Neutralizing the Cloud Threat

A Secret Meeting Somewhere in California, 2008

“This meeting will come to order,” Larry Baldman, the CEO of International Micro Oratib (IMO) said. “We have a threat to deal with.”

“Indeed we do,” chimed in Twitter Offin, the CMO. “There’s a new trend on the horizon, called Cloud Computing. If we don’t watch out, it’ll put us out of business.”

“How’s that?” asked Lowly Wonk, a product manager on Twitter’s team.

“The basic idea of Cloud Computing is that large organizations won’t have to buy software or hardware anymore,” Larry said. “Instead, they will simply access it as needed from a Cloud provider.”

“Yes, that could be a problem,” Bill Geekazoid, the chief product architect said. “If our customers can rent what they need, then why would they buy it from us? After all, we’ve been overcharging for what amounts to repackaged spaghetti code for years.”

“I don’t understand,” Lowly said. “”What is Cloud Computing anyway?”

“Well, here is where it gets interesting,” Larry responded. “In reality, Cloud Computing is a myth—or it’s a myth that it’s anything new, anyway. It’s really just old wine in new bottles.”

“What do you mean?” Lowly said.

“Allow me, Larry,” Bill said. “Cloud Computing is a combination of economic and technical trends that have been going on for years. It’s a confusing mishmash of software as a service, virtualization, utility computing, on demand computing, application service providers, and the World Wide Web itself.”

“The Web itself?” Lowly was incredulous.

“Yes,” Twitter said. “Some of these new Cloud startups are saying things like they have capabilities delivered over the Internet via standard protocols.” Bill snickered. “In other words, their stuff runs on the Web.”

“But we’ve been doing that for over fifteen years!” Lowly was getting increasingly confused.

“That’s right, Lowly,” Larry said. “But it’s still a threat. Reality is irrelevant, you know; it’s all about perception. So, team, what are we going to do to get our butts out of the fire on this one?”

“I got an idea, boss,” Twitter said. “Let’s turn lemons into lemonade.”

“I’m listening,” Larry said.

“Well, everybody’s heard of Amazon’s early Cloud efforts, right?” Twitter explained. “Publicly available, multitenant Cloud environments, where they offer capabilities to a large number of customers, which gives Amazon enormous economies of scale.”

“Right, Twitter,” Bill said. “It’s those economies of scale that will eat us for lunch. They can simply offer software and infrastructure at a vastly lower price point than we could.”

“Precisely,” Twitter said. “So, how about we convince customers they have to build their own Clouds?”

“Their own Clouds?” Lowly was lost. “But, isn’t that just saying that they have their own data centers running virtualization software?”

“Absolutely, but we don’t tell them that,” Twitter explained. “Perception is reality in marketing, as Larry said. We use the mystique of Cloud Computing to convince our customers they need to build Cloud environments for themselves. We call them ‘private Clouds.’ That way they need to buy all the gear from us to set those private Clouds up.”

“Cha-ching!” Larry smiled. “I like it! But how are we going to convince our customers they need their own private Clouds?”

“Well, that’s where marketing comes in,” Twitter said. “We emphasize all the risks of public Clouds, and convince them they get the benefits of a public Cloud without the risks if they build their own private Clouds.”

“I still don’t get it,” Lowly said. “Isn’t the whole point to a public Cloud the on demand, dynamic provisioning? I mean, by spreading out infrastructure resources over so many customers, a public Cloud provider can deal with large spikes in demand in a cost-effective way. But with a private Cloud, won’t they need to buy a bunch of equipment that will sit idle most of the time, on the off chance they need to scale up suddenly to handle a spike in demand?”

“That’s why I like the plan so much, Lowly!” Bill said. “When a customer buys gear from us that they don’t need, it makes our shareholders happy! Hell, if our customers only bought stuff they needed and actually used, our profit numbers would be in the toilet.”

Lowly laughed. “OK, I get it! This is a crazy business, you know!”

Bill’s eyes lit up. “Hey, I have another idea,” Bill said.

“Let’s hear it, Bill,” Twitter prompted.

“What if we set up a Cloud of our own, and put all of our old middleware in it. We set it up so that customers could essentially rent our middleware in the Cloud.”

“How does that help solve the problem, Bill?” Larry asked.

“Well, here’s the point: they already own our middleware, right? And they’re stuck with it, so we have a never-ending stream of maintenance revenue anyway. But now we can rent it to them at the same time. Get it? We sell it and rent it to the same customers!”

Larry sat back in his chair, as a big grin came over his face. “Perfect! They rent middleware from us that they’ll end up connecting to the middleware they already bought from us. The good ol’ ‘middleware for your middleware’ story that we used to neutralize the SOA threat a couple years ago, only with a Cloud twist. So what should we call that?”

“Let’s call it ‘platform as a service,’” Twitter said. “Can you imagine? Customers thought they were saving money by moving to the Cloud, but in reality they’re paying us three times instead of once!”

Everybody had a great laugh. “Boy, this was a great meeting,” Larry said. “We pulled our butts out of the fire for sure. OK, let’s gear up the marketing engine. Focus on private Clouds and platform as a service. I’ll give the CEOs at our top accounts a call. It looks like IMO is in the Cloud business, people!”