All Clouds Are Not Created Equal
Recently a number of companies have announced cloud services to compete with Google Apps. Microsoft and IBM are among those that have recently announced their own cloud services. In the confusion resulting from these announcements, the end user must know that not all cloud services are created equal.
In today’s blog I will try to clarify why. In my next blog I will discuss Cloud Security. Firstly, I will emphasize that Cloud Services, Google Apps, Amazon EC2, SalesForce (in this blog for simplicity I will concentrate on Google and Google Apps) are based on a planet-wide, distributed, massively parallel computers that appear to the end user no different from the corporate server running, say an e-mail application like MS Exchange. Secondly, I will emphasize that cloud services are a disruptive innovation that will be very difficult for existing client-server computing vendors, like Microsoft and IBM, to successfully introduce cloud services as a business, even if they are able to create a planet-wide platform to rival Google’s.
The Cloud is a planet-wide, massively parallel computer
Google’s planet-wide computer has been evolving for the past 7-8 years as the company’s share of Internet searches has risen to over 60%. Throughout this period, Google has gradually built a massively parallel computer to process within a second, each of the hundreds of millions of search queries that it must answer each day. The architecture of the massively parallel worldwide computer is comprised of both software and hardware.
State of the art software (Big Table, GFS, Map reduce) distributes and processes these queries in parallel as a single non-stop, always available computer. This software is based on decades of computer science research on massively parallel processing as well as fault tolerant experience acquired by servicing million of user queries daily.
The hardware platform is built on hundreds of thousands of custom-built PC servers distributed across dozens of data centers. Each data center is estimated to require around $500 million to build. These data centers have been built up gradually over Google’s lifetime. During this period, Google has developed proprietary technology to package, house and cool hundreds of thousands of processors in one data center. Google’s data centers are said to be among the most eco-friendly, energy efficient data centers in the world.
Disruptive innovation
High Technology products frequently emerge to satisfy market needs, displacing old inefficient products. Innovation drives the evolution of technology to satisfy market needs. Most frequently, innovation occurs incrementally and progresses as technology and user needs evolve. This type of innovation is called sustaining innovation. A new version release of the MS Office or MS Exchange is typical examples of step-ups in the sustaining innovation curve.
However, over the years, products driven by sustaining innovation climb up a curve that increasingly diverges from that of the user needs curve, which typically rises at a gentler pace. Subsequent releases of the MS Exchange product have cumulatively loaded the products with a myriad of features that the typical user has increasingly had little use for. This MS Exchange feature overshoot exemplifies the divergence driven by sustaining innovation between the evolution of a product and the needs of the user. While the dominant vendor’s product curve moves away from the user needs curve, a different product (e.g. Google Apps) creeps up on a trajectory below that of the user needs curve but at some point, crosses it, emerging to displace the established product.
Web based ASP services for the enterprises, available almost from start of the Web, have been unable to meet user needs until the last couple of years. However, the spread of broadband and the evolution of Ajax and the Web 2.0 platform have, since roughly last year, suddenly allowed Web ASP services to match the needs of many corporate users. Google Apps is able to offer the core features provided by the MS Exchange applications and at a much lower cost. Google Apps is now poised to replace MS Exchange for enterprise users.
Given the threat that cloud services represent to established vendors such as Microsoft and IBM is it possible for them to succeed in creating their own cloud services to compete? In ‘The Innovator’s Dilemma’, Christensen argues that it is difficult for companies that have been advancing their products on a sustaining innovation trajectory to move to a competing disruptive innovation curve. The main reason being that making the shift means adopting values and processes that are not compatible with the existing culture within that corporation. Microsoft derives very high profits from MS Exchange and high profit deals are a core value within the corporate sales culture. Thus, it will be difficult for the high gross profit Microsoft package sales culture to adapt to the new low profit cloud services culture. Christensen mentions that existing companies were only successful when they were able to spin-off the disruptive technology products to a newly created and completely independent organization within their structure.
Typically, established vendors will try to retain the high revenue/high profit of their established products by offering hybrid solutions, in this case a client server/cloud solution, but it will be difficult for the hybrid solutions to compete in cost performance against the purely disruptive innovation such as Google’s Cloud.
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Much Regards, Mark
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