October 8, 2012
Volume XLI, Issue 3
Scayl Sponsors CLOUD COMPUTING WEST 2012
The DCIA and CCA proudly announce that Scayl has signed-on as a sponsor of the CLOUD COMPUTING WEST 2012 (CCW:2012) business leadership summit taking place November 8th-9th in Santa Monica, CA.
Scayl's software is the first true e-mail service with no attachment limits. It is a social sharing application that combines a distributed, secure, and private cloud (server and client in one) to help people communicate directly and more efficiently with their friends, families, and coworkers.
Scayl gives users an ideal solution that is free, easy, far faster, and enables secure delivery of large attachments including folders of files. It will run on many devices from laptops to digital living-room gear, and users can view attachments on any display including iPads, HDTVs, and mobile devices.
It works with legacy e-mail clients such as Outlook and connects the new better Scayl e-mail platform to the old ones. Home videos can be previewed or played as they are still arriving similar to the way Netflix works. Content can be delivered into the first spam-free folders.
Scayl is a free service supported by video ads and premium services; domain name e-mail service is available on an annual license basis. Scayl will be downloadable for free onto most Internet connected devices. Producers can add studio grade digital rights management (DRM) to protect high-value assets.
CCW:2012 will feature three co-located conferences focusing on the impact of cloud-based solutions in the industry's fastest-moving and most strategically important areas: entertainment, broadband, and venture financing.
Following Scayl's recent debut at IBC, its CEO Bill Kallman will present a keynote address at CCW:2012.
CCW:2012 registration enables delegates to participate in any session of the three conferences being presented at CCW:2012 — ENTERTAINMENT CONTENT DELIVERY, NETWORK INFRASTRUCTURE, and INVESTING IN THE CLOUD.
At the end of the first full-day of co-located conferences, attendees will be transported from the conference hotel in Santa Monica to Marina del Rey Harbor where they will board a yacht for a sunset cruise and networking reception.
So register today to attend CCW:2012 and don't forget to add the Sunset Cruise to your conference registration. Registration to attend CCW:2012 includes access to all sessions, central exhibit hall with networking functions, luncheon, refreshment breaks, and conference materials.
Internet Jobs Booming Across All Sectors
Excerpted from Online Media Daily Report by Gavin O'Malley
Ripe for a political talking point, new data shows that employment in the ad-supported web ecosystem doubled over the past four years to 5.1 million.
Better yet, the same digital ecosystem contributed $530 billion to the US economy last year — close to double the 2007 figures, according to the Harvard University Business School (HBS). The research was commissioned by the Interactive Advertising Bureau.
That dollar amount accounted for 3.7% of the US gross domestic product — an uptick from 2.1% four years ago, the HBS reports.
"One of the most striking findings of this report is that growth was fast in the consumer-facing layer, but that it was even faster in the less glamorous infrastructure layer that supports the high-profile brand name sites and services" said John Deighton, Harold M. Brierley Professor of Business Administration at Harvard Business School, who authored the report with Leora Kornfeld, Research Associate at Harvard Business School.
"Jobs grew fastest in digital advertising agencies, ad networks, ad exchanges, customer analytics firms, and listening platforms," Deighton added. "The engine of growth was not just consumer-facing companies like Facebook, Twitter, and YouTube, but also firms that used the data spun off by them."
The ad-supported digital industry directly employs 2 million Americans, and indirectly employs a further 3.1 million in other sectors.
The report shows New York and California as home to the headquarters of the largest number of US web firms. More interestingly, perhaps, is the revelation that Washington, Massachusetts, and Illinois rank as the next three most digital-friendly states.
In total, nine states are the sites of headquarters that account for 72% of attributed employment, although the jobs themselves were dispersed across other states in the union, the report shows.
That said, every Congressional district in the US was home to at least a handful of companies within the web ecosystem, and many had thousands of such companies, per the report.
Overall, job creation was highly dispersed, with less growth in aggregate and in percentage terms in the so-called "megaplexes" of Google, Microsoft, and Yahoo than in the tiny entrepreneurial ventures across every state and county.
Sole proprietors and small firms were cited as the big winners, this year. They contributed 375,000 full-time equivalent jobs to the 2 million in the Internet ecosystem.
Many were selling on Amazon, eBay, and Etsy, while other others were self-employed web designers, writers, and programmers. App development alone accounted for 35,000 full-time equivalent jobs, and the number of moonlighters was an order of magnitude larger.
Report from CEO Marty Lafferty
 As we start the one-month countdown to the inaugural CLOUD COMPUTING WEST 2012 (CCW:2012) strategic business summit, the DCIA and CCA cordially invite all DCINFO readers to register now for what promises to be an enormously stimulating and valuable event.
Attend this event to jump-start a very successful 2013 for yourself as a best informed and prepared industry participant.
Here's a sneak preview of day-one of this very exciting program, scheduled for Thursday November 8th in Santa Monica, CA.
Our opening plenary session will introduce the overall themes of cloud computing's effects on three extremely critical areas for this year and next — media, telecom, and investment.
Specifically, our opening keynote will address these key questions: How are cloud-based solutions in the entertainment sector evolving? How do these and related developments impact broadband network infrastructure? How should investing in this space be evaluated?
This will be followed by a panel discussion probing these central topics in more detail. Is "the cloud" more important to content creation or storage and delivery? What role(s) do Internet service providers (ISPs) play in this arena? What are the risk profiles and ROI projections for entities in this space?
From there, following a mid-morning networking break, we'll outline the latest advances in each of these areas with three co-located conferences.
At ENTERTAINMENT CONTENT DELIVERY, our first keynote will examine the latest trends in cloud solutions for high-value content production and distribution. Then we'll move to a panel analyzing the newest cloud offerings for entertainment, and the industry's direction in terms of adopting them.
At NETWORK INFRASTRUCTURE, our first keynote will explore current impacts of cloud migration on broadband network operations and businesses. Then a panel will analyze network resource usage by data centers and new ISP cloud services.
Meanwhile at INVESTING IN THE CLOUD, our first keynote will offer fresh updates on venture capital and M&A activity in the cloud computing space. And the follow-on panel will analyze the latest trends in capital structuring and strategic alliances for cloud computing firms.
Then we'll bring all delegates back together for our conference luncheon. In the first part of the afternoon, each of the conferences will raise crucial concerns and point-out obstacles that must be overcome.
One keynote will outline pitfalls to avoid in adopting cloud solutions for content development and delivery. Then a panel will analyze problem areas now affecting cloud adoption in the entertainment sector.
Another keynote will lay-out the drawbacks to cloud deployments from broadband network operators' perspectives. A panel will follow analyzing problem areas for ISPs created by the proliferation of cloud computing.
And a third keynote will consider liabilities that need to concern investors regarding cloud- based businesses. The related panel will then analyze problem areas affecting investments, acquisitions, and mergers involving cloud services.
From there, a series of very focused ENTERTAINMENT CONTENT DELIVERY keynotes will highlight current developments in cloud collaboration, cloud dailies, cloud editing, cloud metadata, and cloud pilots.
NETWORKING INFRASTRUCTURE keynotes will examine third-party SaaS, third-party PaaS, third-party IaaS, security, and interconnection.
And INVESTING IN THE CLOUD keynotes will explore public clouds, private clouds, hybrid clouds, virtual private clouds, and community clouds.
Finally, we'll come back together for the day-one closing plenary session to summarize all that we've covered regarding benefits and drawbacks of cloud computing for entertainment, infrastructure, and venture financing: How do the advantages of scale-and-cost, encapsulated change management, next-generation architectures, and choice-and-agility measure up against such pitfalls as security, lock-in, reliability, and lack of control?
After this very full day, we'll bus from the Santa Monica conference venue to Marina del Rey for a relaxing cruise and networking cocktail reception aboard a yacht.
Next week, we'll provide a preview of the sessions scheduled for Day 2 of CCW:2012 on Friday November 9th, but meanwhile, if you haven't already done so, please register now and book your travel. Share wisely, and take care.
The Proposed "Cloud Computing Act of 2012"
Excerpted from Forbes Report by Eric Goldman
US Senator Amy Klobuchar has introduced a new bill, the Cloud Computing Act of 2012 (S. 3569), that purports to "improve the enforcement of criminal and civil law with respect to cloud computing." Given its introduction so close to the election, it's doubtful this bill will go anywhere. Still, it provides an excellent case study of how even well-meaning legislators can botch Internet regulation.
From its 1980s origins as a law restricting hacking into government computers, the Computer Fraud and Abuse Act (CFAA) has morphed into a general-purpose federal law against trespassing on anyone else's computers. With that breadth, the CFAA extends to a wide variety of activities, ranging from data scraping (see, e.g., EF Cultural Travel v. Explorica) to fake profiles (see, e.g., the Lori Drew prosecution related to Megan Meier's death) to ex-employees walking out the door with competitively sensitive information (see, e.g., US v. Nosal and WEC v. Miller).
The proposed bill's main substantive provisions attempt to give "cloud computing services" extra protections under the CFAA. First, the bill says that each unauthorized access of a cloud computing account counts as a separate CFAA offense. Second, the bill specifies a formula for computing losses in CFAA violations involving cloud computing services, setting a minimum floor of $500 loss per affected cloud computing account.
Here are the problems with the bill.
The CFAA is already a mess. Good luck trying to read the CFAA's text. Constant amendments over the years have created spaghetti code. This bill adds only slightly to the CFAA's overall lack-of-tidiness, but every incremental amendment makes the CFAA more unwieldy.
The definition of Cloud Computing Service is Incoherent. The bill seeks to protect cloud computing services, but what are those? Check out the bill's definition: the term "cloud computing service" means a service that enables convenient, on-demand network access to a shared pool of configurable computing resources (including networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or interaction by the provider of the service.
What? This sounds more like a vendor's sales pitch than a basis for criminal prosecution. We can reinforce the definition's weakness by trying to determine what isn't a cloud computing service. Every user-generated content website seems to qualify; but so should every online bank. In fact, this definition of cloud computing service probably becomes co-extensive with the Internet generally.
To be fair, the failed definition isn't totally the drafter's fault. I don't think it's possible to define "cloud computing service" precisely. Tip to legislators: if you can't clearly define your subject matter of your legislation, you're probably doing something wrong.
What's the problem that needs to be solved? I can't figure out how the proposed amendments address any problem we're seeing in the field. It's possible I've missed some relevant case, but I can't think of a single case I've seen where the CFAA under-protected a cloud computing service or this legislation would have changed the outcome. Seeking some clarity, I submitted a press inquiry to Senator Klobuchar's office last week and got no response. So I have no idea what problem this bill purports to solve.
This bill exemplifies several ongoing problems with efforts to legislate the Internet:
1) Legislative grandstanding. It's flashy for legislators to tell their constituents that they are fighting hard to protect emerging technologies like "cloud computing." But legislators rarely understand cutting-edge technologies, and usually rapidly evolving technologies are poor candidates for legislative intervention. So legislators' efforts to push buzzword-laden legislation are often more for show than substance.
2) Regulatory exceptionalism. As I explain here, legislators keep creating new "exceptionalist" rules for subsets of the Internet ecosystem—online dating sites, social networks, cloud computing services, etc. We saw how well that worked in California's effort to ban employers from asking employees for social media login credentials. California so utterly failed at defining "social media" that it simply covered the entire Internet and all non-networked electronic data too! Yet, legislators seemingly haven't learned from their colleagues' repeated failed efforts to precisely define the contours of some Internet sub-community. The proposed CFAA amendment, and its gibberish definition of "cloud computing service," exemplifies this.
3) Code proliferation. For every problem, real or perceived, legislators think they can fix the problem with more regulatory code. But the manufacturing of new legal code exacts a toll of its own. This bill increases the CFAA's complexity with minimal or zero commensurate benefit. If Senator Klobuchar or anyone else really wants to "fix" the CFAA, a good start would be to reduce the law's length, organize it better, and reduce its implications for users' ordinary Internet activity.
Europe's Massive Cloud Strategy Could Help US Companies
Excerpted from Wall St. Cheat Sheet Report by Dan Ritter
On Thursday, the European Commission released a statement detailing a new strategy for unleashing the potential of cloud computing in Europe. By 2020, the plan is expected to create 2.5 million jobs, and boost European GDP by 1 percent annually.
"Cloud computing is a game-changer for our economy," said European Commission VP Neelie Kroes. "Without EU action, we will stay stuck in national fortresses and miss out on billions in economic gains."
The EU will facilitate the cloud by developing a single set of rules to cut through "the jungle of technical standards" and legal systems between the 27 member states. The agenda calls for interoperability and data portability standards to be identified by 2013, as well as an update to data protection policies. One sticking point against cloud adoption is security fears associated with decentralizing data.
Viviane Reding of the European Commission said, "The cloud strategy will enhance trust in innovative computing solutions and boost a competitive digital single market where Europeans feel safe."
This is where the Commission's plan could spell good things for US companies. Among those that could provide exactly the type of solutions and services the EU needs: Amazon, Apple, Cisco, Dell, Google, IBM, Intel, Microsoft, and Oracle. US companies are already offering competitive cloud services at home, and will be well-situated to extend those services across the Atlantic.
A report from Gartner estimates that by 2015, companies adopting big data storage and processing cloud technology will outperform competitors by 20 percent, using financial metrics. It also predicts that the cloud-based business performance management market will grow by 25 percent year over year.
Amazon's EC2, IBM's SmartCloud, Intel's Cloud Builders, Microsoft's Azure, and the Oracle Cloud will all be major players in the US and Europe as cloud computing and technology becomes increasingly significant.
Will there be an Amazon of Europe?
Excerpted from GigaOM Report by Barb Darrow
Can one company dominate the public cloud infrastructure-as-a-service (IaaS) market in Europe as Amazon has in the US?
The short answer is no. The longer answer is that Europe — for many reasons — is a much more fragmented (perhaps fractious) market than the US — or North America for that matter. Here's why it would be hard for one infrastructure player — even Amazon — to dominate the European Cloud.
If the European Commission is able to unify the varied data protection mandates across the 27 European (EU) countries as promised, public cloud adoption would probably speed up. Many companies are just deferring cloud decisions — or adopting private cloud that would let them keep their data local — because they don't know how these laws would affect them now or in the future.
The EC cloud computing report does recommend that the various governments come up with a comprehensive plan on data protection, the goal being a "single set of rules at the EU level and a one-stop shop for enforcement."
But, no actual convergence of those laws is expected till 2014 or 2015. In the mean time a technology advisor with the UK's Information Commissioner's Office (ICO) last week reiterated that companies remain accountable for handling customer data regardless of where it's deployed.
Simon Rice said, "As a business, you are responsible for keeping your data safe. You can outsource some of the processing of that data, as happens with cloud computing, but how that data is used and protected remains your responsibility.
It would be naive for an organization to take the attitude that these guidelines are too much effort to simply store some data in a different place. Where personal information is involved, the stakes are high and the ICO has already demonstrated it will act firmly against those who don't meet data protection laws"
The perception is that if businesses outsource their data to a "certified" cloud provider (more on that in a second), they will be exempt from penalties if there is a breech. Rice seemed anxious to remind companies that the buck will still stop with them. (ZDnet and SCMagazine have good roundups on this data protection dustup.)
The EU report also recommended that cloud providers be "certified" as trustworthy to handle consumer data. That prompted blowback from Liam Maxwell, the UK's deputy CIO. He slammed the EC's certification plan because it will restrict the number of cloud providers.
Maxwell called this a "tremendously retrograde step" that would "enable the oligopoly that has driven IT for many years to police the cloud," according to itpro.co.uk.
Even if data protection laws get totally sorted out, Europe remains fragmented by language, by currency (only 17 of the 27 European Union countries are in the Eurozone) and by culture. The relative homogeneity of the US was a factor that let Amazon get so big so fast, European IT pros said.
Amazon runs its European cloud operations out of Dublin and support for Amazon Web Services is available only in English (and Japanese) although a spokeswoman pointed out that the AWS site itself is available in German, Spanish, French, Japanese, Portuguese, and Korean. In addition, Amazon takes payment only in US dollars.
While many Europeans speak English, that's not a foregone conclusion. And it just seems polite for a company doing business in a region to take the local currency.
Steve Hughes, principal cloud evangelist for Colt Technology Services, a global IT provider based in London, said three factors contributed to Amazon's success stateside.
First, Amazon was an Internet-only company that was able to exploit its scale in a one market (e-commerce) to another (public cloud infrastructure). Second, the US has a large developer and early adopter market that flocked to Amazon's easy-to-spin-up compute instances. And third, Amazon faced tech competitors that were more concerned with protecting existing revenue streams than jumping into the cloud. It is still riding that first-to-market advantage.
"That combination of factors coming together at the same time doesn't really exist in Europe," Hughes said.
Still some in the market expect that a few key IaaS players will emerge over time. "There will probably be consolidation because of sheer economics," said Carl Theobold, CEO of Avangate, an Amsterdam-based provider of e-commerce payment and transactional services. There will be a few big players that provide a higher level of service at scale — there won't be hundreds but there won't be just one, he said.
There's also a healthy dose of protectionism both in local governments and the national telcos that could work against an outside power like Amazon encroaching on their turf.
Both Deutsche Telekom and France Telecom have lobbied for national clouds, for example, arguing that European countries need to protect citizens' data from subpoenas or seizure under the 9/11-inspired US Patriot Act. If customer information resides in a data center run by a US cloud provider like Amazon, Microsoft or Google, the thinking is that those companies would have to turn it over to US authorities.
Some European cloud and hosting vendors actually advertise their non-compliance with the US Patriot Act.
Given all these forces at work, it will be hard for any one player to achieve Amazon-like cloud status in Europe. Still, after all this several sources I talked to said if any company could beat the odds, it would be — you guessed it — Amazon itself.
Tucci: Cloud Computing, Big Data, Partners Drive Success
Excerpted from CRN Report by Joseph Kovar
Cloud computing and big data are driving the storage industry more than ever, but not every cloud is created equal, said EMC's Chairman & CEO Joe Tucci during a Tuesday keynote presentation at the Intel Capital Global Summit.
During his time on stage, which was a question-and-answer session with Cory Johnson, an editor with Bloomberg Television, Tucci also touched on the importance of partnering, including working closely with potential competitors.
The Intel Capital Global Summit, held this week in Huntington Beach, CA, is an annual event that brings companies in which Intel Capital has invested together with potential investors, customers and partners.
Tucci's appearance at the Intel Capital Global Summit was his second public appearance for the day after flying to the event directly from giving a keynote at Oracle World in which he discussed the opportunities related to big data.
Tucci said that cloud computing has been talked about for years. But in the last couple years, it has become an important IT driver as people saw the success of Google's cloud offerings. EMC is looking at how to take the technologies Google used to build its cloud to other cloud providers and to customers looking to build private clouds, he said.
However, Tucci said, Amazon Web Services is a better model of how the cloud is being built. Unlike Google, Microsoft, Facebook, and many others who built a cloud infrastructure specific to their own applications, Amazon Web Services was built to make any applications available to thousands of users.
"Google and Microsoft are tuning the infrastructure for their own apps," he said. "Amazon tuned their infrastructure to run any app."
Big data, which Tucci described as technology that lets a company glean business insight from structured and unstructured data from its own sources, partner sources and public sources, is also driving the growth of the storage business.
For example, he cited the case of an insurance company that traditionally based its auto insurance rates on a driver's age, driving experience and number of tickets accrued. However, new cars are now collecting a lot of data related to its location, speed and so on that can be used to adjust rates, with a driver speeding through a 25-miles-per-hour zone paying more than a safer driver.
Insurance companies will eventually adopt such a system, and give customers the chance to opt out, although such customers will likely pay higher rates. "It's coming," EMC's Tucci said.
The heart of EMC's strategy is to build the technology that will allow businesses to build software-defined data centers, a strategy that depends very much on partnerships, he said.
Such a strategy will make it possible to pool compute, storage, and networking resources in such a way that they present a consistent infrastructure to applications. Those applications would tell the infrastructure what service-level agreement, security and data retention policies, and performance it needs, and the infrastructure would respond by providing it, he said.
For that strategy to work, EMC must remain open to partnering, Tucci said. That includes partnering with potential rivals such as Oracle, where he said the approach to cloud computing is focused more on building infrastructure specific to that company's applications, he said. "If you don't leave room for others to be successful and prosper, why would they partner with us," he said.
Partnering on many fronts is important to EMC, a company that is focused much more on product development than on services, Tucci said.
"The hallmark of a successful company in IT is you gotta partner," he said. "And we tell our services partners, here, you do it. And we take our precious resources and invest them in product development."
Private Cloud Computing — Some Impeccable Benefits
Excerpted from Blue MauMau Report by Andy Roberts
Advances in virtualization and distributed computing have allowed corporate network and data center administrators to effectively become service providers that meet the needs of their "customers" within the corporation.
Marketing media that uses the words "private cloud" is designed to appeal to an organization that needs or wants more control over their data than they can get by using a third-party hosted service such as Amazon's Elastic Compute Cloud or Simple Storage Service.
Private cloud computing, offers a number of significant advantages, which includes lower costs, faster server deployments and higher levels of resiliency. What is often over looked is how the Private Cloud can dramatically changes the game for IT disaster recovery in terms of significantly lower costs, faster recovery times, and enhanced testability.
Before we talk about the private cloud, let's explore the challenges of IT disaster recovery for traditional server systems. Most legacy IT systems are comprised of a heterogeneous set of hardware platforms - added to the system over time - with different processors, memory, drives, BIOS, and I/O systems.
In a production environment, these heterogeneous systems work as designed, and the applications are loaded onto the servers and maintained and patched over time. Offsite backups of these heterogeneous systems can be performed and safely stored at an offsite location. There are really 2 options for backing up and restoring the systems:
1) Back up the data only.
This is where the files are backed up from the local server's hard drive to the offsite location either through tapes, online or between data centers over a dedicated fiber connection. The goal is to assure that all of the data is captured and recoverable.
To recover the server in the case of a disaster, the operating system needs to be reloaded and patched to the same level as the cloud server, the applications need to be reloaded, re-patched, and configured, and then the backed up data can be restored to the server.
2) Bare metal restore (BMR).
This is considered to be a much faster way to recover the entire system. BMR creates an entire snapshot of the operating system, applications, system registry and data files, and restores the entire system on similar hardware exactly as it was configured in the production system.
The gotcha is the "similar hardware" requirement. This often requires the same CPU version, BIOS, and I/O configuration to assure the recovery will be operational. In a heterogeneous server environment, duplicate servers need to be on-hand to execute a bare metal restoration for disaster recovery.
Cloud 2.0: The Fight for the Next Wave of Customers
Excerpted from Telco 2.0 Research Report
As part of the New Digital Economics Executive Brainstorm Series, future strategies in cloud services were explored at the New Digital Economics Silicon Valley event at the Marriott Hotel, San Francisco, CA on March 27th and the second EMEA Cloud 2.0 event at the Grange St. Pauls Hotel on June 13th.
At the events, over 200 specially-invited senior executives from across the communications, media, retail, finance, and technology sectors looked at how to make money from cloud services and the role and strategies of telcos in this industry, using a widely acclaimed interactive format called Mindshare.
This briefing summarizes key points, participant votes, and our high-level take-outs from across the events, and focuses on the common theme that the cloud market is evolving to address new customers, and the consequence of this change on strategy and implementation. We are also publishing a comprehensive report on Cloud 2.0: Telco Strategies in the Cloud.
The first phase of enterprise cloud services has been dominated by the 'big tech' and web players like Amazon, Google, and Microsoft, which have developed highly sophisticated cloud operations at enormous scale. The customers in this first round are the classic 'early adopters' of enterprise ICT — players with a high proportion of IT genes in their corporate DNA such as Netflix, NASA, Silicon Valley start-ups, some of the world's largest industrial and marketing companies, and the IT industry itself. There is little doubt that these leading customers and major suppliers will retain their leading edge status in the market.
The next phase of cloud market development is the move into new segments in the broader market. Participants at the EMEA brainstorm thought that a combination of new customers and new propositions would drive the most growth in the next 3 years.
These new segments comprise both industries and companies outside the early adopters in developed markets, and companies in new territories in emerging and developing markets. These customers are typically less technology oriented, more focused on business requirements, and need a combination of de-mystification of cloud and support to develop and run such systems.
There are opportunities for telcos in this evolving landscape. While the major players' scale will be hard to beat, there are opportunities in the new segments in being 'closer to the customer'. This involves telcos leveraging potential advantages of existing customer relationships, existing enterprise IT assets, and channels to markets (where they exist); and geographical proximity, where telcos can build, locate and connect more directly to overcome data sovereignty and latency issues.
Telcos should also be able to leverage existing assets and capabilities through APIs in the cloud to create distinctive offerings to enterprise and SME customers: network assets will enable better management of cloud services by allowing greater control of the network components; data assets will enable a wider range of potential applications for cloud services that use telco data (such as identification services); and communications assets (such as APIs to voice and messaging) will allow communications services to be built in to cloud applications.
Telcos need to move fast to leverage their existing relationships with customers both large and small and optimize their cloud offerings in line with new trends in the enterprise ICT market, such as bring-your-own-device (BYOD).
Customers are increasingly looking to outsource business processes to cut costs, and telcos are well-placed to take advantage of this opportunity.
Telcos need to continue to partner with independent software vendors, in order to build new products and services. Telcos should also focus on tight integration between their core services and cloud services or cloud service providers (either delivered by themselves or by third parties.) During the events, we saw examples from Vodafone, Verizon and Orange amongst others.
Telcos should also look at the opportunity to act as cloud service brokers. For example, delivering a mash up of Google Apps, Workday and other services that are tightly integrated with telco products, such as billing, support, voice and data services. The telco could ensure that the applications work well together and deliver a fully supported, managed and billed suite of products.
Identity management and security also came through as strong themes and there is a natural role for telcos to play here. Telcos already have a trusted billing relationship and hold personal customer information. Extending this capability to offer pre-population of forms, acting as an authentication broker on behalf of other services and integrating information about location and context through APIs would represent additional business and revenue generating opportunities.
Most telcos are already exploring opportunities to exploit APIs, which will enable them to start offering network-as-a-service, voice-as-a-service, device management, billing integration and other services. Depending on platform and network capability, there are literally hundreds of APIs that telcos could offer to external developers. These APIs could be used to develop applications that are integrated with telcos' network product or service, which in turn makes the telco more relevant to their customers.
Emerging Standards Drive Next Generation of Cloud Computing
Excerpted from IT Business Edge Report by Michael Vizard
While there is still much to be desired in the way of true interoperability in the cloud, there is still a significant amount of progress being made.
The latest step forward involves the formation of The OpenStack Foundation, which is charged with building a consensus around how the management of cloud computing should evolve.
While there are still some major players missing from The OpenStack Foundation, most notably Amazon and Citrix, there is some critical mass starting to build. Angel Diaz, IBM Vice President for Software Standards, says the most important thing to remember is that it's a framework for managing the cloud.
Each vendor still needs to come up with its own management applications based on the framework. But a common framework makes it possible for each vendor to manage multiple instances of cloud computing.
While OpenStack gets most of the attention these days, Diaz says equally important, nascent, standard efforts include the Linked Data Working Group created by the W3C to create a more granular way of integrating applications as an alternative to application programming interfaces, the Open Virtualization Format (OVF) that is being developed by the Distributed Management Task Force (DMTF) to make it easier to move workloads across virtual machines, and the Topology and Orchestration Specification for Cloud Applications (TOSCA) that is developed by OASIS to provide a standard way of describing cloud application workloads and services.
It may take a while to pull all these efforts together in a way that truly makes cloud computing interoperable. But Diaz says the fact that so much time and money is being poured by the vendor community into developing these standards suggests this might be one of the most exciting times in IT in recent memory. Once workloads in the cloud become truly interoperable, the implications for making cloud computing truly ubiquitous will be profound.
It's still anybody's guess what that cloud computing landscape will look like once those standards are in place. But chances are that Amazon is not going to be as dominant in the cloud as it is today once those standards level the playing field.
Rackspace: A Beneficiary of the Growth in Cloud Computing
Excerpted from Seeking Alpha Report
We are bullish on Rackspace Hosting, as it has continued to show impressive top and bottom line growth, despite the tough competition in the cloud hosting industry. Earnings are expected to grow by 45% over the next year, whereas the company's five-year earnings growth rate is 34%, well above the industry average.
Rapidly changing technology, and the demand for cloud hosting as an attractive and more cost efficient option for various businesses, continues to be the growth driver for the company, which is also reflected in the company's share price.
The stock is up 50% on a YTD basis, and since the earnings release in August, it has gained 35%. However, it is currently trading at high valuations. We believe the company has sound financials, and investors seeking to take a long position should wait for a better entry point.
Rackspace, with a market cap of $9 billion, is a major player in the cloud computing industry. It offers a wide range of cloud computing services that include dedicated cloud hosting and public cloud hosting to customers that include small and medium sized businesses.
As of the quarter ended June, 2012, the company had over 190,000 business customers, deploying almost 85,000 servers to cater to its customer needs in more than 120 countries. Its shares are listed on the New York Stock Exchange, currently trading near $66.
The company provides IT-related services on servers that are dedicated to a particular client, thus freeing the customer from managing the data center or hardware. It also provides public hosting services, where it manages a pool of resources to deliver computing resources to its clients utilizing various virtualization and other cloud technologies.
The majority of the company's revenues come from the US, with Rackspace having an international presence as well. As of the second quarter ended, the company's local operations accounted for almost 75% of its total revenues.
The company is a growth story. Sales rose to $319 million, beating analyst expectations of $317 million; since the earnings release in August, the stock has gained over 35%. Rackspace has been generating double digit revenue growth for a number of quarters.
In Q2 2012, this trend was repeated, with a revenue growth of almost 30% over the same quarter of the previous year. The company has been seeing an increased demand for its services from business customers, and that has reflected positively in its revenue growth and profitability. If we take a look at the company's key business metrics, an improvement across all metrics is fairly visible.
Rackspace is also on track to expand its international footprint. The company recently launched its first data center in Australia, and through the data center, it will provide dedicated hosting and virtualization solutions to business customers. Since entering the Australian and New Zealand markets in 2009, Rackspace has experienced a healthy increase in its customer numbers, which is reflected in its annual and quarterly filings.
The company's rapid growth can be attributed to its hallmark customer service called "fanatical support," which is available to its customers round the clock throughout the year. It is because of its customer tailored service that the company has seen its customer base expand so rapidly over the years.
Revenues have grown at a 4-year CAGR of almost 30%, which has also tricked down to its operating margins and earnings growth.
The company has an insignificant amount of debt on its balance sheet, with a debt-to-equity ratio of 20% as of the most recent quarter, and an interest coverage ratio of 11x. Rackspace is expecting to incur capital expenditures in the range of $335 million-to-$405 million for data center infrastructure costs, as well as office build outs.
It seems unlikely that the company will not be able to cover its CAPEX requirements through its cash flows and available credit facility. Operating cash flows have stayed on an upward trend over the years, and in FY 2011, operating cash flows rose by over 40% to $345 million.
Key Risk: The stock looks overvalued based on almost all multiples as compared to the industry average, as well as its rival Equinix. However, we believe that for such a high growth story, these high valuations are not a big concern. The valuations would normalize as analysts revise up the future earnings.
Industry Leaders Cite Integrated Tech, Content Delivery
Excerpted from Media Daily News Report by Steve McClellan
Closed digital networks, "collaborative consumption" and "functional integration" are just a few of the big developing trends cited by industry CEOs in the media-marketing space at a Thursday Advertising Week session moderated by NY Times advertising columnist Stuart Elliott.
Tim Armstrong, CEO of AOL, noted what he called three "mega—trends" developing in the industry today, including the growth of closed networks offered by industry giants like Google, Apple, and Microsoft that aggressively market both devices and media platforms to consumers.
"That's a massive change within the industry," he said, where content and devices exist within "ecosystems" created by individual companies. Armstrong also cited the movement of traditional marketers into the technology space - such as Nike with its FuelBand service that allows consumers to track their physical activity with a wrist device called an accelerometer.
"Offline companies are getting better and better at technology," he said. He noted the rise of trading platforms at agencies that effectively allow "brands to become publishers on big platforms."
Bob Greenberg, CEO of RG/A, the agency that developed FuelBand for Nike, talked about companies like Amazon and Apple that "have the consumer surrounded by products and services," a tactic he described as "functional integration."
That was the idea behind FuelBand as well, he said. It is not only a product, but also a measurable media platform with a community of FuelBand users that totals 7 million. Nike has created its own ecosystem combining products and a media platform. "Technology has disrupted everything," he said. Clients are both excited by the opportunities and "terrified about how to make change happen."
Time Inc. CEO Laura Lang said she sees a "profound shift" in media consumption behavior — a shift where mobile may be the biggest game-changer. At Time Inc. going forward, the company will "have no primary platform to tell our stories." Instead, the company will be prepared to deliver content that consumers want, wherever and whenever they want it. "But we need better consumer data to do it," the former Digitas CEO said.
Social media also presents an opportunity for publishers to be "curators" for consumers, Lang said. "Who wants to go through a tremendous stream of social commentary?" she asked. "We can help curate."
Dan Rosensweig, CEO of Chegg, the online textbook rental company, said the basic idea was to help students avoid bankruptcy upon graduation from college by helping to cut their costs. "We saved students $1 billion in textbook costs over the past year," he said.
The company is part of the "collaborative consumption" trend, he said. Netflix does something similar in the entertainment space, and other online companies are emerging in other sectors such as home rentals and driver services. Rosensweig also used the term "disruptive" in describing Chegg's business model. Lots of colleges and universities don't like it, he said, because it potentially draws revenues away from their own bookstores.
Josh Sapan, CEO of AMC Networks, said that technology and the resulting media fragmentation have transformed TV's business model. The old model was about "who wins and who loses," primarily based on Nielsen ratings. But with literally thousands of viewing choices, he said, that model is "now eroded and all but disappeared."
Technology, he added, "has turned foes into friends." Conventional wisdom used to be that the more a TV program was repeated, the less value it had. Now, services like Netflix are seen as potential ratings boosters because they expose viewers to programs they hadn't seen and drive audiences in bigger numbers to future seasons.
Social media, added Sapan, gives viewers an outlet to talk to fellow fans about programs. Networks, he said, "need to create communities around the stuff they air and treat those communities preciously."
What I Learned at the Cloud Computing Revolution
Excerpted from Fortune Magazine Report by Alan Cohen
I recently spent the past year on the front lines of the computing revolution, bringing network virtualization technologies to dozens of telecommunications companies, new cloud computing entrants, and enterprises that are changing their business models through cloud.
Cloud promises to profoundly transform how we produce and consume information and information technology (IT). If you drive up and down Route 101 here in Silicon Valley today, there is a hot billboard war going on; if you drive up and down Main Street someplace else, there is a quieter but no less compelling revolution.
The current computing model was pretty simple: your business bought the hardware and software required to run key applications, the storage devices to maintain your data, and the networks to allowed it all to flow. Today, however, there is a range of new choices, which including renting some or all of the IT supply chain.
Computing is not just important because it is a big industry — $3.8 trillion annually worldwide according to Gartner — but because everything else in our economy is dependent on it. Computing is inside every steak, potato, and glass of red wine you eat. It's in your car, your iPad delivered Netflix, and it's your money. So there is a lot at stake.
The cloud however is not being driven by vendors but by users. Let me share 3 observations:
Shadow IT is going mainstream.
Businesses do not care about hardware and software: they care about capabilities and processes to run their business. When IT shops could not provide what businesses need, nature found a way and "shadow IT" was born. This initially spawned new software-as-a-service (SaaS) offerings such as Salesforce.com (sales process automation). Today entire processes like collaboration are occurring on new offerings such as Box (inter-company collaboration).
Functional groups will bypass IT and purchased these services directly. Now companies (frequently led by IT) are embracing third party capabilities and purchasing the actual computing cycles directly through cloud infrastructure providers such as Amazon and Rackspace. If you can, securely, get what you need from the cloud, does it matter if you own the gear/software and is running in your building?
IT wants to go fast.
In his hilarious spoof of race car driving, "Talladega Nights," Will Farrell plays a race car driver named Ricky Bobby who runs around saying "I want to go fast" and "if you're not first, you're last." What business wants to be the 2nd or 4th entrant into a new market? IT and business people alike have lost patience in how slow traditional IT delivers key capabilities.
During the past year I spoke with automobile manufacturers who told me IT was inhibiting their ability to launch new models as well as cloud providers that want to be your new IT shop, changing the rate and pace of new businesses when computing can be turned on and off like electricity, removing both human middleware and delay in gaining compute resources.
It's about the developers.
For the past few decades, the power elite for IT in the enterprise has been operators, people who purchase and maintain IT hardware and software. IT vendors spent decades catering to this crowd and feting them at annual buyer conferences bespoke with star-studded speakers and rock concerts. The primacy of this group though is steadily being usurped by developers: architects and software programmers who are responsible for designing and delivering new capabilities. And developers are getting together and collaborating in new forum like OpenStack (a cloud computing group creating an open source approach to computing) and shared code repositories like GitHub.
Watching the change in the IT industry driven by cloud is a little like "Downton Abbey" on steroids. Just as the British television series chronicles the maelstrom and decline of the Edwardian British aristocracy, cloud computing is uprooting the existing IT order, both by establishing new buying centers and approaches.
When the IT world turned from mainframes to client server (the PC/Internet era), the industry fragmented from a monolithic model "stack" dominated by 1 company (IBM) to a fragmented, but very innovative model now dominated by a few dozen companies and a variety of partnerships (e.g., "Wintel").
But they had one thing in common: they sold you IT gear you managed in your buildings. Think of the parallel in the consumer world: when I got hooked on Apple's iTunes, I stopped purchasing CDs and downloaded my music. Since I signed up for Pandora 2 years ago, I stopped downloading music and consumed it directly through the cloud.
Coming Events of Interest
ITU Telecom World 2012 - October 14th-18th in Dubai, UAE. ITUTW is the most influential ICT platform for networking, knowledge exchange, and action. It features a corporate-neutral agenda where the challenges and opportunities of connecting the transformed world are up for debate; where industry experts, political influencers and thought leaders gather in one place.
CLOUD COMPUTING WEST 2012 - November 8th-9th in Santa Monica. CA. CCW:2012 will zero in on the latest advances in applying cloud-base.
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