app a web app? It sounds basic, but before you migrate to the web, you need to make sure that your application is a web application. Today, there are simple tools that can easily convert it, but make sure to convert it.
2. Is your app native .NET/Java? Before you start to migrate your app to the cloud, understand what it is you are transferring and the technological aspects of it. This is important because you need to know which clouds support your stack of technologies.
3. Do you use any interop to other technologies? Prepare yourself. If you do use any interop, it is important to make sure that those technologies are also supported by the cloud you are targeting
4. What database type do you use? When you are planning to migrate, make sure that the target cloud can support the database you are using. If not, can you change the database? Alternatively, you can consider running the application on the cloud and connect to an on-premise database; some DB vendors already support securing these channels.
5. What kind of management/monitoring tools do you use on your app? This is particularly important to check if your app was not originally a web app. Not all management and monitoring tools can be used on the web (and even more so, not on the cloud), so confirm this before you start. If your tools are not web-compatible, can you recreate them for the web?
6. Can you assess the costs of cloud deployment of your app? Costs are an important factor when considering migrating to the cloud. Explore whether you can optimize your costs. For example, what are the payable elements on this specific cloud and will you be able to optimize those elements to maintain the lowest possible costs? Some will try to scare you away from the cloud with fore-warnings of high costs, but there are cost-effective ways to use the cloud.
7. Determine the security risks that cloud deployment will reveal. There are two steps to this. First, review the provider’s regulations and trust level. Second, know that security hazards can be created by making the client available from any PC that is connected to the web.
8. Upgrade costs. Figure out what the costs and technical implications of upgrading your app are, as well as changing it after deployment.
9. Flexibility and transferability. Have you checked if you will be able to move between cloud providers? Are you locked into a specific provider after the app is deployed? Sometimes, when choosing a specific cloud platform, you have to make adjustments to fit their specifications. This may put restrictions on your ability to transfer to another cloud platform.
10. Scalability and redundancy capabilities. Are you able to provide full dynamic scalability and redundancy capabilities to the server parts of your app? It is important to realize that these are directly affected by the technologies that you use, and their ability to scale. When it comes to ability to scale, if you cannot scale dynamically, you simply can’t move to the cloud.

These are only some of the important concerns you should review after you have decided to step onto the cloud, but before you begin the migration.

___________________________________________________________________________________

Guest Author: Chevy Weiss
Thanks to Itzik Spitzen of http://www.visualwebgui.com for assisting with this post.

Ning provides companies and organizations easy tools and platform to create white label social communities without having the need to understand and work on the plumbing that goes towards getting the site up and running. Armed with 100+ million dollars in venture funding and the backing of Marc Andreesen, this company made waves much before Facebook came around, only to be overshadowed since. They started with the Freemium model allowing people to setup up communities for free with an ad supported model. Organizations that wanted their own custom domain, flexibility and more capacity could then graduate to a tiered paid model.

Freemium, according to Wikipedia, is a business model that works by offering basic Web services, or a basic download-able digital product, for free, while charging a premium for advanced or special features.

The term “Freemium” was first coined by Fred Wilson on Union Square Ventures back in 2006 and the business model draws from its pre-cursor from client server world – “shareware”. There are some very successful businesses bootstrapped by the freemium model – like YouSendIt, AVG Anti-Virus, Evernote, Skype, Google Apps, Dropbox, Freshbooks to name a few.

A Freemium model is best characterized by the following strategies.

1. Keep the free version easy, self-service based and clearly defined. Having multiple criteria to determine what is free version with kickers for overages creates hurdles for viral growth.
2. While the free version allows you to build relationship with users, ensure it adds very little overhead to the vendor’s organization in terms of support. Keeping the cost-of-service low for free version is absolutely essential.
3. Freemium IS your marketing. What you would otherwise be spending on marketing is being spent in the form of offering free version and should replace any needs for extensive advertisements. Provide as many avenue as possible for users to spread the word about your service.
4. Monitor, Measure and ensure free customers are using the application frequently. The more they use it the more their dependence on the application and more the chances of their graduating to the paid service. Not to mention the increased chances that they will share it with their friends/colleagues. Conversely, having a lot of casual free users is just an overhead. You still have to manage, maintain their data for no real benefit.

So why then would Ning terminate their free version? Just when you think, with a track record of few years behind them, their marketing machinery (read mind-share) would have started bringing in new customers and the conversion rates of incumbent free customers to paid ones. Apparently not.

One could also argue that it was wrong to pull the rug from under the unsuspecting customers who signed on entirely for what was advertised as free and were happy with it. The responses to the announcement allude to the fact. One of the fundamental tenets of a premium model is to keep the free version consistently lest customers would loose belief in this model and create a lasting reminder when choosing another freemium offering. It is one thing to eliminate the free version if you are a Anti-virus or Spyware, but completely different when you have customers/companies who have built their community, mind-share not to mention all the data. Now their only choice is to pay-up or go elsewhere minus all their discussions, interactions.

That said, the company is under obligation to right by the investors and do whatever it takes to become profitable and eventually generate the returns for the investors. Also it is not a crime to ask for people to pay for service that are truly benefiting from.

In my view, the biggest problem with Ning using the freemium model was that they were trying solving too big of a problem. Add to that the fact that they allowed anyone and everyone to build networks. While it is great to just get virality but very tough to do customer segmentation. Freemium works best when the problem is simple and contained – think YouSendIt. When the success of your solution involves care-and-feeding by casual user stakeholders it is a recipe for success-by-meandering.

Here are somethings I would do if I were the person responsible for strategy.

1. Ning is not Facebook. So now that you have realized that going after casual users who setup a network to share their photos of picnics and road trips, is not good business, focus your attention to communities in real world. Let Yahoo Groups take all that not so useful groups. There are lot of non-profits, trade associations, professional groups that do a lot of collaboration and would need communities to engage with their “customers” (customers here is used in broad sense). Sell to them to get them on-board and help them engage with all their constituents.
2. Every company worth their salt (and understands the true meaning of marketing) is looking for ways to socially engage with their customers, partners, you name it. Target them for your white label community offering – while you continue to amass the data and create potential for aggregate mining in future. If they cannot afford to have people to manage, curate them, offer them services. VAR partnerships can be great here.
3. Setup broader communities that you manage yourself. These could be for causes like “Breast Cancer Awareness”, “Grassroots Financial Education” and recruit experts in the field to contribute. Hold on-line webinars, broadcasts that will pull captive audiences in. This is the platform that Facebook should be and is not.

What do you think? Would love to hear.

Startups today have no IT infrastructure of their own. They are lean, agile, and small. They work virtually using applications that are hosted in the Cloud. According to Wikipedia, a typical Cloud Computing provider deliver common business applications online which are accessed from another web service or software like a web browser, while the software and data are stored on servers.

You can crank up your startup idea over a weekend and automate every essential function of the business by using services in the Cloud. Here is a blueprint on how to achieve utopia:

Email

Email is the heartbeat of a business. In the past, it used to take businesses weeks to buy licenses, setup mail servers, troubleshoot email delivery issues etc. Or, most of the startups would buy shared hosting from a hosting provider and then host their mails with them. This proved to be marginally better than hosting it yourself but still clunky. Today, your startup can just sign-up with Google Apps. Setting up takes a few hours and you get a Gmail-like interface (including a host of collaboration tools) to run your corporate email. Smooth, fast and hassle-free.

Website/ Blog/ Analytics

Setting up a website in the past included buying a domain, server space and then working with a designer, web developer to design the website. Today, with WordPress, Posterous, Tumblr, TypePad and SquareSpace, hosting, designing and developing a website is all self-service even for the non-technically. Signup with a service, choose a theme from a catalog of themes provided and start updating your new site right from your browser! These services also provide you to the ability run Google Analytics to track and analyze traffic to your site, so you know exactly what people are doing on your site or where have they come from? If you are savvy, Google Webmaster toolset can help you optimize your site for search (SEO).

Leads/ Sales

Online CRM tools like Salesforce, BatchBook, Zoho CRM let you keep a track of your leads, prospects, customers, sales and all communications that you have with prospects and customers. You might not have a sales team when starting out, but having a CRM application will truly help your startup get organized and streamlined from day one where tracking each lead-to-sale can be crucial. The more details you capture along this process, the more insights you get into what you can do better.

Work Management/Collaboration

Startup days are crazy. There are always more things to do than the number of resources you have to do them. A tool to organize, manage and track your internal work and projects can go a long way to reduce chaos. Tools like DeskAway help you streamline work amongst teams and adds accountability, control and transparency when working with virtual teams. With dashboards, alerts you can run projects in a much more agile way.

Storage/Backup

With so much information being produced each day in the form of documents, images, presentations, spreadsheets etc. you need an easy way to store your media assets. As a startup you might be working virtually and need access to all your files from anywhere. With a service like DropBox you get storage space on the Internet and you can keeep all your computers, laptops in sync with the latest files and documents. Think of it as your virtual hard-drive.

Marketing

You have setup your systems and so now is the time to spread the word and drive mind share to your business. With tools like Twitter, Facebook and LinkedIn, YouTube it has become really easy to spread your message and build relationships from the very moment you start your business. You don’t need deep pockets or an expensive agency to walk you through participating on social networks. If people love what you do, they will tell their friends who inturn will tell theirs. The viral nature of these social networks makes it extremely powerful to spread your message and drive leads for your business. The key skill is in listening, tracking what people are saying about your industry, brand, product or service and then engaging with them over time. Tools like HubSpot help your business get found by people on the Internet and help you do inbound marketing.

With these cloud-based services in your arsenal your startup team now can easily spend the time envisioning and growing your business rather than setting up software, configuring, troubleshooting servers or spending scarce capital on archaic marketing activities.

And before you knew it, your idea will have grown into a viable business on Cloud 9.

The 4 day event was kicked off with the Business Summit. Bruce Richardson, the newly minted Chief Strategy Officer and rapidly becoming the face of Infor, kicked things off with the Keynote. Bruce had interesting observations as he looked at the Cloud Computing landscape and saw that the fragmentation today with hundreds (if not thousands) of me-too offerings will eventually consolidate to industry dictum – “Every market comes down to 3 vendors.” In the end the Business Summit turned out to be the best part of the event.

Sandhill.com presented the results from the survey they conducted on what was behind the stupendous success of Cloud Computing and what do executives in companies see in future. As you can imagine and we have been saying “Cost was not the key driver” for the success of Cloud. It was in-fact the agility it gives companies in adapting to business changes. Cost did show up in the list but was a distant third. The companies also so Software-as-a-Service(SaaS) as something that has already made its mark while Platform-as-a-Service(PaaS) represents the big opportunity and Infrastructure-as-a-Service(IaaS) as a given.

Two topics that were oft heard in any cloud computing meetings around the world  – Private Cloud and Virtualization – were also clear cut favorites to dominate the discussions. Private Cloud definitely did but Virtualization not so much. Maybe Infrastructure-as-a-Service not making a lot of noise in the conference might have something to do with it.

Private/Hybrid cloud was by far the most heard topic in the CloudConnect with its Yay and Naysayers convincing the other side of their reasoning. If you followed the twitter stream of CloudConnect (#ccevent) you would have seen that lot of keynotes just turned out to be a vendor pitches – with the usual suspects – Microsoft, Oracle turning in their version and interpretation of Cloud. Notable absentees from the conference were Salesforce.com, Google, Cisco, VMWare – the ones you would have thought would be dominating the whole conference with banners, booth, uniformed booth personnel etc. Sans a couple of sessions by some middle management executives from those companies there was not much fanfare from any of those horses of Cloud Computing – Surprising eh?

Virtualization, surprisingly I might add, grabbed substantially less attention. From the people I talked it seemed like (and I concur) – virtualization is something you do with or without cloud computing. For a SaaS vendor with its own data center or colo, virtualization does provide a way to optimize hosting multiple customers without having to go the Multi-tenancy route.

There were some good (and funny) presentations around the vicious (and smart) BOTnets and how that could serve as a design pattern for true cloud computing. So were some other initiatives in the Government space.

There were some really good sessions around Moving to the Cloud, Building Applications in Cloud (particularly the ones by Amazon.com), Handling Large Data, Privacy, Security, Governance.

The Expo was a little bit of a downer as there was not much interesting out there. But then again, it did not matter, I guess, since it was compensated by a lot of great sessions.

Let us start with examining the raison d’etre of Open Source. Open Source made its entry with a bang with the introduction of Linux operating system. These were the days when Unix vendors and Microsoft were doing very little innovation besides suing each other and banking large license deals. Linux represented the rebellion against the proprietary operating system vendors and put the power in the hands of the masses to innovate and contribute towards a larger goal that each of them by themselves would not have been able to accomplish. The appeal of a free operating system with inexpensive support (or no support if you were brave enough to lean on the community) was just what the doctor had ordered. It was the equivalent of generics in the world of pharmaceuticals – just-as-good but at one-third the cost. The fact that Linux would work on commodity hardware amounted to double dipping for companies. Cost Reduction++.

Despite starting off as a low-end pretender to the incumbents, thanks to the rate of innovation Linux has caught up with all the high end operating systems – some would even say it is better. The success of linux opened the floodgates of open source offerings in all area like databases (MySQL, PostgreSQL), System Management Tools (Nagios, Zenoss), Content Management (Alfresco, Drupal) and even to mission critical business applications (Compiere, SugarCRM, Apache OFBiz). Not limiting itself to end products, Open Source has since moved into platforms (Apache, JBoss, LAMP, Zend) upon which ISVs or IT shops have built their products.

So far so good. Open Source was on cruise-control seemingly crossing more frontiers.

Then came the SaaS wave. SaaS posited that it was absurd for companies in the non-technology business to each spend large amounts of resources and manage their own IT infrastructure. Companies were better off focusing on their core business and leave IT Management to the experts. They also proposed hosting and managing software and letting companies use them in a subscription-based model, thereby helping companies manage their ballooning IT spend. After the initial spurn, the world seems to have come around and accepted the notion of SaaS. Armed with economies of scale through multi-tenancy, virtualization (the coincidental wide adoption of broadband), SaaS is now providing solutions ranging from edge apps like Email (Google Apps), Sales Management (Salesforce.com) to business critical applications like Financial Management (Intacct), ERP(Netsuite), Human Capital Management(SuccessFactors,Workday, Taleo), Product Lifecycle Management (Arena Solutions), Security(Symantec), Identity Management (Symplified).

With SaaS, companies/customers need to concern themselves only with the service availability and forgo the IT nightmare. No more software license, upgrades, maintenance, army of IT people, backups. All that is packaged into a single subscription fee paid on a as-used basis.

Riding on the coattails of SaaS, its brethren – Infrastructure-as-a-Service and Platform-as-a-Service are now wooing outlier custom projects onto pay-as-you-go, focus-on-your-core-business platforms. They take away the complexity in the infrastructure and technology platform giving you the similar benefits as SaaS.

What does all this mean to Open Source? Does this mean the target customer base for open source companies would soon be dwindle down to the SaaS ISVs, PaaS vendors?

The biggest challenge dealt to Open Source by SaaS would be that with Open Source, while the costs of licensing and maintenance are reduced, companies will still bear the responsibilities of building their own solutions and maintenance. This would mean that companies need to continue to spend on maintaining large IT resource pool and deal with the vagarities of complex technology integration. The entire premise of SaaS hits at this very pain.

That said, if you are a CEO of a Open Source company, you should not be immediately concerned about customer base seemingly dwindling with every gain of market share by SaaS/PaaS vendors. At the same time here are three things to think about

1. Open Source represents the single biggest large collaboration, crowd-sourcing based successful innovation models of our times. There are many other industries trying to borrow what-has-worked in Open Source and apply it to their industries. So while many open source companies are looking to cash out selling themselves to proprietary vendors (MySQL, Xen, SpringSource.. the list goes on), it serves you well to keep expanding the engagement with community and serving their interests. There will be a open source shakeout – lot of “gimmicky” open source vendors who just have a useless community edition product will wither away. The longer you can keep your innovation going, the more longer you will be viable.
2. Consider having a SaaS (or atleast a hosted subscription service) for your Open Source application. Software technologies will only be delivered through subscription in 5-10 years from now. Use this time to establish that presence while you still have a license business.
3. Join hands with other Open Source vendors and create platforms/applications that are integrated and easy to consume and maintain. This should not just be limited to technology integration but also in the areas of upgrades, support and documentation. RedHat has done a great job in integrating all their offerings into the JBoss Suite and reducing the complexity for their customers. Doing this will address both the value delivered by PaaS and the overhead requirements that customers have today in stitching together multiple open source offerings. I see a future where co-operative platforms where multiple vendors contribute to make up the platform and its ongoing success.

The idea of this is to create discussion from both the Open Source and SaaS/PaaS die-hards. Like it or not, if you look further ahead, this is head-to-head is going to happen, no way around it.

The challenge of coming up with a SaaS incarnation when you have a established on-premise customer base is nothing short of what the Big Three Auto manufacturers are going through in re-inventing themselves. The entire thinking software design to delivery and maintenance changes. I will take a look at some of the key challenges and potential solutions.

Lay of the Land

Let us start with a look at a the footprint of a typical large on-premise application deployment.

• Global 2000 company with global deployment of a suite or integrate set of applications covering Financial Management, Supply Chain Management, Human Capital Management and Customer Relationship Management besides some industry specific vertical applications.
• Extensive customizations, localizations, integrations to other applications
• Reporting infrastructure supported by a large data warehouse or some form of redundant data store with aggregated data from one or more sources.
• Company specific security implementation to meet the governance mandates.
• Scalability related deployments like WAN Optimization, Caching, Replication.
• 5-10yrs of historical data.
• All of these managed over private hardware infrastructure that needs large upfront investment and ongoing care-and-feeding.

Just so we get a true sense for what they are up against by establishing the key characteristics of a SaaS application. Granted, the definition of SaaS along with Cloud Computing, Web 2.0 form the troika of terms that have had a hundred interpretations, if not more. But in my mind a true SaaS application would have the following characteristics

1. Single Code base shared across all customers
2. Multi-Tenancy architecture to host all customers in a single instance.
3. Blue-prints/Templates to facilitate rapid on-ramp of new customers.
4. Self Service Administration model
5. Framework to easily integrate external applications
6. Framework to move data from existing applications in bulk

The Challenge

The incumbents see the on-coming SaaS train shaking the very foundation of guaranteed maintenance revenues. In the face of mounting pressure from customers to reduce TCO and also to combat lost sales to upstart SaaS vendors, are responding to this challenge is different ways.

• Some have gone onto create a new product, albeit scaled down version with limited success.
• Some have sprinkled some web-based services to their on-premise offering and claimed victory with some marketing around it.
• Some have just plain made claims that their products have been designed as SaaS from the ground.

To me all this is posturing in deferring the inevitable. They all know SaaS is here to stay (Sorry for ruining your wish Harry) and the on-premise gravy train has run its course and entering its last leg. If the recent customer pushback to a SAP’s one-price-fits-all maintenance contract (driven increase) is any indication, customers are clearly sending the message that they are tired of bearing all the risks, overheads and whims of software vendors.

The Journey

Different companies have embarked on this journey in different ways. There are companies like SAP and Callidus who have created a alternate line of products for SaaS and along with it came a parallel organization who will invariably end up competing against each other. Then there are companies like Oracle, Infor who are re-architecting existing products or new version of their products to support both models. While this seems like nirvana, it is rife with challenges.

Business Model: The foundation of any business is its business model. Moving from a license model based company to a subscription based model creates ripples in the business model. It creates challenging questions around the R&D budgets, revenue streams, revenue recognition and cost of sales as they are going to be dramatically different from what it is in the on-premise world. It is easy to just hope that this Cloud/SaaS stuff would go away.

Sales: Of all people, Sales will have a rude awakening. There will no longer be those front loaded large contracts that will bring in big commissions. SaaS deals are going to be much smaller in size to begin with and then ramp over time. Save for some exceptions like Flextronics deal for Workday or GE deal for Aravo, deal sizes are going to come down a notch from millions to thousands. Just so SaaS sales does not cannibalize the maintenance revenue “gravy train” from existing on-premise customers, they will be out of bounds for SaaS sales team. Hunter & Farmer model, if adopted, will create more heartache for sales guys. They will not be able to engage with customers after the initial sale as they do now.

Marketing: Marketing will no longer be the “all vapor no results” and now unwillingly be bed fellows with sales. Their activities will be scrutinized and tied to ROI more so than ever before. Budgets will be constrained unlike days of the past. As I explained in my post scope of marketing will now expand from demand gen activities to lead qualification and the primary goal would be reduce sales cycle. Webinars, online marketing campaigns, customer/partner communities, customer engagement assume critical nature.

Partners: System Integrators in the good old days would take a product that does not really fit the real needs of the customer would make it work by customizations, integrations, migrations – all for a lowly price of some million dollars. If you had just recovered from the sticker shock of the product, the after shock from SI would enough to make you dig deep into your IT budgets. Now with SaaS, the provider takes onus for many a activity that a SI would have performed. Customers expect the try-before-you-buy deal during which they expect to spend very little, if at all. As a SaaS vendor, you are expected to have integration APIs, Web Services that connect to their in-house apps or other Cloud based apps. This also puts onus on you to have a more finished product and eliminates a shield that SIs provided for product issues in the past.

Product Architecture: This to me is the most under-estimated issue. To say,  “Our architecture is designed from ground up to work for on-premise as well as SaaS” is gross underestimation of the challenge. Just stripping the database for multi-tenancy architecture while essential, makes not a product SaaS ready. Here are things you need to factor in

• You are now going to be responsible for scaling of the application, fail-over, almost zero-downtime maintenance, all this while one issue is enough to cause most, if not all, customers to be at your throat.
• You will have to continuously tweak a single deployment to adapt to the varying workloads in terms of volume, user habits, areas of the application usage, geography.
• If you said, same product will work for both sets of customers, on-premise and SaaS, brace yourself. You will have two sets of customers each expecting different rates of change. Having a product team go full throttle once and hunker down another time is easier said that done. Remember – they say in Good Driver guide – Rapid Acceleration and Sudden Slow Down might not get you where you want to go faster, but it guarantees damage to the engine.
• If you had two different teams for building SaaS and On-premise, then you are dealing with fragmentation of knowledge and skills. Domain experts will now need to stretch themselves to meet the needs of two teams.

Operations: This is a completely new area for a software company. If internal Development Operations was challenging enough, now you are dealing with Data Center challenges, Redundancy, Disaster Recovery, Intrusion Detection, SAS-70 Audits and constant demands from sales team to support them in sales cycle allaying fears of customers. The SLAs asked of you would put you on the hot seat while the budget constraints will continue to ask more of your for less.

Support: In general, the customer support of most enterprise software companies is ordinary at best. Customers are left to fend for themselves and at the mercy of System Integrators, IT Consultants and Community Q&A forums. This in addition to the small army of IT resources in-house. With SaaS, the support tiers suddenly collapse. Vendor is now becomes the helpdesk for not just product issues but also for its availability and performance SLAs. It would be in your own interest to make the product as much self-service as possible to alleviate the strain it is going to put on your support. Fostering a vibrant community to support itself via community owned product documentation, how-tos, case studies would go a long way.

Roadmap: No not the product roadmap, the company roadmap. There is no way a company can keep going with two product lines that demand such divergent needs of the company. There should be plans for the product lines to converge and so also the plan to move customers over to SaaS. While SaaS would continue to drain a lot of money upfront for infrastructure investments while on-premise gravy train continues to fund it. But this can go only for so long. Ask Callidus Software that embarked on such journey as to the amount of (financial) stress it put on them for some quarters.

A few companies like Infor, Plex seem to have made the transition or almost there. It will be interesting to see how this journey shapes up for SAP, Oracle and how they transition from old to new.   While the ever growing list of upstart brand new SaaS startup with no baggage keep creeping into their customer base.

To give you good sense of what Platform-as-a-Service would mean I will start with an analogy with a relevant topic.

Say you are FremantleMedia and you are in the business of producing and hosting American Idol. Since your core business is creating and delivering an entertainment programs, building and owning an auditorium/theater probably figures last in your list. Your other choice is to rent the Kodak Theater. With your rental comes all the necessary components you need to create and deliver the show – namely the  studio, the podium, the green room, A/V system, the lighting, the chairs, the ticket booth, the tiered seating, the rest rooms, parking lot.. you get the idea. It even comes with accommodations for the different classes of audience (Think customer segments) children, aged, families, physically disabled audience. So you did what your core competency was created, delivered the program in the theater. You did not have to go through the hassle of building a theater, owning it and incurring the overhead of managing and maintaining it. The theater by itself, might have turned to the electric utility, water district, security companies for delivering the various needs you might have needed. But all that came as a package as part of renting the theater.

Platform-as-a-Service seeks to deliver a similar experience to companies using and creating web based applications, to meet their business needs.

Platform-as-a-Service (PaaS) at its core comprises of a computing platform that facilitates the development and deployment of web application without requiring companies to build, configure and maintain the infrastructure that hosts it.

A best-in-class Platform-as-a-Service must include

1. Application Development Technology Framework: A robust application development technology framework built on a technology that is widely used. Most widely used technology frameworks are built on J2EE, .NET, PHP. The framework must support the management of the entire application lifecycle of design, development, testing, delivery, change control and update of software applications.
2. Ease-of-Use: One of the key selling points of Cloud Computing is that the complexity gets masked from the clients. So PaaS should be no different. A Platform-as-a-Service should come with easy to use WYSIWIG tools with pre-built widgets, canned UI components, drag-and-drop tools and support for some standard IDEs. Eclipse, NetBeans, InteliJ to name a few. It should facilitate rapid, iterative Application Development.
3. Business Process Modeling: A strong business process modeling framework that allows you model your business process and build the application around it. Remember, the new age applications should be built using model-driven, agile methodologies to afford you the ability to quickly adapt to the rapidly changing dynamics in a global business landscape. A good platform must support robust digital and human workflow capabilities and allow for rich collaboration as part of the business transactions that would be conducted in the application.
4. Ubiquitous: Companies these days have extended workforce in the far extremes of the world and they operate round the clock. The platform of choice should be accessible and available (at acceptable service levels).
5. Scalable: Businesses are dynamic and the workforce is elastic with all the M&As, divestitures. The platform should be smart enough to leverage the elastic capacity from the underlying infrastructure, when put under stress of  volume data and/or user load. In addition, it should also address the needs around State Management, Persistence, Caching, Localization, Accessibility, Cross Browser support while abstracting it from the application development team.
6. Adaptive: Technologies change by the day. Mobile is increasingly becoming platform to deliver atomic services. A best-in-class PaaS should provide ability to develop an application and deliver it on multiple run time platforms besides web. Mobile and Rich Client capabilities are becoming increasingly the norm.
7. Secure: Should I say more? The more things we push on the internet the more we offer to the hackers. To effectively combat the threats, the platform should address things like Cross-site scripting, SQL Injection, Denial of Service, Encryption of traffic and make it ingrained into the application development. Additionally the platform must support  single sign-0n capabilities for you to be integrate with your other on-premise applications or any cloud applications.
8. Inclusive: The platform should provide the ability to include/embed/integrate other applications built on the same platform or others. In fact, support for integrating to third party services using REST, Web Services or any other RPCs should be built in should be a minimum requirement in evaluating Platforms.
9. Portable: Business dynamics change and there is a distinct possibility that you might want to move your application from one Infrastructure-as-a-Service provider to another that your acquirer has standardized on. The platform should be agnostic to the underlying infrastructure and allow companies to move the application to another infrastructure. This might also be the case as you scale from a smaller vendor to a larger vendor as your business goes from being a million dollar company to a billion dollar company.
10. On-board Tools: Considering that most companies transition existing applications to the platform, it is fair to assume that they would also like to bring a subset of data with them. To easily and quickly migrate data over from the legacy on-premise application to the application based on Platform, bulk import, transformation tools would be a necessary part of the toolkit that comes with the platform.

PaaS Landscape

If you look at the current landscape, you will find two sets of players – the big kahunas in  Force.com, Microsoft Azure , Google App Engine and some niche nimble successful smaller ones like LongJump, Engine Yard and SaaSGrid.

Who needs it?

The two key consumers of Platform-as-a-Service would be

1. Small ISVs/Startups who work under tight budgets and scant resources. They cannot afford to invest in a dedicated team building a platform. Since majority of them operate on a atomic idea and opportunity window, time to market is critical for them. PaaS provides them a quick way to get their product to market.
2. IT shops laden with the inventory of fragmented legacy apps (i-have-an-app-for-that?) which are band-aided together. Invariably most of those applications will be written in some outdated technologies like ColdFusion or Foxpro. The challenge companies would be facing would be dwindling knowledge about the application and not being able to retain that “special talent” who built that application and finally deciding to re-write them.

As I mentioned in my last post, specialized tasks are best done by a specialist. And that is more apt in the case of Platform-as-a-Service than others.  Building a Application Technology Platform is highly complicated stuff and is not for the regular “Joe the Geek” who hacks some early version of an open source software and creates a small bespoken app.  It takes a lot of foresight and architectural skills to create an adaptive, scalable platform and support it.

So after establishing the virtues of PaaS, let us look at some of the hurdles that are preventing a wider adoption by companies.

1. Transition: Companies have a lot of legacy applications that are currently in use.  For better or for worse, they work and help run business. There is no way to migrate them as is to a Platform without rewriting them. Any new application requires new investment. With IT budgets no longer the same as the glory days, CIOs will have tough time wiggling out a slice of the budget for a new application. Any tools that will have Rapid Application Development and data migration tools that can reduce the upfront work and cost will surely help get past this hurdle.
2. Portability: Each PaaS platform comes with a underlying IaaS platform that they have partnered with. Already finicky, companies that bet on a particular platform would definitely like their applications be portable to other Infrastructure that is either their corporate standard IaaS or internally hosted infrastructure. The PaaS platforms available today are not geared to be  a-platform-to-go. Also of critical importance is ensuring that platform based on a widely used technology. Try getting a Ruby-on-Rails programmer or architect in a offshore country. They are expensive and scant.
3. Viability: Outside of Force.com, there are not many successful PaaS platform companies that have established a track record. Coghead’s PaaSing is still fresh in memory. Google and Microsoft have announced  me-too platforms but it remains to be seen if there is enough focus on it amidst the hundreds of other things they both try to do. The rest are small vendors who will f ind it difficult to get past the corporate attorneys and their terms.
4. Credibility: While there are many vendors claiming their platform as the nirvana for all things application development in future, there are few that case studies of real critical applications being built on their platforms. Without that, a pure-play PaaS vendor will have a tough time convincing the CIOs of expanding their technology footprint to yet another platform. In the case of Salesforce.com, their success can be attributed to the fact that they are a SaaS company, that owns a key business entity in companies – i.e., customer. With that under their management, it is easy to cajole companies to build extension applications around that key entity.
5. Governance: As with all things cloud, the elephant in the room is governance. With SaaS, it is clear whose throat will get choked if things fell apart. With Platform-as-a-Service it gets a little tricky. If things fell apart, is the developer who built on the platform going to be blamed or the platform on which it is built or the third party infrastructure that it is built on going to take the blame. Here are three things that I think the would have to happen to allay those fears
   1. An independent body akin to Better Business Bureau model that grades the platforms for their reliability.
   2. Ownership of SLA by the Platform provider irrespective of who the infrastructure provider is.
   3. Disclosure of the underlying technologies used in the platform that corporate architects or third party reviewers can review to get comfortable. Under strict non-disclosure obviously.

If you are a startup

As Brian Jacobs (@brian_emcap), General Partner at Emergence Capital Partners, pointed out to me, one of the most important considerations for startups thinking of building their application on a standard Platform-as-a-Service is thinking about their eventual exit. Here are couple of things to get you thinking on that front.

1. You might limit of your chances of getting acquired based on the platform you decide to base your application on. For example: A company built on Force.com might not be appealing to a company that has its own platform like Microsoft or Google.
2. The issue of Intellectual Property might get a little challenging. You will have to sort that out before derivative work on the platform is created. How does the ownership transfer happen? Case-in-Point: If SAP acquires a company built on Force.com does it get to take the application and customers to its own platform? or more importantly can it?

In conclusion, there are is a lot of value to be derived from a platform-as-a-service but more questions need to be answered.

Now let us look at the reality. Despite all the hype and promises of cost efficiencies and barrage of me-too announcements we get daily from technology vendors purporting Cloud capabilities, all the evidence around usage of  Cloud services points to it being limited to

1. Early stage startups building edge-apps or small business focused applications. (Okay, I know there are some exceptions and they are anything but)
2. Enterprises replacing file shares with cloud based storage for redundancy, backups.
3. Enterprises conducting a proof-of-concept/R&D projects on cloud based computing power before building the real-thing in-house.

While the value of Cloud is definitely the way of future, I still do not see any real evidence of large scale customers moving their mission critical technology deployments on to the cloud based infrastructure. Not just yet.

In fact, there is no evidence that Big 4 SaaS vendors Salesforce.com, Intacct, NetSuite, SuccessFactors themselves don’t claim their services are based on commercial cloud based infrastructure. Note: I will stand corrected if someone from those companies can provide some facts.

In this three part series, I will focus on the Infrastructure-as-a-Service (IaaS)  and try and establish the needs yet to be met before a wider, large company adoption can be expected. In the follow-up posts, I will delve into PaaS and SaaS related challenges and needs.

Infrastructure-as-a-Service (IaaS), for the uninitiated, is the delivery of IT Infrastructure capacity as a service. Companies can consume ubiquitous elastic Computing Power, Storage Capacity, Network Capacity, Security, Backup, Redundancy on a usage based subscription fee.

IaaS aims to relieve companies from the burden of

• Having to make large capital investments in IT Infrastructure to build capacity and consequently move to a more predictable OPEX model in tune with your business needs.
• License, Install, Upgrade and maintain all software
• Buy, Configure, Upgrade and Maintain Hardware
• Hire and Retain teams of System Administrators, Network Engineers, Database Administrators
• Negotiate and Maintain Vendor contracts.

All these capabilities delivered by achieving unprecedented economies of scale by using commodity hardware, open source software, virtualization and continuous automation.

All the virtues listed above and then some make for a undeniable value proposition. So why all the concern and inertia in large scale adoption?

Large enterprises work in cycles that are much slower than the pace of innovation in industry. With good reasons, I might add. IT has become the backbone of running any business today and changing that in-flight is akin to changing the foundation of a house that you continue to live in. So, not withstanding all the catastrophic predictions by the so-called experts, for those not embracing the Cloud, we should carefully look at the reality.

I will use GE as a prototypical large global company with heterogeneous businesses, each with its own demands, technology and resource footprint. So if I am Gary Reiner and I am considering to move the GE IT infrastructure to Cloud based services, here are somethings I would definitely seek answers for

1. Given that I will not be moving my entire IT portfolio to a single Cloud provider, how do I keep my Cloud Deployments in sync? Are they interoperable? Can I move things from one cloud to another? Can I move a VMWare vCloud app to Amazon? Do I need to maintain multiple flavors of them if I use different cloud vendors?
2. Can I move workloads from one cloud provider to another? Or can I burst workloads from one to another to meet seasonal or periodic demands of the IT infrastructure? Think Best Buy during holidays.
3. Can I get guarantees on the performance, latency that I get from my dedicated network?
4. Do I have robust tools to manage the various cloud platforms out there? Can the same set tools work for all the cloud platforms?
5. Can I meet the governance mandates, I have around SOX, HIPAA, PCI-DSS? Can I have control on defining access policies to the data all the way to the storage?
6. The most important, can I tie the Quality of Service that I need to provide to the business, with the elasticity of the cloud. Especially, given that the cloud provider’s architecture has been built to provide a particular service and not envisioned as participating in another transaction.

Let us go through each of the points in detail

Interoperability: As with any new technology, the cloud standards are yet to mature, if at all. Each infrastructure-as-a-service vendor is pushing their own standard implementation API – AMI for Amazon, vCloud for VMWare. They do not have standards for a common API that service providers or application vendors can integrate into to access those services. Standards around security, cloud security, infrastructure protocols and data artifacts are still in the early stages in DMTF, the working body that is making an attempt to draft standards. Cloud interoperability standards that result from their work it is hoped will reduce lock-in and increase agility for cloud computing adopters taking advantage of a multi-provider, mixed cloud environment.

Portable Workloads: Given that companies have different applications that meet different needs, their capacity and scalability needs might be different too. It is fair to assume that companies would have a federation of clouds to manage different needs – much the same reason companies have multiple internal networks to compartmentalize things. The departmental lease management application, core financial application and the corporate data warehouse all might be hosted on different clouds if not different providers. If a company decides to use a hybrid model with some of those applications in house and spare capacity for them on cloud, today it is not possible to burst out workloads from one cloud to another or from an internal network to the cloud. This goes back to the lack of standards.

Network Latency:  In the new soon-to-be-all-in-cloud world we will all be accessing the applications through the good old internet. This is like saying we will all take the same freeway to work in the morning. So every time there was the Victoria Secret live broadcast on the internet we will all be log jammed on our way to the critical application we need access to finish work. This today is less of an issue since most large enterprises have dedicated networks and WAN optimization implemented.  All the SLAs provided by the IT to business and Cloud provider to the IT organizations is moot if the packets don’t travel fast enough. Another kind of Net Neutrality discussion you say?

Manageability: Most of the enterprise applications that are managed on-premise today have sophisticated tools from System Management vendors like HP, BMC, CA that allow you to manage almost all the aspects of the enterprise IT footprint. Once we move the applications to the Cloud, most of those system management tools, configured to your current environment might not work. Load Testing, Monitoring, Quality, Configuration Discovery tool vendors do not openly claim to support cloud based deployment. Most of this goes back to the fact that there no standards for Cloud APIs. Adapting the tools for each cloud provider is a R&D spend tools vendors have not committed to.

Data Governance: In the hyper optimized virtualized environments in which the Cloud platforms operate (they have to so they achieve economies of scale) data is virtualized, sharded, replicated, cached. This brings the very critical needs around data retention, protection, purging, access requirements mandated by SOX, PCI, HIPAA that large companies need to comply with. The current cloud vendors save some announcements do not openly claim they are ready to sign SLAs to agree to these needs. The Cloud platforms today do not have the quality of tools that are needed for companies to dive into the logs, access and troubleshoot.

Availability and Reliability: Unplanned outages in Amazon, Google are but rare publicly discussed occurrences of Cloud Service reliability issues. Those kinds of odd occurrences can happen even in a private network. But when you talk about multiple large customers co-locating on the same infrastructure, it raises concerns of many more of those outages. The Cloud architecture that are available today have been designed with a certain set of assumptions of how applications work. Case-in-point,  Amazon.com has no understanding how SAP Payroll system would work, neither are they interested. So not having an understanding of application workload patterns, architecture any SLA provided upfront is meaningless. Without tying the Quality-of-Service(QoS) metrics that you have in place for your customers/business and the SLAs being signed with Cloud vendor there is no way availability can be guaranteed. If you consider the scenario of multiple clouds or hybrid clouds then the integration of SLAs between all of them and tying it to QoS is practically impossible. Service credits to compensate for the lack of availability, by themselves, might not guarantee his/her job for the CIO who made the decision to move to cloud.

I know an argument could be made as to how things like portable workloads are handled today in an internal network, if at all. I admit, companies are probably not geared to handle these needs today, whilst on their own network, but then if we discount future needs then all the switch-to-cloud would bring is a like-for-like swap,  a cloud network for private network. The cost advantages that cloud brings will be offset by the loss of existing investment. So what gives?

I also hear people talking about companies not being ready to absorb sunk costs into legacy IT infrastructure as the reason behind lack of cloud adoption. To which I say – I don’t see people swapping old perfectly well-functioning cars/houses for new energy efficient ones. Maybe a cash-for- clunkers program is in order here too.

If at the end of this elaborate post, if it seemed that I am a tad bit anti-cloud, I am not. I am a die-hard fan on the cloud computing. In fact, I am one of those who thinks – IT shops have no business building custom applications, regular companies have no business building their own power generators and people like me have no business buying a cow when all I need is just milk. The world works best when specialists are left to do things they are the best equipped to do. That said, I would tread carefully and evaluate my risk before making bets on next best technology innovation since slice bread.

Anyway I digress. Now that we have had a successful year of market share gains for SaaS vendors behind us, it is time for CEOs of SaaS companies to make their new year resolutions. Having spent some time meeting CEOs of SaaS companies and their clients, I thought the least I could do is to create a new year resolution template to help them out. So here goes.

Resolution #1: Improve Customer Service: My customers have been incessantly complaining of lack of adequate customer service. This coming year we will spend enough money and resources to provide A+ service, excellent documentation and foster a community that can support itself. After all, we will need customer references to gain new customers now that we have cornered the easy pickings. The last thing we want when the economy recovers is for the customers to move in droves, to a competitor.

Resolution #2: Provide better on-ramp process: We managed to get a bunch of customers online – kicking and screaming. Not to mention, our profit margins on those customers went down the toilet. Considering that we do not need to spend all that money on cross-platform porting/certifications, on supporting multiple versions concurrently, we should make it easy to get new customers online and using the product.

Resolution #3: Provide a real integration framework: Following up on my previous resolution, we should make sure the engineering team designs the product with the knowledge that we will not be an island onto ourselves. Companies require that the information loop is closed with their other cloud applications or existing on-premise (or do those fall under the category- Clunkers now?) applications. Standard APIs/Web Services should be moved from nice-to-have bucket to must-have bucket early this year. In fact, we should be working with our customers to identify the adapters that we should be providing out of the box. This will then make good on all the blabber we made about TCO during the sales cycle.

Resolution #4: Be the best customer advocate I can be: I MUST become the biggest customer advocate in the company. I don’t need to be the great visionary all the time. Customers have made big commitments by taking a chance on us and signing up to our service. Now it is my job to support them and help them succeed in their business. While I am at it, I should make it a point to ensure my entire organization makes only those commitments that they can follow through. Memo to Sales team – “SaaS is not a hit-and-run sale, we will be engaging with the customers for a long time, so let us not start on a wrong footing by promising the impossible/non-existent.”

Resolution #5: Be Transparent: Every time we had service outage this year, we have had to have a embarrassing meeting to customers/press. This year invest in being transparent. Trust builds when we are transparent. Do what Intacct and Big Dog Salesforce.com has done with their service level dashboards. We definitely do not want to have a public boo-boo day like Workday did. While am at it,  I must put in place a process to share the audit certification and governance reports as well with our customers.

As a CEO if I follow-through on all these resolutions and we execute we  should be able to have another great growth year ahead while keeping the customer churn down. Now that I have captured my resolutions, it is MBO time for VP of Products, Service and Sales !!

I will start of with Larry Ellison, the oracle of software industry. Most opinionated and has been mostly correct, as history has proven, albeit sometimes a few years early. Did I mention he is funny too?.

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Then we go to Larry’s mini-me Marc Benioff, who gets credited with the large portion of SaaS success and has become the poster child for SaaS. You might have heard Larry himself giving his protege a plug in his video. Sorry, Marc was not available for a video shoot so he sent his marketing power point (or is it Google Presentation?) on his behalf

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That covered we Googled a little bit and found Eric Schmidt chiming in with this thoughts

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Someone asked what does Microsoft think about this? So we went up north from silicon valley to Redmond and check what another most opinionated technology leader Steve Ballmer had to say.

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While there we sought out Werner Vogels, CTO at Amazon, and considered the brain behind Amazon Elastic Cloud Computing platform, to get things clarified for us in terms of the business model changes and innovations – [courtesy GigaOm].

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En route we ran into Forrester VP and Principal Analyst Frank Gillett, who wanted to make sure we don’t hype the Cloud

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Not to be left behind our friends across the pond chipped in with what they call the “the damn Cloud Computing” laced with ample four-letter jargons.

Fast Tube by Casper Thanks to Vinnie Mirchandani for pointing to this video through his post

Hope you enjoy this collection.