Gartner: After Surviving the Dot-Com Meltdown, Is a ‘Cloud Meltdown’ Inevitable?

Intriguing title, but this is actually one of the weaker Gartner reports that we’ve read recently.  The argument is that because cloud computing is an emerging technology, there will be many new entrants to the market – and the resulting rapid proliferation of services will have parallels to the dot com era.  While that may be true on the surface, to take that argument to the conclusion that we may see an implosion similar to what we saw with the dot com bust is one part stating the obvious (nearly every emerging market with low barriers to entry experiences growth among entrants before entering a cycle of maturation and consolidation), and two parts flawed logic.  The reasoning doesn’t hold up, at least at this stage of cloud computing’s evolution, for a number of reasons:

1. We are in a much different capital environment and are facing greater aversion to risk than with the dot com boom; entrants to the cloud computing market are lured by the long-term opportunity, and in many cases the ideology, as opposed to the availability of capital.  We’re not in this for a quick exit and a huge payday…this isn’t San Francisco’s Townsend Street in 1999 where just about every company referred to themselves as “pre-IPO.”
2. Cloud computing is about changing the economics of service delivery to enable new applications and democratize technology (i.e. level the playing field).  The dot com era was about making billions selling dog food, as if every dog in America was going to get infinitely hungrier with the proliferation of the Internet.
3. The movement that preceded the current cloud computing trend was referred to as “Web 2.0.”  One can infer that the second generation of technologies and businesses was built upon the successes and the lessons learned from the first generation (i.e. “Web 1.0″).  With cloud computing, while I won’t disagree we’re struggling with finding highly effective commercialization / monetization strategies in the early stages, we will quickly refine the models and make them work because we’re building on both business models and technologies that have been fleshed out for over 10 years now.  To make the case that cloud computing will suffer from the same naivety and overblown expectations is to make the case that that we learned nothing from the dot com era.  Yes, history does tend to repeat itself over a long enough time horizon, but most of us are smart enough to not make the same mistakes more than once.

Key thoughts / takeaways from the research:

• “The markets around cloud computing are just starting their growth phases, with
  significant growth ahead.” (Page 1)
• “A cloud service provider can use
  somebody else’s infrastructure to run its business.” (Page 2)
• “Most Web 2.0 companies did not make heavy investments in infrastructures. They were
  able to benefit from the commoditization of infrastructures and extensive open-source
  offerings.” (Page 3)

Nicholas Carr:  Cloud as a feature

Good post by Nicholas “IT Doesn’t Matter” Carr about a model for leveraging “the cloud” in a very interesting manner.  He introduces the term “Cloud-as-a-Feature” or “CaaF,” which we don’t necessarily see gaining much traction as a buzzword, but is an important concept to explore in commercializing cloud computing.

Key thoughts / takeaways:

• “By radically changing the economics of high-performance computing, the cloud democratizes the supercomputer.”
• “…the cloud is most interesting as a means of doing new things with computers, rather than just doing old things in a new environment.”
• “…if you want see some of the most creative thinking about how to meld cloud services with traditional PC software you’d do well to look not at Microsoft…”

The impact of Microsoft’s announcement that it was entering the Cloud Computing game wasn’t fully appreciated until I was watching Nightly Business Report on PBS and was taken aback when they did a full segment on “cloud computing.”  That was the moment when I realized that the “cloud” had gone mainstream, and the validation made me feel like Paul Revere after having felt more like Chicken Little during countless meetings with CIO’s and IT managers where I was extolling the virtues of SaaS and “utility computing,” and telling them that if they didn’t adopt radically different service delivery strategies, the pending revolution would make IT organizations go from ineffective to archaic almost overnight…only to be met with the obligatory blank stares, skepticism, and protectionist attitudes.  Well, it’s here, and for that I’m…ambivalent?

There’s no doubt that Microsoft entering the Cloud Computing game gives the philosophy / movement / model instant mainstream credibility.  But I’m conflicted as to whether this is a good thing; on the one hand, I can see that the day is almost here where I don’t have to spend half of a sales cycle educating clients on SaaS, PaaS, or “The Cloud.”  On the other hand, when Microsoft enters a market, Microsoft doesn’t conform to the market – it tries to mold the market in its own image.  SaaS, SOA, and Cloud Computing are too important to be co-opted by the traditional IT vendor paradigm, let alone be “Microsoft-ized.”

It will be interesting to see where all of this leads.  I am not anti-Microsoft by any means, and I have a lot of respect for the brainshare in Redmond.  Unfortunately the company has a fairly lengthy history of grandiose announcements and aggressive ambitions that overshoot either the company’s ability to execute or the market’s willingness to adopt the Microsoft way of doing what it has already adopted elsewhere.  I still use Microsoft Office on Microsoft operating systems because the former is the bedrock of productivity tools, but I have not seen anything from the company that I could get excited about since the announcement of Exchange 2000 back in the day when I managed a 10,000+ seat Exchange 5.5 organization.  That was almost 10 years ago.

The fanfare surrounding Azure has been a boon for everyone involved in the Cloud Computing space – a “rising tide lifts all boats” scenario – but our take is that this project will take Microsoft years to complete, and in the end it will prove to be too grand a proposition for them to get out the door in the timeframe necessary for it to be truly game-changing.  What we will see in the late 2009 / early 2010 timeframe is a limited framework, scaled back significantly from what was evangelized on the initial Azure roadmap, that provides access to small-scale “widget”-like functionality that marginally extends the functionality of only a handful of core products.  By that time, the thought leaders in the utility computing / Cloud Computing space will be pushing far more compelling envelopes, and the ability to run Office through a web browser and write cool widgets for it will elicit a collective yawn from all but the deeply entrenched enterprise CIO-types that can claim adoption of “The Cloud” in the most conservative (i.e. non-pension-threatening) manner possible.  But hey, thanks for the millions of marketing dollars to help educate the mainstream, Microsoft!  We’ll be sure to ride on those coattails for as long as the checkbook remains open.

Gartner: Microsoft’s Cloud Vision Reaches for the Stars but Is Grounded in Reality

Phil Wainewright: Windows Azure: Microsoft mainstreams the cloud

Dave Rosenberg: Microsoft’s Azure–I remain perplexed