ACG Research

ACG Research
We focus on the Why before the What

Thursday, January 27, 2011

Cloud Computing: A Value Proposition

The Internet is, no doubt, a marvel, definitely an unmatched entity with its constant technological advancements. Its popularity has been driven by our zeal to use technology to make our lives easier and simpler. It has become second nature for most us to use the Internet as our primary resource when looking for information. One of the marvels of the internet is cloud computing.

Cloud computing is technically defined as an Internet-based calculations where shared information, software, and information are disseminated to computers or any other devices. It allows users to access web browsers and information without buying or installing any software. If you've used Google mail or visited YouTube you have experienced cloud computing.

Cloud computing is very popular because it eliminates the need for physical or technological infrastructure. The user accesses services and pays for only what they use. The infrastructure of cloud computing deals with the setting up of software that is involved in cloud computing.

Cloud computing has the following five attributes:

Multitenancy (Shared Resources)
Unlike previous computing models, which assumed dedicated resources, for example, computing facilities allocated to a single user or owner, cloud computing is based on a business model in which resources are shared, for example, multiple users use the same resource, at the network level, host level, and application level.

Massive Scalability
Although organizations might have hundreds or thousands of systems, cloud computing allows for scalability to tens of thousands of systems as well as scale bandwidth and storage space.

Users can rapidly increase and decrease their computing resources as needed and release resources for other uses when they are no longer required.

Pay as You Go
Users pay for only the resources they actually use and for only the time they require them.

Self-Provisioning of Resources
Users self-provision resources, such as additional systems (processing capability, software, storage) and network resources. One of the attributes of cloud computing is elasticity of resources. This cloud capability allows users to increase and decrease their computing resources as needed.

The following are five more reasons why service providers should capitalize on cloud computing for their business and for their customers: value proposition, revenue, IT independence, data center efficiency and service provider differentiation.

Cloud Computing Advantages

The Value Proposition

Cloud computing has the potential to affect service providers' operating costs by reducing the hardware and software requirements of their current networks and platforms.

Network architectures that build on optimization and consolidation are a key interest and increasingly, a requirement for all service providers. Cloud computing platforms enable enterprises to provision an infrastructure and add computing capacity on demand. This elasticity promotes rapid deployment of solutions and allows service providers to scale their infrastructure based on demand and, consequently, to improve time to market for new services.

Cloud Computing Revenue

Cloud computing is one of the fastest growing segments in the IT industry, and service providers are uniquely positioned to capitalize on it because they already have the size and depth to build scalable services. By assuming an end-to-end position (application to end user) in the cloud computing value chain, the service provider can improve and add significant quality of service to user-to-application experiences. This network-based approach to service assurance can position service providers to capitalize on the software revenue market related to the use of the applications, a market that network providers have yet to fully explore and utilize.
IT Independence

With more employees scattered in global offices or telecommuting, Web-based services and applications are perfect for the rapidly changing enterprise workplace. Service providers can increase their revenue and market share and capitalize on Web-based application services by communicating and promoting the tangible business benefits to their customers.

Mobile communication, accelerated developments in broadband networking, open source technologies, and Web 2.0 have made on-demand services more reliable and affordable. Using cloud-based services, businesses can store more data than on private computer systems, allowing them to save on the processing power and hard-disk space required for desktop software while giving them access to an unlimited number of applications.

Additional benefits for businesses—and selling points for service providers—include lower costs, improved system performance, reduced software cost, instant software updates, data reliability, universal data access, and hardware/device independence.

Data Center Efficiency

With typical data center costs running to approximately 25 percent of total IT budgets, service providers are under pressure to find cost-efficient business solutions and models to operate their data centers. A cloud computing data center model enables rapid innovation, scalability, and supports of core enterprise functions, resulting in significant economies of scale.

A cloud computing data center reduces the need for additional hardware, software and facilities; for server network storage; operating systems and middleware provisioning; and for dealing with security issues, all of which are costly and time-consuming functions.

A cloud computing platform also increases the utilization of servers, which can range from 20 percent to 70 percent, resulting in a decrease in required infrastructure. This hardware reduction translates to a dramatic drop in some associated operations expenditures: rack space, real estate, power, and cooling. And let's not forget the cost savings associated with continuity and data center longevity. The average life expectancy of a large data center is 12 years. With the cost of developing a data center at approximately $500 million, cloud computing becomes both a business and operational value.

Service Provider Differentiation

Delivering cloud-based consumer and business-critical applications with solid SLAs not only allows service providers to differentiate themselves but also maximizes the value of the network while promoting a new business model.

Moving to a cloud-based platform does, however, pose challenges and concerns for service providers. Dealing with standards, security, performance, data compliance aligned with procedures and operations, and availability issues are just a few of the organizational and technical challenges service providers will have to address for cloud computing to offer a true value proposition.

Service providers can leverage their reputations and solid performances to offer reliable, comprehensive, and secure cloud services. Most importantly, service providers can show value by strongly emphasizing that cloud computing allows enterprises to focus on other aspects of their businesses without having to concentrate resources on IT, server updates, and maintenance issues—a win-win service offering for both service providers and their customers.

My "Brush" with Steve Jobs

Last night I was reading Newsweek and came across this article on Steve Jobs, which also mentioned him being at Michela's Restaurant in Cambridge MA (

I too, was at Michela's that year as manager and occasional bartender before I went to business school. It was the late crazy 1980's (yes folks, the 1980's were crazy too!) and expensive restaurants and high priced wine was totally in style. And, what most people don't realize is that the chef at Michela's at that time was Todd English before he left to open Olives.

Anyway, Steve came in with his group from NeXT and had dinner, and what happened that night set in motion a short friendship I'd like to tell you about. Steve's new marketing person had his coat taken by someone else that night (one of those Burberry look alike coats), so as we do in the business we try to help out as much as possible. Turns out the coat which was left had some information in it and we found the guy and they swapped coats the next night. A few nights later Steve and his marketing guy came in with some folks from MIT's media lab where they were testing the NeXT machine and Steve's marketing guy gave me a present: a NeXT T-shirt for helping him out that week.

Turns out Steve and his team were not just dining at Michela's for fun, they were also looking for space in the building (the Carter Ink building, best known for its picture in the 'Make Way for Ducklings' book) for his new company and wanted only to move into the area where Thinking Machines was. Since I knew a lot of TMC folks, I mentioned he'd have to badge everyone since TMC was very careful about 'industrial espionage' in those days (open disclosure: I worked for Thinking Machines Corporation for 4 years right after business school). That night I also recommended an Italian 'super Tuscan' wine for Steve called Monte Vertine ( that he loved. He asked me to save him the 3 or 4 bottles I had left from that vintage, and I promptly went and tagged them in the cellar with a note that said: "Save for Steve Jobs". How often do you get to do something like that?

Steve came in and drank the rest of the wine over the next month or so, and was always gracious, kind and funny.

I followed Steve's career after that and read several books about his early days at Apple and what brought him back to Apple after such a bad parting. I guess that writing this personal note about him is more important to me to do while he's still with us, since he's had such an impact on not just our marketplace, but on how we connect with people in general. Social networking is great, but without great devices and networks to enable those devices, we'd all still be on AOL (O.K., exaggeration). Anyway, I hope Steve sticks around for a long time, just like the fine wine he appreciated.

Eve Griliches

Friday, January 21, 2011

MPLS-TP: What the Heck Is Going on?

Let me start with a disclaimer: I am not a standards expert, far from it. In fact, my one trip to an IETF conference was frankly, kind of painful. So while my coverage of IP and optics occasionally involves protocol discussions and standards efforts, I rarely get too deep into either one. But I feel this time I just have to say, 'why can't we all just get along', the stakes are simply too high.

It seems as if the ITU-T and the IETF joint objective of defining a standards-based Transport Profile for MPLS has hit a political bump in the road. Over the last two years the industry has converged on MPLS-TP as the standard as it preserves MPLS forwarding paradigm and OAM. The industry agreed to retire T-MPLS proposition because it did not interoperate with MPLS and its deployment as a “MPLS” technology was a wolf in sheep’s clothing that would lead to parallel investment by vendors and surprise interoperability issues for service providers. We thought this one was put to bed.

However at a recent ITU-T meeting some vendors are trying to bring back T-MPLS by proposing Y.1731 for MPLS OAM and in our opinion this is bad for the industry. Furthermore, we have talked to many customers who are hearing from the very same vendors that using Y.1731 for their OAM equals MPLS-TP and is therefore compatible with MPLS. Unfortunately, this is not true and has us concerned.

The History: A Simple Version
The IETF and ITU-T have been working together to standardize and develop a Transport Profile for MPLS called MPLS-TP. MPLS-TP extends MPLS to include OAM (Operations, Administration and Maintenance) features that are inherent in SONET/SDH or OTN networks today. The entire purpose is to continually add extensions where necessary to meet transport requirements to handle the growing video, LTE, triple play IP requirements increasingly added to the network with little payback for the provider (but that's a separate issue, isn't it?).

T-MPLS was originally undertaken by the ITU-T and approved in 2006. By 2008 it was tested in a couple of operator networks in China and one in Italy. At the same time the IETF was working on PWE3 standards for packet switched networks, and consequently a joint working group was formed between the IETF and ITU-T to align the requirements and protocols. The working group’s goal was simple: to protect existing investments and provide interoperability on the new transport extensions to MPLS that the original proposition didn’t necessarily consider. So far, so good, eh?

Well, issues do arise like the control plane; the ITU-T supports ASON and the IETF supports GMPLS. And we have to agree on synchronization for the packet network, right now there are multiple approaches. And, the encapsulation approaches must be the same for all the potential technologies. And lastly, there has to be interoperability and backward compatibility on legacy SONET/SDH networks. Ok, so no easy feat to agree on all of this within one group, nevertheless two different groups. And, we've only started with OAM features!

But folks, the reason for writing about this at all, is that the optical networking market dropped from a $14 billion market to slightly over $12 billion in the last couple of years. We simply cannot afford to be arguing like this. Optical vendors have been beaten up on system pricing, and demanding that components come down in price is simply not working. It has only driven the optical component market to consolidate and slow innovation. We're all here to make money, maybe not get rich, but stay in business.

What the OIF has done this past year provides us an example of leadership in the industry. The OIF suggested that portions of hardware implementations become standardized in order to increase volume for the component vendors, resulting in reduced cost for system vendors, and you can still add your 'special sauce'. In general, most vendors are falling in line with this efficient approach to the tough market conditions we're under right now.

What is the real story here?
Four operators, China Mobile, China Telecom, China Unicom and Telecom Italia are in the process of deploying the earlier T-MPLS OAM approach which was terminated in 2008 in lieu of the ITU-T and IETF working together to standardize MPLS-TP. And because this pre-standard has been deployed regionally in China, the operators are pushing for the terminated standard to arise from the dead and become the standard of today. Well, T-MPLS was terminated for a lot of good reasons, and it is a terrible idea to resurrect it now. Doing so would fragment the premise of industry-wide network interoperability. While one set of vendors may want to re-ignite the earlier proposition for obvious reasons, others may not.

The Result
Anyway, the suggestion (from the Chinese operators) on the table at the joint ITU-T and IETF working group is to now take two separate paths to the standard, I do it my way, you do it your way kind of thing. That would be terrible for the industry and I am urging the vendors involved (you know who you are if you are helping, and you know who you are if you are creating this chaos) and the providers involved to come together and get along. The industry simply cannot afford to stall over this right now, and service providers should put their money where their mouths are and assist in this effort for many reasons: we don't want commodity hardware to be the composite of our telecom infrastructure 10 years from now.

So, I apologize for not having more technical reasons behind all of this mess, but clearly some vendors must make a change in their approach, and operators have to alert other operators in the industry that it's time to move forward efficiently, not separately.

Eve Griliches