Which Companies Will Lead the IT Industry's New Mainstream Platform?

'Tis the season for predictions.

Let's see.  Well, we have the 2011 world prophecies from top psychic astrologers.  I was elated to read on this web site that "all predictions of life on Earth and End of the World in 2012 will turn out to be false and untrue."  So not only "false" but "untrue" as well.  Now that's a relief.

The 2011 Oscar predictions started making the rounds in October. CNBC announced earlier today that on Dec. 8 it will unveil its predictions for the 2011 economy.  I also saw an article about the 2011 food trend predictions made by 1,500 chefs.  And of course there are thousands of professional sports-related predictions including this one from The Orange Country Register:  Lakers will lose!

But in a sea of annual predictions on subjects that are really just trivial, there's one list that I look forward to each year at this time.  And once again, it did not disappoint.

If you haven't seen International Data Corporation's 2011 IT industry predictions, you can find it here.  You to have register with IDC to read it, but if you want only the summary here's the press release.

Here are the reports' highlights:

• spending on public IT cloud services will grow at more than five times the rate of the IT industry in 2011, up 30% from this year.  Why?  Because more and more businesses, small, medium and large, are realizing the friendliness of cloud economics, the flexibility and reliability of cloud computing models, and that security issues have been over-stated;
• mobile computing will continue to explode.  Ok, that's obvious.  But what about this:  IDC says close to 25 billion mobile apps will be downloaded next year! That's compared to "only" 10 billion or so which were downloaded this year.  It's not time to kiss our PCs good-bye quite yet.  But it will be interesting to see how the manufacturers with PCs in their DNA reinvent themselves in a world where mobile computing dominates, and
• in 2011, business finally gets social.  More than 40% of SMBs will use social networks to promote themselves and we'll see a consolidation tsunami as the bigger software suppliers scoop up social software vendors to fuel their social business efforts.

The key prediction from IDC is not only will cloud computing, mobile computing and social networking grow and mature next year, but they will "coalesce" into a new, mainstream platform.  And the players who are today's leaders in the cloud, mobile and social may not be the same companies who will be leaders of the new coalesced platform.

"In addition to creating new markets and opportunities, this restructuring will overthrow nearly every assumption about who the industry's leaders will be and how they establish and maintain leadership," said Frank Gens, senior VP and chief analyst at IDC.

In 2010, the cloud, mobile and social all found their rhythm.  Things will get even more fascinating next year when they share the same stage on prime time. 

I don't know about you, but I can hardly wait! 

You Know It's Real When It Enters the "Trough"

In August, Gartner Group released its annual Hype Cycle on Emerging Technologies. We here at 3Point Communications were awaiting the release of this year's Hype Cycle because we were particularly interested to find out if cloud computing -- which had been at the "Peak of Inflated Expectations" in 2009 -- would begin its descent into what Gartner terms the "Trough of Disillusionment."

You see, the ultimate goal of any emerging technology is to become an accepted technology as quickly as possible, go mainstream, thus lowering the cost of production. It is then that the investment in the new technology can be recouped and profits realized. This doesn't happen until the emerging technology makes the perilous trip through the Trough.

Some emerging technologies enter the Trough of Disillusionment never to be seen again, such as broadband over power lines, while others, such as interactive TV and speech recognition, are well on they way to mainstream adoption.

It is our belief that cloud computing will quickly become standard operating procedure for businesses and consumers alike, and this was confirmed by Gartner's recent report which has cloud computing going mainstream within 2-5 years. So seeing cloud computing entering the Trough was a welcome sight.

Here are five reasons we think cloud computing is here to stay:

1. It's already here. If you've used a photo-sharing site such as Shutterfly or accessed email on a friend's PC, then you've already tapped into the power of cloud computing. These simple applications, and countless others like them, don't exist on your PC, laptop or mobile device, they "live" in the cloud and are accessed on an as-needed basis. On the business front everything from email to CRM to customer support has migrated to the cloud. Not every company has moved every application from internal IT systems to the cloud, but the trend is well underway and in our opinion inevitable.
2. Cloud computing saves money. When businesses move infrastructure, platforms and software applications to the cloud, they save money. If your core business is not IT, why invest resources, time and money in owning and managing an infrastructure? A good example is Recovery.gov, the first government-wide system moved to the cloud, which expects to save $700,000 in its first budget cycle with more savings to follow.
3. Cloud computing is more secure than people realize. The number one concern among CIO and IT professionals is security when moving a company's data and resources to the cloud. But in many cases, cloud-based security is more secure than a company's internal systems. For example, an Aberdeen Group report found that a company's email security may improve by as much as 53% when moved to the cloud.
4. Going mobile. With the success of Apple's iPad, new tablets hitting the market, smartphones and other mobile devices, businesses and consumers are both accessing information on the go. These devices simply don't have the storage capacity or internal power to house thousands of apps. Rather, mobile devices are portals into the world of cloud computing. And IDC predicts that more than a quarter of a billion smartphones will be sold this year and numbers will increase next year by 10% or more. All will access the cloud.
5. Money talks. Amazon, Google, Microsoft, HP, IBM, Cisco, CA, Oracle and thousands of other companies big and small, are investing billions of dollars in cloud computing. Some, like Microsoft, have made bold claims that cloud computing must be the future of the company if it is to survive and thrive. With this much momentum behind the cloud, it is only a matter of time before it becomes mainstream.

We would interested in your thoughts on cloud computing. Are you there yet? Have you begun the journey? Or is something holding you back?

For the record, 3Point Communications embraces cloud computing and uses cloud-based applications to manage and run our business.

Cloud Computing is Sitting in the Catbird Seat

Cloud Computing is sitting in the technology catbird seat.  

Earlier this week, two leading technology companies betting their businesses on the promise of cloud computing -- EMC, Inc. and VMware -- reported strong second quarter earnings.

For EMC, this was its third consecutive quarter of record revenue growth.  The company's operating cash flow is at an all-time high.

And server virtualization leader, VMware, exceeded analysts expectations with strong second quarter profit and sales results as well.

Google, who along with VMware constitutes half of the so-called Four Horsemen of Cloud Computing, also announced last week that it too grew second quarter and revenue profits -- although profits fell short of the street's expectations.

On the company's earnings call, EMC execs said that sales of its solutions for building virtualized, private and public clouds will grow this year by about 25 per cent.

VMware's second quarter results and rest-of-year guidance were strong enough to earn a price target increase from the analysts at J.P. Morgan -- from $60 to $70.

And if these cloud developments don't excite, then how about this? Cloud computing is helping organizations climb out of the global economic mess!

How?

Well, according to a new study conducted by international research firm Vanson Bourne, a majority of IT business and decision makers say cloud computing is helping their companies do more with less.

A number of the 600 survey respondents believe that the benefits of cloud computing will result in a 15 percent decrease in their IT budget while others said IT savings could approach 40 percent.

Bryan Doerr, CTO at Savvis, Inc. -- which commissioned the study -- says that two key issues are driving organizations to cloud computing: flexibility and a pay-as-you-go model.

Cloud computing isn't the perfect computing model -- yet.

Security issues remain a concern, for example. But among fewer and fewer organizations as security issues are addressed and resolved.

Not matter how you slice it, Cloud Computing is enjoying the view from its coveted perch.

The Four Horsemen of Cloud Computing

The first four of the seven seals, as described in the last book of the New Testament, represented pestilence, war, famine and death.  These four seals were depicted as beasts riding on white, red, black and pale-green horses.  These Four Horsemen of the Apocalypse, as they became to be known, were said to have been unleashed to warn of upcoming events -- including the Day of Judgment.

That is heavy stuff.

Ok, now fast-forward some 2,000 years, and we had the "lite" version of the Four Horsemen:  Cisco, EMC, Oracle and Sun Microsystems.

Much less intimidating than famine or death, and certainly not as serious, but still imposing in their own right.

These were the four companies who prior to the rupture of the Internet bubble, were firing on all cylinders.

EMC had reinvented and reinvigorated the data storage solutions industry.

Oracle was king of the database software world.

Cisco networked the universe and at one point became the world's most valuable company.

And Sun "the network is the computer" Microsystems was happy, for a time, to sell the world as many high-end servers as it could manufacturer.

As a result, Wall Street had christened these companies the Four Horsemen of the Internet.

Today, three of the four continue to dominate their market segments while one has been subsumed by the other and lives on in technology only, no longer in name.

Although three of the four companies that comprised the Four Horsemen live on, The Four Horsemen of the Internet is done.  It's time has come and gone. Their 15 minutes of fame behind them.

Make way for the The Four Horsemen of Cloud Computing.

In alphabetical order, here they are, the Four Horsemen of Cloud Computing.

Akamai:  "At Akamai we've been optimizing the cloud for over ten years, building a global computing platform for over ten years, building a global computing platform that helps make cloud computing a reality."

Google: "the elephant in the cloud."

VMware:  "Advancing the Foundation for Cloud Computing."

But wait a minute. That's only three horsemen.

Well, I guess we could go with The Three Horsemen of Cloud Computing.  But to me, it lacks the panache of "The Four Horsemen of Cloud Computing."

Do you agree that we need a fourth?

If you do, please weigh in.

The cloud computing company that gets the most mentions will become the fourth horseman of cloud computing.   And you'll get the satisfaction knowing you helped make it happen.

Social and Collaborative Applications are Working Their Way into Enterprise 2.0

The Enterprise 2.0 Conference is taking place through Thursday of this week at the Westin Boston Waterfront Hotel in the scenic Seaport District of the city.  As you probably guessed from the conference name, the focus of this tidy expo is collaborative technologies, Web 2.0 solutions, designed specifically to enable enterprises to become more efficient, productive and innovative.

Steve Wylie, the conference GM (you'll find tweets from the show at #e2conf), points out that while businesses are taking advantage of game changers like cloud computing and data center virtualization, applications that exploit these infrastructure technologies have lagged the application advances being made in the consumer market.

That's what e2conf is all about: examining and showcasing the latest developments in enterprise-class social and collaborative applications. And there's no shortage of talent at the expo.  Today I had the opportunity to spend a few hours listening to the keynotes, kicking tires on the show floor and asking a few questions of the software developers who were there.

As you might suspect, most of the exhibitors on hand are smallish, privately held software companies.  The big guys were there too, including Novell, IBM and Cisco.  But the vast majority are innovative, emerging companies developing very exciting social and collaborative solutions for business.

In one day it's impossible to get a close look at all the companies there, but I was able to take a look at quite a few.  From what I saw and heard, these three are my picks for the coolest companies at this year's e2conf:

• Doodle, in their own words, "makes scheduling virtually effortless."  Using Doodle, scheduling a meeting with busy coworkers is as easy as creating a poll, casting a vote for the preferred date and time, and informing participants of the outcome.  Doodle was founded in 2008 in Zurich, Switzerland and has about 10 employees.  And I love the name.  Do you Doodle?

• At the other end of the emerging company spectrum is Jive Software, a well-funded, well-established company with more than 2,500 customers (they claim).    Jive Software, now based in Palo Alto, Calif., (the firm was started in Portland, Ore.), is eyeing an IPO in 2011 and is led by industry veteran Tony Zingale, who led the sale of Mercury Interactive to HP four years ago.  I saw Zingale's keynote earlier today and he still turns it on.  Jive Software is partnering with heavyweights like Google and Twitter and looks to be well on its way to building an enterprise 2.0 company with staying power.

• I'd be remiss if I didn't mention Baydin, a San Francisco-based company and winner of today's "Launch Pad People's Choice," a fun text message-based audience-participation contest pitting four newish companies against each other.  Baydin has an "Unsearch" product that's built into Outlook and hunts down or "automatically discovers" in your email, documents and colleagues who could help you with any given project.  I love this:  at Baydin, they talk about "the future of search...is not having to search."

I apologize for leaving out so many other cool companies and I'm already looking forward to the next edition.

Controlling Cancer for Pennies in the Cloud

You might know how bullish we are here about the potential of the cloud. You might even go so far as to think we believe the cloud could help cure cancer!  You might be right.

We came across an interesting story this week about an assistant professor of computer science at the University of New Mexico named Shuang Luan.  Professor Luan specializes in finding ways to apply computers to improve treatment for cancer patients. Last year, Luan's team decided to tackle an interesting treatment issue facing the medical community. Researchers realized the best way to treat cancerous tumors with radiation was to attack one damaged cell at a time. By doing this, they avoided collateral damage to adjacent healthy cells during treatment. 

They could reduce a week of calculations to less than 15 minutes at a cost of about .10 cents an hour for computer time.

But the math is a problem, specifically the complex Monte Carlo simulations required to figure out where each proton and electron from the treatment beam will travel during therapy. These calculations help medical physicists determine how much radiation should be used and at what precise angle it should hit the tumor. Of course the path of the radiation is indirect and different for every tumor.  The beam has to travel through muscle and fat and bone, all of which needs to be taken into consideration to map the target area to achieve the kind of pinpoint treatment envisioned by the researchers. Calculating this takes hundreds of hours, so the only viable solution was to use a super computer -- base cost about $150,000 before you pay for those pesky add-ons like peripherals and software. The time and cost required to apply this to every tumor clearly exceeds the scope of most physicians and insurance coverage, so the only alternative is to use far less precise short cuts in calculations. At least, that's what most physicians have thought. Professor Luan and his team realized you just need a credit card.

Physics graduate student Roy Keyes, a member of Luan's team, set out to tackle the problem in the cloud.  He created new treatment calculations while Christian Romano, an undergraduate computer science major on the team, determined how to run the calculations on 200 different computer nodes rather than one super computer.  They went to Amazon's web services with Luan's credit card and found they could reduce a week of calculations to less than 15 minutes at a cost of about .10 cents an hour for computer time.

The process won't be ready for every day use for a couple more years because the grad students need to get a medical license for their technique. But the promise is enormous. Keyes told KRQE TV in New Mexico that he thinks this is just the beginning of what medical research can do with affordable access to the cloud. In fact, he recently finished a presentation in Amsterdam on how the research and technology works and is scheduled to make other presentations. 

In a university press release, Professor Luan explained it like this: “In the Computer Sciences lab upstairs they probably have fifty or sixty machines, and a lot of students using them. You cannot just say I’m going to use them all today. But in cloud computing, we just basically type in a credit card number and say give us 200 nodes. And they give it to you in maybe five minutes.” 

So maybe the cloud actually can help cure cancer -- or at least dramatically improve the quality of treatment and reduce the risk of collateral damage.  If only it could clean up an oil spill.

iPhones, SmartPhones and the Coming Cloud Addiction

I'm not your typical early adopter, but I pre-ordered Apple's iPad and have used it endlessly since the day it landed on the doorstep of my Virginia farmhouse. Wherever I take it, I end up doing a sales pitch for the darned thing.  From waiters at the only good restaurant in town to kids and adults at the hockey rink, everyone wants to know about Apple's magical device. The question I answer most often is "What do you use it for?" My answer is about 100 different things, but not just one thing. There is no killer app.  For all its sizzle and hype, the iPad is a subtle device.  It works its way into your daily routines in a hundred ways until you end up having separation anxiety when your spouse sneaks off with it to read a book.  Weird, but true. Then again, isn't that what great products do?  They subtly work their way into our routines.  We don't know they have crossed the path from useful to vital until we don't have access to them for a period of time.  Then we panic.


A few years ago, I bought a car with a Continuously Variable Transmission (CVT).  It wasn't why I bought the car.  Truth be told, I didn't even know what CVT was. I liked the car.  Five years later, when I went shopping for a replacement, I only considered cars with the smooth shifting CVT.  Marketers can fill Times Square with all the brightly lit messages they can afford, but unless a product delivers consistently every day until we are dependent upon it, the product ranks as fad not trend.


For all the fanfare surrounding the cloud, I suspect this is the way the cloud will enter our work lives -- slowly, steadily and subtly. We won't be aware of its integration into our lives until there is a problem and we can't access something. I think this is already happening on a much wider scale than we realize.


The savvy people over at ZDnet's CloudTweaks raised an interesting illustration of this point in their blog about yesterday's introduction of Apple's other wonder tool, the iPhone. Writing about the introduction of a whole new class of SmartPhones, from Apple, HTC, RIM Nokia, Motorola and others, CloudTweaks pointed out that "these devices are introducing cloud computing offerings to many who might not otherwise care. The folks purchasing these devices don’t really care about all of that, however. They just want a slick looking, highly functional device."  Exactly!


SmartPhone Apps have moved in one year from the novelty of Zippo Lighters to very functional network-based applications and services. And these are not just limited to apps of restaurants, maps and directions. There is an increasingly diverse set of corporate applications in areas like CRM, banking and communications.  The cost benefits and limited risk certainly make these applications appealing to SMBs.  But if employees start injecting cloud usage of their own accord via SmartPhones into the technology gene pool of large corporations, will their subtle reliance on the cloud accelerate the adoption of more mainstream cloud deployments?  How long will it take until the cloud wends is way into mainstream corporate usage?   For all the hype and marketing about the cloud, nothing will measure success in technology better than separation anxiety. In fact,  I think they call it addiction. Excuse me. HONEY, WHERE'S THE iPAD?!!!!!!

Time to Cut Through the Cloud Computing Mania

Every few years a new idea representing a fundamental shift in how a task is accomplished or how a certain category of problem is solved, is introduced. Today, in marketing communications this fundamental shift is represented by social media. Social media has turned marketing communications on its head. Communications agencies everywhere are running hard and fast to stay ahead of the opportunities that the new social media channels present. For most agencies, staying ahead of what's new in social media is like drinking from a fire hose. It's exhilarating and exhausting at the same time. But mostly, it's exhilarating.

Today, in the world of technology this fundamental shift is represented by cloud computing. Cloud computing is the big new idea for how companies access, pay for and deploy technology -- from applications, to infrastructure, to computer power, etc.

Cloud computing is turning the technology world, and the business of technology, on its head.

Cloud computing, to me, is the single most exciting thing happening in technology today. Staying ahead of the cloud computing advancements being announced on a daily basis is also exhilarating and exhausting. But mostly exhilarating, if you're a cloud computing bigot like me.

Yes, the advancements in the mobile technology segment are electric. It's a segment that is growing faster than any other and is more imaginative and lucrative than most. And let's not forget the advancements and opportunities that are ongoing in the more established segments that include enterprise IT and semiconductor manufacturing.

But what these technology segments all have in common is the cloud. Whether it's a mobile technology company selling to other businesses or directly to consumers or both, or a global B2B enterprise IT solutions provider or a manufacturer of semiconductor components, they are retrofitting their existing offerings to leverage a cloud computing environment or they are developing new solutions optimized specifically for the cloud.

Some have referred to the cloud computing market as the "Wild West" or another gold rush on the heels of many before it, like the Internet gold rush of the mid-to-late 90's and the networked multitasking operating systems shoot out of the late 80's and early 90's.

At 3Point, we write a lot about cloud computing because we believe that cloud computing represents a broad transformation of the information technology industry. It's a seismic shift in technology and business, like the Internet was 15 years ago. Heck, local small circulation daily newspapers are even mentioning cloud computing on their business pages.

Cloud computing will be around long after many of the companies who are betting the farm on cloud computing will be around. I'm not talking about the big players, like Salesforce.com and Oracle and Microsoft, but the outcrop of new companies who are building their businesses on the cloud computing mania.

The companies that will survive, I believe, will be the ones who battle test their offerings -- of course. But they will also be the companies who communicate most effectively through the hype. They will be the companies who will communicate new ideas that break through the clutter. They will be the companies who educate their markets rather than hype the news. They will be the companies that start with a strong point of view and find ways to take a different perspective. They will be the companies who exploit the new social media channels appropriately and intelligently and not just because it's new and cool.

In the next few weeks, we'll be writing more about cloud computing marketing communications and how cloud computing companies can put social media to work for them.

In the meantime, I'd love to hear your ideas or examples of how you're using social media to cut through the cloud computing hype.

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.

Apple v. Google: Battle in the Cloud

I watched with amazement, and some amusement, as more than 300,000 people bought the new Apple iPad on the first day it was available -- and it isn’t even 3G enabled! I find it fascinating to watch people rush to buy the latest and greatest tech gadget the day it comes out knowing full well that it will have glitches and bugs, and will fall far short of versions 2.0 and 3.0 in terms of performance.

I talked with a geeky engineer friend of mine last night who had purchased his iPad last weekend and he gave it a less than glowing review of “it’s OK.” “Wait’ll the next rev,” he suggested.

But who am I to talk. I did the same thing last November when the Motorola Droid, running the Google Android OS on the Verizon network was introduced. I actually contacted Verizon in advance of the Droid launch to place my order. That ensured that my Droid arrived in the mail the first day the new smartphone was available. And guess what? It did have glitches and bugs, and it did fall short of my very high expectations.

Then on December 11 of last year the next rev of the Android OS automatically installed on my Droid and all of the problems I had experienced disappeared. Wait’ll the next rev, I thought to myself.

So I found it a bit ironic that on Tuesday of this week, just 4 days after the launch of the iPad, my Droid once again prompted me to download a new version of the “system software.” Was Google responding to the iPad launch with some vital fixes to the OS, or was it packing new features into it to maintain its lead over the iPhone? I wasn’t sure, but the timing of the operating system upgrade sure was interesting.

It is becoming clear that the future of mobile communications will be a battle in which both Google and Apple will be featured prominently. The iPhone came first, but the Google-driven Droid has proved to be a worthy opponent. And while the iPad hit the market first, there are several similar tablets in the works, including the WePad from Germany-based Neofonie, that will use the Android operating system and access the tens of thousands of apps available in Android Market.

A source no less than Gartner Group is predicting that the Android operating system will surge to 14% of the smartphone market by 2012, putting it ahead of the iPhone, Windows Mobile and the Blackberry; second only to the Symbian OS used in Nokia’s devices which are popular in Europe and many countries outside the US.

And why is Gartner so bullish on the Android OS? The Cloud. Gartner gives Android such an enormous surge in popularity because of a variety of factors, but chiefly because of Google's backing of Android and the range of cloud computing functions and related applications that Google will make available in coming years.

Smartphone applications live in the cloud. Therefore, the smartphone with an operating system designed for cloud computing is likely to perform better, and work more intuitively, than an OS that wasn’t built with the cloud in mind.

To quote Ken Dulaney from that Gartner Group report, “…because Android and Google operate in an integrative and open environment, [they] could easily top ... the singular Apple.”

Yes, Google and Apple will continue to slug it out in both the tablet and smartphone markets. Both companies will make great products and both will market the heck out of them. But the winner may be decided by which of them better understands how to work within a cloud-computing environment. So far, that appears to be Google.

Are You Looking at the Cloud through OpEx-Colored Glasses?

We repeatedly see stories attaching Cloud Computing to what is often cited as a single clear cut accounting advantage. "Cloud Computing enables companies to move the cost of computing from capital investments (CapEx) to operating expenditures (OpEx)."  This phrase is cited so often as a benefit to moving to the Cloud that it almost has become an automatic part of the litany. 

In simplest terms, the discussion comes down to one we all face at various times in our personal lives: is it more advantageous to lease (OpEx) or own (CapEx) something?  In business, it is more common -- and usually more advantageous -- to lease (office space, company cars, etc.). So, it is easy to draw the conclusion that the advantage of leasing computer capacity via Cloud Computing's managed services is a clear benefit. A data center requires up front purchases of servers, software licenses, networking equipment, etc., so the commitment of capital when compared to cloud computing's usage-based payment model can seem like an excessive burden. But is this really a CapEx vs. OpEx issue?

Geva Perry, author of the blog, "Thinking Out Cloud"  suggests we look closer. Perry cites three problems with the oft-cited accounting issue:
1.  First, it's not about OpEx or CapEx at all. Those who make the argument are really talking about cash flow -- do we spend now or over time?
2.  Perry states emphatically that there is absolutely no benefit in moving an expense from CapEx to OpEx, and
3.  The blog adds that the long term cost of renting anything -- hardware, software, server, networking equipment, Volkswagen or condo --  is going to cost more over time than purchasing the same item.

Perry goes on to say that there are many inherent benefits to Cloud Computing that should be considered, but warns us to avoid the automatic accounting assumption because the language describing it is misleading. When looked at as an issue of cash flow, the decision is far less automatic for a business and requires a more careful analysis of the specific needs and situation of an organization.

What do you think?

The Dark Side of Cloud Computing

The old axiom in real estate is location, location, location. I just spent a full day at the CloudConnect Conference in Santa Clara, CA and the manta repeated by every one of the presenters on the future of cloud computing was security, security, security!

One presenter after another quoted data from Gartner Group, McKinsey & Company, or privately-funded research to show that 9 out of every 10 potential customers listed security issues as the number one barrier to implementing a cloud computing strategy at their company.

And the concern about cloud computing security is well founded.

One of the presenters asked conference participants if they knew what enterprise had the largest cloud computing presence in the world. Among the guesses were IBM, Microsoft, HP, Facebook, Amazon, and of course Google. The answer, however, was an outfit, if you can call it that, with which many in the audience were not even aware – Conficker .

A New York Times article from last year describes Conficker as program that “uses flaws in Windows software to co-opt machines and link them into a virtual computer that can be commanded remotely by its authors. With more than five million of these zombies now under its control – government, business and home computers in more than 200 countries – this shadowy computer has power that dwarfs that of the world’s largest data centers.”

Indeed, Conficker’s “cloud” is larger that the cloud computing efforts of Amazon, Google and IBM combined! And its sole purpose for existing is to disrupt normal business operations inside of companies, organizations and governments. With that monster looming in millions of “cloud computing resources” around the world it’s no wonder 9 out 10 customers considering implementing cloud computing strategies are nervous about security breeches.

But all is not doom and gloom. Despite the security issues that must be taken seriously, the benefits of moving resources to the cloud far outweigh the risk, and many organizations, including the US Government, are doing just that in a big way.

Much of the same research that showed security as the biggest impediment to cloud computing adoption also showed cloud computing revenue growing by more than 20 percent in the next three years. Of course with that much money in the balance, Conficker, and other ne’er-do-well’s won’t be far behind. That’s why security will remain front and center in any discussion about cloud computing.

In my follow up post next week, I’ll address Gartner Group’s “Seven Deadly Sins” of cloud computing security and what questions companies should ask of their cloud computing vendor before taking the plunge.

Shining Light on Dark Clouds

At 3Point we are of the opinion that cloud computing is rapidly evolving to the point that eventually nearly every corner of business will be impacted. We see nearly all segments of technology, from semiconductors to enterprise software to mobility, becoming significant elements of the cloud.

However, as we have mentioned in this space before, cloud computing hype is beginning to peak which could lead to confusion and delayed market acceptance. As an undercurrent to the hype, there is also a steady drumbeat of cloud naysayers, populating the blogosphere with the opinion that cloud computing is nothing but fog and will fall short of its ideal.

A quick Google search finds articles such as Money magazine’s “Cloud Computing is for the Birds” and AdAge’s “This Cloud (Computing) Has No Silver Lining,” which present arguments and opinion that cloud computing is not all as promised. Even respected McKinsey & Company released a study last year that painted the cloud in shades of dark gray saying that while the cloud provided some benefits for smaller companies, large companies could lose money through cloud adoption. And industry luminaries such as Larry Ellison continue to rant against the cloud as old news, nonsense and water vapor.

There is even a Facebook page devoted to debunking the cloud suggesting “Join if you think that cloud computing is a horrible idea” and posted commentary like “It's a funny word for "web services". It's been around forever, and it still kinda sucks. Calling it "cloud computing" doesn't make it any more practical.”

This skeptical opinion also appears to permeate some large corporations, like P&G, as reported by VentureBlog. “What is interesting, however, is that one thing they aren't trying are cloud services. It was made clear that P&G runs everything behind their own firewall. And they have no intention of moving any part of their infrastructure into the cloud. P&G's view of the enterprise is pretty old school.”

This presents a challenge for companies bringing cloud-related products and services to market. Not only must they present a compelling case for their individual success, they must present a solid argument for cloud computing.

We welcome your comments and opinion on this topic:

Is the skepticism of the cloud well-founded?
How might companies rise above this fog of negativity?
What companies are doing a good job with the cloud?
Is any company other than Saleforce.com doing a good job of marketing cloud computing?

Real Men Have CAD

“Real men have fabs.” That famous quote from the early 1990s, is usually attributed to Jerry Sanders, Chairman of Advanced Micro Devices, and was used to underscore the belief that owning a semiconductor manufacturing facility, or fab, was the only way a semiconductor company could be successful.

Many innovative chip companies saw things differently, however, and by the mid-1990s there were many successful “fabless” semiconductor companies. These pioneers realized that the $1-2B it cost for the construction of a new fab every couple of years was not only prohibitive from a cost perspective, but also not necessary at all.

These chip makers turned to TSMC, UMC, Seiko-Epson and even IBM for the manufacturing of the wafers and chips, while focusing their efforts on design innovation, testing and marketing.

By the mid-1990s, many of these fabless chip makers were among the most profitable companies in the semiconductor industry.

Fast forward to today.

The continuing economic downturn has forced all companies to take a hard look at cutting, or at least managing, costs. The semiconductor industry is no different from other markets, and every chip maker is looking for a way to turn fixed costs into variable costs.

In his post on Xuropa last year James Colgan said that one way semiconductor companies plan to turn fixed costs into variable costs is by moving parts of the EDA (electronic design automation) flow to a SaaS model, where components of the semiconductor design software reside in the cloud.

Clearly there is a trend in the semiconductor industry to take advantage of cloud computing as a way to reduce costs. The chart below shows the adoption curve for many of the EDA modules migrating to the cloud.

This will have ramifications for how EDA companies such as Cadence, Synopsys and Mentor Graphics market their products to customers. No longer will customers want to purchase costly software design tools, or even licenses to those tools, if they can use them via the cloud on a pay-per-use model. This trend is just now in its infancy, as is the way EDA companies talk about their relationship to cloud computing.

But as rapid as other software applications have moved the cloud, we're probably not too far away from hearing some stubborn semiconductor executive stand up and proclaim that "real men have CAD."

What Cloud Computing Means For Marketers

Cloud Computing has become one of the top trends in technology, with the business world buzzing about the potential and leading innovators like Microsoft to dedicate significant resources to be at the forefront of this trend.

The IT and operational benefits of the cloud are becoming well-known – increased efficiencies, lower barrier to entry for smaller companies, increased flexibility, etc. Even we at 3Point have embraced cloud computing operationally, leading to some nice efficiencies. However, what is the value the Cloud offers marketers? Often marketers turn a deaf ear to technology talk but this is a topic that has the potential to be hugely liberating for marketers, enabling great digital experiences for customers and enhanced revenues for companies.

What is cloud computing? Simply, all the computing infrastructure and intelligence (software, data and servers) is owned and managed remotely by a third party, and accessed via the internet using a web browser. Within cloud computing is software as a service (SaaS). Many of the innovative CRM, marketing automation and social software vendors operate via a SaaS model of delivery. But why is this important to a marketer focused on sales, brand value and customer experience, not how technology is delivered?

It matters because this approach can be hugely liberating for marketers, particularly in enterprises where the IT function is frustratingly slow for marketers trying to keep up with the breakneck speed of changing customer expectations online, and where putting together a business case in new areas of digital may be challenging. Among the primary benefits:

Cost. Cloud services are drastically less expensive than tradition hosting options, so marketers can do more and innovate more with their money. Cloud services enable some basic things such as faster time-to-market as solutions can be built in less time.

Faster scalability to better keep up with the variables of marketing campaigns and user traffic. In the past companies would have to prepare for an ad, email, keyword, or offline-online campaign and get resources ready on standby and have difficulties implementing mid-campaign course corrections. With cloud services campaigns can scale on demand with a lower cost and faster timeline.

Strategically, social services are enabled through cloud computing. New offerings like Facebook Connect, Twitter/delicious/reddit/digg/etc. apis, or even YouTube embed capabilities are all cloud services that enable you to drive traffic to your site without having to build your own social network. Facebook Connect is a cloud service that enables the portable social graph bringing users to your property. One user post back to a user’s Facebook wall results in three more users accessing the site. Customers tried to build social networks on sites like flip.com and other properties, now they can tie into the cloud service and get the same functionality in a fraction of time .

Most importantly, Cloud services allow us to think less in terms of technology architecture and more in terms of the marketing processes and workflow supporting the desired end-result. The Cloud smoothes a lot of technical complexity and assumes everything can be easily and integrated in real-time allowing marketers to focus on marketing and creativity. Blogger Adam Needles captures this idea well in this post and the situation has continued to evolve. We anticipate more and more company marketing departments will adopt the Cloud as a model and this will lead to new innovation in the design and implementation of campaigns.

If technology is becoming increasingly integrated into how you sell, manage relationships and build your brand's reputation, take a closer look at the Cloud. There are opportunities to increase simplicity, enhance control while at the same time lowering costs and increasing flexibility. And most important, providing marketers the opportunity to focus on marketing not IT.

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.

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.