Mobile applications in the future are neither about games, nor communications, but will be the front-end interaction of relational processing applications, according to Software Park Thailand chairman Manoo Ordeedolchest, who suggested that software developers view the process-as-a-service as their business opportunity in cloud computing technology. Manoo Says,

Relational applications will be end up at mobile applications, thus in the future, mobile applications will be not games, not communication, but will be the front-end of interaction in the group called relational processing, which is a large area and open for developers that need not to invest a lot.

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Advancing technologies and their swift adoption are upending traditional business models. Senior executives need to think strategically about how to prepare their organizations for the challenging new environment. The rapidly shifting technology environment raises serious questions for executives about how to help their companies capitalize on the transformation under way. Exploiting these trends typically doesn’t fall to any one executive—and as change accelerates, the odds of missing a beat rise significantly. For senior executives, therefore, merely understanding the ten trends outlined here isn’t enough. They also need to think strategically about how to adapt management and organizational structures to meet these new demands.

Source: McKinsey Quarterly

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Unless we understood clearly what is there in the data centers, it would be difficult to construct a model that would help IT migrate from current siloed infrastructure to cloud-aware, shared computing model. This map is a result of my attempt to decode the data center complexity. This map is based on numerous deep-dives of the data center architecture and my own hands-on experience.

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I have been trying to map the architectural layers of the infrastructure in the data center/enterprises, technologies that map to these layers, and players/providers who is offering solutions/technologies to help deliver these services. I have been embarked on a mission to find whitespaces/blue oceans to help enterprises to create/claim value from the “redwood” in their data center before it turn into “deadwood”.

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[While cleaning up my journal logs, found some of these notes. Sharing with the hope that this may provoke some challenging ideas/innovations]

We entered 2010 asking where will Cloud take enterprises in 2010? Still the debate on whether Cloud is ready for enterprise adoption is picking up the steam. 2010 going to be a year for emergence of many new applications that would run in the Cloud. But, wide adoption of cloud needs both technical issues to be addressed as well as organizational cultural issues.

Today most of the business applications run on dedicated hardware. Challenge is to accurately determine the proper sizing of resources for stable operation of traditional applications. Moving away from dedicated resources to shared computing pools requires more diligent management of available computing resources. While it helps to consolidate the unused resources, it leads to new challenges where more applications compete for these computing resources. Need more sophisticated automation and deployment tools to balance these workload demands.

The overwhelming challenge for data center operations is managing complex application environments. Service Engineering & Operations (SE&O) teams constantly deploy many third-party applications as well as homegrown applications, upgrades, and patches. They make application configuration changes for security and performance tuning frequently. In addition to deploying and constantly monitoring for any security breaches and performances issues, SE&O folks need to track and analyze the configuration and state of deployed applications on a regular basis.

Moving these applications into Cloud is going to pose many operational challenges. Any technology designed to address these issues to configure and deploy their applications must be infrastructure, application, and demand aware. For these applications to work in the cloud, application packaging and deployment need to capture knowledge about an application, such as its configuration methods and dependency requirements. More importantly, end-to-end automation of the deployment process is possible only when a technology understands that infrastructure elements such as Web servers, application servers, databases, and application elements — such as custom code and content — must all work together to make a functioning application.

“It will take many years for the utility computing system to mature. Like Edison and Insull before them, the pioneers of new industry will face difficult business and technical challenges. They’ll need to figure out the best ways to meter and set prices for different kinds of services. They’ll need to become more adept at balancing loads and managing diversity factors as demand grows. They’ll need to work with governments to establish effective regulatory regimes. They’ll need to achieve new levels of security, reliability, and efficiency. Most daunting of all, they’ll need to convince big companies to give up control over their private systems and begin to dismantle he data centers into which they’ve plowed so much money. But these challenges will be met just as they were met before”, Nicholas Carr, in “The Big Switch”.

James Urquhart in his Cloud computing and the big rethink series described how cloud computing will change the way we build and deploy applications.

Cloud Computing: Innovation Edge

Enterprise networks are large and run wide variety of applications and typically operate under strict reliability and security constrains. Normally, these applications, networks, and security represent challenging environment for management and operations control. Stakes are high when enterprises move their applications or burst into the Cloud capacities, as productivity can be severely hampered by any SLA degradations or security compromises. Andi Mann quoted in his tweet that 76% of downtime comes from human-error and Yankee group reported that 80% of IT budgets are spent on maintenance and operations.

Many applications in today’s enterprises are multi-party services and demands different levels of isolation, security, assurance and auditability with very different characteristics. At the same time, we see the emergence of wide variety of value added services composed from shared services with different levels of SLAs. Services will range from low-level services that transport bit streams over the cloud infrastructure to value-added services such as integration services, data analytics, data mining. Complex services will demand access to large amounts of data, real time data streams, and distributed computing tasks. Supporting this service model and this emerging class of complex services requires innovation in a number of areas.

Dynamic Resource Allocation Based on Application Demands: In some cases applications and services have advance knowledge of changes in resource requirements, and in many cases services have no knowledge of resources demands due to variability in user demands. Mechanisms are needed to dynamically scale services to optimize performance, which demands end-to-end service delivery guarantees. Virtualization came to rescue this challenging IT infrastructure to provide consolidation, flexibility, and resource management. Virtualization technologies evolved to abstract compute, network, and storage resources to separate physical resource from their of way of consumption. Sounds good. This enabled Service Engineering & Operations (SE&O) teams to assign computing resources as needed to virtual machines and quickly respond to fluctuating loads. While this simplified the complexity in the computing infrastructure, virtual machine sprawl added another layer of complexity. Now enterprise need to manage two different sets of computing resources, physical infrastructure and virtual infrastructure, to keep their applications running to meet their customer Service Level Agreements (SLA). To some extent, virtual infrastructure provided mechanisms to eliminate the need for provisioning for the peak. Thanks to virtualization for redefining the relationship between the application and physical deployments.

Though server virtualization enables dynamic workload (for clarity, workload means any demand for performing an unit of work) management. However, current models of VM live migrations induce significant overheads on hypervisors and network bandwidth.

Virtual Networking: Setting up and operating logical networks across participating enterprise networks to provide network isolation, security, confidentiality (Note: current dependence of complex VLANS and tunnels needs specialization to setup, management, and tear down these networks. For enterprises to leverage the power of Cloud Computing, new class of network services required to provide the assurances required). As explained in my introduction, most of the operational overhead in today’s enterprise private data centers is coming from the lack of consistent and integrated operation, administration and management plane.

Application-aware Networks: As more and more businesses use Cloud, conditions in the network (inter/intra Cloud communications) and at the endpoints will change continuously, and mechanisms are needed that allow the network and services to adjust quickly depending on service specific demands. Also, different services demand different levels of data transferability and latency needs. Cloud should be able to handle traffic streams both in terms of the ability to share resources between co-operating traffic streams and the quality of service for individual streams. Hence the need for systematic methods for balancing the constraints and priorities of services competing for resources – computing, storage, and network services including the security, perimeter control, auditability, service assurance, SLA enforcement etc.

Customization vs. Configuration: Many companies still believe that customized business processes are their competitive advantage. Enterprises spent huge sums of capital in undertaking multi-million dollar customization projects coupled with 6-12 months of upgrade/deployment cycles. That is one of the reasons traditional SaaS offerings didn’t take off as it inherently restrict the customer’s ability to customize the solution, require co-mingling of sensitive data from various customers, and force all customers to comply with upgrade and downtime schedules dictated by the vendor. Customers demanded greater freedom. SaaS advocated one solution for all.

Then comes the Cloud computing with low cost mantra and re-instating the freedom to customize and deploy applications/business processes. Customers can gain back the control over its own IT infrastructure at a very low cost combined with an ability to scale up and down. In addition, cloud can offer them complete freedom to customize the solution as it sees fit and complete control over upgrade/deployment cycles.

”A man who carries a cat by the tail learns something he can learn in no other way” – Mark Twain

“All generalizations are false, including this one” – Mark Twain

“Don’t preserve the past – find the future”

“Too much attention is focused on technology innovation and not enough on business innovation. When that happens, we add functionality, but also complexity. The technology innovations with real impact are those that reduce complexity”

Private v. Public Cloud Debate

In Public Vs. Private Clouds: Which Cloud Wins? Vanessa Alvarez writes, “The concept of private cloud on the other hand, is of course, more appealing to enterprises. Because of the very nature of its name, it gives enterprises that comfy feeling that their data is safe and secure. It’s the age-old enterprise mentality that if you lose control of your data, it’s not safe”.

Transformation from traditional silos to more responsive networks of operations centers – combination of private and public clouds.

• shared infrastructure in local corporate data centers
• application of virtualization to simplify the infrastructure automation
• manage resource pools vs. dedicated silos
• cloud burst of resources based on seasonal demands or need based to virtual networks

Cloud and Governance

Governance is all about helping IT get to the expected business benefits of their IT services. Governance helps IT do is to more broadly foster trust across those distributed domains. It’s going to help become a catalyst for communication and collaboration, and it’s going to help jump-start that non-expert staff. The thing that’s key about governance is that it helps integrate those silos of IT. It helps integrate the folks who are responsible for designing services with those who actually have to develop the back end implementations and with those who are doing the testing of performance and functionality. Alternately, it integrates them with the organizations that are responsible for both deploying the services and the policies and integration logic that will support accessing those services.

In Governance: Service Catalogs and the Cloud Lori Macvittie says,

“The use of SOA governance solutions never truly took the world by storm, and that may be in part that the metadata it carried wasn’t “meta” enough given the level of abstraction used by SOA. Virtualization and cloud computing take that abstraction far enough to be useful both in invocation and management. SOA, too, was hampered by the fact that automation of processes – while nice – was not a necessary piece of the value equation. For cloud computing (on-demand) automation is one of the key variables in the benefit equation, making abstraction of management a necessity.”

Keeping a perspective on lifecycle governance, your organization can be primed and ready to handle Cloud, as it scales, as more and more services go into production, and more and more services are deemed to be ready for consumption and reuse into new composite applications. The key is to keep a service lifecycle governance perspective in mind, as you go about your governance program, and automation is key. … Automating policy compliance can bring a huge pay off.,/p>

What we are finding more and more now is that organizations are actually investing in a role known as service manager, someone who oversees the implication of not only delivering a service over time, but those that are consuming it. I see this as a best practice that can be supported by Cloud governance, and which helps empower them by giving them a foundation to set up policies and have visibility in terms of how this service is meeting its objective and who is consuming the service.

Intelligent Application Delivery

Application delivery is so complex and overwhelmed with way too many complexities. There is no push-button deployment of services. It takes way too many manual steps, scripts, and configurations to make these services/applications work even in the small deployments. Imagine them deploying to Clouds. THis gets way to complex when it comes to deploying enterprise applications/services. Chris Hoff very crisply articulated the vision of intelligent application delivery in his post Application Delivery Control: More Hardware Or Function Of the Hypervisor? Chris Hoff writes,

” there’s the real meat: contextual networking. That’s the ability of a solution to take into consideration context when applying policies and rules and functions to traffic and data. Understanding the context of a request and response – location of the client, type of client, type of response data, network over which a client is connecting, etc… – makes it possible to apply application delivery functions like optimization and acceleration and security more efficiently. In order to understand the client, you’ve absolutely got to have visibility into the client-side of the equation as well as the server-side. If you’re nothing more than a service in the fabric, you aren’t going to have that visibility – some other device or solution will. Without that visibility you can’t easily obtain the context, and thus you aren’t capable of adapting to what’s going on right now – on demand.”

Vision sounds great. Who is delivering these solutions. There are some solutions exist today. They are way over engineered again to make then unusable by SE&O folks. That leads to one more layer of strip down and dress-up to meet their needs. That in turn leads to versioning and patching challenges. So, if we need realize the value of cloud, it is time for us to define mechanisms to define application/service packaging and delivery mechanisms in a vendor or service provider agnostic manner.

Cloud: Strategy

If we want to get the cloud right, we need put aside the technology discussion and start thinking about how the Super Corp of 21st century going to work – who their partners are, who their customers are, and then think about how we can support customer, suppliers, partners, and collaborators better than ever before. Too many people look at the cloud as a technology phenomenon when they should look at it as a business opportunity and an accelerator for innovation. The cloud is an environment for creating ways of doing business that are radically different from monolithic ERP-based processes. The age of command-and-control in business technology is over. You empower the knowledge worker through collaboration.

What this is telling us is that we have reached another stage of maturity, and that in order to move forward organization will need to think about Cloud as an overall program, and how it impacts both technology and people dimensions within the organization. We are indeed moving from project- and application-level Cloud to more of a system and enterprise scale. We need to look at how Cloud’s success is actually defined, and what factors and practices in these organizations that are successful have the most impact. While you may think that technologies are key enablers, but what I found was organizational and program dynamics are the key contributors to success. If you’re able to handle trust, you’re able to influence organizational change management effectiveness. If you’re able to address business alignment, then you’ll have much more success in understanding the impact on architecture and vice versa.

Companies should adopt cause-effect strategies for private/public cloud, finding appropriate applications, integration mechanisms, and exploiting the economies of scale of Cloud to boost the bottom-line performance of the companies.

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I put together an expert panel to discuss opportunities and challenges in Cloud computing next week at Cloudplay 2010 at Plug and Play Tech center, Sunnvyale. Panelists include Vishal Sikka, Executive Director and CTO, SAP, Susie Wee, CTO, HP Client Cloud Services.

Notes from Cloudplay Panel Discussion:

Good afternoon. Let us give a big applause for our panelists for taking time from their busy work schedules and showing up here today. Welcome to Cloudplay 2010. We have a great panel. Our topic today is Cloud Computing: Challenges and opportunities for Consumers, Enterprises, Entrepreneurs, and Service Providers. I see cloud computing is a revolution in making for number of years. Financial meltdown, globalization, and consumerisation accelerated the seeding of Clouds. Enterprises, regardless of their size, are seeking ways to rein in capex, drive down internal IT costs, consolidate their IT resources, and run as lean as possible. Cloud is seen as a solution to managing their Capex/Opex. Cloud is becoming a strategy and an approach for service providers, technology vendors, enterprises, and consumers. This impacts everyone of us here in way or the other.

Next, with the emergence of powerful handsets, including smart phones, iPhones and iPads, consumers are now using data services and applications as never before. This exponential growth in data traffic is forcing network carriers to increase their bandwidth through adoption of WiMax/LTE.

This opens the door to a world of unlimited choices to the consumers as well as numerous opportunities to services providers. There is no shortage of opportunities and new competitive challenges. Cloud Service Providers (CSP) are now foraying into content publishing, application stores and other complementary areas under the Cloud umbrella. You can hardly see any business presentation without a reference to Cloud.

Cloud services will continue to represent a larger proportion of the overall market than the infrastructure services. My guess is that the scale and growth of cloud services will be significant during the next five years to 10 years. This growth of cloud services will lead to a period of accelerated business innovation and IT evolution. Adoption of cloud-based solutions will not only increase the absolute business value. But will it radically transform the way these services are sourced by enterprises. All this madness to cloud transition may lead to a storm (no more bubbles though!) and cloud becomes “business as usual”.

Let us get started with introductions with our panel members. Each of our panel member will introduce themselves and tell us their point of view on Cloud computing: a hype or a reality?

• Not long ago there was a browser war driven by the adoption of Internet. I am sure there are enough lessons learned to win the expensive war. Now, cloud computing is brewing another platform war. What is your strategy to deal with this disruption? What will you do differently this time?


• Cloud computing is creating new opportunities for consumer driven applications. It is transforming the way consumers connect, communicate and interact through very rich user experiences. However, still lot of work need to be done to deliver back-end services to drive enterprise adoption of Cloud computing. Given these challenges many CIOs are still building their own infrastructure rather than using Cloud services. Let us ask our panelists from HP, Microsoft, and SAP, how Cloud will disrupt their MaaS (Monopoly as a Service) and if they are motivated to address these issues to accelerate the cloud adoption?


• We are oversimplifying moving enterprise applications into Cloud. People don’t understand how complex is to move existing applications into the Cloud. There are many oversimplified pitches: Take an application put into the Cloud. Magic happens. In realty, there are great deal of things that need to be done. Need to spend whole lot of energy to make these applications work in the Cloud. Confusing licensing and pricing strategies from software vendors, lack of transparency, lack of standardized protocols makes it really hard. Can you explain to us what kind of platform, pricing and licensing innovations you can think of emerging for cloud services?


• Amount of computing power we can buy for $1000 is doubling every 12 months. But, Data is exploding much faster pace than the computing. Still dealing with large data is a daunting challenge. Amazon recently introduced “sneakernet” and you can put your data on disks and ship it to them. They can load into S3. Let us ask Lou how his company Zetta is disrupting the way data is stored in the Cloud? What Microsoft and HP doing in this space? What can we expect next 12-18 months from now?


• Cloud offers attractive business benefits and opportunities for creating value through elimination of complexity and creating new revenue generating services. But, there is a flip side to these attractive business benefits. It will be necessary to take a fresh look at each of them to be able to assess benefits and the respective management, organization and governance challenges. I want to ask each of our panelists from their business perspective, what are the new challenges of cloud services?


• Cloud services are offered as “plug-and-play” assemblies that need little or no attention to set up processes, and can — allegedly — be implemented immediately. Most of these products are essentially “black boxes”. Lack of transparency and open standards introduces whole new challenges and new business risks that must be assessed and properly managed. Let us check with our panelist to what their company’s strategies to address these challenges?


• Look at Apple app store. Number of applications is exploding. Cloud service providers are finding new ways to deliver value to their customers. If Cloud service providers are capable of becoming competitive publishers, application storefronts, and value added service providers, what opportunities it opens for innovators and entrepreneurs? What kind of partnerships and ecosystem needed to exploit these opportunities?


• I see new emerging trend at the intersection of Cloud adoption. Generation Y are entering the workforce with unprecedented knowledge of how to communicate with each other using social networks, blogs, and all things digital in the Cloud. This new generation will disruption as they climb up in the enterprise ladder. Fast forwarding 5-10 years into future, do you think this shift in consumeration & influence of generation Y would hyper accelerate cloud adoption?


• Do you think cloud service providers can really make money and keep the cloud based innovations more sustainable?


• What are we going to see in next 12-18 months? What we can do in 12-18 months which we can’t do it today? What opportunities exist for entrepreneurs and investors next 24-36 months.

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For the past one decade, businesses focused on the short term profits. Many businesses outsourced the customer service and/or moved toward self-serve models. This not only significantly reduced the customer interactions with the business but also reduced, if not eliminated, critical information flows from the customer to the businesses. Customers are now resorting to social networks for their product search as well as to share their product experiences. Though short-term focus and offshore activities helped businesses to improve their operational costs but what it did was eroding the trust and there is no or little effort to improve the customer satisfaction.

I recall an interesting note by Charles Hardy in 1995 May-June, Harvard Business Review article, “Trust and the Virtual Organization”,

“An economy that adds value through information, ideas, and intelligence—the Three I Economy—offers a way out of the apparent clash between material growth and environmental erosion. Information, ideas, and intelligence consume few of the earth’s resources. Virtuality will redesign our cities with fewer skyscrapers and fewer commuters, making a quieter and perhaps a gentler world. Our aspirations for growth in a Three I Economy would increasingly be more a matter for the mind than for the body”.

Imagine where we are after 15 years. We are still building data centers to manage our applications with so much of waste of our capital resources, eroding the earth’s resources. Our roadways are still crammed with traffic jams. Like our roadways, our mind-ways are also jammed with too much of information pushed at us. Finally, Cloud is here to enable the next wave of 3I revolution and virtuality.

Cloud: Enabling Customer Driven Enterprise

Cloud Computing enables enterprises to invest their resources in improving and streamlining the customer facing business process(Core) and eliminate or reduce mundane and costly IT infrastructure services(Context). This shift in customer focus will enable enterprises to benefit from Customer driven innovation and thereby improving the customer satisfaction and loyalty factor. For the past one decade, vendor pushed many unnecessary technology features to the customers increasing the complexity burden on the customer. As a result of this complexity, vendors also supplied the best practices to deal with these complexities. Customers are more smarter now. They can do more with less. Open source innovations offered more choices at cheaper price as well as lesser complexity. Technological advances also offered “mashable” services on need basis. This is forcing vendors to shift from “vendor push” approach to vendor-customer co-creation.

Cloud Computing: Enriching the Customer-Business Interactions

Cloud offers technology and rich information access enables more interactions between customers and businesses. The result will be better customer experience, lower customer defection, increased customer dedication to the brand. Moreover, social network empowered customer becomes marketing agents for the company by WoM referrals to their social networks. As cloud simplifies the overly complicated information services delivery mechaims and frees up scarce resources to focus on reversing some of the damages caused by reduced or eliminated customer interactions for the past decade or so.

Cloud drives or enables:

Innovation: Creating innovative products and service by collaborating with customers

Product Promotion: Customers are key elements in the current social media network. Satisfied customers are more inclined to spread the promotional messages to their networks. Also, they are more likely to recommend the product favorably when some one checks with them. So, keeping the customer center of the innovation process helps immensely.

Customer feedback: Technological advancements and social networks have completely chaged the landscape of marketing communications and product promotion. With emergent tools and inexpensive cloud services available now and emerging in next two-three years will change the way enterprises will interact and react to their customer needs and demands. Business should be able to learn more about their customers and quickly configure business process to cater or address these customer needs. I clearly see current Customer Relations Management software evolving into very intelligent service capable of detecting, publishing, and analyzing the customer information or need changes and dynamically configure their business processes or rules.

Sensing and Responding: We are already deeply woven with many modes of presence and interaction technologies. Twitter, IMs, Facebook, LinkedIn, Contextual Mail Services(my wild thought: current mail systems are dumb. I am envisioning next generation mail services are much smarter ones powered by machine learning for semantic as well as contextual intelligence), GPS, and many other modes that convey who we are and what we care about. Manufactures will evolve their relationships with the customers directly eliminating the middleman.

Social Networks Connects Businesses and Customers: Next generation businesses will focus to engage their customers at every level of their business process. With all the chatter going on in the social media, businesses are facing daunting challenges to keep their brand image. So, Super Corps should be more focused on measuring their customer satisfaction by identifying critical interaction points and focus on delivering business processes to achieve these interactions. Cloud makes this easier for enterprises to achieve their goals.

Conclusion

Cloud not only enables customer driven innovation it also enables 21 century socially responsible organizations to tap into their customer social networks. These customer social networks provides valuable consumer context information that can be leveraged to discover new customer trends, needs, and complains. Also, by understanding the communication patterns related to products and services helps businesses to respond more quickly to address the customer needs. Businesses can also identify key influencers that can be instrumental in promoting their product and services. Cloud enables businesses to compose their business process more rapidly than ever before in response to the contextual information discovered in the social networks. This will put “You”, the customer, at the center of these interactions and drives WoM marketing. WoM is two more effective than radio advertisements, four times more effective than direct selling, and seven times more than print advertisements.

What do you think? I would like to hear your views and comments.

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Companies currently spend about 5-6% of their revenues on IT. Many of these companies are now struggling to align their IT to support the business strategy, provide a competitive advantage, and serve as a platform for growth. Exploding number of choices and growing complexity of technology assets making these companies victims of their rapidly obsolescing computing infrastructure. Once these assets offered these companies the competitive advantage and served as barriers to entry but now these IT assets are becoming liability. Supply chain meets the cloud to boost the visibility of collaboration processes with and between third-parties such as suppliers, partners, and customers. If companies fail to deconstruct their IT infrastructure and embrace cloud, somebody will do and make them irrelevant.

CORE AND CONTEXT

The bulk of the economic value of organizations is processed through business and consumer supply chains of products and services across manufacturing and services industries. No matter whether it is retail, healthcare, banking, real estate, manufacturing, insurance, communications or others, there are significant gaps in the point-to-point business processes across business’ operations resulting from underlying Infostructure complexity. These enterprises are trapped with their internal IT (Context) focus and are ignoring the importance of the information and interactions across their supply chains (Core). For many companies this has resulted in loss of profitability and in some cases the elimination of products and services all together.

Professor Hau Lee, well known expert in Supply Chain Management said,

“Companies are great not because they were focused on cost or flexibility or speed but because they have the ability to manage transitions – changing market conditions, evolving technology, different requirements as a product moves through its life cycle. Companies also need to be able to handle one more transition: Crisis Management. Successful companies have been able to grab market share out of crises, which often requires them to work effectively across functional boundaries”.

As the recessionary economic and business climate becomes more challenging for organizations, there are many competing priorities and fewer resources to maintain and manage existing operations. Still, with a once in a generation slowdown, it is also an opportune time to re-evaluate where automation and collaboration of these processes can make significant improvement now and in the upturn. It will not be sufficient to just be internally focused on your segment of the supply chain.

SERVICES IN CLOUD: ARCHITECTURAL TRANSFORMATION

Cloud computing is a new deployment and operational model for making IT management simpler and more responsive to the needs of the dynamic business. Cloud architecture decouples the IT infrastructure from the business services. Cloud computing not only enables rapid innovation, flexibility, and support of core business functions but also enables design, development and delivery of new applications by highly efficient virtualized compute resources that can be rapidly scaled up and down in a flexible yet secure way to deliver a high quality of service.

In the pre-information era, suppliers and manufacturers have market power because they have information about a product or a service that the customer does not and can not have. But, now customer has all the information. Whoever has the information has the power. Power is now shifting to the customer. This means that the supplier, manufacturer will soon cease to be a seller and instead become a buyer for a customer. This is already happening. Peter Drucker put it succinctly in his article, HBR Sep-Oct 1997, “Looking Ahead: Implications of the Present“:

“Increasingly, a winning strategy will require information about events and conditions outside the institution: non-customers, technologies other than those currently used by the company and its present competitors, markets not currently served, and so on. Only with this information can a business decide how to allocate its knowledge resources in order to produce the highest yield. Only with such information can a business also prepare for new changes and challenges arising from sudden shifts in the world economy and in the nature and content of knowledge itself. The development of rigorous methods for gathering and analyzing outside information will increasingly become a major challenge for businesses and for information experts.”

Technology is a critical part of supply chain management because companies need to bring together disparate strands of information to be able to understand and assess situations. They also must have analytical services to be able to quickly and consistently decide on the best course of action. A large number of the larger vendors offer some or all of the pieces needed to support more effective supply chain execution — supply chain management and ERP software for collecting data, data warehouses for staging data, and business intelligence software for creating and managing the reporting, scorecard, and dashboard elements. However, they may not be bringing all of the data together in a way that makes it useful, timely, and actionable. To do so, significant integration and customization are needed, which is very time consuming as well as expensive undertaking. Justifying the long development cycles and huge R&D budgets makes these projects not attractive to the business leaders.

Paul Saffo summarized the state of machines, complexity of tools, and exploding information in his HBR article, “Are You Machine Wise?(HBR, 1997)”

“As our tools become ever more complex and interconnected and more central to the conduct of business, their benefits also become harder to recognize. Furthermore, executives need to know and understand the logic of the work done by machines—and, above all else, the limits beyond which those tools cannot be pushed. Meanwhile, the volume of information continues to expand exponentially, generated by machines conversing with other machines on our behalf. Every business activity leaves behind a wake of information, from data spinning off production-line process controllers to transaction records generated over retail-credit-card networks. And the growing centrality of the Internet for business purposes will only add to the flood.”

CLOUDABILITY OF ERP/SCM SERVICES

It has taken good 10 years for companies to embrace enterprise resource planning and supply chain management. This is primarily due to high implementation and licensing costs of the software. In my view, the adoption of cloud computing services in a supply chain and enterprise resource planning many be faster than the former uptake patterns of on-premise enterprise resource planning software. More and more companies are already collaborating with their suppliers, vendors, and partners using the Internet or VANs. It doesn’t make any economic sense to own and operate their own internal data centers to run these applications.

In the same way that ERP/SCM applications have not been employed to automate 100% of enterprises’ business processes, organizations are likely to use a hybrid approach, public and private cloud services where appropriate. Initially, lower-level cloud-based services such as accessing compute power or storage capacity over the internet (infrastructure as a service) and exploiting platform as a service for use in tactical and emerging applications. Software as a service models will be embraced for standardized application areas such as finance, payroll, logistics, human resources (context) that do not provide organizations with competitive advantage.

These companies may also pursue the concept of “private” cloud computing to create their own “private cloud” datacenters. Individual business units (or partners) then pay the IT department for using industrialized or standardized services in line with agreed charge-back mechanisms. This approach is less threatening than a wholesale move to the public cloud, but should make it easier to plan the gradual migration to cloud services.

Joe Wienman enumerated number of use cases for enterprise adoption of Cloud Computing. Joe Wienman wrote,

“Cloud services are definitely of use for extranet communities…we are seeing it in a variety of areas in AT&T’s businesses. For example, AT&T’s Sterling Commerce unit is a “cloud provider” for supply chain visibility and optimization, and our AT&T Telepresence Solution provides benefits through extranet connectivity, where there is a network effect. And, with networking costs and transaction costs coming down, and enabling technologies such as RFID, sensor networks, electronic product codes, etc., supply chains will continue to benefit from neutral and authoritative cloud services, e.g., chain of custody for tagged pharmaceuticals. And, when two giants are part of the supply chain, e.g., a large retailer and a large consumer packaged goods manufacturer, where should the data reside? If it’s at the retailer, then the manufacturer can access it, but needs to build separate interfaces for other retailers, etc., so the order(n) vs. order(n squared) economics come into play, driving functionality into the cloud.”

CLOUD AND BUSINESS IMPLICATIONS

Economies of Scale: Cloud redefines economies of scale, allowing small companies to enjoy the low unit cost for scaling out their computing infrastructure – traditionally companies with huge data centers only been able to offer rich information to their customers.

Compressed Transaction Costs: Transaction costs along the supply chains are getting lower and they continue to decline sharply. Lower transaction costs are allowing companies to significantly enhance the richness of the information combined with interactivity(soon may be augmented realty), that would have been too costly to capture and process in absence of Cloud like models.

Your Success Depends on Quality of Decisions You Make:A real-time enterprise derives competitive advantage from responding to changing business conditions and opportunities faster than the competition. Often, decision-making depends on computing, e.g., business intelligence, risk analysis, portfolio optimization and so forth. Since an ideal cloud provides effectively unbounded on-demand scalability, for the same cost, a business can accelerate its decision-making. So far, few organizations have figured out how to turn the oceans of data available to them into islands of insight about their best opportunities for growth. Therein lies largely untapped potential for companies to accelerate their growth and separate from the competition (Cloudonomics Law #7).

Create and Stage Rich User Experiences:Using Cloud, enterprise can take advantage of Cloud to reduce the latency of critical business applications (Cloudonomics Law #8).

Availability and Reliability at Fractional Cost: The reliability of a system with n redundant components, each with reliability r, is 1-(1-r)^n. So if the reliability of a single data center is 99 percent, two data centers provide four nines (99.99 percent) and three data centers provide six nines (99.9999 percent). For enterprises to achieve this level of availability, it not only takes huge capital investment, but also drives their operational cost. Instead, enterprises can leverage Cloud to achieve extremely high reliability architecture with only a few data centers (Cloudonomics Law #9).

CLOUD AND BUSINESS CONSEQUENCES

Process Optimizations: Though Y2K provided an opportunity to replace/optimize the old transaction systems with more efficient models, many enterprises have been quick to replace them with standard software – primary goal was Y2K compatibility. Cloud provides a unique opportunity to optimize key enterprise services — business process management, end-to-end visibility of demand-supply patterns, business activity monitoring, business analytics and data warehouse.

Process Standardization: Globalization, supply chain management, and restructuring demand standardization of services with clear interfaces. Standardized services are critical for collaboration, co-ordination, and co-creation with business partners and alliances.

Shared Services: Many enterprises are today utilizing shared services like UPS/FedEx for transportations/Logistics, ADP for payroll processing. Cloud enables these enterprises to explore more opportunities for shared services enabling them to focus more on their core competencies.

Enterprise Messaging Services: Last one decade many standards for information exchange across enterprise applications have evolved like EDIFACT, cXML, Rosettanet etc. Cloud will take these building blocks to the next level by enabling the globally scalable and reliable messaging infrastructure relieving them from expensive VANs used by enterprises today. It makes sense for today’s VAN providers to provide similar services in the cloud at fractional cost.

Integration Services: Even after a decade of huge investments into Enterprise Application Integration services, still integration is the major barrier for enterprises to launch new services. My hope is that Cloud offers a platform to simplify the integration through standardization of service interfaces. Instead of investing into customization and support of these integration services, VAN service providers can offer these integration services, if still required to talk to legacy systems.

Communities of Co-Ops: Cloud enables greater number of cooperating services between the members of a business community (suppliers, partners, customers).

Data Warehouse: ERP, SCM, and CRM process measurement generates an unprecedented flood data. Enterprise value is buried in this data. Most of the enterprises can’t afford to have their own IT infrastructure to make meaning out of this data. Cloud enables enterprises to burst into Data Warehousing services to enrich and contextualize this data.

CONCLUSION

The economic downturn and globalization is changing the way enterprises operate. Changes are becoming increasingly more radical. Enterprises are being broken down into components and reassembled along different lines. The feeling of uncertainty has never been great as it is now. Cloud computing going to play a critical role in simplifying the operations of Supply Chain networks and communities by taking advantage of cost structures and cloudonomics offered by the Cloud. Cloud makes new business solutions possible. This might means new or improved products and services, additional sales channels, more optimal means of procurement, new ways of customer, supplier collaboration, more effective management, and new information services.

ACKNOWLEDGEMENTS

I had the good fortune to be in a good place at the right time and to learn from others who willingly shared their experiences. I am most grateful to the many people who have offered me a helping hand, encouragement, and inspiration along the way. I would also like to acknowledge the years of wisdom many of you has shared with me on cloud computing, issues, benefits, and challenges. My sincere appreciation goes to Joe Weinman for his helpful insight and perspectives on Cloudonomics and Supply Chain. He has generously allowed me to use his ideas and spared his valuable time to review this post and provided me his valuable feedback. I have incorporated number of his Cloudonomics laws and some of our email conversations into this article.

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The discussion about the difference between interoperability and portability isn’t new by any means. In the context of Cloud, Portability is the ability to move an application or service from one cloud to another cloud, usually with minimal overhead, or no overhead. Interoperability is the ability of services to seamlessly communicate with each other.

If Mime is a portable format for exchanging the mail attachments in consistent and decipherable format, then the SMTP is an interoperable communication mechanism to transport these messages from one place to the other. Similarly, SNMP is the transport and MIBs are the message codification scheme for portable understanding of these messages. That’s good. We solved this problem number of times. We learned lot from these evolutions. So, combining all these rich experiences and wisdom, I am sure we all can come up with simple but powerful mechanisms for enabling the another level of technological disruptions and innovations.

Christofer Hoff wrote on his incomplete thought on “Cloud Portability or Interoperability?”:

There is a lot effort being spent now on attempts to craft standards and definitions in order to provide interfaces which allow discrete cloud elements and providers to interoperate. Should we not first focus our efforts on ensuring portability between clouds of our atomic instances (however you wish to define them) and the metastructure that enables them

Cloud services are composed from connecting one or more services and combinations of message patterns that takes places between or among these services. This implies that Interoperability (dealing with how to communicate among these services) and Portability (how to move these services and associated data sets from one cloud service provider to the other) are more critical than ever before for Cloud.
Lori MacVittie argued that:

I don’t think there is a difference between portability and interoperability. If you have one, you have the other. We can certainly move forward on an attempt to define a standard that allows portability across environments of atomic components as long as we do so in a way that bears in mind we’ll need to extend it to support metastructure in the future.

Allen Baranov has a different point of view:

In other words… they(portability and interoperability) need to come at the same time.

I do agree with @Allen that the Portability and Interoperability are two inseparable and conjugate concepts that need to go hand in hand. Though how that can be done is different issue. But, both of them are necessary and required conditions to give the customers required confidence that they can move their services and data freely. I am sure @Lori is also meant that Interoperability and Portability are not two separate things and they need to go together. Good news is that as network speeds approach computer bus speeds, the network becomes the computer, Portability starts embracing Interoperability issues and Interoperability can start gleaning the benefits of Portability. So, the distinction or difference between these two started to blur and portability meets interoperability.
Dan Philpott has expressed his interesting view and concern on innovation and standardization:

Building in a requirement for portability at the outset would tend to retard development of new technologies. If a technology is portable it becomes a commodity. Commodities mean you have no market incentive to beat the competition on anything but price as all products are otherwise equal. Companies who innovate want to lock in a larger market share by producing something unique and market differentiated. So building in portability means that they would not be rewarded for the innovation.

Yes, Agreed. But, that is true for specialization. I am not sure if APIs or protocols are their sustainable competitive advantage. The interoperability that results from using standards makes it easier for consumers to mix and match products and it increases competition. In case of Cloud, standards clearly needed because we’re talking about some kind of platform on which other applications and services are going to be built. In my view, the biggest economic contribution will in fact come from the platform or the applications on top of this standardized platform. If you are building a specialized service on top of this platform, then competition make sense. Though the competition is definitely a key component in driving innovation, but it’s important to question where that competition should be occurring, and where it’s mutually beneficial to have a standard. Internet shouldn’t have been successful without TCP/IP or portable data formats. XML, MIME, EDI are all standards but innovation thrived around these standards. So, i strongly argue that vendors/cloud service providers need to be more innovative than locking up access protocols or methods.

Finally, we need to make sure we clearly define what we mean by interoperability and portability and try not to gloss over the differences. Interoperability is extremely important as far as Cloud services are concerned.

Then Rich Miller asked three challenging questions to help complete Hoff’s incomplete thought:

• Within the context of infrastructure as a service, what does an interoperability means? Does it mean anything other than I can package up a workload on one of the IaaS environment and reinstate it on the other side? Doesn’t that sound like portability?
• Within the context of PaaS, what does interoperability means? Does it mean that I can do a database “merge” operation between collections residing on the two services without an export and import? Have we just reinvented federated database operation? Or does it mean successful export-import aka data portability?
• In Cloud environment, what’s the difference between interoperability and portability exactly? What cloud go to do with it?

@Rich, you answered your own questions. Interoperability and Portability are not a new topics for any of us. We have dealt with these issues for ORBs, SQL, EDI etc. Posix has been around for awhile giving us mechanism to provide interoperable and portable access to systems all along. In my view, we all need to seriously start thinking about collaboration and standardization to address these portability and interoperability issues. I don’t think, protecting APIs or access methods gives any one vendor a sustainable competitive advantage. Any comments?

What do we need to standardize?

It would be very difficult to fully anticipate the needs of the Cloud service consumers. There is a growing need to distribute the application/service globally to be able to meet the demands of growing business needs. When services are distributed or deployed across clouds, latencies and performance guarantees of each other is critical. Ability to switch over to the other service providers who can fulfill these goal is also equally important. User applications or services should be able to balance their requirements like cost, geography, throughput and other efficiencies. As Cloud is all about dynamicity, it is essential to provide a common interface to negotiate, allocate or de-allocate any additional cloud services or resources completely driven by the business needs. All these lead to having a common interfaces or standards to facilitate addressing some of these challenges:

Some of the key standards required for the futuristic cloud services (metastructure) are:

• Cloud Resources:Cloud service provider independent mechanism to access metastructure (including the common semantics for cloud resources like Nodes, Load Balancers, Switches, Routers, Firewalls, Network ACLS, Data Access(both structured and unstructured etc)
• Cloud Services Directory:Cloud service directory services for service configuration, identification, location, and routes etc. Same interfaces or services should be accessible from other cloud service providers too.
• Audit, Assurance, and Compliance Data:Given the growing policy and compliance needs, Cloud service consumers needs some common mechanisms to extract this information from the underlying cloud resources or services.
• Accounting and Metering: Cost of resources is a very important factor for any application. Of Course, primary goal of every business is to create value for their shareholders. Traditionally, IT departments have been operating with huge capital expenditure budgets (depreciation curse) or operating leases (off-balance sheet magic). Cloud introduces pay-as-you-go model making it very difficult to predict the cost of these services during the budgeting process. IT leaders need to figure out how these services are budgeted. However, what is very critical in that direction is having an uniform interface and/or semantics for metering and monitoring resources consumed in the Cloud. In addition, these mechanisms also help them to put some governance and financial controls.
• Resource Life Cycle Management: Cloud moves the resource ownership to centralized service providers. As consumers started to use Cloud resources, they need better control on negotiating, acquiring, pricing and activation of these resources. So, it is very important to define common mechanism and interfaces to address these needs in the cloud with some common interfaces to negotiate, execute and monitor these contracts or commitments.
• Cloud Security Services: Security is becoming increasingly important concern in the cloud. It is not that current applications addressed this problem very well and cloud is not thinking about. Enterprise applications are hosted inside the bricked walls to protect themselves. That gives the users the confidence and assurance required. The moment they move these applications into the cloud, onus will be on the applications themselves protect from any security breaches. Applications need to sense and respond to any threats. It starts with defining the common interface to provide the security protocols required. Again, how this mechanism implemented are left to the Cloud infrastructure providers to innovate and come up with new technologies and innovations. Some cases, we should be able to leverage all TLS, HTTP/S, IPSEC and other technologies innovations already in place. At the minimum, it is important to think of how cloud applications and security aspects needs to be provisioned, monitored, and controlled. So, this leads to my requirement for defining protocol or common mechanisms for provisioning security identities in the cloud.
• Cloud Performance Data: Performance monitoring and tuning is going to be another Interesting challenge that InterCloud need to address to provide an ability to predict an application’s performance across different clouds. Unless the Clouds can provide some signals of performance(like what we have today for OSs), it would be hard for service brokers to negotiate these contracts dynamically. To facilitate the service bursting into Cloud having a well defined interfaces to the Cloud resource is very essential. Though initial phases of cloud adoption, application can take care of these initially(that may open some more new challenges though) but we should start thinking at higher level i.e. Cloud infrastructure level.

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Most successful brands create breakthrough ideas or innovations that are inspired by a deep understanding of consumers’ lives. Customers are no longer tolerating the rushed and mediocre service offerings. Instead, they are demanding satisfying and rich experiences. Companies that provide it will evoke emotional bonding with the brand and win their loyalty.

It’s fashionable today to talk of becoming “customer oriented.” Customer centricity is not just a slogan. It’s a pre-requisite for substantial profitable growth. Customer driven innovation isn’t just a strategy. It is a rigorous process and helps companies to understand who their customers are and what they care about. Customer centric thinking focuses on developing better ways of communicating value propositions and delivering complete, satisfying experiences to customers. It takes more than good intentions or grand visions to innovate in a customer-centric way. With the emergence of information rich societies and wide range of options for interactivity, customers are demanding more than ever before. It is going to be more challenging to keep your customers engaged with your brand unless you put them into your innovation process.

Padmasree Warrior, Cisco CTO, wrote on her blog:

Much of the discussion regarding apps today focuses on the debate between pure cloud (SaaS) delivery vs. the traditional on-premise approach to apps. Our view is that we need to move beyond this conversation and focus on the user experience. Here’s what we mean by that: As users we all want an experience that’s consistent and seamless, with the ability to stay connected and have instant access to the services and functionality we need, regardless of our location or what device we happen to be using. To deliver that seamless experience we’re going to need a combination of different types of applications—some that are on-premise and others that are on-demand.

Yes, we have been spending too much time debating on SaaS vs on-premise hosting of our applications. Instead, our focus should have been on creating rich and memorable user experiences. A disciplined process of Customer innovation will turn customer wishes into an enduring competitive edge – and a growing marketing cap. How do we enable this? How flexible and agile our systems and processes are to drive this level of interactivity with our customers. Limitations and rigidity in our systems and services are being pushed onto customers as “best practices” and cost of customization of these “rigid” systems far exceeds the value it offers. So, we need a radical shift in our thinking. We need to bring customer into the innovation process. This is only possible by shifting our conversation from systems view to customer view.

However, to fulfill this ambitious goal, we need agile, stable, and scalable service delivery platform. In spite of the all trends and developments in the technology, like SOA and Web 2.0 serving, we are still mired with IT infrastructure complexities and deeply fire-walled applications. So, the next frontier of innovation will require the customer focused, lean and optimized, utility based, and demand driven (CLOUD) computing infrastructure.

Though some argue that Cloud is the new business model or outsourced IT model, my view is that it is both an architectural paradigm shift and an economic model enabling optimal pricing and rapid innovation of new services without a huge capital outlays. Cloud is an architectural paradigm shift because we need to think differently the way we build, deploy and manage services in the Cloud. With the Cloud, we can focus on innovating to fulfill this new user centric view instead of spending all our time and resources to keep the lights on. Current applications were designed with different assumptions. Designers and developers glued their applications tightly to an operating environment and network. Hard-wired whole bunch of localized configurations into their applications. They fused-in specialized ACLs into network switches. Built rings of firewalls and VLANs of hell around their applications. May holes were punched and many controls were enforced around these applications. Moving these applications into Cloud is a huge undertaking.

Last 3 years, I have studied number of applications including massively complex Supply Chain Management processes to stateless web serving applications. Moving them into Cloud involves either complete re-write or re-engineering of data extractions, transformation, and loading in addition to re-wiring their business processes. Many of these applications assumed local optimizations, caching, connection pooling. It is even shockingly surprising that many application secrets were buried and firewalled on those servers. Moving them off the localized fire-walled environments to Cloud needs architectural re-thinking.

Though many enterprises are curious to move to the Cloud, my view is that they are not ready to embrace Cloud unless they look at their architecture and infrastructure more holistically. Virtualization is necessary but not sufficient. Extreme automation is the key. Today 76% of the production outages are caused by errors in configuration or change management. So, Continuation Integration combined with an automated deployment should be integrated into the services. Cloud is a promise. Service is the fulfillment. End-to-End Service is what it matters to consumers/customers.

With that said, majority of Cloud (Public Cloud) adoptions will be driven by emerging companies, services, and consumer facing web companies. Meanwhile, enterprises will start to adopt the private cloud model for their enterprise applications. That will give them fairly good opportunity to look at their applications, networking, security, and integration infrastructure more holistically. Once these applications are rewired into services with infrastructure 2.0 thinking, then they can burst their capacity needs into the public clouds. I see this as a multi-year journey.

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