A Dispatch from Cloud City – 2014 Retrospective

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In an effort to make this an annual event, here is a plumbing-palooza stream of cloud consciousness. Last year’s broad themes remain intact though my Rackspace call didn’t pan out.

Cloud Infrastructure

  • Public cloud has won. Thanks Target. Thanks Sony. Thanks Kim Jung Un. If your public cloud gets hacked, you get to blame someone else and will have company in your misery. Public cloud will absorb vast quantities of enterprise on-premises IT spending and thus be an enormous pot of gold.
  • Docker – everyone likes Docker. Even people who don’t.
  • There are two and a half big league public cloud providers vying in what John Connors has dubbed the (WTO-free) “Battle in Seattle” (Google does a lot of cloud work in Seattle too):

Amazon remains the leader with incredible execution and is relentlessly pushing up the stack. They are on the same “enterprise journey” that Microsoft went through beginning in the late ‘90s (with some of the same people in fact), in an effort to get IT comfortable paying them vast sums of money. Amazon seems to have abandoned price leadership as they find themselves in a price war against competitors who have vastly more money than they do. Frittering away valuable cash on hardware misfires and TV shows is a growing opportunity cost. If Amazon’s stock price doesn’t recover, expect their employee retention problems to grow and discussions of spinning out AWS to get more serious. But they’re not going to yield their leadership in 2015.

What I said last year about Microsoft still works:

“Azure has become the clear challenger to AWS. The much maligned Mr. Ballmer is not getting credit for Microsoft’s embrace and execution on cloud. Unlike most of its cohorts rooted (mired?) in previous generations of technology, Microsoft is well on its way to making the cloud transition.”

Microsoft is executing like old school, taillight-chasing Microsoft with the added advantage of glass-half-full perceptions about the company for the first time in nearly two decades under the regime. The open source embrace (sans extend) is real after enactment of the strategy tax cut. If you’re still having cognitive trouble with this, the best analogy I can offer is Microsoft has become Intel and just wants to soak up all those datacenter compute cycles (a pithy analogy for what Intel has become eludes me, but it could be a fun exercise).

Google I don’t give a full big league integer to because cloud is still basically a hobby for them. In technology terms, they are in many respects the leader, but they’re just not serious about the non-technology investments they need to make to really compete for that broad enterprise transition to the cloud (they too need to embark on an “enterprise journey” as opposed to hoping those enterprises beat a path to their door). The company seems more interested in n+2 or n+3 opportunities (self-driving cars! life extension! an air force!) than mundane n+1 opportunities like cloud (which gets interesting if you believe we’re seeing weakness in Google’s search cash geyser for first time – will the further out new businesses spin up soon enough to offset slowing and/or deteriorating desktop advertising?). Presumably all those robotics investments are so they won’t have to hire humans to do enterprise sales and support. Google is the Crazy Eddie of cloud (note Eddie didn’t have much of an enterprise business and but did have a fraud problem. But far be it for me to suggest that the ad business is anything but squeaky clean). They will continue to push prices down which is a great way to push Amazon to the wall. But Google needs more than just technology and lowest price to really compete for the enterprise cloud jackpot.

  • Docker – did I mention Docker?
  • Below the big boys we have a bevy of wanna-bes, characterized by varying levels of self-delusion about their ability to really play this game. The old school announcements of “one billion dollar” multi-year investments aren’t even table stakes – Google spends that on capex in a couple weeks. IDC slyly and without elaboration predicts “75% of IaaS provider offerings will be redesigned, rebranded, or phased out in the next 12-24 months”, which brings us to this group:

IBM has been my poster child for the existential threat cloud poses to old school IT vendors. I’ve been pontificating about the peril they face and their clueless response for quite a while (here, here, here, here, here and here as a start). I took a lot of grief about this view when I first wrote about it but now their plight is widely understood and even conventional wisdom:

Bloomberg Businessweek (US)

My inner contrarian even wants to go bullish on the company just to flout the crowd except I can’t see any path that looks like clear success. Even the best outcome, where IBM keeps all its market share, still results in a dramatically smaller company (in terms of revenue, workforce and stock price) due to the deflation of cloud computing. IBM’s fundamental problem is it is their traditional customers who are being disrupted by technology wielding upstarts and they are going to have to show customers can actually use IBM technology and “business consulting” to be successful against competitors who don’t have that burden. Good luck with that. IBM’s streak as the worst performer in the Dow Jones two years running may not be over.

To their credit, IBM woke up this year and is no longer downplaying cloud or attributing their woes to simply poor execution of ye olde business model. I am amused that IBM’s leadership has expressed far more public concern about their prospects than the normally curmudgeonly IT industry analysts and pundits who evidently are telling IBM’s customers not to worry about generational transition risk.

Beyond their cloud wanna-be status, it is hard to get enthusiastic about their big initiatives of Watson and becoming an iPad reseller. After what seems like decades of hype, Watson is being devoured by hundreds of much more focused machine and deep learning startups. And it is uncanny how iPad seemed to flatline just as IBM got interested in it (and if you contend IBM’s apps are just what the iPad needs to reestablish growth, I ask only that you name an IBM app, and if you can do that, name one that you’d like to use). Delusion factor: low. The dubious marketing underscores their desperation.

HP (sorry Hewlett Packard Enterprise) trails IBM significantly in terms of existential angst and has a massive internal distraction in splitting themselves up. Helion: they only wish they had another L. While I have been assuming a “better than Autonomy” bar would lead to acquisitions like Box or Rackspace, their efforts to get their hands on VMware suggest there may be some sanity lurking somewhere. Delusion factor: medium.

Cisco is the company with the biggest gap between reality and their own cloud blather. While they are one of the few growing server vendors, their reckoning approacheth on multiple fronts. Delusion factor: highest

Rackspace – my prediction last year was they would not be an independent entity by the end of 2014. They did put themselves up for sale, but had no takers (HP let me down). They have realized they can’t play with the big boys and have retreated to their old hosting turf. OpenStack was a huge distraction for them. But their stock price supposes there is still an acquirer out there. Delusion factor: low. They touched the hot stove, and will not make that mistake again. 

Telcos – CenturyLink (also in Seattle) is executing the best here while the others are too busy chanting “cloud is our birthright” to do much. Delusion factor: medium to high.

OpenStack – another year where the number of press releases probably exceeds the largest number of nodes in production in any instance. They lost ground this year as public cloud continues to outpace private cloud and OpenStack public clouds aren’t very public. A pivot to Docker is coming, even as they perhaps settle to be a telco supplier. Delusion factor: high.

  • Docker – the most interesting aspect of Docker is it works because Linux has won as the operating system of the cloud (and having written those words, a new operating system must surely be upon us imminently). If you don’t need to virtualize multiple operating systems, you can push application isolation up above a single OS. But while Linux has won, Red Hat has lost. They just don’t play any material role in cloud infrastructure. They’re a legacy, on-premise operating system company. Maybe this year the markets will ask why they’re trading at a multiple of over 70.
  • Digital Ocean – while the old school vendors huff and puff, I’ll just note this is increasing where the cool kids run their apps. The problem with taking the “enterprise journey” is it almost always leaves you somewhere developers don’t want to be.
  • Docker – they really mishandled their first competitive blitz, which was actually pretty minimal. But good practice for when VMware finally gets around to announcing vCenter will manage both VMs and containers (and I have no inside knowledge here, it just seems like an obvious thing to do).

Cloud Platform

  • PaaS is still a zero billion dollar market, but there are signs revenue is ramping to the point where we can have a serious discussion about this threshold next year (note I define PaaS narrowly to net new, general purpose application platforms and don’t subscribe to xPaaS speciation/inclusion of decades old code) I still think this is the only layer at which most companies should be doing private cloud.
  • The Cloud Foundry Foundation – not sure if I’m more disappointed that it exists or that it wasn’t called the Foundration.
  • DevOps is a distraction and something you want other people to do on your behalf: if you’re actually doing DevOps, you’re doing it wrong. (That sentence will probably bring me more grief than any other in this post).

Big Data

  • FOMO is the biggest driver of big data in the enterprise. Lots of data is going into the lake, but not much is coming back out yet.
  • Hadoop, or more accurately HDFS, has won based on storage cost advantages and addressing the administrative and governance needs of IT. The programming model can charitably be described as unsettled, which is one of the factors hampering the realization of material value from big data. A big question for 2015 is how quickly Spark matures.
  • The most amusing announcement of the year was Google sucking it up and announcing full support for Hadoop, which they view as an obsolete and decade-old Google technology laundered through Yahoo.
  • The hype around big data will shift to the Internet of Things in 2015. IoT-washing will make cloudwashing look modest, as every data player adds at least those three letters to their home page. Some are doing more and actually building for specific IoT needs. Samsung is the biggest threat to IoT as they feel the urgency to ship half-baked spec sheets devices and crummy software that could set the whole market back significantly.
  • Get ready for data protectionism, as the EU (as a front for European manufacturers) decides they need to control their own data exhaust and not let those evil American technology companies squeeze all the value out of precision metal bending. We could see some very strange big data acquisitions by German manufacturing companies.

What else should we be watching in 2015?

11 thoughts on “A Dispatch from Cloud City – 2014 Retrospective”

  1. Charles, entertaining, as always. I think you’ve got it right.
    RedHat is the new Big Blue.
    No mention of Oracle?
    Also: Will the transition be revenue-neutral for traditional on-prem storage vendors like NetApp and EMC? Will they just sell the same gear to AWS and Azure? And what about Pure? Are they selling the best damn buggy whip on the market?

    oh, and: It’s on premises not on premise.

  2. Hey Dino

    Oracle has a problem in that they aren’t winning new customers and their existing customers hate them. As with Red Hat, they have a problem (Larry’s protestations to the contrary) in that the cloud isn’t being built with their software. The question is how long before that really begins to bite. IBM teaches us you can sustain a flat-lined business for a long time. The Datalogix acquisition also reiterates Larry is still the Darth Vader of technology and has no problem doing things others might have qualms about. Hopefully we’ll see more discussion of whether we trust Oracle to track our every move online and off.

    Hard to see how on-prem storage transition is revenue neutral given they’re not selling gear to AWS or Amazon. None of the legacy box guys seem to have cracked selling to the guys who are buying millions of boxes. I don’t have opinion about Pure.

    Typo noted and fixed.

  3. 1.) My comment on public vs. private is the TAM for public keeps growing. That inevitably is at the expense of private.
    2.) So much that is labeled private cloud is BS and/or cloudwashing. The research you point to isn’t very compelling as it doesn’t distinguish between “use” and “plan to use” private clouds. Talking about private clouds is much easier than building or running them. I’ll bet the IT guys at Sony are still saying they “plan to use” private cloud.
    3.) Would love to see any research that shows real Openstack deployment growth beyond tiny POCs which is the context for this statement.

  4. After 50 years in IT, I’m still buzzing and this is one of the best things I’ve read in many a year, incisive and hilarious to boot. Having said that there would seem to me to be a glaring omission:- “Where is Apple going in all this?”.

  5. You can say that again! Apple’s head is in the cloud or somewhere up their ass when it comes to the cloud. I’ve lost more data and had more screwed-up data (like phone contacts) than in my whole 50 years in IT since trusting in the iCloud. I’ve just put 10,000 music tracks up there and getting it all sorted out was no small mean feat – it took hours to sort it all out – but so far I’m happy with the result. But when it comes to phone contacts and apps using the cloud to sync data across devices it’s a ******* nightmare, none of it works consistently – you just don’t know what to expect.

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