From a recent headline: This is either a sign of the apocalypse or yet another indicator that the cloud movement is real — Ellison Defends Oracle’s Cloud Strategy. After all, it wasn’t all that long ago when Mr. Ellison had a decidedly different bent toward the cloud in this Ballmer-esque rant he delivered during a discussion at the Churchill Club a couple years back.
Mr. Ellison coming around on the whole cloud phenomenon may not be all that surprising actually. Many, if not most executives in high tech and IT today, seem to be at least resigned to the fact that the cloud will be a part of their tech strategy in some capacity. I heard this from a discussion our company had with the CEO of publishing house TechWeb, Tony Uphoff, who said that the CIOs that his company surveyed reported cloud to be a major part of shaping the IT infrastructures for the next decade to come. Mr. Uphoff also said another interesting thing, namely that the time period between the years 2000 and 2010 being the “Lost Decade” in terms of innovation in enterprise IT. We readily agreed, of course, as we’ve been on-the-record with the same dim assessment ourselves:
I always ask people, tell me what’s the most innovative product that’s come out in the last decade? Everybody kind of scratches their head and says, “Well, it’s been incremental.” But there hasn’t been tremendous innovation. Storage area networking was fairly innovative, but on the IP side there hasn’t been a reason to be. It’s been dominated by one player that didn’t have to do massive innovation because it had such a large customer base.
It’s not all an easy jaunt down the primrose path for cloud however. I refer to Gartner’s recent report warning of the potential financial pitfalls of moving whole hog to the cloud if those cloud users do not properly manage their cloud utilization rates (presumably for public cloud services, e.g. Amazon’s EC2). Here’s a good summary of Gartner’s position:
While an increase in the utilization of cloud computing will lead to a shift in the opex/capex ratio of IT spending due to its lower capital requirements, the reduction in capex due to cloud adoption over the next several years will not be as pronounced as originally thought…Cloud computing shifts the burden of utilization risk from the user to IT. The inability to effectively manage utilization can lead to serious financial consequences, because pricing is related directly to utilization. Even when cloud computing provides significant per-unit cost advantages companies can end up spending more if demand is not properly managed.
I recently got real-world validation of this myself in a separate discussion with one of our customers in the data center hosting industry, who is in the business of managing co-located “on prem” IT services for their customers. That is, this company competes directly with public cloud service providers such as Amazon and believes it delivers higher value at better cost structures. As evidence, he flashed a pretty compelling slide comparing a customer success story that showed that his company was able to deliver higher value, higher performance and higher reliability compute/network/storage services at far less cost. He mentioned that a comparable offering from Amazon would run well north of $1 million a year compared to $63,000 a month with his services.
Interestingly, Gartner confirmed the validity of this head-to-head comparison in a chart showing that while acquisition cost-per-unit for compute/network/storage had been going steadily down in the previous decade, the market forecast for actual cost to companies are headed up primarily due to the inability to manage capacity demands and IT utilization rates over a long period of time. To me this says that not every IT organization out there has driven an effective “cloud bursting” strategy, it appears.
I wonder if Mr. Ellison would change his tune again if he took a hard look at this numbers. Probably not. At least according to this Forbes.com blogger, Mr. Ellison might have his sights on bigger targets. Now, I’d love to see the many, many rants that would trigger.