Monthly Archives: April 2010

Information Week has an article that talks about the difference between the US and European Cloud Computing markets. The article points out to some numbers given by The 451 Group’s William Fellows 

The 451 Group’s William Fellows in a “Cloud Outlook 2010” Webcast, says that 57% of spending on cloud computing is done in the U.S., 31% in Europe and 12% in Asia. But when it comes to the adoption of infrastructure as a service, the way to leap the furthest into cloud computing by using Amazon’s EC2 or Rackspace, 93% of that spending is done in the U.S., 6% in Europe and 1% in Asia.

In fact, this matches with the kind of numbers I am getting while talking to vendors from around the world. Couple of months back, I spoke with Christoph Streit, CTO of Scale Up Technologies, on the same topic. He told me that the European market is tough and they are lagging behind US by at least one year.

I asked them about the European cloud market and what kind of traction they are seeing in the market. Christoph told me that they are finding it difficult to convince customers to move their assets to cloud. He told me that they have to put considerable efforts to educate customers about the benefits of cloud computing. In his opinion, European market is lagging behind US market by at least a year on cloud adoption.

In fact, Christoph even told me that they are spending valuable time and resources educating the customers about cloud computing than actually selling it to them. I have spoken to couple of other European vendors and analysts since then and they all share the same opinion about a difficult terrain in Europe. The lack of understanding about the benefits of cloud computing along with a difficult terrain in terms of privacy laws makes cloud computing a tough sell in the market. However, it is possible to overcome the difficulty associated with their privacy laws with the help of an open federated cloud computing ecosystem. Regional players like Scale Up Technologies are playing a crucial role in bridging this gap.

The lack of enthusiasm for cloud computing beyond US is not restricted to Europe alone. As noted by the 451 Group Analyst, Asia is far behind even Europe in terms of cloud computing spending. I am a partner in a Cloud Consultancy firm in India and we are observing the same trend there too. It is tough to convince the businesses about the benefits of cloud computing. Probably it is cultural but they are reluctant to give up their existing infrastructure and move to clouds. There is a long way to go before cloud computing can gain steam in countries like India and other parts of Asia. However, we are hearing from IBM that Chinese government is showing some interest in setting up cloud infrastructure for the consumption of their local governments.

I asked our own Ben Kepes about the status of Cloud Computing in Australia and New Zealand. Since he has been travelling a lot to different parts of Australia and New Zealand running Cloudcamps and talking to both users and vendors, I thought he can give some insight into the trends there. According to Ben, the cloud adoption is very low but some of their big traditional vendors are starting to roll out IaaS offerings. He said he has seen some big companies adopting Google Apps but it is not a widespread trend. He attributes the lack of enthusiasm to poor internet connectivity in that area and the enterprise concerns about cloud security.

In short, cloud computing is a more local trend and we have a long way to go before it becomes an universal phenomena. This also highlights the tremendous opportunities available for more and more players from these countries. As I have always said, we will have an open federated cloud ecosystem in this world and not a handful of monopoly players like some pundits predict. What do you think? I would love to hear from users and vendors in different parts of the world. Please feel free to jump in if you have any comments.

Yesterday, I attended the GigaOm bunker series on Open Source and Cloud Computing. The event had two panels, one featuring Larry Augustin of SugarCRM and Jim Zemlin of Linux Foundation and the other with Joe Tobolsk, Rich Wolski, Shelton Shugar and Tom Hughes Croucher. There were some interesting discussions on both panels and an overall agreement that open source is beneficial for cloud computing (in the words of some of the participants, the single most reason for the very success of cloud computing). But there was one question that turned out to be controversial and it is about who makes money from Open Source. Derrick Harris from Giga Om Pro offers a good coverage of this question and the ensuing discussion in this post. During the event, I had fun observing the debate and I thought I will offer my views here.

Roughly, the participants in the discussion can be split into three camps. On one side, there were those who went gaga over how open source is successfully making money and, on the other end, there were skeptics who were wondering why Open Source is not making big bucks like their proprietary counterparts. In between these two camps were the so called “moderates” who argued that open source need not make big money but they enable others, like Web 2.0 vendors and the current day cloud vendors, make big bucks. They even showed the example of how open source is single handedly keeping Wall Street running and, thereby, helping some people make really big bucks.

My thoughts about Open Source making big money are summarized below

• The biggest mistake made by most of the participants in the room is to view Open Source as a business model. This is not something new. Ever since Open Source started gaining traction in the business world, various players involved in the game tend to view Open Source as a business model. In 2007, in response to a debate between various pundits on the true nature of Open Source, I had argued that Open Source is not a business model but a philosophical platform on top of which various business models play the game. In that blog post, I had compared Open Source to basic science and I would love to dig a bit more on this comparison here. If you tend to view basic science as a business model (many people in the industry tend to see everything using the lens of monetization and, even in a capitalistic country like US, it is not necessary), you will realize that it is one of the biggest money losing endeavor in this world. However, basic science is the single reason why we, as a society, have advanced to what we are today, including in the area of commerce. Basic science didn’t make money but it enabled the society to progress through innovation and allowed businesses to make money by productizing the results of basic science research. Essentially, basic science acted as a platform acting as an enabler of innovations and led to various business models based on these innovations. I see Open Source in a similar vain. Open Source is a platform that enables innovation by sharing of source code and allows some businesses to make money by layering a business model on top of it. Some business models may work and many might just fail depending on whether the business model is compatible with the nature of Open Source. Failure of a particular type of business model does not imply the failure of open source itself. I don’t believe in having a metric to measure everything (do we have a metric to measure happiness yet?). But, if we ever have to have a metric to measure the success of open source, that quantity will be proportional to the amount of innovation it has enabled and independent of the money that was directly made from open source itself. If we grasp this point about the true nature of open source, then Simon Crosby’s comments about the presence of proprietary components in many successful open source products will be hardly surprising. In this world view, having proprietary addons to the open source core is one of the successful business models on top of the Open Source Platform. This is not the only one and there are others including Redhat’s approach. There are many more to come in the future. Business models on top of open source may come and go but the basic philosophy will stay intact for a long time to come.
• Another mistake, in my view, is about the metric they use in measuring the success. They tend to use the yardstick they use in the proprietary world to measure the success of Open Source. One of the biggest success of Open Source from an economics perspective is the commoditization of software. The proprietary vendors made big money by the exclusivity enjoyed by their products and, in most cases, the lack of viable competition. This offered them the leverage to charge exorbitant prices to their products. The very freedom offered by Open Source breaks the spine of this exclusivity enjoyed by these software vendors. In fact, this freedom opens up an unique opportunity for more than one business to profit from the same software. The inability of vendors to charge sky high prices and the forking of business opportunities by many people will ensure that the idea of big bucks doesn’t enter the Open Source world.
• This point is more political than technological. The American idea of capitalism measures the success of capitalism in terms of the number of people who won big but my idea of capitalism is not about winning but about creating opportunities for individuals to compete. In my world view, there may not be one single big winner but many winners having their own piece in the marketplace. The comparatively moderate economic success of companies running their business on top of open source platform fits this worldview of mine. Open source empowers businesses of all sizes to compete in an equal footing, with each getting a piece of the pie based on many factors including the availability of some unique features which users found compelling, fanatical support, etc.. This spreading of opportunities ensures that no single business is hugely successful but it creates many successful businesses. Some people in America may call it socialism but it is capitalism for me. Empowering more and more people to compete in the marketplace is capitalism IMHO and open source does it very well.

Well, these are some of my thoughts on why Open Source is not making big money like their proprietary counterparts. Open Source is a philosophical idea that fosters innovation and enable many business to compete in the marketplace. Like basic science, it may not make big money but it will enable big ideas which, in turn, may make big money. Like any commoditized marketplace, the money is not going to be huge for any single player. It is important for us to understand the true nature of open source. If we understand it correct, we can better utilize this platform to innovate better. If you are a business looking to make big money with software, then open source is not the right path for you. You are better off with proprietary approach. Open source will still survive by the very itch in the hands of users (read companies in the cloud based world).