Every now and then I get asked to explain cloud computing. Fortunately it’s getting lot easier lately to explain this fast emerging concept.

Following video by GoGrid team does a great job in giving a simple explanation. Without relying on any jargon or intimidating concepts, this video nails down the right definition.

I would encourage you to share this video with anybody who asks about definition of cloud computing.

If you want to measure how fast the clouds are moving in tech industry - yes despite all the scary stories about economy - then check this interview of Ron Conway. Ron is a uber angel investor in Silicon Valley and has perfected the art of riding a new trend.

What makes cloud computing really explosive is old cliche - it’s an idea whose time has come! Many trends are converging - Cheap bandwidth, low power consumption requirement, emerging market needs, rapidly maturing computing stack, telecoms hungry for data based revenue streams, emergence of advertisement-based business model, list goes on and on.

Ron Conway will end up investing in handful of startups. He has been amazingly efficient in detecting right signals, very early on.

Rule 1 for migration to Cloud Computing - Get the definition right.

IT industry, like fashion industry, has an absolute Darwinian need for inventing (and then betting farm on) new trends. Cloud computing, with all it’s advantages and disadvantages, is on it’s way to become a must-play IT trend.

George Zachary of Charles River Venture, calls this a new dotcom. He should know, he must be getting business plans by the dozens. I won’t be surprised if half of those PowerPoint pitches are full of replace-all of ‘Web2.0/SaaS’ with ‘Cloud Computing’. If that transformation is not enough, then working demo of Salesforce, Facebook, Amazon S3 mashup will fill in for the necessary aha. There you have it - a fully compliant cloud computing app.

No sir I don’t understand what is Capacity-on-demand? I thought being able to store user mugshots on Amazon S3 was cloud computing? - No?

Head over to expert panel for more cloud(y) insights. We need cloud definition sooner than AIG needs bailout. Or before we hear $100 million venture fund dedicated for cloud computing investments.

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Also checkout Reuven Cohen’s rant on the declining quality of cloud computing definition.

Public cloud solutions, as rolled out by Amazon AWS, Google AppEngine and Microsoft Azure have proven that capacity-on-demand is good ROI. There is real dollar value in migrating certain types of applications to cloud clusters. Though not every application is ready for migration to these public clouds due to legal and privacy reasons.

To address privacy and compliance requirements, virtualization vendors - led by pioneer VMware, started offering in-house cloud solutions. vCloud product leverages VMware’s lead in virtualization and extends that advantage in variable capacity management. vCloud APIs will be available very soon.

This led to interesting problem for enterprises - how to migrate internal applications without sacrificing years of compliance and policy based resource provisioning. To address this problem, couple of startups have emerged. Elastra is one such start-up. ( Kaavo is another startup in this space.)

Elastra, San Francisco based startup, recently rolled out public beta of its Elastra Server Cloud 2.0, which company see as the broker between public compute clouds and in-house compute clouds.

What makes this company really interesting is their promise of bi-directional migration support between public and private clouds. Elastra abstracts out application configuration, provisioning rule, usage policy and other stack properties - and makes it ready for cloud migration and management.

This kind of solution will create interesting possibilities for Cloud Interoperability. Once companies start storing application deployment meta data in portable cloud management systems - cross cloud interoperability will naturally evolve from it.

Elastra received $12 million funding last year, backed by cloud pioneer Amazon and couple of top tier venture firms.

Here is Elastra CEO, Kirill Sheynkman, talking about Cloud Computing for the Enterprise market:

Watch Elastra on Startup City  |  

Saleforce (CRM) reported very impressive quarterly revenue numbers. Proving that even in this economy there is scope to wring out cost efficiency. Salesforce is winning at the expense of Oracle and SAP suits. CEO, Mark Benioff, in his characteristic style is hitting on pet themes and slamming familiar vendors (Full transcript at SeekingAlpha):

These new customer additions are key to our growth strategy not only because they result in new business today, but because of their growth potential in the future. There’s a common theme in the deals we won in the fourth quarter. Customers are taking a hard look at the maintenance payments that they’re making to enterprise software companies and replacing those stagnant legacy technology costs with predictable scalable subscriptions in constant built-in innovation of cloud computing.

Whether it’s our Salesforce CRM sales, customer services and support, or Force.com platform, customers are choosing the low cost, low risk, and fast results of cloud computing over expensive hardware, software, and data centers that burn through precious capital and yet rarely produce the promised returns. In face offs with Oracle, Microsoft, and SAP, customers moved to the cloud in record numbers in FY ‘09. That’s because in days like these, when cash is king, liquidity is critical and credit is scarce, the predictable flexible cost of cloud computing is overwhelmingly the right choice.

Key metric of net New Customers is outstanding. They added 3,600 new customers which will ensure predictable revenue over next few quarters.

As you might expect, the Salesforce CRM and Force.com community is growing as well. As of the end of the fourth quarter, our global community of net paying subscribers stood at more than 1.5 million, up more than 35% from a year ago. Equally important, we added roughly 3,600 net customers during the fourth quarter to bring our total net paying customer count to more than 55,400. That’s an increase of roughly 14,000 customers for the year, more customers than we added in our first six years of business.

What is really baffling me is the list of customers and number of licenses bought by them in last quarter. Now we all know from general economy tracking is that last quarter was anything but positive. Companies across the board retrenched. In fact one of the companies mentioned by Benioff - First Data - laid off 150 of their call center staff members. So we can expect good correction in the numbers touted by Salesforce. On this point Larry Dignan at ZDNet wrote:

For now, attrition rates at Salesforce.com are less than 1 percent, but that’s likely to increase in fiscal 2010, according to the company

On other fronts, Salesforce showed equally impressive numbers. Force.com is growing like a weed -

Custom applications, that is, applications built by our customers natively on the Force.com platform crossed the 100,000 mark for the first time. Pretty incredible. There are now more than 452,000 custom objects or traditional custom database tables now serving our customers. Our servers are now running 21 million lines of Apex Code, our procedural language that runs on our multi-tenant virtual machine, up from 15 million last quarter and 10 times the level of the first quarter.

Overall very impressive quarter. Hopefully this will lift SaaS market in the short term.

I am struggling to understand the definition of cloud computing - in the context of IT budget allocation. How is industry going to classify something as falling under cloud computing budget? In many companies I work with there is no Chief Cloud Officer operating with allocated budget.

With data center, we know there is an infrastructure cost component and staffing (along with well defined roles) which goes with it. Similarly on the application side, we have line of businesses and strategic initiatives.

Question is who is going to the primary driver for generating need (and subsequently budget) for conducting cloud computing projects. Cloud computing is in many ways a deployment strategy. Big server vendors (IBM, HP, Sun among others) have historically used their services arm to up sell their hardware solutions. With hardware going to cloud, can smaller IT service firms confidently compete with big service providers? Appirio is one startup which thinks they can disrupt this emerging market.

Appirio seems to have successfully combined many innovative cloud elements in their business model. By working closely with Salesforce and Google, they have established their leadership in pushing customer facing processes on cloud platforms.

To their credit they have secured Series C round of money from marquee venture firms. They definitely deserve big applaud for this. Especially in these recessionary times!

Though their claim to disrupt #1 trillion of IT spending smells of mild propaganda to me. From blog post (my emphasis):

Our market: Far more important than anything about Appirio’s business is the market opportunity that we’ve targeted. Cloud computing will disrupt $1 trillion of IT spending– great things happen when you’re able to accelerate an industry transition of this magnitude.

Our model: New markets call for innovative business models. Traditional wisdom says you have to choose whether to be a services company or a product company. We believe that the availability of web platforms makes a truly hybrid business model not only possible, but advantageous. Consider our new product offerings in 2009, Services Management and Facebook Referral Management– neither would have been possible without the opportunity to directly serve and learn from leading customers in these markets. Our model of delivering high end professional services, innovative software products and compelling cloudsourcing solutions is what we like to call a ‘next generation IBM without the baggage of hardware’. Customers need alternatives to the Global SI’s and traditional enterprise software - our hybrid model directly addresses that need and has delivered repeatable results for our customers.

Cloud computing has usual variable costing advantage, similar to SaaS model. Experience shows we will converge around some hybrid cloud model. Enterprises will not just throw away all servers and start logging into AppEngine or EC2 farms. To begin with enterprises will push edge level applications to cloud computing. Processes, like social media connectors, residing on the enterprise fringes will find easy case for migration to clouds.

I think we are still long way from claiming that cloud computing model will completely disrupt how IT service gets delivered and gets procured. Appirio, with strong validation by venture funding, is definitely leading the show here.

On IT budget and trends related to that, I would strongly recommend reading Goldman Sachs report for IT spending in 2009. This survey points to a severe reduction in discretionary projects. Which is in-line with the current economic climate.

Can cloud computing steal the budget from other critical initiatives? We will find out this year.

Goldman Sachs - IT Spending Survey

Platform-as-a-service startup, 10gen, has scored their Series A investment from Union Square Ventures. Backed by proven management team, DoubleClick ex-CEO is one of the founder, company plans to take on Google App Engine and Amazon cloud computing offerings.

From their press release:

10gen (http://www.10gen.com/), creator of a new Platform-as-a-Service (PaaS) technology that helps developers more quickly and easily build dynamic, scalable Web sites and applications, today announced $1.5 million in Series A financing from Union Square Ventures. The cloud computing company, founded earlier this year by DoubleClick veterans Kevin Ryan, Dwight Merriman and Eliot Horowitz, and former Joost engineering VP, Geir Magnusson Jr., aims to provide significant time and cost saving advantages by allowing developers to focus on solving business problems and delivering functionality rather than expending effort on infrastructure, scaling and system management.

“At 10gen we are building a cloud stack from the ground up - including a database and application server - with the design goal of running sites and services of all sizes,” noted Dwight Merriman, Founder and CEO. “Rather than porting existing tools into the cloud, Web development can only prosper by building new technologies for this environment, technologies which are available in an open way such that many companies and other entities can collaborate on their development.”

10gen’s team is creating a virtual Web application server and database from distributed computing resources with the goal of providing horizontal scalability and geographical redundancy that is secure, transparent and easy to manage through a high-performance grid-aware object database, automatic on-demand application scaling and site management, deployment and performance evaluation tools. The application server supports JavaScript as its first development language, with Ruby support in early testing and other languages on the product roadmap.

Popular blog sites Clusterstock and Silicon Alley Insider are using 10gen cloud. Beats me why these blogs have to complicate simple Wordpress deployment architecture by going to custom cloud configuration?

Fact that it’s an open source play, it will be interesting to see how it evolves. Business model is cloudy and looks like this will go premium services route ( not unlike SourceLabs). In the absence of revenue models like Google Adsense and Amazon Shopping store, any startup to come and challenge these behemoth’s cloud computing offering is pure chest thumping.

10gen looks great and has all the right backing for it to become a serious player. What it lacks is a here-and-now reason for small shops to download and start using it. Maybe striking a deal with identi.ca will help it to get into start up market. It won’t happen since Union Square Venture funded Twitter competes with Identi.ca.

Download link: http://www.10gen.com/~~/f/10gen-src-nightly.tar.gz

(Caveat : We were not able to figure exact open source license. Will be digging on that soon. Specific type of open source license can significantly impact future growth curve of any open source software. Also it limits in how many ways software can be used.)

Open source is entering into a mature phase. So mature that now we need to understand between different flavors of open source.

There are many flavors of open source. Some vendors push “professional” open source, some “commercial”, some call it “business hardened” and offcourse we have Microsoft’s shared source. Offcourse we are not getting away from the conventional proprietary license products. Diversity is good and market wins in the end. So we are going to celebrate this diversity.

Diversity of open source approach in some ways provides more innovation fodder to the marketplace.
If open source is a new force then migration freedom is it’s biggest weapon. Customers are free to take their code and move to most free platform. Customer drives the direction of migration. We intend to facilitate that by highlighting popular migration stories.

If you have interesting story to share please let us know.