The Public Cloud Has Won Web-scale clouds are happening now ...

don’t be left in the cold

Randy Bias @randybiasJun 27th, 2011 @cloudscalingeComm - SFO

Mobile Matters

Mobile Apps Exploding

Sources: Asymco.com, Chetan Sharma, Morgan Stanley

Mobile + Cloud

Two Sides of the Same Coin

ProductionConsumption

Two Sides of the Same Coin

ProductionConsumption

Carriers Know

Mobile

Carrier Advantages

IP backbone

Carrier Advantages

IP backboneWireless network

Carrier Advantages

IP backboneWireless network

CO & DC footprint

Carrier Advantages

IP backboneWireless network

CO & DC footprintMobile/IP CDN

Carrier Advantages

IP backboneWireless network

CO & DC footprintMobile/IP CDN

In-country expertise

Carrier Advantages

IP backboneWireless network

CO & DC footprintMobile/IP CDN

In-country expertiseBilling/micro-payments

Carrier Advantages

Carriers Don’t Know

Cloud

First Gen Carrier Clouds

First Gen Carrier Clouds

“Enterprise” not “web-scale”

First Gen Carrier Clouds

“Enterprise” not “web-scale”Expensive & Complex

First Gen Carrier Clouds

“Enterprise” not “web-scale”Expensive & Complex

NOT Agile

First Gen Carrier Clouds

“Enterprise” not “web-scale”Expensive & Complex

NOT AgileFocus on IT buyer

First Gen Carrier Clouds

“Enterprise” not “web-scale”Expensive & Complex

NOT AgileFocus on IT buyer

Virtualization 2.0, not cloud

First Gen Carrier Clouds

“Enterprise” not “web-scale”Expensive & Complex

NOT AgileFocus on IT buyer

Virtualization 2.0, not cloudBottom Line Focus

First Gen Carrier Clouds

“Enterprise” not “web-scale”Expensive & Complex

NOT AgileFocus on IT buyer

Virtualization 2.0, not cloudBottom Line Focus

Looking back, not forward

Cloud Value Prop

Bottom line cost savings

Top line revenue generationvs.

Which Value Prop Matters?

Bottom line cost savings

Top line revenue generationvs.

Which Value Prop Matters?

ASP SaaSvs.

Web-scale Clouds

Web-scale Cloud Pioneers

Web-scale vs. Legacy App Focus

vs.

Greenfield & Mobile Apps Legacy Apps

Enterprises use Web-scale Clouds for Greenfield & Mobile Apps

Enterprise Mobile Apps

Estimated IaaS Growth RatesWeb-scale vs. Legacy Cloud

0%

23%

45%

68%

90%88%

20%

Web-scaleLegacy

Source: Cloudscaling market analysis

Bookseller in Top 10 IT services by 2016?

1 IBM $37,3472 HP $34,6783 Fujitsu $26,9354 CSC $16,2815 Accenture $15,5556 Capgemini $11,2557 Hitachi $11,0508 Ericsson $11,0319AWS $10,465

10 NTT Data Corporation $10,425

Source: servicestop100.org - 2010 top 100 IT services businesses by service revenue

Comparing Clouds

Capital Expense (Initial)

Web-scale vs. Legacy Cloud

$0

$1,000

$2,000

$3,000

$4,000

$382

$3,216Cost per Sellable ‘VMU’

(m1.small, 1.7GB RAM, 1 vCore)

Web-scaleLegacy

Source: Cloudscaling confidential financial models for IaaS clouds

Operational Expense (Labor)

Web-scale (1500:1) vs. Legacy (300:1)

$0M

$38M

$75M

$113M

$150M

Year 1 Year 2 Year 3 Year 4 Year 5

Servers : IT Headcount

Source: Cloudscaling estimates of VM:admin based on known IaaS deployments

Web-scale Legacy

Legacy 5-yr TCO is 3-5x more than Web-scale ...

... doesn’t provide 3-5x value for greenfield or

mobile apps

Legacy Clouds Reduce TAM

In-country Enterprises

Long Tail of Customers

In-country

App Developers

Enterprise

SMB

Global

Legacy Clouds Reduce TAM

In-country Enterprises

Long Tail of Customers

In-country

App Developers

Enterprise

SMB

Global$$$$$

$

Mobile Apps on Clouds

250M+ Users, 25M DAUPublic AWS for launch, dev, scaling, & testPrivate web-scale “Z-Cloud” for base

Studio Model

Studio Model

No way to predict winners

Studio Model

No way to predict winnersBuild 10: 3 win, 3 fail, and 4 languish

Studio Model

No way to predict winnersBuild 10: 3 win, 3 fail, and 4 languishModel: Launch,Measure,Triage

Studio Model

No way to predict winnersBuild 10: 3 win, 3 fail, and 4 languishModel: Launch,Measure,TriageOptimize costs before, during, & after

Own the Base, Rent the Spike

App Workload

1

Launch & Measure Traffic

Sources: Graphics from Everest Group, Inc.

2

Own the Base, Rent the Spike

App Workload

Move Base to Z-Cloud

Sources: Graphics from Everest Group, Inc.

3

Own the Base, Rent the Spike

App Workload

Keep Spikes on AWS

Sources: Graphics from Everest Group, Inc.

4

Own the Base, Rent the Spike

PROFIT!Sources: Graphics from Everest Group, Inc.

Take Aways

Take Aways

Studio model drives cloud choice

Take Aways

Studio model drives cloud choiceCost matters & web-scale delivers

Take Aways

Studio model drives cloud choiceCost matters & web-scale delivers“Hybrid” works when clouds interop

Why Did Carriers Miss?

“It’s not our target market”

“It’s not our target market”

Except that, enterprises:

“It’s not our target market”

Except that, enterprises:

Use web-scale clouds

“It’s not our target market”

Except that, enterprises:

Use web-scale cloudsMake mobile apps

“It’s not our target market”

Except that, enterprises:

Use web-scale cloudsMake mobile appsHost app back-ends on AWS

“The market isn’t big enough”

“The market isn’t big enough”

Except that:

“The market isn’t big enough”

Except that:

AWS will be 1B in rev in 2011

“The market isn’t big enough”

Except that:

AWS will be 1B in rev in 2011> all global ‘legacy cloud’

“The market isn’t big enough”

Except that:

AWS will be 1B in rev in 2011> all global ‘legacy cloud’100% CAGR

“The market isn’t big enough”

Except that:

AWS will be 1B in rev in 2011> all global ‘legacy cloud’100% CAGR

Carriers trying web-scale now

Bottom Line

Bottom Line

Massive Disruption

Bottom Line

Massive DisruptionLegacy cloud biz model is stillborn

Bottom Line

Massive DisruptionLegacy cloud biz model is stillbornCarriers have inherent advantages

Bottom Line

Massive DisruptionLegacy cloud biz model is stillbornCarriers have inherent advantagesWeb-scale + Carrier advantage = Win!

Bottom Line

Massive DisruptionLegacy cloud biz model is stillbornCarriers have inherent advantagesWeb-scale + Carrier advantage = Win!Carpe Diem