Cloud Chips

It seems as if every technology company in the industry has announced a cloud computing strategy. IBM and HP. Oracle and Microsoft. CA and Saleforce.com. Amazon.com and Google. All major software and computing companies are moving to market with cloud computing solutions. It’s no wonder that a report from McKinsey & Company claimed that there are 22 different definitions of cloud computing in the marketplace.

So I guess I shouldn’t have been too surprised when I spoke to a friend of mine at Nvidia Inc. recently and he told me his company was “bullish” on cloud computing. For those of you unfamiliar with Nvidia, they are, in their own words, “the world leader in visual computing technologies and the inventor of the GPU, a high-performance processor that generates breathtaking, interactive graphics on workstations, personal computers, game consoles, and mobile devices.”

In short, Nvidia makes really powerful semiconductors for graphic applications. But why would a chip company be so bullish about cloud computing?

Let’s start with one of those 22 definitions of cloud computing. At it’s simplest, it is a way of computing, via the Internet, which broadly shares computer resources instead of using software or storage on a local PC.

Now some of those “computer resources” that live in the cloud are graphically intensive, 3D-modeling software applications that are used for everything from designing jet aircraft to modeling photo-realistic images of a patient’s heart for a doctor to view before surgery.

If you’re an aeronautical engineer working for Boeing, for instance, you might use a cloud computing application to run some 3D models for wind resistance over one of the plane’s wings. That type of graphically intensive application isn’t going to run on just any old computer server in the cloud. No, complex 3D modeling requires a server that is run by powerful GPUs, the type made by Nvidia.

Make no mistake, Nvidia and other semiconductor companies aren’t going to start building server farms and begin hosting cloud-computing applications. But companies such as IBM, HP, and others do. And those companies either buy or build specialized servers to run these graphically intensive applications.

In turn, the firms providing cloud-computing resources need to offer a variety of applications to meet the widely diverse needs of their customers. As a result, the demand for servers that can handle the enormous processing load placed on them by complex 3D graphic software is going to increase.

This interconnected food chain of cloud computing is creating opportunities for technology companies across the spectrum – from enterprise software to semiconductors. That’s why Nvidia, and any other forward-looking chip company, is bullish on the cloud computing opportunity.

The Battle for Cloud Computing Dollars in the Enterprise Has Only Just Begun

It seems like only yesterday when cloud computing was considered a dark magic – fringe technology that only a handful of the brightest technologists claimed to understand. Its business benefits not quite clear but its business risks all too clear. Earlier on, only the most aggressive large enterprises demonstrated an interest in cloud computing although caution flags dotted their path. Those brave enough to put a toe in the cloud computing waters did so with some courage but with much trepidation.

Fast forward to today and the cloud hype is deafening http://www.gartner.com/it/page.jsp?id=1124212.

Everyone is shouting, from Oracle – just one of several enterprise software companies currently expounding the virtues of cloud computing – to Microsoft, HP, IBM, VMware, among many others. While a number of these companies are promoting their unique definition of cloud computing (in part, to leverage their technology “differentiators”), the one thing they do have in common is the conviction that the cloud isn’t going away.

Recently, two enterprise software vendors in particular staked a leadership claim in cloud computing: Salesforce.com (www.salesforce.com) and CA, Inc., the company formerly known as Computer Associates (www.ca.com).

Officially, Salesforce.com is the first and only $1B cloud computing software vendor. Billing itself as the “enterprise cloud computing company” in its press releases, Salesforce.com announced last week fiscal year revenue of $1.3B. Company CEO Marc Benioff credits cloud computing with driving 21% revenue growth over the prior year http://bit.ly/cCjndT. Salesforce.com is reaping the benefits – as are its customers – of its early foot hold in the cloud computing mega trend.

A resurgent CA, Inc. is following in Salesforce.com’s footsteps in terms of making a very aggressive cloud computing push. CA’s recent acquisition of 3Tera, an established cloud computing company (www.3tera.com) – when combined with the recent flurry of CA’s cloud-related M&A activity -- sends a signal to the rest of the industry that the company’s transformation toward relevance and also toward cloud computing leadership is real. “It looks like CA paid well over 30 times 3Tera’s revenue. Such multiples are fairly atypical in tech (mergers and acquisitions) today, and very atypical for CA,” said a 451 group analyst http://bit.ly/bKu0Yf.

The battle for cloud computing dollars in the enterprise is officially underway, and if Saleforce.com’s recent earnings and CA’s acquisition spree are any indication of a trend, the price to play will keep going up.

Of Health Care Bills and Hybrid Clouds...

The debate of whether cloud computing will happen resembles the current debate over health care here in Washington -- everyone agrees it is needed, everyone has a different theory of who the customer is and what the customer needs, nobody likes the other guy's approach and yet nobody can agree how the issue will be resolved. So we should expect the hype and industry debate will continue to rage.

Wholesale conversion of massive data centers laden with legacy systems -- including highly efficient mainframes -- seems impractical and unlikely. Certainly, it is easy to overlook this somewhat pedestrian issue. The lure of getting up and running faster with new products and services is as compelling as the ability to scale on-demand to handle unexpected loads. A compelling argument could be made that these safeguards alone justify the change, if for no other reason than to prevent lost business due to decreased performance or downtime. But cloud management issues, particularly security and compliance, are not sufficiently resolved yet to enable CEOs, CIOs and boards of directors to endorse a wholesale move to the cloud.

What seems most logical is an evolutionary process through stages of the hybrid model. This likely starts with a shift of internal virtualized data centers to deploying external clouds for peak demands to meet the needs of internal users.

As an enterprise gets familiar and comfortable with an external cloud model, it will more readily evolve from peak demand to on-going hybrid, where IT departments rely on external cloud providers for continuing support of non-core functions.

This evolution holds endless possibilities, but we wonder how quickly it can happen. Looming large in the decision process is the "S" word. It is reasonable to expect customers will require the same level of management and security (policies, systems and processes) in a hybrid cloud that they have with internal data centers or private clouds. Today, customers perceive risk -- what happens if my data is co-mingled with others when I go off-premise? Vendors have not addressed this perception to the extent that customers are ready to move.

At this point, it isn’t clear whether the health care bill or full-scale cloud adoption will evolve first. They both hold enormous promise for change, but both seem to be progressing in fits and starts with non-negotiable issues still unresolved. In a world in which success seems to be increasingly measured by wholesale change rather than incremental development, we're not yet ready to bet the farm on which gets resolved first.

The Cloud Flattens The World

The world really is becoming flat, to borrow from The New York Times writer Thomas Friedman. In his popular book, Friedman argues that the world is rapidly becoming flatter through the use of technology among other things. This is becoming even more evident as the advance of Cloud Computing enables the smallest emerging markets and even individuals to catch up and compete globally through their ability to tap the resource of the developed world easily and cost effectively.

Every time there is a major inflexion point in information technology, there is usually a corresponding change in competitive edge. With the arrival of Cloud Computing as a new type of IT platform, we’re about the see a significant narrowing of the IT competitive edge gap that could especially benefit companies in developing countries. In the same way the rise of mobile phone technology in Asia has enabled that region to leapfrog other countries, Cloud Computing has the potential to facilitate further advances in emerging countries, evening the playing field, creating new business models and fostering new levels of innovation.

In his blog post “How Did Cloud Computing Suddenly Become Important,” Simon Munro effectively explores the impacts of the Cloud and the potential with expanded access of information, services, products and capital throughout the world. He states that “cloud computing is destined to provide the architectural basis for new products offered by first world organizations to emerging markets. Products will be delivered via the Internet, but as emerging markets do not have first world infrastructure, so delivery will have to be done using mobiles, simple interfaces, low bandwidth and low latency. Also, due to such a high dependency on a mobile device and the low margins for each sale, the (possibly free) ecosystem needs to be social, viral and low cost in delivery and marketing terms.”

The reverse is true as well. Companies and individuals in emerging markets are rapidly gaining access to people, information and capital that once was exclusive to the developed world. Even access to capital in even the smallest amounts (imagine systems that provide, perhaps via a mobile device, microfinance funded by individuals in the United States and other wealthier nations) provides ample motivation for ideas in the emerging world. This will sponsor a new generation of innovation allowing small companies and small countries to compete globally.

For marketers, this opens up a whole new world of possibilities but also a host of challenges. Out of marketers famous 4 P’s, Place becomes a constant as the Cloud become’s the world’s bazaar of all manner of products and services, while Pricing, Product strategy, and Promotion will require a combination of simplicity, creativity and recognition of customers from all corners of the globe.