Monday, July 27, 2009

The Cloud - its benefits and its threats

I am very intrigued by the following quote from Dave Powers at Eli Lilly, the pharmaceutical giant and makers of Prozac®, Cymbalta®, Cialis® and dozens of other medicines. Their IT challenge was daunting – purchase 64 compute nodes and storage, assemble, and perform their critical testing. The choices were a large capital expense layout with high-cost management or look to a new method to conquer the task. Lilly turned to Cloud Computing and specifically Amazon’s EC2 (Elastic Compute Cloud). Their comment below is the epitome of Cloud Computing. Lilly’s project is fairly typical of geo-science and manufacturing companies that use a sort of ‘modeling’ or simulation approach to discovery, forecasting, and product improvement/ testing.


“Lilly has demonstrated the viability of cloud computing in pharmaceutical R&D, according to Dave Powers, the firm’s associate information consultant for discovery IT. "We were recently able to launch a 64-machine cluster computer working on bioinformatics sequence information, complete the work, and shut it down in 20 minutes," he says, describing a project the firm executed using Amazon’s Elastic Compute Cloud (EC2) service. "It cost $6.40. To do that internally—to go from nothing to getting a 64-machine cluster installed and qualified—is a 12-week process."
(Original article - http://pubs.acs.org/cen/coverstory/87/8721cover.html)


To me, this is the true beauty of Cloud Computing.


5 years ago, I remember a similar discussion about temporary processing projects and implications with an oil and gas executive. He mentioned that the key to their exploration efforts was gathering a bunch of data with ground penetrating machinery. Their machines would “thump” the ground from multiple triangulated locations and gather the reflections from the geologic formations underground. The better the reflections, the more thorough the data but it also meant a few dozen to a few hundred TBs of raw data. The challenge was to process the data as fast as possible such that their team of geologists could find the anomalies and make a decision on the size, location, and viability of extraction of the natural resources they wanted.


The answer 5 years ago for that oil and gas project manager was “renting” a High Performance Computing solution from a notable vendor versus the capital investment to do it themselves. The oil and gas company would have the vendor build the physical 32 or 64 node cluster with storage, deliver the mass of machinery to the oil and gas company site, get the cluster ‘ready’, and then run their data jobs. The company would manipulate the data as required for 2 to 4 weeks depending on how many ‘runs’ they could get processed. In their case, fast was never fast enough. As a “rental”, it was expensive but it was better to “rent” than “own” – the lesser of two evils. After use, the hardware vendor (with their own capital invested) would typically look for another company to coordinate another rental. While some oil and gas companies could justify the investment in large clusters, the processing power and expense was equivalent to chasing something you could never catch. To be more effective over the long term, the oil and gas companies continue to use more sophisticated ground penetrating equipment which gathers more and more data to process. Owning the processing equipment is near insanity from a financial and processing point of view.


Fast-forward 5 years to Eli Lilly. They have discovered Cloud Computing and its benefits. A seamless method to process and extract the information they need. Surely, other industries will gravitate to the Cloud for their modeling and simulation.


That’s the good stuff. What does the Cloud mean to the hardware vendors? If you were a financial analyst tracking a hardware company, what questions do you ask of them?


Q. “Cloud Computing has some great customer benefits but from a hardware point of view, it might mean selling less hardware; assuming you aren’t the cloud vendors hardware of choice, what do you do?”
Possible A. “We are developing newer products that unify compute and storage for more efficient, denser solutions that can serve multiple markets – the end customer that still needs in house control of their transactional business and Cloud vendors that need a massive amount of storage.


While that potential answer is OK, the trend to the Cloud will accelerate. What does it mean to hardware companies that base much of the business on testing, modeling and simulation. A notable vendor once claimed (privately to me) that 50% of their entry level storage products were sold into Enterprise accounts primarily for modeling, simulation, and scaling. That fact seems counter-intuitive to their sales and marketing efforts which geared their high-end products to the Enterprise and their low-end products towards their channel and first-time buyers of that technology.


Assuming customers now have a choice to model their business using a 64 machine cluster for $6.40 in 20 minutes time without the capital expense, the threat is real for hardware manufacturers. The capital investment that larger companies make to model their enterprise will take a chunk out of established revenues of the hardware manufacturers over time by the Cloud. Today that chunk might be small, maybe not. Hardware manufacturers have all faced changes in the market and the good companies know these trends and innovate. The Cloud is the newest challenge and might pose a tougher threat. The Cloud is the first time that end customers have an option of not buying hardware the traditional way and tackling dynamic workloads almost instantly.


The Eli Lilly example solution is a great Cloud example… Imagine an IT meeting with the CIO in a large conference room in Indianapolis, Indiana. The IT department beaming from ear-to-ear with the news that they modeled their new drug in record time with a huge reduction in costs. The CIO impressed with the achievement says, “That is tremendous. What else can the Cloud do for us?”


And thus the Cloud trend accelerates..

Thursday, July 16, 2009

Dell allegedly going on the acquistion trail

Folks are predicting that Dell will acquire a storage company to boost their growth. There seems to be several good indications that this is true:

clue #1. Dell recently hired IBM's merger and acquisitions executive
clue #2. The Equalogic acquisition went well (Dell made a significant jump in the iSCSI market)
clue #3. Dell has almost $10B in cash
clue #4. In a recent Dell analyst call (July 09), Michael Dell said that the enterprise business is a high-margin area where the company could seek acquisitions".

Sounds like Dell is going to harvest a storage, software, or hosting company. Check out the current predictions.

Here are the predictions:

3PAR Disk Arrays(Taneja Group) - "3PAR's InServ Storage Server systems compete with EMC Corp.'s Symmetrix, as well as with systems at the high end of the Clariion platform, which Dell resells"

My prediction - not likely at all... EMC is well-known for storage and trusted by a large number of customers for decades.. Dell walking in the door with a re-badged 3PAR won't sway many customers. 3Par might end Dell's partnership with EMC and thus cause EMC to go on the offensive. If the partnership stayed in place, a Dell badged 3PAR array would cause an array positioning nightmare for the Dell's marketing and sales force.

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CommVault Systems Inc, Storage Software (Taneja Group/ESG) - CommVault has the profitability, high margins and recurring revenue streams that Dell wants." "CommVault also brings materiality from a revenue standpoint, and is profitable."

My prediction - possibly but unlikely... I think it is inherently hard for hardware companies to sell software well. I've seen this type of mismatched sales culture clash with other pure hardware companies buying software companies. The typical hardware company's sales force has a hard time grasping something that they can't see, touch, or inventory. If an acquisition happened, CommVault sales would potentially suffer at the hands of the "hardware guys" using discounted software to sell hardware (or even worse - run them as a separate company and ignore them completely).

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Compellent Technologies Inc. disk arrays (ESG/Taneja) - If Dell buys Compellent it would signify serious problems with the Dell-EMC Corp. relationship. Compellent's Storage Center midrange systems are direct competitors with the Clariion.

My prediction - ppbbbttt! same argument as 3Par (above)

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DataDirect Networks - Privately owned DataDirect Networks would let Dell scale up further into the enterprise. DataDirect's disk arrays are self-healing (huh?) and it recently added a scale-out cloud storage system called the Web Object Scaler (WOS).

My prediction - I have no idea but I'll say no.. I don't think Dell needs ANOTHER disk array.

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GlassHouse Technologies Inc. -Dell is a partner with and an investor in privately held storage services and consulting firm

My prediction - NO.. keep paying them as a consultant

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Isilon Systems Inc., NAS storage - unstructured data will account for most enterprise data growth going forward. Most major vendors are looking to add scale-out network-attached storage (NAS) systems to their portfolios to accommodate this trend. Isilon would have that product and compete against EMC

My prediction - not likely; again another disk array with the same challenges - awakening the wrath of EMC and/or positioning nightmare with too many products

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NetApp, NAS storage - biggest name in NAS; loser in the Data Domain bidding war

My prediction - somewhat likely but not probable.. it would give Dell some instant credibility in NAS and might work but it would be a hefty price for yet another hardware vendor with vendor-specific software.

_________

Symantec Software - analysts predict this as another long shot because of its size, but there has been speculation that Symantec's storage and security software portfolios could help Dell on two fronts

My prediction - unlikely to maybe. similar to CommVault.. it is a silicon valley culture with good software but getting acquired by a low-cost Texan hardware company would be a culture clash just behind Compaq and Digital. Symantec has good products - consumer (Norton virus) and corporate (Veritas backup & file manager suite).

(http://bit.ly/pka54 - Searchstorage.com - original article)

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Palm (Computerworld)- a smartphone consumer company to expand its presence in the mobile market. Palm would provide smartphones to Dell's portfolio of products

My prediction - possible but if you aren't buying Apple then I think you will always be second or worst in smartphones (look at Sprint, Verizon, etc). Now, Steve Jobs is a time-teller and not a clock-builder so in the future if Jobs were no longer the CEO, Apple would be a good target.

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Acer (Computerworld) - PC maker and competitor that has made some significant market moves in the PC market

My prediction - No. Overlapping products with low-margins. Dell already uses the PC as a loss-leader for other products. They don't need to beef up their loss-leader product line. Sure it gives Dell #1 marketshare but long term profitability is more important.

_________

Drum-roll! Please
Rich Bruklis' Acquisition Predictions

Rackspace Hosting (hosting and cloud computer vendor) - a meteoric rise to $531M revenue in 2008 with 60%+ of gross margin. An independent leader in hosting and cloud computing. Current partnership with Microsoft. Dell could boost sales of their products inside Rackspace data centers while Rackspace continued with their innovative services for customers; both Dell & Rackspace sales' models are direct... both companies are in Texas (Southwest Airlines might double-up their flights between San Antonio and Austin), both companies are fairly nimble when servicing customers. Dell would teach Rackspace about controlling SG&A. If Vegas had a betting line, I'd throw $100 on Rackspace.

Now EMC could still come into play with their Atmos cloud and partnership with AT&T. A Dell/Rackspace-EMC/AT&T partnership could twart IBM, HP (if they ever do anything cloud-based) Microsoft, and Google. But even if that wasn't in the works, EMC would most likely leverage Dell for their server needs.

A group of startups - Zuora (an online billing and metering vendor), Sonian (archiving and compliance cloud software), Rightscale (management platform), Eucalyptus Systems, AppZero (Application Virtualization), etc (http://virtualization.sys-con.com/node/770174 -virtualization journal of top 150 cloud vendors)

EMC itself - the Dell partnership is already in place (albeit two dogs circling the same bone at times); it would give Dell everything that the other predictions are promising; an acquisition sticks it to IBM and HP who are looking up at EMC in the storage market. It also allows the EMC sales force to become the 'one stop shop' that they always sell against when IBM and HP are in the deal. The price would be steep but HP gobbled up Compaq so anything is possible.

The Catholic Church--- Sorry! Apparently Microsoft has dibs on them (the internet's first hoax '94)

Friday, July 10, 2009

Tuesday, July 7, 2009

2 companies that decided to use a CLOUD

I found two great quotes from a couple of startup companies that used Amazon EC2 Cloud service. These quotes tell you how the cloud is a true benefit...(if you are short on time, just read the bolded sections)

Summary:
Unless you are very good at predicting your future needs AND you have the capital expense to support that prediction, your project could be a good candidate for a cloud implementation.

Quote #1
Running an Internet startup remains a tricky business, says ShareThis. During the past two years, more than 110,000 sites have added the ShareThis, allowing readers to forward articles or videos to their friends. The popularity has made the company's data requirements enormous: it handles up to 12,000 requests a second and 130 million page views every day.

In the planning stages, the startup realised that potential success would mean that it would have to establish a data centre -- and pay for provisioning the infrastructure -- before its business took off, says Nanda Kishore, CTO of ShareThis. Understandably, the business balked at such costs.

"If you look at a traditional data centre model, it is very clumsy," Kishore says. "Your need to buy capacity is always ahead of demand (and) if you don't have the traffic, you've built up all this capacity and you are stuck with a fixed cost."

Quote #2
“We explored renting CPUs, and grid computing models, but the costs were prohibitive. Plus, the ones that operated at any scale only allowed batch operation. There was no effective real-time computing option,” said Paul Hammann, VP Datacenter Operations for Powerset. “Then we explored Amazon’s web-scale computing model and Amazon EC2. The decision was easy. Amazon delivered all the functionality, flexibility and scalability we needed at a fraction of what it would’ve cost us to build it out ourselves.”

For Powerset to operate effectively, it would require enormous amounts of expensive back-end infrastructure, meaning, much of Powerset’s investment capital would have to be spent on CPUs, terminal switches, cable, racks, datacenters, hosting, and expensive power from Silicon Valley. They recognized the huge benefit of someone else managing this infrastructure for them