Wednesday, August 19, 2009

Back-to-school shopping

If you haven't read the UC Berkeley RAD Systems Lab paper, "Above the Clouds," it's well worth the effort.

Written in a conversational rather than academic tone, it discusses the technical, line-of-business, financial and historical drivers of cloud computing. It also authoritatively defines cloud computing: software-as-a-service plus utility computing. SaaS providers can be utility computing customers. The other Whatever-aaS models are not included, nor are private clouds.

It also defines three economic engines of the cloud phenomenon. I list the first two just to be thorough. We'll be discussing the third:
  1. Pay-as-you-go. The authors use the term "fine-grained" to describe the micro level at which capex is moved into opex.
  2. Hardware deflation. Processing, storage and network horsepower all constantly decline in unit cost, but at different rates; cloud providers can benefit from the "float" and, maybe even pass them on to you, the consumer.
  3. Elasticity of average and peak utilization. This old conundrum -- how to provision enough computing power for crunch time without drastically overpaying for 300 days out of the year -- is a step closer to solution in the cloud.
This third point is, of course, most crucial to startups and to web-based businesses that might have to dial back down considerably after the novelty wears off. But I venture to say there isn't a CIO in the world who isn't concerned about capacity management.

The Berkeley authors provide an interesting example:

"Target, the nation's second largest retailer, uses [Amazon Web Services] for the website. While other retailers had sever performance problems and intermittent unavailability on 'Black Friday' (November 28), Target's and Amazon's sites were just slower by about 50%."

This is all the more amazing because Amazon's EC2 offering is essentially just virtualization in the cloud, according to this same paper. "An EC2 instance looks much like physical hardware, and users can control nearly the entire software stack, from the kernel upwards. This low level makes it inherently difficult for Amazon to offer automatic scalability and failover." They suggest Google's AppEngine platform for that purpose. One wonders what's results would have been if it resided at Google.

But what I'm wondering is, what will the results be on this coming Black Friday, and the Black Friday after that? There's a first-mover advantage here: The capacity was indeed available, albeit at a degraded level. We've all been hearing about the slow back-to-school retail season, and how stores are dreading an equally dismal holiday season. They're going to cut back on expenses, and that's going to make the cloud particularly attractive to them. Nobody has bigger seasonal capacity requirements than retailers. That means there will be more direct competitors in the mix. Cloud providers are also struggling with elasticity. Will they be willing to buy all the capacity they need for 30 Shopping Days 'Til Christmas, even if most of it lies fallow for the rest of the year?

I don't think so. Expect outages this year, overcapacity the following year, and outages again the year after that.

Think I'll actually get reacquainted with the mall.

Either that or start shopping now.

Have a better day,



  1. provides a scaleable infurstructure in which Ecommerce retialers can scale there resources as needed. With this being a pressing need in a more digital age GoGrid has reconized the need and are delivering a safe and secure solution.
    All clouds are public based which can lend itself to being more unsecure. To fix this GoGrid offers a hybrid solution utilizing dedicated servers and cloud servers. By optimizing free F5 load balancing for web servers and secure dedicated servers retial companies can thrive in the cloud.

  2. I have a strong preference for free speech over censorship. Do I need to moderate comments? I would do so only with deep regret.

    If you have something commercial to say, fine. Just make sure it has something to do with the posted topic. If you have a suggestion for a future posting and would like to introduce yourself as a source, that's appropriate here as well. Nothing wrong with a little soft-sell.

    But let's agree that this is not the format for drive-by direct-mail marketing messages. If such posts recur too frequently, though, I will change the moderator settings to keep them from getting out of hand.

  3. William, That's is understood. My point was how a cloud can accomplish the needs of retailers. Security and scalability are always needed for retailers and with a public cloud it's a little tricky to set up but it can be done.
    No direct mail marketing I just wanted to through in an opinion from implementation perspective. I like the topics discussed.

  4. Your question makes a basic assumption that retailers are advanced to the point they can deploy or even contemplate this form of computing. My answer depends on the technological state of the retailer. If the retailer has technology that can not communicate between online and offline than, in my opinion, cloud computing represents running before they can walk.

    However, if a retailer has coherent communication between online and off line data, cloud computing could be a significant leg up in potential saving. But, if this communication is missing, than cloud computing is adding technology (and cost to ramp up) that is misdirected.

    I have worked in a corporate environment and provide marketing solutions in the small to mid size business community. A portion of my focus is retail. While the companies I worked were well know, they fell into in the former category and were spending (rightly so) technology dollars to link their data to communicate online. Cloud computing for them was a phase 2.
    Just my two cents.

  5. EBM, that certainly maps with my experience. Retailers are (online sales interfaces aside) more concerned with distribution of physical goods than with tracking data. And that just makes sense from a business viewpoint.

    I think we'll need to discuss, in this space, what constitutes organizational capability, maturity and readiness to implement cloud computing, either private or public.