Infrastructure in the Cloud

James Urquhart sent me an email about one of his posts and invited me to join the conversation. After reading his post and Simon Wardley’s post, it was interesting enough that I thought I’d throw in my two cents.

The topic of discussion was Google’s new App Engine. Per Google’s site:

Google App Engine lets you run your web applications on Google’s infrastructure. App Engine applications are easy to build, easy to maintain, and easy to scale as your traffic and data storage needs grow. With App Engine, there are no servers to maintain: You just upload your application, and it’s ready to serve your users.

The theme of James’ post, and why I think he invited me into the conversation, is does this matter to the large enterprise? I tend to agree with James. While I think this is cool technology, in its present form it’s probably of little value to the typical large enterprise. At the same time, I would definitely qualify this, and Amazon’s cloud of services, as disruptive technologies. I can’t help but find myself making mental comparisons to Clayton Christensen’s discussion of steel mills. Smaller steel mills came along and catered to the low end, low margin area of the market that the larger, integrated steel mills were happy to give up. Over time, however, those smaller mills expanded their offerings until the business model of the larger mills was completely disrupted. Will something similar occur in the infrastructure space?

There are certainly parallels in the potential markets. Big enterprises are not the target of Google or Amazon, just as the smaller steel mills focused on re-bar rather than on the more expensive and potentially lucrative market for structural beams or sheet metal. One key difference, however, is that it’s hard to figure out who the “big steel mill” is in this case. Clearly, both Google and any major enterprise currently buy servers. So, Google is not disrupting HP, IBM, Dell, etc. What we’re really talking about disrupting is the internal IT data center. In most cases, save for outsourcing the data center to EDS or IGS, there is no business to be disrupted. The right comparison of this to the steel mills would be a comparison of companies that leveraged the products from the smaller mini-mills disrupting the companies that leveraged the products from the larger, integrated mills. While efficient cost controls are certainly part of the equation, there’s much more that goes into the disruption equation.

In the end, it’s very clear to me that tools like Google App Engine are good for the industry as a whole. They cater nicely to the low end of the market and the size of Google can sustain low margins or even a loss on making these services available. Over time, some of the companies that leverage them will become bigger companies, making additional requests of Google, which will in turn evolve the product that with each evolution makes it more attractive to a broader set of customers, eventually including the big enterprise.

One Response to “Infrastructure in the Cloud”

  • Todd,

    Thanks for taking the time to provide your comments, and for the time you have taken to respond to each of my questions over the past year.

    I love the steel works analogy, and I think Simon and I both feel the same way. My focus has been on the short term–is cloud computing going to affect data centers today–while Simon’s was understandably more long term–this is the beginning of a very disruptive era in all forms of computing. Make no mistake, I firmly believe the disruption is inevitable.

    As always, you were concise, articulate and spot on.

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