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“Is colocation cheaper than using a cloud computing service to run the same workload?”

This quote comes from an analysis of the costs of cloud-based computing vs. traditional colocation as a function of the work load and duty cycle. This type of analysis is increasingly germane for companies that are looking to make a transition to cloud-based service providers in the hope that it will allow them to lower their overall IT costs. The results, while not surprising, do raise some interesting points. First, here’s the link:

https://vijaygill.wordpress.com/2010/08/09/cloud-economics/

The crux of the argument here is the concept of the duty cycle. The duty cycle for a deployed application is the percentage of available hardware resources that are being consumed at any given moment in time. Intuitively, a higher duty cycle corresponds to more efficient and cost-effective use of the underlying hardware. One of the fundamental promises of cloud computing is that it will allow you to run applications in a way that will produce a much higher duty cycle through elasticity, i.e. idle resources can be released without impacting the ability to scale back up in the future.

The analysis includes a spreadsheet with some hard data for one specific style of application, and the result is that an equivalent workload for this style of application would cost $118,248 at Amazon and $70,079 in a colocation facility, with the implication that a higher duty cycle can be achieved via colocation. However, this result is not as clear cut as it might seem, owing to the fact that the “application style” is an extremely subjective and important attribute for any given application. In my experience, it is rare to find an application that can be characterized in this way; instead, most applications that I have run across are inherently custom in some important way. I would think that this analysis would need to be performed on a case-by-case basis for any application that is considering a move to the cloud, and the specific result of that analysis would apply only to that application.

A subtle conclusion of this type of analysis is that duty cycle optimization for a given application should be a key criterion for cost reduction. And, somewhat conversely, if an application already has a high duty cycle then the opportunities for cost reduction through cloud-based resources will be limited at best. Or, more simply: if you already run highly-utilized servers then you might do better with collocation.

Hope this helps.

“How Big is Amazon’s Cloud Computing Business?”

Everyone seems to think that Amazon’s web services business (a.k.a. EC2, S3, and the rest of AWS) is very big and getting bigger, but Amazon stubbornly refuses to break out the AWS contribution to Amazon’s earnings. A recent blog post on GigaOm is the first that I have seen that includes some real data — both for Amazon and for the total accessible cloud services market — to estimate the size of the AWS business today and the size of the market going forward. First, here’s the link:

http://gigaom.com/2010/08/02/amazon-web-services-revenues/

The data comes from a UBS Investment Research paper, and it estimates that AWS is a $500M business in 2010. It further estimates that AWS will grow to $750M in 2011 — 50% year over year growth — reaching $2.5B, with a B, by 2014. Amazon as a whole does roughly $25B in revenue, growing in the 30%-40% range over the past year, so the numbers for AWS, while still small, are a high-growth component of Amazon’s overall business. Add in the fact the the UBS paper reports the gross margin of AWS at around 50%, vs. around 23% for Amazon as a whole, and one might draw the conclusion that the profit contribution of AWS will be a growing and very significant piece of Amazon’s pie in the years to come.

The question I have is this: Why aren’t more internet companies doing the same thing? Amazon’s results are a clear and undeniable validation of their AWS business strategy. That strategy, in a generic sense, was to build a very efficient cloud infrastructure for their own retail applications, and sell the excess capacity to the general public. They have proved that there is demand for the excess capacity and the service APIs that they provide for that capacity. And their list of customers has slowly transformed from penny-pinching startups and early adopters to a who’s who list of the largest, richest Fortune 500 companies in every business domain. And don’t forget that AWS has data centers around the world, and there is every reason to think that the demand for AWS from foreign companies will mirror growth in the US.

I can think of a bunch of older, larger internet companies that should definitely be trying to duplicate Amazon’s success. Some of them have already tried, albeit with a slightly different level of offering (e.g. Google’s App Engine, Microsoft’s Azure). But the barrier to entry, such as it is, requires only a large number of machines and the will to build the necessary cloud infrastructure systems. I’m sure someone will call BS on this statement and tell me that some serious skill is also required, and I would agree with that. But we live in a time when skill moves around a lot, and no company has a monopoly on talent. So why isn’t everybody trying to copy AWS?

“Android will run majority of smartphones by Spring”

This latest quote comes from Adobe Systems’ CTO Kevin Lynch during an interview with Fortune. It’s actually an approximation of what he said, but I think it captures his intent, which is to suggest that Android will shortly become the dominant smartphone operating system, and to imply that Adobe — with its close partnership with Google surrounding Flash — is not quite as dead on smart devices as we have been lead to believe. More on that shortly.

But first, here is the link:

http://tech.fortune.cnn.com/2010/11/10/adobe-cto-android-will-run-majority-of-smartphones-by-spring/

The article contains a set of statements attributed to Lynch in which he states that he expects Android to achieve a 50% share “in the springtime”. If true, this implies a meteoric rise in Android adoption from 3% in late 2009, to 26% in late 2010, to 50% by early 2011. The sheer number of devices that can potentially run Android along with the large number of wireless carriers that support it will give it a huge advantage over Apple and iOS in terms of growth and market share. This numerical superiority could justify Lynch’s prediction, but it does not imply that customers are choosing Android because of the quality of the experience. This is a key point, in my opinion, because Apple can close the proliferation gap — via a CDMA-based iPhone for Verizon, perhaps — and after they do so then market share will more closely track the customer experience. This is where the tightly controlled and polished iOS and iTunes App Store experience will continue to shine, and this is where Android will continue to deal with fragmentation issues in their device base that will affect the customer experience. What fragmentation issues, you ask?

A quick look at the Android Developers Site gives us the latest data on which versions of the Android OS are currently in use across the global Android device base. As of November 1, 2010, they are:

Android 1.5: 7.9% Android 1.6: 15.0% Android 2.1: 40.8% Android 2.2: 36.2%

This data indicates that the Android device base is fragmented by OS version into three large buckets: obsolete versions (both 1.5 and 1.6) at 23%; version 2.1 at 40.8%; and version 2.2 at 36.2%. This presents a challenge, to say the least, to Android developers who wish to write apps that will run on any Android device, and this will certainly affect the quality of the overall Android experience. And, getting back to Adobe, it is worth noting that only Android 2.2 — at 36.2% — supports Adobe Flash 10.1 for a true Flash experience on a mobile device. Collectively, devices running any version of Android might achieve a 50% market share as Lynch suggests, but that metric does not appear to be an apples-to-apples comparison with Apple’s iOS because of this fragmentation. Apple does not report iOS version percentages as Android does, but an educated guess is that a much higher percentage of Apple devices are running the latest version of iOS due to the relative ease of the iOS upgrade experience via iTunes.

Which leads me back to Lynch’s implication that Adobe is well-positioned via its partnership with Google to capitalize on Android’s market share. The data above shows that only a minority of Android devices (36.2%) can run Flash 10.1 today. Unless this percentage rises significantly in the next six months, Flash adoption on Android devices will not keep pace with Android’s growth rate. To be fair, new growth in the Android device base should be almost exclusively newer devices running the latest version of Android, and this should serve to increase the overall percentage of Android devices that can run Flash 10.1. But for now, Adobe and Flash appear to be chasing an Android market that is accelerating away from them.

Tags: Adobe, Android, Apple, Flash, Google, mobile