James Governor's Monkchips

Cloud Computing: On Structural Advantages and Lessons From History #EMCWorld

Share via Twitter Share via Facebook Share via Linkedin Share via Reddit

First off I want to say how much I enjoy EMC Global Marketing CTO Chuck Hollis’s blog. Crazy job title, really smart guy, its one of the few tech blogs I keep up with these days [kudos to EMC comms professional Matthew Buckley – his weekly email roundup of blogs always catches my attention].

Chuck says insightful things like:

“Internal cloud is just a user revolt saying to IT ‘can you just stop playing with knobs and give me what I need now”

Right On. But I felt I had to call him out on the notion that telcos and traditional service providers have “structural advantages” in cloud provisioning. In a post from EMCWorld this week entitled EMC Takes Atmos Storage OnLine he argued:

Any successful storage as a service offering has to meet two criteria; (1) it has to be cheaper or easier than doing it yourself, and (2) it has to offer certain well-defined and pre-agreed standards for performance, availability and security.

Unless you can do #1, you don’t have a market.

And unless you are pretty clear about #2, no one will trust you with their information.

The Service Provider Advantage?

Everyone points to Amazon’s S3 as the leading example of storage as a service. I’d agree that they do a decent job of #1 above, but as far as #2 — well, let’s just say that not everyone is convinced yet.

Now, consider for a moment the economic advantages that a service provider — such as AT&T — brings to the table. They have plenty of data center space in all sorts of useful locations. Those facilities are already built and already paid for. They have big pipes — wired and wireless — that can deliver information when and where it’s needed. Those pipes are largely already built and paid for.

They already have business relationships and trusted provider status with enterprises large and small. Those relationships are already built and paid for.

And they have sophisticated infrastructure and process in place to manage things like service delivery, security, provisioning, billing and so on. Most of that is already in place.

So, when people ask me about newer-style storage cloud providers (Amazon as an example) being viable in the marketplace long term, I just have to point to all the inherent structural advantages favoring the telcos and service providers in this market.

“Inherent structural advantages” has a really nice ring to it, but I think you could use the argument to drain the water off pasta. Lets consider some history.

We have been expecting telcos to make a substantive and successful play for the IT market since long before I came into the business 15 years ago. Remember “convergence”? The idea was that telecoms companies would use their inherent structural advantages to wipe out IT suppliers. Didn’t happen did it?

In fact if we look at the numbers- the latest telecoms company to make The Big Play has certainly suffered for it. Under Ben Verwaayen, ex-CEO, BT “went big” on Global Services. New CEO Ian Livingstone is now cleaning house. Costs were out of control, and the “synergies” and “structural advantages” weren’t realised. As Computer Weekly reported a couple of weeks ago:

BT is restructuring its struggling Global Services business to focus on three separate areas after its “unacceptable performance” led to the group losing more than £1.3bn.

My question for Chuck is basically- can you name a single example of a major telecoms company that is a successful IT service providers Now try and name some that have failed in that ambition…

Inherent structural advantages. Like the music business perhaps in the face of digital music? Or the mobile communications business perhaps?

What did Apple and the iPhone do to existing players with their “structural advantages”? Apple doesn’t rely on telco billing relationships – it uses them to subsidise the hardware for customers, then builds its own billing engine and relationships through the AppStore. Who would argue its wireless network partners got the better end of the deal?

My colleague Michael Coté talks of the “shackles of success” – and telcos have those in spades.

Lets consider AT&T, which Chuck says has “plenty of data center space in all sorts of useful locations”. Perhaps – but how modern are these resources? According to IBM

70% of data centers were built before 1985, and will need rebuilding (via @merv).

Now I don’t play tennis, but I would not be too quick to call “advantage AT&T”. Not when the competition will come from companies like Amazon, Microsoft and Google. Who builds the most efficient data centers- Google or AT&T? I’d be interested to know what you think Chuck?

Does EMC really want to bet against Amazon CTO Werner Vogels? Have you seen the progress they are making rolling out new functions? This week came Monitoring, Auto Scaling and Elastic Load Balancing for Amazon EC2. I am pretty sure IBM wouldn’t be encouraging customers to deploy production workloads to Amazon if the environment couldn’t be trusted.

Lets think about security for a minute – the commonplace anti web company canard.

How many serious breaches has salesforce.com suffered from since the company was formed 10 years ago? As far as I know the answer is… zero. How many banks, with vast security budgets, can claim that track record? How many customer identities have we seen lost by public sector and financial services incumbents in that time? Oops I lost my disk. Oops I left my laptop on the train. Oops who was looking after that tape again? Many of the organisations that have lost these customer details are major EMC customers. That didn’t protect them. Poor security is poor security whichever side of the firewall its on. There are no inherent security advantages in being an existing telco or service provider.

In the 1970s the FUD was that computing bureaus were insecure. Plus ca change.

Nick Carr has already said all this stuff far more eloquently than I ever could. One of my top Cloud thinkers is Simon Wardley from Canonical, the commercial arm of Ubuntu. I credit him with the photo I used to illustrate this post. Who is it? Joseph Schumpeter – the guy that coined the term “creative destruction”.

EMC is a really strong data management company. No doubt about it. It has an awesome arsenal of “enterprise-class” products. EMC also deserves great credit for realising the threat Amazon storage services face earlier than most – but I would advise the firm to be very cautious about an assumption that your channels to market have inherent structural advantages.

disclosure: IBM is a client. Not so Amazon or EMC.


  1. Cloud Computing: On Structural Advantages and Lessons From History #EMCWorld http://bit.ly/B8TPC pimping my own post
    This comment was originally posted on Twitter

  2. I strongly agree and have said in the past publicly that telcos are very well positioned to become major players in the cloud: lots of big DCs and bandwidth.

    However it is the large scale server and service management realm where the differentators will arise…

  3. Hi James (thanks for keeping our #emcworld hashtag going),
    It seems that your primary argument is that there is 1 best way to do cloud and that the old service provider model failed.
    On the single model, to quote Nicholas Carr from his IDC Directions presentation, he said that we can expect phases to realize Cloud’s potential: 1) DIY 2) supplement (new capabilities cheap) 3) replacement (capacty=demand) 4) democratizer (new opportunities) 5) revolution. What Chuck lays out fits some of the middle stages.
    As for the fact that telecoms failed in the past – there is now a lot more bandwidth available and to quote Chuck, “virtualization changes everything”.
    Stuart Miniman (EMC)
    Twitter @stu

  4. Agree that Telcos have the infrastructure and cloud will be the new “utility” business of this century. But the antideluvian mindset of a 20th century utlity company does not readily translate to the utility business of the 21st century. So unless incumbent Telcos can re-invent themselves to operate at web speed in an un-regulated markert, then the likes of a Google or other big disruptor will seize the opportunity and un-seat them.

    It will be interesting to see how this plays out over the next 10-20 years.

  5. Stuart Miniman- thanks for stopping by. Actually i would say that my primary argument is more negative than positive at this point. I argue against the notion of “inherent structural advantages” – frankly its all up for grabs. Where exactly do you see an argument in my post that there is only one way to do things? I certainly think Amazon is the market leader at this point, and it continues to innovate and win new customers and partners. Companies like Cap Gemini…

    Steven Rdzak is absolutely right that the mindset and infrastructure of a 20th utility company doesn’t really prepare it for the new world.

  6. James Governor’s Monkchips » Cloud Computing: On Structural … http://tinyurl.com/p5dbt5
    This comment was originally posted on Twitter

  7. my new slogan – Don’t Bet Against Werner Vogels. thinking about getting some t-shirts made. http://bit.ly/B8TPC want one @mattb?
    This comment was originally posted on Twitter

  8. really nice piece from my colleague @monkchips: http://bit.ly/F7IwV
    This comment was originally posted on Twitter

  9. Great article by @monkchips on clouds, internal and otherwise: http://bit.ly/F7IwV (via @sogrady)
    This comment was originally posted on Twitter

  10. James, I agree with your perspective on this, but left unsaid by you, EMC, and AT&T is that storage by itself is only part of the solution.

    How useful is storage without compute?

    Sure, storage for backup, archive and DR is important, but there are lots of ways to skin that cat. Without compute, storage service providers have got to hit a pretty low price point to compete. Not to mention dovetail with all the backup and recovery processes already in place within the enterprise.

  11. […] 2009/5/22: More on telcos becoming Cloud providers from EMC’s Chuck Hollis, with a retort by James Governor. Just listing these as FYI but my main point in this post is not about telcos, […]

  12. I’d buy that t-shirt …

  13. Hey William,
    On the aspect of SLAs in the cloud, SLA@SOI are highly active in this area by creating a framework to allow the management and automation of SLAs in the cloud, including the automation of violation handling and compensation. It considers multi-level SLAs, their guarantee terms and multi-provider agreements. There’ll be a bunch of documents soon released on the site detailing the 1st year’s research so perhaps these will be of use for further defining process.
    This comment was originally posted on William Vambenepe’s blog

  14. Cloud computing: on structural advantages & lessons fm history. EMC world via @monkchips http://tinyurl.com/p5dbt5
    This comment was originally posted on Twitter

  15. Thanks for the pointer Andy, this is very interesting and new to me. Very relevant indeed, I’ll keep an eye on this work.
    This comment was originally posted on William Vambenepe’s blog

  16. @monkchips: just read http://bit.ly/B8TPC – excellent post, thanks for the kind words and I’d buy one of those T-Shirts.
    This comment was originally posted on Twitter

  17. Hi James — very insightful perspective.

    I agree wholeheartedly with you — past attempts by telcos to enter the IT infrastructure business have failed woefully.

    But that doesn’t mean they’ll fail in the future, does it?

    The key question might be “what’s different this time around?” and Stuart said it best — virtualization changes everything.

    All props to the great people at Amazon and what they’re doing. However, I have to point out that enterprises currently have an allergic reaction to their offering, and it’s still questionable whether they’re making any money at it.

    The real question is — who will become the IT infrastructure service provider for enterprises? Is it an existing entity (telco, outsourcer, etc.) or an entirely new beast (e.g. Terremark, Savvis)?

    The telcos do have a structural advantage — if they choose to use it. And that’s the big question in my mind.


    — Chuck

    1. just because it never happened before doesn’t mean it won’t happen now – the essential problem with arguments from history, eh? 😉

      of course its early days, and we’ll see a lot of shifts ahead, but i think calling AWS toxic for enterprises will be proved premature. Virtualisation changes everything – whaddya mean? its already been around for 40 years. 🙂

  18. @dberlind Chuck Hollis, EMC CTO, has been pimping telcos on his blog. now we know why. http://bit.ly/y2dt8 my take http://bit.ly/B8TPC
    This comment was originally posted on Twitter

  19. Via @ @monkchips (re: Verizon’s use of VMware for EC2-like cloud) EMC CTO’s pimps telcos on his blog. now we know why – http://bit.ly/B8TPC
    This comment was originally posted on Twitter

Leave a Reply

Your email address will not be published. Required fields are marked *