The Microsoft that produced the Windows-Office monopoly let its products get fat, dumb and happy. The Microsoft that must contend with the Oracle database juggernaut puts out a pretty good database. That’s why the sudden influx of new public cloud riches exemplified by this week’s official launch of the Google Compute Engine, coming a few weeks after Microsoft launched its Windows Azure IaaS options, may be tough on the competitors but could be very good for smart IT consumers.

Look for price cuts to continue, along with a flow of new services, and better APIs to access those services.

While I haven’t parsed the instance-by-instance price comparison between GCE and AWS, Google’s decision to sell compute instances in sub-hour increments could lead to cost savings vs. Amazon, which prices by the full hour. Don’t be surprised if Amazon responds, however.

We’ve already seen several price skirmishes in cloud including five or six price cuts in cloud storage in the span of a few weeks late last year between Google, AWS and Microsoft. Heck, even Rackspace, which touts its fanatical support rather than low prices, got into the act a little bit later.

Look for this sort of one-upsmanship (one-downsmanship?) to continue as these extremely well-funded and highly motivated competitors angle to get your workloads on their respective clouds. For the discerning IT buyer, whether she’s at a startup or a Fortune 100 company, that is only good news.

Photo courtesy of  Flickr user Official U.S. Navy Imagery

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Amazon CTO Werner Vogels and CEO Jeff Bezos on stage at AWS: Reinvent

Here are a few things AWS (which after all, remains the cloud to beat) could do to shore up its defenses as GCE, Windows Azure and soon VMware’s AWS competitor (to be re-announced May 21) come online.

1: Get more granular in pricing

One headline item Wednesday was Google’s decision to rent cloud instances by the minute instead of by the hour (well, you have to buy a minimum of 10 minutes with incremental charges for each additional minute.) AWS rents by the hour, which is something it could well change. Both companies are late to this particular feature however: Both Cloud Sigma and Profitbricks have offered sub-hour models for some time.

2: Keep pounding on enterprise support …

And management options like Trusted Advisor, which instructs AWS users on how to deploy their workloads more efficiently and more securely.  The knock on Google remains that it (let alone its cloud) doesn’t “get” the enterprise — millions of  Google Apps and Gmail business users notwithstanding. A CIO might ask herself: “Gee, do I want to trust my workloads to a search and advertising company? I still can’t believe I’m trusting some of them to a book seller! “

If enterprise is a key business, you have to keep earning it.

3: Prove that AWS is an Amazon corporate priority

The perception that Amazon.com, Jeff Bezos and corporate don’t care that much about AWS continues to dog the cloud services arm. It was a big deal that Bezos showed up at AWS: Reinvent last year, but he really doesn’t talk about the cloud business all that much. What might help there? BREAKING OUT AWS REVENUE! If AWS is a $2 billion-a-year-plus business, get transparent about it. And talk profitability, not just revenue. Come on guys, it’s time.

4: Keep the services coming

Much was made of Google’s brand new NoSQL database service, which, as my colleague Derrick Harris pointed out, is “eerily similar” to Amazon’s DynamoDB. Google SVP Urs Hölzle noted that Google, 11 months after announcing GCE, rolled out 10TB persistent disk, something that an “unnamed competitor” hadn’t done in its 7 years. That may be, but AWS has lots of other services and perks and maturity counts — especially among corporate buyers.

So, Amazon. It’s your move.

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The theory behind tools like these is basically this: sure, public cloud computing is billed as cheap, but too often it turns into a wasteland of dormant instances and other fallow resources. So as inexpensive as it can be, it’s not necessarily efficient or as cheap as it could be. Companies like Newvem, Cloudability, Cloudyn, CloudVertical et al say they can help you optimize all that and save more.

Newvem for Windows Azure covers many of the same core usage and cost metrics as the AWS version. A “heat map” helps users visualize their workloads as they move from on-premise implementations to the cloud, according to Newvem VP of marketing Cameron Peron. The free beta is available now to all Azure users. Newvem’s AWS version started out free as well, and a base level of capabilities remain free, but as of late last year, the company started charging for higher-level services.

Newvem said it sees Azure — which launched its AWS-like Infrastructure-as-a-Service  capabilities last month — gaining traction.

“The size of the Azure installed base is probably one of [Microsoft's] best-kept secrets,” Peron noted. Well, not that secret since Microsoft recently said Azure is a $1 billion-a-year business – a claim that some find difficult to swallow. Newvem would not comment when asked if Microsoft helped fund its Azure tool, but given that Microsoft wants to build the Azure ecosystem and compete better with AWS (as well as the spanking new Google Compute Engine), I’d say it’s a safe bet.

It’s also true that companies like Newvem, which built services around AWS, have been perplexed to see AWS adding richer and deeper monitoring and management services like Trusted Advisor. Given that, it makes sense that these companies offer multi-cloud capabilities.

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My money’s on Google taking the GA plunge but then again the company is known for fielding “preview” products for years. Still, Urs Hölzle, SVP of technical infrastructure and Greg DeMichillie, director of product management for Google’s Cloud Platform, will host a session Wednesday afternoon on the next-generation of cloud computing which will feature “announcements and demo important new features of the Platform.” Hmmm, smells like a GA announcement to me.

A Google spokeswoman said she had nothing to share at this time but referred users to the above-mentioned session. One of the things Google is expected to do is drive use of its cloud platform via its Google Drive and Apps franchises and right on cue, Google on Monday said customers will get 15 GB of unified storage across Google Apps, Drive and Google +. According to the Google Drive blog post:

“So, instead of  having 10 GB for Gmail and another 5 GB for Drive and Google+ Photos, you’ll now get 15 GB of unified storage for free to use as you like between Drive, Gmail, and Google+ Photos.”

While that’s not really tripling the amount of storage for Google users, as some have reported — it actually spreads it across Google properties. But 15GB is still more than what competitive free services offer. Dropbox offers 2GB for free; Microsoft SkyDrive starts users at 7GB for free while Apple iCloud and Amazon Cloud Storage provide 5GB before charges apply.

GA or not, here it comes

But getting back to GCE, here’s the thing:  even some AWS cronies say that GCE is the cloud infrastructure to watch in the upcoming year given Google’s experience in scale-out computing. It would also make sense for Google to roll out a for-real load balancer service, which one AWS partner said is a huge hole in Google’s platform strategy compared to both AWS and Rackspace. Google has also been working to beef up Google App Engine capabilities, something that Snapchat co-founder Bobby Murphy will doubtless address at GigaOM’s Structure event next month. The popular Snapchat photo sharing service runs on GAE. Google telegraphed (by virtue of its Google I/O agenda) that it will add a new language to the fold for its Google App Engine Platform as a Service (PaaS). GAE now supports Java, Python, and Go. Speculation at Reddit is that PHP will get the nod . Thomas Clayburn over at InformationWeek would prefer to see Google add Node.js or JavaScript first, so we’ll see. Some also say Google needs better integrate its Cloud SQL database service into its cloud platform

Battle for public cloud workloads ratchets up

Whatever Google’s official roll-out plans, GCE is already considered a contender in a hard-fought battle for public cloud infrastructure dominance by virtue of Google’s size and expertise.  AWS, launched in 2006, has a prodigious head start, but now with Microsoft’s Windows Azure  and GCE coming on line, AWS faces two extremely well-funded and tech-savvy rivals, both of which seem  determined to carve out a healthy chunk of this market. And then there are all the OpenStack-based public cloud options from Rackspace, HP and others. It’s still very early on in the cloud deployment game so things should get very interest in the race to add services — and cut prices. It could be a very good time to be a buyer of cloud services over the next few years.

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But there is nagging worry, sparked anew by Rackspace’s laggard Q1 cloud growth, that the appetite for cloud services may not be unlimited after all. For its first quarter ending March 31, Rackspacelogged $91 million in public cloud revenue, up 4 percent sequentially and 40 percent year over year. It is the quarter-over-quarter number that has people spooked; given that Rackspace has been touting its new OpenStack public cloud, folks expected much better numbers.

To be fair there are nuances about the Rackspace quarter to be examined. First, it blamed some of the inertia on price cuts on some services during the quarter. And the newer OpenStack-based public cloud business was up 75 percent sequentially, CEO Lanham Napier told analysts on the company earnings call Thursday night. The problem is demand for the older Slicehost-based cloud technology evaporated and bookings for the new cloud haven’t taken up the slack. New customers are being directed to the OpenStack option.

RAX data by YCharts

There are Rackspace-specific issues but there are more macro concerns, which I’ll get to in a minute.

Bryan McGrath, Rackspace’s director of finance, acknowledged that there may be vendor consolidation, just as there has been in other areas when technology matures.

“There are lots of versions of Linux out there but only a few are widely adopted,” he noted. But his point is that even with consolidation, Rackspace is well positioned to prevail. After all, he noted, he company was able to build a $300 million business on its older cloud technology, which was admittedly less scalable and capable than giant Amazon Web Services.

“People bought that because of our support and service. Now we have a new, much better cloud based on OpenStack with new features and functions,” he said. “We’ll marry that with our dedicated business to offer customers what they need.”

Now for the macro cloud problem

Of perhaps greater concern is that so many vendors are jumping into the cloud services game that there may not be enough customers to support them all. IBM will doubtless sell its OpenStack options as they come online to its typical Fortune 500 accounts, the biggest of the big companies. That leaves other smaller — yet still big companies — with OpenStack options from Hewlett-Packard, Red Hat, Rackspace and perhaps Dell, Cloudscaling, Nebula and other players going forward. Or they’ll go with CloudStack or Eucalyptus or OpenNebula clouds.

Telcos, carriers and hosting companies are gearing up their own cloud services based on their own or partnering with aforementioned OpenStack or Joyent. Microsoft just last month came online with its Azure IaaS option, which will probably get traction among the zillions of Windows shops. While Google Compute Engine, which will probably become generally available next week at Google I/O, is not really seen as a business class public cloud, you’d be foolish to rule it out completely. And then there is the big, bad incumbent, AWS, which continues to churn out new services, price cuts and service options by the week.

No matter what we make of Rackspace’s quarter, if you thought the cloud wars were hot before, you better gear up for the next round. The big question is whether there really is enough cloud work to support all these players going forward.

My best bet? Nope.

Amazon.com CTO Werner Vogels, Rackspace President Lew Moorman and other cloud luminaries will no doubt map out this competitive landscape at GigaOM’s Structure event next month.

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The company provides a graphical visualization of the architecture and resources used by a given application, not just a spreadsheet-like list of all the AWS instances on one page and all the databases on another, said CEO Daniel O’Prey via email. MadeiraCloud got its start in Beijing and now has an office in San Francisco.

That funding comes atop about $160,000 in seed funding, and will be used to beef up the development team and to market the product. The 11-person shop has done no marketing to date.

There are a raft of companies that provide AWS monitoring and management capabilities, but O’Prey said Madeira’s simple, self-service interface probably competes most directly with the AWS Console itself. Longer term, he sees MadeiraCloud taking on companies like RightScale and Enstratrius, just acquired by Dell.

Those are some pretty big rivals to contend with but the company most of these contenders have to watch is Amazon itself, which is rolling out more and more of its own management and monitoring tools, including OpsWorks. 

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Andy Jassy and Michael Skok chat at the Harvard iLab.

When he was given the green light to hire 57 people to build AWS back in 2003, here’s what Jassy looked for (and continues to look for) in prospective employees.

1: Intelligence

It’s table stakes but it’s important. When AWS was staffing up, it was key to find people with deep infrastructure knowledge but who “were not pickled,” Jassy said. Knowledge is important but so is intellectual curiosity.

A startup or a startup within a bigger company needs to make sure that the folks it hires know a lot of stuff, but don’t think they know it all already, Jassy told a roomful of entrepreneurs or would-be entrepreneurs at Harvard Business School’s iLab.

2: Stick-to-itiveness

It was clear from the get go that AWS would be a huge project so team members had to be able to handle the long haul. “We knew this would be hard so we wanted people who would stick it out.  We screened for tenacity,” Jassy said.

3: Big vision, big energy:

Another checklist item was that hires would be “hungry, ambitious people with a high bias for action … any startup needs to move fast not slow,” Jassy told a roomful of entrepreneurs. Folks had to be optimistic that they could “change the world.” At that time the idea of rolling out big data centers and offer services for rent at low margin was a huge bet.

4: Willingness to debate

The debates over spec’ing out which services or features to build immediately, which to hold off on and which to skip, have to come early in the process. Hashing out the plan often before rolling it out was also a huge deal that’s not usually popular with developers, who just want to get on with it.

But it’s really important to validate your plan of action before writing code, Jassy said. ”There is nothing worse for dev teams to believe this is the product and get way down the road and have people flip it around,” he said.

The odd upside of pre-planning is that once it’s done, development usually goes much, much faster, he said.

5: People who listen

The other side of that same coin is that developers and managers really need to heed feedback from users or potential users. “I’ve seen teams soliciting feedback and then not listening to it. Sometimes you have such a strong vision, it’ shard to hear something needs to change. You have to hear and be willing to adjust,” Jassy said. But it’s also important to drill down into that feedback to make sure what you’re hearing is really what they’re saying.

“We ask lots of questions,” Jassy said.

6: Startup DNA

Amazon preferred people who had been at startups or at startups within existing companies and it didn’t hurt if the startups had failed. “We just wanted them to be self aware of why it didn’t work. We want people at all levels who are really good learners.”

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There weren’t a ton of details on pricing and dates which could come at the company’s annual SAPPHIRE conference, next week, but according to the release, SAP HANA Enterprise Cloud will be delivered by SAP and its partners:

 ”SAP intends to adapt this open ecosystem strategy with its managed service providers to offer the capabilities of SAP HANA Enterprise Cloud from their data centers, as well as from multiple SAP data centers worldwide.”

In a research note, Nomura Securities analyst Rick Sherlund wrote:

“SAP indicates it will price its elastic cloud-computing service based size, scale of data, and application usage. The advantages are faster time to market and time to value, with lower total cost of ownership. Offering a service that delivers quick value and easy implementation should be a nice complement to the real-time capabilities users seek from HANA for a wide variety of new, real-time business processes, in addition to the Business Suite.”

SAP will continue to offer HANA via AWS, a spokesman said. But it’s clear that more contention is arising between legacy enterprise IT players and Amazon which is starting to compete with them by offering more higher-end services that compete with their products.  AWS has made no secret about its ambitions here —  it all but called out IBM, HP, Teradata, and Oracle by name when it announced its RedShift data warehousing service last November.

Meanwhile, SAP — along with these other legacy enterprise IT giants — has rushed to embrace cloud. Better to cannibalize your own on-premises business than to let Amazon do it after all. But, SAP got a rocky start in cloud. It launched Business ByDesign as a SaaS product four years ago to underwhelming response. But it vowed to do better and started buying up cloud expertise, with its $3.4 billion  acquisition of SuccessFactors, a SaaS provider of human resources management, two years later. But HANA, the hot in-memory database and analytics product  has become the company’s focal point in  cloud and big data efforts.

What would really be surprising is if SAP didn’t offer HANA from its own cloud.

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Telcos must invest in their infrastructure, even as demand for their services rises. Yet they cannot ask revenue to continue rising at the pace of consumption, and in some cases, such as text messaging and voice calls their revenue is falling. So far their response has been to decry bandwidth hogs, implement new pricing plans that try to hold the line on the dollars coming in even if users choose to use over-the top-alternatives.

But some are realizing that that’s not enough. They are investing in technologies such as OpenFlow, or at least software defined networking, as they try to get a handle on their costs. And they are demanding their suppliers provide them with specialized software running on commodity hardware, as opposed to the pricey, proprietary boxes of previous generations’ of technology.

Metaswitch’s big switch for telco gear.

For example, Metaswitch, a three-decade-old company based in San Francisco has created Project Clearwater, a software-based IMS core for telephone networks. An IMS (it stands for IP Multimedia Subsystem for those who care about these things) system is the glue that connects the old analog wireline systems to the newer digital systems. The thought behind IMS was that mobile operators would use them as a bridge into the IP world, but in reality they proved complex and expensive and telcos put off making those investments.

As Metaswitch looked at the market two years ago it saw an opportunity. The company, which provides other hardware to wireless carriers, saw the world was changing. So CTO Martin Taylor said the company decided to build an IMS core that ran on commodity hardware. And if that wasn’t revolutionary enough (remember, we’re talking about telcos here) on May 8 Metaswitch will open source the software.

Taylor points out that telcos used to have the largest scale systems, but that is changing. The globe-spanning networks delivering five nines that once inspired such awe, are now common as Google, Microsoft and others build out their own globe-spanning infrastructures. And telco’s know that to keep up they must adopt the same tricks the web scale companies have, like open source software and commodity hardware. Thus Metaswitch will open source its Clearwater software, and follow a Red Hat model of supporting the software and releasing regular updates. Taylor has the right idea, but telcos need to go even further.

But the real solution isn’t open-source software

As forward-thinking as Metaswitch is with its open source business model and trying to deliver a software-based IMS core built for commodity hardware, its customers are making a mistake if they rely on Metaswitch to hold their hand. As the telco network looks more like cloud and webscale infrastructure — in that telco networks they are taking on more load without adding costs — telcos need to think like real cloud vendors and webscale companies, not like enterprise IT customers.

Telcos are providing essential infrastructure in their mobile networks. Many of them also provide cloud computing services. In yesteryear it was enough to just provide the pipes, but if you’re going to provide compute and networking infrastructure today you need to adjust to the new reality for infrastructure providers.

The new infrastructure reality

And that reality is you need to own your systems. Infrastructure is going to be a commodity, even in mobile access (look at Free Mobile’s plans in France or even Republic Wireless here in the U.S. if you want to see the future). And people are going to want more and more of it, so the build out had better be cheap. So if telcos really want to be cloud providers, and the really want to compete in an all IP world, they need to stop demanding hand-holding from their vendors, hire smart people to own their infrastructure development, and get off their butts and start innovating.

For example, Amazon doesn’t hire a company to provide help on its operating systems or databases. When it chooses an open source technology it also chooses and hires smart people to make sure that technology is up and running and maintained. Google, Facebook, Netflix, they all operate the same way in the core areas of their business. Because when you cut out the middle man you cut costs. When you have smart people on staff, you can keep innovating at your pace and in the direction you want to go.

So if you’re going to be an infrastructure provider, that mindset and skill set is par for the course. And telcos do not seem to get this.

They can’t say they want to be like Amazon and play in that world if they want their vendors to do the work. They’ve got to find a way to embrace not just the technologies but the economic realities of competing in the commodity and cutthroat business that is the cloud and IP networks. Otherwise they will begin a long decline.

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Terms were not disclosed but here’s how Dell described its new acquisition:

“Enstratius is available as software-as-a-service or as on-premise software that enables full control from within a customer’s data center, or via a hosted service … and complements the capability Dell recently acquired from Gale Technologies, now Active System Manager (ASM), by providing enhanced multi-cloud management and application configuration capabilities and integrates converged offerings with cloud systems management.”

For the past few years, Dell has plotted a tricky course as it tried to morph from a PC and server vendor to a provider of software, cloud and managed services. Toward that end it has bought companies ranging from Wyse and Boomi to bolster its cloud credibility and Quest Software for its data center management and automation tools. Like its rivals in traditional IT — companies including HP and IBM, Dell faces growing competition for enterprise and webscale workloads from Amazon Web Services. 

Update: As Dell rolled out its going-private game plan, GigaOM’s Derrick Harris counseled it to get serious about buying up real cloud expertise, which it apparently has.

Here’s how GigaOM described Enstratus (the company added the “i” a few months ago) in reporting the company’s $3.5 million Series A funding in 2011:

“EnStratus is similar to the more widely known RightScale service, although enStratus actually supports more clouds. It currently claims support for Amazon Web Services, AT&T Synaptic Storage, Bluelock, Cloud Central, Cloud.com, CloudSigma, EMC Atmos (e emc), Eucalyptus, Google Storage, GoGrid, Nimbula, OpenStack, Rackspace, Terremark, VMware vSphere, VMware vCloud Express and Windows Azure.”

Not surprisingly, George Reese, CTO of Minneapolis-based Enstratius, said Dell and his company align well. Enstratius runs a tight ship and has managed to stake a claim in enterprise cloud management with “just Series A financing,” Reese said via email.

Reese added that Dell:

“Sees cloud management as a key value point in the cloud computing stack. By acquiring us, they acquire established leadership in cloud management aimed at enterprise needs. Customers don’t want a single solution on a single stack, they want a solution that enables them to interact with many different cloud platforms, public and private. The Enstratius acquisition immediately gives Dell leadership in this area over other large technology vendors.”

Dell ownership gives Enstratius more resources to attack that market faster, he added.

At least one Wall Street analyst agreed (Dell is still trading until its restructuring is complete): Wells Fargo’s Maynard Um characterized the Enstratius buy as a good use of cash. In a research note, Um wrote:

“We believe the acquisition signals 1) management remains focused strategically on transforming the company and 2) from an industry perspective, the importance of being agnostic (though we expect tight integration with Dell’s owned-portfolio).”

This news comes just an hour or so after Quest competitor BMC announced plans to take itself private. Which just goes to show, if you don’t like the current IT landscape now, just wait a minute.

This story was updated at 8:47 a.m. PDT with more context about Dell’s cloud strategy  and Wells Fargo comments.

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