Innovation is not just for the USA

Readers of this blog have undoubtedly been following the ongoing controversy between Jim and Steve about whether Boston or the Bay Area is the most important center for technology innovation.

Jim and Steve, what about all the innovation taking place outside of the US?

Grenoble, France, where I happen to live, is located just under three hours from Paris and, much like Boston and the Bay Area, is home to some of the nation's leading universities, medical schools, research institutions and technology companies.

According to the magazine l'Usine Nouvelle, The Grenoble Institute of Technology is the second largest engineering school in France and is second in terms of research contracts awarded. The Grenoble Graduate School of Business was the seventh best MBA program in Europe, according a 2009 Financial Times report.

Research institutions include Minalogic and Minatec for nanotechnology, NanoBio and Nano2Life for biotech and Tenerrdis and the PV Alliance for solar and other forms of renewable energy.

Technology companies in the region range from established multi-nationals such as Capgemini, HP, Radiall, Soitec, STMicroelectronics, Sun and Xerox to dynamic start-ups like H3C-energies and UShareSoft.

The great thing about innovation is that anybody anywhere can have a great idea. And, given the right environment -- world class higher education, research institutions and an dynamic economy -- great ideas become great companies creating great products.

An End User's Perspective of the Cloud

It will take a complete newcomer to the cloud about 15 minutes to realize one cloud size does not fit all. Much is written about the enterprise and its concerns over security, governance, compliance and configuration. Despite mounting evidence to the contrary, a declining handful of skeptics still debate whether enterprise cloud computing will fulfill its promise.

But the debate does not encompass the millions of us who have been using the cloud -- knowingly or not -- for years.  In fact, most of us are pretty satisfied customers. In its most basic form, the cloud offers us the ability to store our data somewhere decentralized and access it from anywhere we have an Internet connection. The cloud reduces our worries about where our data is, whether it’s backed up, and where and how we access it.  It also makes it easier to collaborate and communicate.  If you use Gmail, Facebook or LinkedIn, you're in the cloud. Chances are, you use these and other applications from a computing device -- Windows, Mac or Linux and a mobile device -- Android, iPhone OS or Windows Mobile. In most cases, all you need is a password to authenticate yourself, and you have access to information that you store and manage on a range of incredible applications via the cloud.

As an example, I'm writing a draft of this blog on Evernote, a cloud application that I have become dependent on for a number of uses in ways that I would never have envisioned just a few years ago.  I write my draft in Evernote, and Evernote keeps a duplicate of my notes on their web servers and automatically synchs the local copies of my notes. So my information is accessible locally from my MacBook Pro and through the Evernote web interface via my Macbook Pro, my iPad and my iPhone.  In fact, I can install and synch my notes with as many computing devices as I choose.  That is the power of the cloud for an end user and the beauty of Software as a Service (SaaS).  Evernote users don't have access to infrastructure; Evernote does that for us.  All we do is access the application we need -- when we need it on the device we want at that point in time.

Evernote gives me redundancy of my notes and ensures that I will access them consistently over any device.  It lets me share my notes in a variety of ways that I control.  It instantly stores what I create and lets me find it easily the next time I need to access it.

While the debate continues over when and how enterprises will adopt the cloud as a replacement for data centers, millions of us who have had our heads in the cloud for several years would ask what all the debate is about.  The cloud works in ways that opens endless possibilities for us all.

Image reprinted from Cloud Computing Use Cases White Paper, Version 3.0, published by the Cloud Computing Use Case Discussion Group.

A Brief Investment Perspective of the Cloud

We've written extensively here at Beyond the Arc about the confusion surrounding cloud computing. Like anything with enormous potential, cloud computing is fueled by marketing hype, uninformed dialogue, informed dialogue and overstated expectations.  We only need to look back at last weekend's launch of the iPad to see how this scenario builds to a volume so loud that fact no longer is easily discernible from fiction and product or service delivery becomes the only control a vendor has on the hype cycle.

Who, I wondered recently, cuts to the chase in an objective and measurable way?  Then it struck me that investment analysts might be as much a realist as anyone in the dialogue because, depending on how you look at it, the cloud is either just an evolution of computing as we know it or a sea change in the history of technology and of business. Either way, the implications for investors will be notable. 

One of the more informed articles I found was published recently by Morningstar, the global investment research company.  The article by Sonit Gogia, breaks the market into three commonly known segments:  infrastructure, platform and software as services and then tries to forecast value around each. Imprecise at this early stage, but worthy of consideration, Gogia's analysis suggests the following:

SaaS: Open Competition, Reduced Profitability
SaaS is the most mature of these segments and has proven its appeal, particularly with small and medium enterprises. It already is easy to foresee how changes in the economics of computing driven by the cloud can diminish the impact of enterprise software leaders like Microsoft, IBM, HP, SAP, Oracle and a few others in the same way that the shift from mainframe systems to client server computing in the 1990s threatened the business models of the mainframe market.  With Microsoft Office Web Apps scheduled for release in May, Microsoft already is playing catch up to Google Docs, which was used in 20% of the offices surveyed last year by IDC. While these same vendors are aggressively restructuring their business models toward the cloud, they are joined by many others in offering IT services simultaneously to many customers over the from remote data centers. While creating more choice for customers and weakening the lock-in model that ties some customers to costly, less-than-optimal solutions, SaaS isn't designed to be sticky in the same way long-term licenses and maintenance contracts are currently structured. Until a customer hits a critical mass of users, changing vendors is relatively cheap and easy.  As a result, however, Gongia believes SaaS will limit profitability and returns on capital compared to the levels investors are used to with traditional enterprise software vendors.

PaaS: Less Competition,Greater ROCI
PaaS vendors offer IT departments the ability to develop and deploy software applications in the cloud.  PaaS vendors offer software, servers, storage, networking equipment and management services. Unlike SaaS, the cost of entry is high to providers and the cost of changing vendors can be high to customers.  This is a young, emerging market, but Gogia believes the ultimate number of competitors will be few. IBM and Oracle will be entrants to a market already populated by Google's AppEngine, Microsoft Azure and Salesforce.com's Force.com.  Gongia believes these vendors will deepen the barriers to entry, and he forecasts high returns on invested capital for PaaS vendors.

IaaS: Fast Growth, Becoming Commoditized
IaaS vendors rent out processing power, storage, and bandwidth on-demand. This where Amazon Amazon Elastic Compute Cloud (Amazon EC2) and a few other companies have focused their offering to small businesses, medium businesses and departments of Fortune 500 companies. The appeal of IaaS is that customers can access and pay for computing capacity only when it is needed.  But, Gogia contends, it is destined to become a commodity -- hard to differentiate with low switching costs and, like most commodities, it eventually will migrate to price competition.

If the past repeats itself, as it is often does, computing after the cloud may not be all that different.  But the opportunity for established vendors to reposition themselves, for new companies to enter markets and for customers to gain greater control and flexibility at reduced costs may become  a reality.  Certainly, the opening act has been captivating, and it is exciting to anticipate what happens next.