Friday, January 16, 2009

The Cloud Economy and the Million-Dollar Private Cloud

Interesting post over at on "Million-Dollar Private Clouds". In the article, John Foley talks with Cassatt CEO Bill Coleman. Who says "Private clouds that emulate the characteristics of public cloud services sound promising, but they won’t necessarily be fast, easy, or cheap to create."

In the article, Coleman claims that "Large corporations may have tens of thousands of servers. Coleman says one customer’s deployment rang up, before discounts, at $50 million." I think the more telling question is how much was it after discounts?

I'm having hard time believing that any company regardless of how big they are in "todays" economy is shelling out anything close to 50million dollars for private cloud management software. From the conversations I'm having, the big trend is not in create a wholly encapsulated private clouds, but in the creation of the so-called hybrid clouds that span multiple existing data centers and remote cloud providers. Some of the biggest projects I've heard of have been in the range of 2 -3 million for software related expenses. The notable exceptions are companies such as Rackspace, AT&T and a few other "telecoms" who have reportedly been spending ten's of millions on their new data centers & cloud related projects.

I find Rackspaces strategy of acquisition to be particularly smart. Why spend months building, when you can acquire the emerging leaders for cheap. Such as their recent purchase of SliceHost. Although slicehost isn't traditionally a cloud provider, with a little massaging of the slicehost offering they could easily grab nice piece of the overall cloud hosting market.

Back to the question of Million-Dollar Private Clouds, from what I can tell most of this money has been allotted to the traditional hard costs such as hardware and real estate. Less then 5% is typically allotted to software. Will there be 50million dollar private cloud deployments, some day probably, but I'm not sure if we'll see this anytime soon.

In the short term the biggest opportunity may be in the customized cloud providers, one great recent example is AMD's Fusion Cloud. AMD's press release describes Fusion Cloud as an on-demand cloud which provides access to over 1000 ATI graphics cards work in tandem with AMD processors and chipsets to render and compress graphically intensive content, which is then streamed over the internet to all sorts of devices, eliminating the need for computational effort on the receiving end. The general idea is Internet-connected devices -- from cell phones to laptops - the so called "three screens"- would be able to play games and HD movies without draining much of their battery life or even requiring potent hardware because most of the heavy lifting is done offsite in the cloud. This also fits well into Microsofts "Software + Services" strategy. A question I had in AMD's announcement, was what software they are using to enable their cloud infrastructure, and how much did they spend? At 1000+ CPU's I would estimate in 500k-1m dollar range.

Unlike Coleman, I do feel the opportunity this year is in enabling the ability for companies who have existing data centers a way to create fast, easy, and cheap cloud infrastructures, not the opposite.

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