It’s not who you think… But, then it never is, is it? Video games didn’t come from Mattel or Waddingtons. Horse and cart manufacturers never really got into motor cars. Fountain pen manufacturers didn’t come up with the ballpoint. And Google didn’t come from the Yellow Pages.

In the last few weeks, I have done work for IBM and will be doing some for NEC Philips. They are just two of a multitude of “old technology” companies who have turned their attentions to one of the biggest new trends in IT: cloud computing. But will they be the winners? Or will the real power behind cloud computing (spare computing power) be where the next winner comes from?

An article in The Economist of 11 March 2010 suggests a very interesting possible early winner might already emerging (the picture I have created for this post shows Business Week spotted this late last year as well). And it wasn’t at all who I was expecting.

Clouds under the hammer

Amazon auctions computing power
Processing capacity is becoming a tradable commodity
Mar 11th 2010 | From The Economist print edition

IF YOU are tired of hearing the word “cloud” attached to every term in the computing lexicon, you are not alone. Disillusioned tech folks are beginning to succumb to “cloud fatigue”. But the concept of computing as a basic utility delivered over the internet is here to stay. In fact, the industry is already taking the first steps toward turning computing power into a tradable commodity akin to electricity.

In the electricity business, it was the invention of something called the “rotary converter” and other transformers that led to the rise of the power utility. It allowed power from different generators to be pooled and distributed over the grid. The analogous technology in cloud computing is virtualisation. This separates software from hardware, allowing many programs to run on any machine, and indeed to switch between them. Although hardware stays in one place, “virtual machines” consuming processing power can jump around, even between far-flung data centres. Virtualisation has also given rise to big “cloud providers”, which offer computing power on demand, such as Amazon Web Services, a subsidiary of the eponymous online-shopping giant.

It took decades for electrical power to become a tradable commodity. Computing seems to be getting there faster. Standards bodies are working on rules that would make it easier to move virtual machines around, and a raft of start-ups are making this their business. Zimory’s software ties together corporate data centres so that they work as one. Cloudkick offers tools to manage virtual machines. It is the force behind libcloud, an open-source project that facilitates the development of services spanning different clouds. And RightScale is a pioneer in “cloud broking”, meaning that it helps customers switch between clouds or use several different ones so they do not have to keep all their eggs in one computing basket.

The industry’s heavyweights, too, are working to make computing more fungible. VMware, which leads the pack in virtualisation software for corporate data centres, has also begun selling its products to providers of computing services. If corporate data centres (“private clouds” in the lingo) and cloud providers (“public clouds”) use the same software, virtual machines can more easily move between them and firms can quickly add capacity (which is called “cloud bursting”). Cisco, the world’s biggest maker of networking equipment, has announced new technology to link up separate data centres. This is the linchpin of its vision of an “inter-cloud”—a cloud of clouds in the same way the internet is a network of networks.

Yet it is probably Amazon that will be seen as the firm that really launched computing markets. In December it introduced a new pricing option: customers bid for the retail giant’s unused computing capacity and get to run their virtual machines as long as their bid exceeds the minimum price needed to balance supply and demand. As a result, the price jigs up and down all day like those of pork bellies or wholesale power (see chart). This system does not lend itself to all applications, since the virtual machines may be shut down at any time, when the spot price rises above the user’s bid, says Peter De Santis of Amazon Web Services. But it has already made customers think about computing in more economic terms, by asking what a given job is worth to them.

Amazon’s “Spot Instances” have also led to an animated debate among the cloud cognoscenti about how computing will evolve. Some argue that it will go the way of power and even financial markets, complete with arbitrage, derivatives and hedging. Reuven Cohen, a blogger and co-founder of Enomaly, a maker of software that allows firms to build public clouds, thinks that such things will come quickly as technology improves. In contrast, James Urquhart, a blogger who works for Cisco, argues that there are barriers that could prevent computing from becoming freely tradable. Virtual machines may travel easily, but the related data is much harder to move. That is not just for technical reasons, but also for legal ones: some European countries, for example, do not allow certain types of data to be exported. Moreover, big cloud providers have no interest in turning computing into a true commodity. Instead, they want to lock customers into their clouds, and offer additional services, such as various types of data storage, to that end.

Both visions of the future may turn out to be right. Virtual machines will indeed increasingly move about, but mostly within private and public clouds or trusted federations of them. Some large providers are already experimenting with approaches such as “follow the moon”: virtual machines that migrate wherever demand and temperature is lowest—most often to time zones where night has fallen, when computers tend to sit idle and cooling them is cheaper. Unfortunately, the coining of new jargon is likely to proceed even faster than the evolution of computing markets.

Source: The Economist

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