Appirio

Thursday, April 16, 2009

Cloud Computing Savings - Real or Imaginary?

The venerable management consulting firm, McKinsey & Company, released a thought-provoking analysis yesterday on cloud computing economics. The piece has generated a fair bit of attention because it's been taken to mean that migration to cloud platforms is actually more expensive than what large companies currently spend on their own datacenters.

As usual, the problem is not in the analysis or the research but in the question that is being asked. The question that the McKinsey analysis answers is about the comparative economics between running your datacenter on your own hardware vs. running it on Amazon's hardware (offered as a service). We aren't going to question their analysis or numbers (we'll leave that to experts like Vinnie Mirchandani), but we also don't think this really answers the question about what cloud platforms can do for a business.

Cloud platforms exist at three levels (Click here to enlarge image)

At the lowest level, infrastructure-as-a-service is purely computational power for rent, which is what services like EC2 offer. It abstracts the physical infrastructure but you still need to do the work of mounting a database and an app server on the infrastructure, building and maintaining your app, etc. Therefore, the only savings are those that come from the delta between how efficient your datacenters are vs. those that Amazon runs. As you talk about large, well-managed datacenters that are operating at scale, it's plausible that savings are not significant.

It's at the next level, Platform as a Service, and beyond, that we start to see significant savings. Once you move up the stack to PaaS, there are significant savings because you no longer need to run a datacenter (physical or virtual as in the Amazon case) or maintain infrastructure software (database and app servers). Within our 150+ customers, we see savings of over 30% on operating costs and 2-3x improvements in time-to-market when building on cloud platforms. For example, for a publishing client, we built a custom application that automated the entire publishing process in less than 6 months. Their estimate for doing this using on-premise platforms was over 3 years. In terms of ongoing cost/productivity improvements, they have estimated a 50-75% reduction in the time and effort it takes to add new products. Additionally, since the application is built on the Force.com platform, upgrades are seamless and the platform gets better over time, all for no additional cost.

At the highest level of the stack, the benefits get multiplied further, since you get all the benefits of PaaS, plus you get freed from 22% maintenance and costly (to implement) upgrades every 3-5 years. The savings have been well documented: 25-40% in terms of implementation costs (by freeing yourself from the clutches of the dreaded Globals SIs) and operating cost savings, e.g.,50%+ savings running your mail on Google vs. Exchange.

Cloud platforms provide savings at each layer of the stack, and McKinsey's analysis focuses on just the lowest levels of the stack, thus missing most of the savings potential.

We have seen the benefits of cloud platforms first-hand at over 150 customers, including companies like Avago, Genentech, Japan Post, Qualcomm, Starbucks and Dolby. Once customers experience the benefits of cloud platforms - quantifiable savings, rapid time to value and innovation that drives the business, they seldom want to go back. This is why 90%+ of customers plan to increase their spending on cloud platforms. In these economic times, there is no greater vote of confidence for cloud platforms than that!

Labels: Cloud Computing, EC2, McKinsey, PaaS

A View from the Tipping Point

Dave Orrico

Read the Press Release On Dave Orrico and Jim Emerich Joining Appirio Leadership

Over the last 20+ years I have had the privilege of helping sell and deliver technology to many fantastic companies. When I first joined salesforce.com, I knew something was different. SaaS (which is quickly morphing into cloud computing) was something much more than just another technology change. It was a new model that forced a renewed focus on customer service and once again put the customer (not the vendor) at the center of value. Nearly six years have passed since then, in which I had the opportunity to interact with leaders at many of salesforce's most strategic accounts - Dell, ADP, Bank of America, Cisco, Citibank and many others. The business benefits we were delivering to these companies were remarkable when contrasted with the legacy alternatives, but I was even more struck by how the SaaS model made it so much easier to align a company around serving the customer. Because we earned the customer's business through subscriptions (vs. big up front licenses), I never had to fight uphill internally for my customer's best interest.

The market is finally starting to see something that Marc (Benioff) has been saying for some time - that salesforce.com's success is about more than it being a great company. In fact, it's the fundamental advantages of cloud computing for both the vendor and the customer that have allowed it to prosper. Google Apps, Amazon Web Services, even Facebook are using those same core tenets to expand their services to the largest companies in the world.

We've reached the tipping point. It's becoming clear that most companies will eventually shift to this new model, and this is what made Appirio such an exciting opportunity for me. Here is a company focused from its inception on answering not "if people will make the switch to the cloud", but "how can we help them get there." While at salesforce.com, I admired Appirio's passion and commitment to cloud computing; and their focus on building trusted advisor relationships with both their partners and their customers.

I joined Appirio to help accelerate this transformation to the cloud and to create a new breed of company that could pragmatically answer customers' tough questions on how they can get there (benefits of the cloud). I truly believe we are at a transformational point in the evolution of IT; analogous to the change and benefits that the Internet brought to us as individuals. The Internet has had a profound impact on the the way we find things, shop, create and even interact. Cloud computing can have the same level of impact on business. I want Appirio to be your trusted advisor in your journey to the cloud, and help unshackle your entire business from the constraints of the past.

Labels: appirio, Cloud Computing, salesforce.com

Tuesday, April 07, 2009

Google's Campfire for App Engine Warms the Cloud Ecosystem

Labels: AppEngine, Cloud Computing, Google