Enterprise Cloud MythsRandy Bias @randybiasMarch 8th @cloudscalingCloud Connect 2011

Are Enterprise (IaaS) Clouds a Mistake?

Public or Private Clouds Built in the ‘Enterprise’ style

The Myth

“We need Enterprise Clouds because ...”

The Myth Continued

Enterprises need more ... FUD??

The Fundamental Assumption in the Myth

vs.

Greenfield AppsLegacy Apps

Enterprises Love Commodity Clouds

There Are Two Battles Waging

Enterprise Clouds

Commodity Clouds

The Battle Lines

Public Privatevs.

vs.Public Public

The Error in Cloud as “Outsourcing”

Public Private

vs.

vs.

Where are the cost savings? “multi-tenancy?”

The Enterprise ‘No Clothes’ Moment ...

Where is the enterprise cloud business model equivalent of Amazon Web Services?

$0B

$0.5B

$1.0B

2007 2008 2009 2010 2011

The Amazon Model is Winning

$0M

$150M

$300M

2007 2008 2009 2010 2011

Source: Public estimates from Cloudscaling/UBS & RAX earnings statements

AWS 5-year Projected Revenue at 100-50% CAGR

$0B

$3B

$6B

$8B

$11B

2009 2010 2011 20122013

20142015

2016

Source: Public estimates from Cloudscaling & UBS + Cloudscaling estimates

AWS Growth & Momentum is Staggering

0B

175B

350B

525B

700B

3 14 40102

262

655

Q4’06 Q4’07Q4’08

Q4’09Q4’10

Q4’11

Source: Public AWS blog & PR announcements

S3 Published Growth Numbers

The Starkest Example Possible(‘Private’ Hosting vs. Public Cloud)

-10%

0%

10%

20%

30%

40%

Q4’08 Q1’09 Q2’09 Q3’09 Q4’09 Q1’10 Q2’10 Q3’10 Q4’10

RAX Cloud RAX Hosting

Q/Q % growth rates

Source: Public RAX earnings statements

Commodity Cloud as % RAX Total Revenue

0%

7%

13%

20%

2007 2008 2009 2010 2011

Source: Public RAX earnings statements

The Punchline?Enterprise Clouds Have Greatest Investment

$0B

$8B

$15B

$23B

$30B

2009 2010 2011 2012 2013Commodity Cloud Enterprise Cloud

Source: Cloudscaling estimates based on public data (conservative)

What’s Different About Commodity?

Attribute Commodity Enterprise

H/W Cost OptimizationHomogeneous & standardizedDesign-for-Failure

Self-service, low friction

Scale Engineering

Open Source

Cloud-oriented Biz Model

Initial Capital Expense:Enterprise vs. Commodity Cloud

$0

$500

$1,000

$1,500

$2,000

$225

$1,892

H/W Cost per Sellable ‘VMU’ (1GB RAM, 1 vCore)

CommodityEnterprise

Source: Cloudscaling confidential financial models for IaaS clouds

Labor Operational ExpenseEnterprise (300:1) vs. Commodity Cloud

(1500:1)

$0M

$38M

$75M

$113M

$150M

Year 1 Year 2 Year 3 Year 4 Year 5

Commodity Enterprise

Servers : IT Headcount

Source: Cloudscaling estimates based on known IaaS deployments

The Evidence Suggests ...

Go CommodityServe Greenfield

“Cloud-ready” appsEmbrace the Change