September 2008

It seems that Cloud computing is already scaling its way down Gartner’s trough of disillusionment?  For those not familiar with the Gartner Hype Cycle, the trough of disillusionment begins right after a technology has hit the “Peak of Inflated Expectations”.

Dan Lyons starts things off by agreeing with Richard Stallman about the risks surrounding cloud computing. Dan says:

“Just think of all the little hooks and Velcro straps a cloud service provider can create to keep you locked in. For one thing, they’ve got your data. But think also of all the business logic, the customized apps created uniquely for you. Just look at what Facebook does to make it extremely painful for users to move. That’s a tiny taste of the cloud.”

Stallman tells the Guardian:

“It’s stupidity. It’s worse than stupidity: it’s a marketing hype campaign….Somebody is saying this is inevitable – and whenever you hear somebody saying that, it’s very likely to be a set of businesses campaigning to make it true.”

The Guardian also has a quote from Larry Ellison on cloud computing:

“The computer industry is the only industry that is more fashion-driven than women’s fashion. Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?”

On the other side of the debate is Geir Magnusson:

“I think that notions of privacy and user control aren’t intrinsically at odds with the big spectrum of technologies that are called ‘cloud computing’. Rather, like any other computing technology used by humans, there are options, and we can choose to use and create tech that is secure and open, both in the implementation (as in open source), but maybe more importantly in terms of portability and data freedom, being able to move one’s data to where one chooses.”

Like many other technologies purported to completely reshape the vendor landscape, cloud computing won’t deliver.  However, cloud computing definitely has a role to play in the future of the IT marketplace.  Some applications are well aligned with the cloud.  Others, especially really important business-critical apps, aren’t.  Will this change over time? Maybe, but how many companies still do the majority of their business critical transactions on a mainframe-based system?  Hint, a lot.  Also, as more customers start making noise about data portability and freedom, expect vendors to respond with support for related open standards.

In the end, cloud computing will become a valuable part of every company’s IT strategy.  However, cloud computing simply won’t be the foundation upon which an average company’s IT strategy is built.

What do you think?

Cleversafe has a very cool idea to address data security and reliability.  Seems that the WSJ agreed and decided to award Cleversafe a WSJ Innovation Award. From the WSJ:

“The company’s Dispersed Storage software breaks files up into slices and then sends the slices over the Internet to multiple storage locations on a network. By themselves, the slices are unreadable to hackers or anyone else not authorized to read them, but the original file can be easily reassembled, even if not all the slices are available (Savio adds: since duplicates are stored across the network) due to equipment failure or natural disaster. The software also promises to be less expensive than traditional storage methods, which rely on creating full, multiple copies to protect against loss.”

Users can try out the GPL’d code at on their own servers.  Alternatively, customers can purchase an appliance-based solution from Cleversafe.

It’s interesting that Cleversafe won an award in WSJ’s “software category”, based on the open source code, but there is no mention of open source in the WSJ article.  I like how Cleversafe leverages the significant ease of use benefits of an appliace-based commercial offering as a differentiator vs. the open source code.

And they say that open source vendors don’t innovate…

“How could all these smart people have let this happen?” seems to be the question on everyone’s mind lately.  Obviously, I’m talking about the disaster created by mortgage backed securities linked to subprime loans.

The layman’s answer is that the smart people should have known better.  But they let greed and peer pressure (i.e. “everyone is doing it, don’t question, just come along”) get in the way.

I won’t touch the topic of greed‘, since my MBA colleague Vincent Wong keeps telling me it’s good.  I will however discuss peer pressure as it relates to the software market.

Two years ago I was taken aback by the intellectual peer pressure against questioning if open source software was truly the end game for the software market.  Thankfully, many of the myths associated with open source software have be revealed.  As a result, the open source software movement is stronger, because proponents now use logic-based arguments.

Via Shaun’s blog…we’re seeing the peer pressure led cycle repeat in the SaaS market.  I’m very impressed with Harry Debes, Lawson Software CEO who is quoted:

“as we did the maths, we realised we could get killed. It was going to take us 7 to 10 years before we made any money. That’s nonsense. So we reversed our plans…because all your costs are up front and your revenue is over a five-year period, the more you sell, the more you lose. You don’t break even till the four-and-a-half-year mark, but here’s a bigger problem: there’s no guarantee that that customer is still going to be yours in four years’ time.”

Whatever you think about SaaS, Debes has thrown down the gauntlet against those who strongly believe that the future of the software market has to be SaaS.  If you’re a vendor with private or public investors you are duty bound to think about a 7-10 yr payback.

Only when logic-based arguments, like the one from Debes, are on the table can the discussion progress.  Is there a way to ramp up the SaaS revenue earlier to offset initial development costs? Absolutely, but that question is irrelevant if you hold onto SaaS myths.

Kudos to Mr. Debes.  Let the (mythless) debate begin.  Hopefully we’ll arrive at a solution to SaaS as a component of the overall software market.

Many of you know that I have been pursuing an executive MBA from the Rotman School of Management at the University of Toronto over the past year.  Well, I am happy to report that I’m done.

You’ll notice that I’ll be incorporating topics from Integrative Thinking into my writing in the future.  Integrative Thinking is at the foundation of Rotman and it’s an approach to thinking that I’d like to develop further.  (BTW, some of you will remember that I started down the path of linking open source and Integrative Thinking a few months ago.)

Stay tuned for my next post-EMBA post.  I’ll use choice structuring to evaluate whether “an all open source, all the time” approach is truly viable for large software vendors.

One of EnterpriseDB’s newly announced suite of packaged services caught my eye today.  I’m not an expert on the DBMS market, but EnterpriseDB’s “Remote DBA Service” seems to be quite novel (please comment if you’ve seen a similar offering from competitors). EnterpriseDB explains:

“The Remote DBA Service cost-effectively supplements an organization’s in-house technical resources and provides daily DBA functions and support. The Remote DBA Service begins with an onsite visit in which EnterpriseDB’s Remote DBA staff becomes familiar with the production database operating procedures and systems, develops working relationships with the in-house team, checks the backup and recovery systems, and performs an Architectural Health Check. Monthly and annual service plans are available.”

The Remote DBA Service addresses the market need for managing costs in a tough economy.  It is very cool to see open source (related) vendors innovating beyond technical support as a major driver of revenue.  One could argue that the “Remote DBA Service” is simply a professional service, and hence, not much of an innovation vs. the current open source business model.  On paper, that would be a true statement since most open source vendors rely heavily on professional services revenue when starting out.  However, to me, the difference is that the Remote DBA Service is much more scalable than a typical professional services engagement for an open source vendor.  I say this because of the “remote” focus of this offering.

What do you think?

In other news, social networking site hi5 and EnterpriseDB jointly announced that hi5 has selected EnterpriseDB to provide the data management infrastructure for hi5.  The press release states that hi5 is the world’s third-largest social network (who knew!? – but then, I’m still not on Facebook).

Some cool stats about PostgreSQL’s ability to handle heavy user loads:

“The transaction-intensive site serves more than 56 million active users each month. In June 2008, the PostgreSQL-based system delivered more than 18.5 billion page views, serving nearly 11 million visitors to the site every day.”

As a Canadian Federal Election looms, the Green Party of Canada, releases its platform, including a section on Free/Libre Open Source Software.

Here’s what the Green Party has to say on the topic:

7. Open source computer software
As computer hardware improves, it is important that software programs are readily modifiable by the people who buy and use them. Developing alongside the proprietary software sector is Free/Libre Open Source Software (FLOSS).  This software is generally available at little or no cost, making it very popular in the developing world. It can be used, copied, studied, modified and redistributed with little or no restriction. Businesses can adapt the software to their specific needs.

Under the free software business model, vendors may charge a fee for distribution and offer paid support and customization services. Free software gives users the ability to work together enhancing and refining the programs they use. It is a pure public good rather than a private good.

“Our Vision
The Green Party supports the goals and ideals of Free/Libre Open Source Software  (FLOSS) and believes that Canada’s competitiveness in global information technology (IT) will be greatly enhanced by strongly supporting FLOSS.

Green Solutions – Green Party MPs will:

  • Ensure that all new software developed for or by government is based on open standards and encourage and support a nationwide transition to FLOSS in all critical government IT systems. This will make Canada’s IT infrastructure more secure and robust, lower administration and licensing costs and develop IT skills.
  • Support the transition to FLOSS throughout the educational system.”

Canadian readers, know that the Green Party is still fighting to get recognized alongside the other three major political parties.  However, it’s not unheard of for the major parties to include (variations) of policy recommendations from each other.  It’ll be interesting to see a major North American political party highlight open source so prominently in their platform. How long until it happens?

Thanks to my friend Mat for sending along the link…when he really should have been studying for our Economics exam :-)

ComputerWorld has a very interesting article that even as Lehman Brothers was heading towards bankruptcy it invested $309M on technology and communications in the quarter ended August 31.  This figure represents a 9.5% year to year increase, which is down form the 18% increase, to $1.145 billion, in IT costs for the fully year 2007 vs. 2006.

It seems that Lehman was involved in selling some of its technology, specifically around a high-speed trading platform for equities called Baikal, to a number of investment banks and brokers.

Ralph Silva, a senior analyst at financial services advisory firm Tower Group Inc. is quoted:

“The units of Lehman currently selling technology to other banks are likely to be sold off

All banks are concerned about the ramifications of losing technology, and want more technology to be in-house,” he said. “So in this kind of situation, they tend to negotiate to get hold of the code or the entire systems. In Lehman’s case, the phone calls are probably already happening.”

It’s interesting to ponder whether the third parties using Baikal would be better off if the technology was open sourced?  Probably, but who, amongst the 100s of customers, would continue its development?

Does any customer want to take on the effort of developing a trading system in-house?  There is very little competitive benefit gained from the core of a trading system.

Next, consider the scenario of an independent company taking the open source code and offering support and future development.  Or worse, if multiple companies began to fork the code and offer support and future development.  As a current Lehman technology customer, I would be weary of having to select between 2, 4, or x number of forks.

On the other hand, there is also a risk if Lehman sells it proprietary technology to a company that then decides to go in a different direction than Lehman’s technology customers had expected of Lehman. But this is what source code escrow is for I guess.

I’m not sure that there is an easy answer here.  Is there ever?

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