Welcome!

Cloud Expo Authors: Corey Eng, Pat Romanski, Roger Strukhoff, Keith Cawley, Elizabeth White

Related Topics: Cloud Expo, SOA & WOA, .NET, Virtualization, Web 2.0, Security

Cloud Expo: Article

Licensed to Print Money (In the Cloud)

New approaches are emerging with the goal of minimizing upfront investments in both hardware and software

One of the major issues facing cloud service providers is the expense of building out infrastructure without knowing how or when revenues will follow. As a result, cloud providers are reevaluating their approach to hardware and software investments and engaging with technology and networking vendors to develop creative pricing models that are aligned with cloud business principles and engineered to reduce risks.

In a perfect world, cloud service providers would pay for infrastructure only after a customer has made a purchase - in order to maintain a tight correlation between revenues and expenses. In the real world, however, implementing this type of model is easier said than done. This was especially true during the ‘iron' age, when hardware and software were highly coupled and there were very few alternatives to big vendors that focused on selling high-dollar, high-performance networking gear.

Today, however, new approaches are emerging with the goal of minimizing upfront investments in both hardware and software. One of the most compelling new approaches takes advantage of performance improvements in server virtualization. Leveraging virtualization has several benefits, one of which is the ability to maximize the use of compute resources. Although specialized hardware can provide some performance advantages, the downside is that unused compute resources cannot be utilized or shared by other functions. For many service providers operating on thin margins, idle resources that cannot be monetized can mean the difference between profit and loss.

In contrast, virtualized server resources can be spun up and spun down to perform a wide range of functions and enable a wide selection of services. While hardware will always remain a large expense, standardizing on server virtualization generates savings in the form of volume discounts and also provides the flexibility to ensure maximum ROI is being extracted from the infrastructure. In other words, a virtual machine that ran load balancing yesterday for one customer could just as easily run application services today for a different customer.

The other major benefit of server virtualization is the ability to decouple expensive software and networking functionality from the underlying hardware. While hardware needs to be purchased up front to provide the foundation for services, software does not. Software can be purchased on demand. In fact, software can enable service providers to be real-time technology resellers - seamlessly making products from a range of technology vendors available to their customers. Or software may be purchased on demand in direct proportion to the provider's need to scale or support services purchased by their customers.

A notable example of this trend is software-based networking products - as exemplified by virtual load balancing, secure access and WAN optimization. Instead of focusing only on high-performance dedicated hardware, networking vendors now give cloud service providers the ability to run essential functions in virtualized environments on commodity servers. By giving service providers the ability to move application networking functions onto a common virtualized server infrastructure - and focusing on integration with orchestration and cloud management systems - networking vendors are giving service providers the ability to significantly lower the cost of service creation.

Although significant, this shift is only the beginning. Service providers are demanding even greater creativity from technology and networking vendors. Although virtualized solutions lower capex and opex and provide the ability to respond quickly to customer needs, they still require service providers to invest up front in costly perpetual licensing. Even with the advent of lower-cost and time-bound subscription models, service providers are still required to purchase licenses up front on the expectation of turning a profit as they resell services.

In response, some technology and networking vendors are breaking new ground and turning traditional pricing models on their heads. As an example, a vendor may charge service providers a nominal amount to run software load balancing in a virtualized environment and forgo traditional licensing schemes. In this new model, service providers pay nothing in the way of user licenses until such time as they ramp customers.

Whether the load balancing is used "under-the-cloud" to support and scale software services, or made available "over-the-cloud" as infrastructure services, these new models offer service providers "map-of-the-earth" pricing. In other words, the service provider pays the networking vendor in direct proportion to demand.

Customers simply purchase services on-demand and get charged by the service provider according to metrics such as time or bandwidth. As customers pay, the cloud service provider and application delivery networking vendor generate revenue simultaneously based upon a predetermined arrangement. Depending on the type of networking service being resold and depending on the nature of the service provider's business model, billing could be driven by throughput, users, connections or transactions per second or any variation that provides the most compelling offering to customers and the greatest margin to the service provider.

On the flip side, for these new business models to gain traction, billing and provisioning for customers, providers and vendors must be automated and integrated with service provider cloud management systems. For technology and networking vendors, that means putting as much effort into orchestration as they put into core capabilities - an effort that is well underway.

By standardizing on a common hardware architecture, leveraging virtualized to maximize ROI, decoupling hardware from software and evolving to new on-demand software business models, cloud providers gain a massive improvement in their ability to be profitable. With less risk and less outlay, service providers are better able to manage and grow their business and a rising tide lifts both service providers and technology and networking vendors. As business increases for the cloud provider, technology and networking vendors can also build automated volume discounts into the business model, which may be triggered to encourage growth and further control costs.

As cloud computing and cloud services continue to accelerate, cloud providers - whether offering software, platform or infrastructure services - are well advised to seek out technology and networking vendors with a broad suite of virtualized offerings and a willingness to work with providers on pricing strategies and business models that enhance profitability for both parties.

More Stories By Paul Andersen

Paul Andersen is the Marketing Manager at Array Networks. He has over 15 years’ experience in networking, and has served in various marketing capacities for Cisco Systems, Tasman Networks and Sun Microsystems. Mr. Andersen holds a Bachelor’s Degree in Marketing from San Jose State University.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


Cloud Expo Breaking News
After a couple of false starts, cloud-based desktop solutions are picking up steam, driven by trends such as BYOD and pervasive high-speed connectivity. In his session at 15th Cloud Expo, Seth Bostock, CEO of IndependenceIT, cuts through the hype and the acronyms, and discusses the emergence of full-featured cloud workspaces that do for the desktop what cloud infrastructure did for the server. He’ll discuss VDI vs DaaS, implementation strategies and evaluation criteria.
Cloud computing started a technology revolution; now DevOps is driving that revolution forward. By enabling new approaches to service delivery, cloud and DevOps together are delivering even greater speed, agility, and efficiency. No wonder leading innovators are adopting DevOps and cloud together! In his session at DevOps Summit, Andi Mann, Vice President of Strategic Solutions at CA Technologies, will explore the synergies in these two approaches, with practical tips, techniques, research data, war stories, case studies, and recommendations.
Cloud Computing is evolving into a Big Three of Amazon Web Services, Google Cloud, and Microsoft Azure. Cloud 360: Multi-Cloud Bootcamp, being held Nov 4–5, 2014, in conjunction with 15th Cloud Expo in Santa Clara, CA, delivers a real-world demonstration of how to deploy and configure a scalable and available web application on all three platforms. The Cloud 360 Bootcamp, led by Janakiram MSV, an analyst with Gigaom Research, is the first bootcamp that introduces the core concepts of Infrastructure as a Service (IaaS) based on the workings of the Big Three platforms – Amazon EC2, Google Compute Engine, and Azure VMs. Bootcamp attendees will get to see the big picture and also receive the knowledge needed to make the best cloud decisions for their business applications and entire enterprise IT organization.
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using the URL as a basic building block, we open this up and get the same resilience that the web enjoys.
The Internet of Things is a natural complement to the cloud and related technologies such as Big Data, analytics, and mobility. In his session at Internet of @ThingsExpo, Joe Weinman will lay out four generic strategies – digital disciplines – to exploit emerging digital technologies for strategic advantage. Joe Weinman has held executive leadership positions at Bell Labs, AT&T, Hewlett-Packard, and Telx, in areas such as corporate strategy, business development, product management, operations, and R&D.
SYS-CON Events announced today that DevOps.com has been named “Media Sponsor” of SYS-CON's “DevOps Summit at Cloud Expo,” which will take place on June 10–12, 2014, at the Javits Center in New York City, New York. DevOps.com is where the world meets DevOps. It is the largest collection of original content relating to DevOps on the web today Featuring up-to-the-minute news, feature stories, blogs, bylined articles and more, DevOps.com is where the thought leaders of the DevOps movement make their ideas known.
There are 182 billion emails sent every day, generating a lot of data about how recipients and ISPs respond. Many marketers take a more-is-better approach to stats, preferring to have the ability to slice and dice their email lists based numerous arbitrary stats. However, fundamentally what really matters is whether or not sending an email to a particular recipient will generate value. Data Scientists can design high-level insights such as engagement prediction models and content clusters that allow marketers to cut through the noise and design their campaigns around strong, predictive signals, rather than arbitrary statistics. SendGrid sends up to half a billion emails a day for customers such as Pinterest and GitHub. All this email adds up to more text than produced in the entire twitterverse. We track events like clicks, opens and deliveries to help improve deliverability for our customers – adding up to over 50 billion useful events every month. While SendGrid data covers only abo...
SYS-CON Events announced today that the Web Host Industry Review has been named “Media Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Since 2000, The Web Host Industry Review has made a name for itself as the foremost authority of the Web hosting industry providing reliable, insightful and comprehensive news, reviews and resources to the hosting community. TheWHIR Blogs provides a community of expert industry perspectives. The Web Host Industry Review Magazine also offers a business-minded, issue-driven perspective of interest to executives and decision-makers. WHIR TV offers on demand web hosting video interviews and web hosting video features of the key persons and events of the web hosting industry. WHIR Events brings together like-minded hosting industry professionals and decision-makers in local communities. TheWHIR is an iNET Interactive property.
SYS-CON Events announced today that O'Reilly Media has been named “Media Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. O'Reilly Media spreads the knowledge of innovators through its books, online services, magazines, and conferences. Since 1978, O'Reilly Media has been a chronicler and catalyst of cutting-edge development, homing in on the technology trends that really matter and spurring their adoption by amplifying "faint signals" from the alpha geeks who are creating the future. An active participant in the technology community, the company has a long history of advocacy, meme-making, and evangelism.
SYS-CON Events announced today that Verizon has been named “Gold Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Verizon Enterprise Solutions creates global connections that generate growth, drive business innovation and move society forward. With industry-specific solutions and a full range of global wholesale offerings provided over the company's secure mobility, cloud, strategic networking and advanced communications platforms, Verizon Enterprise Solutions helps open new opportunities around the world for innovation, investment and business transformation. Visit verizonenterprise.com to learn more.
SYS-CON Events announced today that TMCnet has been named “Media Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Technology Marketing Corporation (TMC) is the world's leading business to business and integrated marketing media company, servicing niche markets within the communications and technology industries.
"In my session I spoke about enterprise cloud analytics and how we can leverage analytics as a service," explained Ajay Budhraja, CTO at the Department of Justice, in this SYS-CON.tv interview at the 14th International Cloud Expo®, held June 10-12, 2014, at the Javits Center in New York City. Cloud Expo® 2014 Silicon Valley, November 4–6, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading Cloud industry players in the world.
“We are starting to see people move beyond the commodity cloud and enterprises need to start focusing on additional value added services in order to really drive their adoption," explained Jason Mondanaro, Director of Product Management at MetraTech, in this SYS-CON.tv interview at the 14th International Cloud Expo®, held June 10-12, 2014, at the Javits Center in New York City. Cloud Expo® 2014 Silicon Valley, November 4–6, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading Cloud industry players in the world.
"We are automated capacity control software, which basically looks at all the supply and demand and running a virtual cloud environment and does a deep analysis of that and says where should things go," explained Andrew Hillier, Co-founder & CTO of CiRBA, in this SYS-CON.tv interview at the 14th International Cloud Expo®, held June 10-12, 2014, at the Javits Center in New York City. Cloud Expo® 2014 Silicon Valley, November 4–6, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading Cloud industry players in the world.
Almost everyone sees the potential of Internet of Things but how can businesses truly unlock that potential. The key will be in the ability to discover business insight in the midst of an ocean of Big Data generated from billions of embedded devices via Systems of Discover. Businesses will also need to ensure that they can sustain that insight by leveraging the cloud for global reach, scale and elasticity. In his session at Internet of @ThingsExpo, Mac Devine, Distinguished Engineer at IBM, will discuss bringing these three elements together via Systems of Discover.