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Inside the Cloud: 9 Sectors to Watch

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There’s already a ton of activity taking place in the cloud computing space, so much so that it can be hard to know who to watch. In many cases, it’s too early to pick winners. But there are distinct sectors of the IT industry that are particularly well suited to the on-demand, pay-as-you-go economics of cloud computing. Here are eight segments — and one company that’s a segment all its own — that we’re tracking closely. [digg=]

Hosting companies that make the jump: When it comes to reliable managed hosting, Rackspace leads the pack. (Its VMware-based Mosso offering may appeal more to enterprises trying the cloud for the first time.) Clouds like XCalibre’s Flexiscale and Joyent are already there, but don’t have Rackspace’s installed base.

Stack-specific clouds: While Google and Amazon get the headlines, Engine Yard is heavily involved in the Ruby on Rails development community. Competitor Heroku is also Rails-focused, but relies on Amazon for its hosting platform.

Tools to wrangle virtual machines: To manage your EC2 machines, you’re going to need help. RightScale makes software for managing machines in the cloud; its tight focus on Amazon has made it an early favorite. Elastra, Enomalism and others have similar solutions.

Testing sandboxes: For many enterprises, a testing sandbox is the perfect way to start using on-demand infrastructure. CohesiveFT’s Skytap (a sister to Flexiscale) spins up testing machines in a cloud, but incumbent Surgient and recent entrant StackSafe aren’t far behind. And once you’ve tested a machine and seen that it works, why not leave it in the cloud?

Cloud-based development platforms: Companies like Rollbase and Coghead let non-developers build data-driven applications of any sort (as opposed to more specialized platforms like those of Salesforce and Ning.) But Intuit’s Quickbase, which now has access to Quickbooks data, has a head start: Millions of small businesses. Is this how SMB gets cloud?

Scaling frameworks: Wall Street needed fast, reliable applications that grew easily. Instead of adding more, bigger servers, they used Gigaspaces to bundle whole server clusters into discrete “processing units” that can be cloned to add capacity. In addition to being faster and scaling better, these units don’t care whether they’re in a private data center or a cloud.

Application delivery networks: What has tens of thousands of servers worldwide, a global network connecting them, and isn’t Google? Akamai. What was once a way of getting bits to far-flung corners of the Net is an often-overlooked cloud: Akamai has been able to run code at the edge since 2000. Its 2007 acquisition of Netli made it matter to enterprises even more. Akamai can weather heavy load and may be able to withstand attacks better than centralized clouds.

Cloud builders: 3Tera lets companies get into the cloud business. Enterprises can make in-house clouds on existing data centers; or service providerscan build their own cloud offeringsin the way Enki and others have. In 3Tera’s model, subscribers drag and drop the firewalls, servers and appliances they need. The company’s software then maps these virtual application stacks to servers and network segments. The results are impressive: On seeing 3Tera for the first time, ESM guru John Willis was so impressed he insisted on logging in to the icons on his screen to verify that it wasn’t just a demo.

The obvious one: Of the three big virtualization firms, only one (Microsoft) also has millions of desktops, two handset platforms, licensing for desktops, servers and applications, synchronization, and a huge online presence. Up until now, the Redmond giant has been treading carefully; it has to convert billions of dollars of shrink-wrap sales to on-demand revenue streams. But Microsoft’s going to be a huge player in the cloud.

For more insights into cloud computing trends, check out the recent GigaOM/Bitcurrent briefing on cloud computing that was launched at Structure 08.

23 Responses to “Inside the Cloud: 9 Sectors to Watch”

  1. Well it’s been almost two years since this post and it looks like “The Cloud” is now a common everyday phrase. I’m still a little “cloudy” on it’s exact meaning although Surge seems to help clear it up a little…

    I like how Surge defines the cloud…

    In the software industry, “The Cloud” is used as a metaphor to represent the Internet. Any computing resource, software, or service that can be shared over the Internet is considered to be in the Cloud. This sharing of resources and anytime/anywhere accessibility makes Internet-based software more efficient and cost effective than traditional on-premise software.

    Does anyone else have a good description they can share?

  2. I’m not sure that “stack based clouds” and “Cloud-based development platforms” are two separate categories.
    I imagine that writing on google apps one has access to a great set of Google API’s and not just writing Python code.
    In this sense it is similar to Force.Com where one can write Java applications and gain access to SalesForce API’s.

    Its true that salesforce has much richer Data driven model, but google is picking up and will probably buy salesforce soon :)

  3. Alistar, Good Stuff!

    For those companies that may be looking for more then just a Test “SandBox”…..they might be interested in a recent test done in the Cloud using SOASTA CloudTest Test Solution. Qtrax, a Free Music Download Service provider, was able see what would happen to there application and network if 100,000 simultaneous users hit there site….The Cloud provided about (125) servers for a few hours of testing at a very affordable price.

  4. Naresh Sehgal

    Bert, another question is how do such massive number of servers in a single data-center get managed, in terms of monitoring, alerts, error resolution etc.



  5. Naresh,

    You’ve raised a good point. These efforts are just beginning and will take some time, as at the moment folks have a tough enough time just defining cloud computing. However, yes a few of us have committed ourselves to working on open standards.

    Bert Armijo

  6. Naresh Sehgal

    These are excellent trends to know of, a couple of observations:

    1) Current cloud operators tend to lock in their customers, is any industry group working to standardize data-representation and APIs for applications?

    2) Internet reliability is an issue, before SMB customers especially in emerging markets will move their critical business apps and data to cloud. One solution is to have a local copy that is remotely updated/managed from the cloud.



  7. Alistair – I really like that you named GigaSpaces’ category “Scalability Frameworks”. You hit the nail on the head. Cloud providers, such as Amazon, Flexiscale, GoGrid and others provide the basic infrastructure to scale applications on-demand, which is great. But for a wide range of applications there is still a gap of how to make the application itself scale on-demand on this infrastructure. It doesn’t work with traditional middleware and platforms. As more companies get on the cloud this issue will grow in importance.

    I also think the comment on billing and payments is a good one. We’re facing some challenges in that area with our cloud offering. One interesting start-up in this category is Zuora (

    Geva Perry

  8. @Ian/Phil – thanks for the clarification. I’ve always been confused about the Cohesive/Skytap/Flexiscale relationship.

    @Ranjit – licensing and billing is indeed an important component if clouds are to make money. I’m not sure that it’s going to be a motivator for people to embrace the cloud (although comfort with an incumbent licensing model gives folks like Microsoft an advantage.) Kiril Sheynkman of Elastra cited licensing as a major obstacle to cloud adoption.

    @Sean: Virtual appliances are indeed a way to take chunks of the enterprise and move them into a cloud. One of the things I like about Gigaspaces’ model is the ability to spin up new, self-contained components wherever it makes sense, and virtual appliances share this advantage. JumpBox and rpath are definitely interesting players in this sector.

    When we initially started working on this piece, we were going to point to companies to watch. But as these comments make clear, it’s still early days for that. Billing and virtual appliances are certainly two additional sectors worth watching. Thanks for the feedback.

  9. Alistair, I might suggest a 10th sector you omitted: Virtual Appliances. Disclaimer- I’m one of the co-founders of JumpBox.

    You can think of Virtual Appliances as “freeze-dried” applications. They’re self-contained virtual computers that come pre-packaged with management tools and a fully-functioning application so that you just turn them on and they work instantly. They run on virtualization and many (including our own as well as rPath VA’s) can be deployed into cloud computing services like EC2. This container technology that wraps an application with it’s OS and dependencies serves as an important vessel allowing it to run anywhere and making cloud computing relevant for a huge number of people for whom it wouldn’t be otherwise.

    For a deeper understanding of this space see the review that published on JumpBox this past Friday->


  10. Correction above – Skytap is not a subsidiary of CohesiveFT or a sister company of Flexiscale, but an independent company. Skytap does have a partnership with CohesiveFT to distribute their Elastic Server virtual machines

  11. Dean J. Garrett

    One important but less discussed trend made possible by cloud computing is the number of useful “database community websites” being published. Such a site is similiar to a wiki in how the site’s data content is provided by the users themselves. The sites are free to all who want to search the database and to post new data. The sites are made possible by the use of cloud databases, Software-as-a-Service solutions designed to make web database publishing quick, simple and cheap. Here are two good examples of database community sites: – this site publishes a database of locations where cameras are used a street intersection to photograph violators. – this site publishes a database of gas prices in metro areas around the country.

    These kinds of sites are serving a public need by distributing useful data openly through the cloud. This is just one area where cloud computing is making a difference.

  12. The pay-as-you-go economics requires a monetization engine which includes the rating, invoicing and billing capability for usage. The previous model for applications was “build -> run -> manage”. “Manage” ensured availability, security etc.

    The ondemand model needs a new step for “monetize”. Companies like eVapt fulfill this need for the cloud computing model and it is not clear it falls under one of the 9 sectors in this article. Perhaps it should be the 10th sector termed monetization platform.