Data Center Strategies

Microsoft Azure Prices: Similar to EC2 on some, different on others

Today, Microsoft announced pricing for Azure (which isn't open for business yet) on their Azure Windows MSDN blog. Here are some of the basics:

Windows Azure

• Compute @  $0.12 / hour
• Storage @ $0.15 / GB stored
• Storage Transactions @ $0.01 / 10K

SQL Azure:

• Web Edition – Up to 1 GB relational database @ $9.99 per month
  
• Business Edition – Up to 10 GB relational database @ $99.99 per month
  

NET Services:

• Messages @ $0.15/100K message operations , including Service Bus messages and Access Control tokens

As you might expect, the compute model is similar to EC2 in that the pricing is "per hour" and per GB. The missing part in the model is the size (or type in EC2 terms) of the compute platform. I would expect Microsoft to augment pricing for compute based-on the amount of compute resources an application requires. I don't think Microsoft would allow an applications that requires 5x the amount of memory or CPU time to be the same price as another application with lesser requirements. There must be tiers at some point. Nothing is infinitely scalable.

Transactions, which I think will translate to I/O, are similar as well -- although Amazon is cheaper (more I/O per cost). The SQL and .NET services are different, as to be expected, since Azure is more of a full featured PaaS.

What I found interesting was this statement:

While consumption based pricing provides great flexibility we have also heard it introduces a level of unpredictability and some customers prefer other options. At launch we will share details of subscription offers that provide payment predictability and price discounts that reflect levels of usage commitment.

Burton Group has been saying that we believe that IT organizations need more predictable cloud costs. Some organizations have no idea how much cloud services they are consuming until the bills start to trickle in. IT governance will demand that predictable cost controls be put in place. An "all you can eat within limits" model seems to fit the bill. This could be a good move by Microsoft.

If I had one piece of advice for Microsoft it would be regarding this statement:

To support partners’ and customers’ complex business needs we are providing an enterprise-class guarantee backed by a service-level agreement that covers service uptime, connectivity, and data availability.

Microsoft, please do these things regarding the SLAs:

• Be exhaustive. Don't insult our intelligence with a 1 page SLA. SLAs need to cover more areas than three areas. Things like contingencies, abatements, and service response, need to be covered too.
• Build in some flexibility. An enterprise-class guarantee requires some flexibility. One-size boilerplate SLAs do not fit all.
• Make a machine readable, XML SLA format, complete with the ability to sign and negotiate programmatically. Doing so will speed up automation.

[posted by: Drue Reeves]

Cloud Infrastructure Secrecy: A Competitive Advantage or Disadvantage?

In case you missed it, my colleague Eric Maiwald (Research Director for Burton Group Security and Risk Management Service) made an excellent post on the risks associated with resource aggregation in the cloud. He used the recent Rackspace outage to make his point that customers had better know their providers environment before using their services.

Eric's post draws out another issue -- cloud infrastructure secrecy (or better stated -- the lack of cloud transparency). You see, many vendors are so secretive about their infrastructure, customers are unable to determine whether or not a particular vendor can meet their availability or performance needs. How is a cloud consumer supposed to appropriately manage risk if vendors won't discuss their data center architecture?

Now, I realize why cloud vendors won't discuss these issues (ask any vendor and they'll tell you)... security and competitive advantage are top vendors concerns. Cloud vendors must protect their current customers from would-be attackers, hackers, etc. If you're a hacker, a cloud data center -- where millions or billions of dollars of business are being conducted -- is a prime target. In addition, cloud vendor business models are designed to amortize lots of customers across as little infrastructure as possible. Thus, an efficient data center architecture can be a real competitive advantage. Disclosing that information (no matter how many NDAs are in place) will eventually leak to the general public.

But in my opinion, some of this is overblown and speaks to the immaturity of the market. Vendors often use these issues as an excuse not to discuss anything related to their operations, architecture, availability, or performance. The attitude is: "here's our service, use it at your own risk". However, as the cloud matures, I don't think this attitude will fly with customers. At some point, customers need to have a sense of assurance when it comes to service availability and performance....especially for enterprise applications. If the cloud vendors want to host enterprise applications on their service (not just transient workloads), then vendors must prove their availability and performance capabilities...and not just through historical data. Historical data is a rear-view mirror. It tells customers how well the service has performed in the past. While that data may have some bearing on the future, it does not predict what might happen. Disasters strike, power outages happen, pandemics happen. How will the vendor's infrastructure perform in these circumstances?

Cloud vendors: get used to the spotlight. Every outage will be put under a microscope because it's you who are claiming that you can handle everyone's IT needs. When you go down, lots of people go down....that's Eric's whole point about risk aggregation. So, a 45 minute outage may not be much compared to an outage in a single customer's data center, but when you're a cloud vendor, it's a big deal...like it or not.

And if you think about it, the "competitive advantage of secrecy" may become a competitive disadvantage if customers will not use cloud services due to a indeterminate risk. Over time, cloud computing vendors may find that their market is limited because customers simply aren't willing to put many of their applications in the cloud without some risk assurance. This point isn't lost on all cloud vendors. Many of the smaller cloud vendor and some of the really large hosting vendors (who we already know their infrastructure) have begun to realize they can create their own competitive advantage by actually opening up their infrastructure to give potential customers a sense of assurance. These savvy vendors realize that they don't compete on data center architecture or security through obscurity. They realize they compete on service. In the future of cloud computing, having a highly available, secure data center will be the entry point to being a cloud vendor. It's time for vendors to be more transparent about their infrastructure and stop hiding behind the "security and competitive advantage" claim.

[posted by: Drue Reeves]

EU Slaps Intel with €1.06 billion ($1.45 USB) Fine

By now, I guess everyone has seen the incredible news that the EU has levied a €1.06 ($1.45USB) fine on Intel for "illegal sales practices". As you can imagine, Intel was unhappy about the news, while AMD applauded the move.

From a technical analysis perspective, there are no immediate implications. Intel will still continue to ship it's entire portfolio of processor products, including the new Nahalem (XEON 5500 series) processor. Well, at least for now. However, one has to question the long term implications, including whether or not Intel has the cash to sustain these product lines given the fine. Intel, like many other companies in this economic climate, are watching every dime. Will this fine affect their ability to produce product in sufficient quantities to meet IHV demand? These types of issues make IHVs (e.g. Dell, HP, and IBM) very nervous. Often times, there simply aren't enough chips to go around in the server market. That's why every IHV scrambles to be "on stage" with Intel when they announce a new processor...to guarantee they are "first to market" and corner as much of Intel's capacity as possible. The more processors the IHVs have on hand, the more serves they can manufacture... and the easier it is to keep the competition from shipping similar servers. It's been this way in the server market for years. How many times have customers attempted to purchase a server from an IHV, only to find out that the ship date is extended 3+ months?

Another question: will this judgment hinder Intel from making more investments in future products? Chips design is a long process. New processors are on the drawing board 5+ years in advance. If Intel is forced to make hard decisions, R&D may be the place.

Part of what we've been blogging on here in DCS is the increasing competition within the IT industry...including Ciscos's entry in the blade server market with UCS and Oracle's Virtual Iron acquisition. We think it's an inevitability that larger companies will begin to compete across technical, geographical, and vertical market boundaries. Companies that were once "close partners" are now suspiciously watching each other from across the table. Stands to reason the the governing agencies will be closely following these unfolding events.

[posted by: Drue Reeves]

Oracle's Virtual Iron Acquisition: More Implications

As Richard has already pointed out in an earlier blog, Oracle acquired additional server virtualization technology today by purchasing Virtual Iron. This acquisition had long since been in the works and predicted not only by Burton Group, but by several other organizations too.

The big question on everyone's mind is: why? After acquiring Sun Microsystems earlier last month, one would think that Oracle has all the virtualization technology they need. Richard has already pointed out several reasons why Oracle made this move... including SMB customer acquisition, better management tools, and the ability to sell Oracle's new found virtualization technology as a standalone product. All good points...I'm sure these were on the top of Oracle's list. There is another potential reason -- to keep VirtualIron out of the hands of a potential competitior such as RedHat or Novell. In fact, Oracle may view VirtualIron as another item on their grocery list of companies to acquire that includes RedHat. By purchasing Virtual Iron, Oracle prevents RedHat from acquiring additional virtualization technology, perhaps in attempt to keep RH's price low for a future acquisition. It also prevents Novell from buying VirtualIron's technology, which uses Novell's SuSE Linux for it's services partition.

There are other implications too.

Oracle is now in an interesting position. For many IT technology companies, Oracle has moved from being a strategic partner, to a potential competitor. With the Sun acquisition, both server AND storage companies -- who once happily sold Oracle database solutions -- have to wonder if Oracle will compete by offering highly-tuned servers and storage for their data base technology. Microsoft and Oracle have been competing for a while, but these two acquisitions open a new competitive chapter in virtualization and operating systems. VMware too, realizes there is a new player with deeper pockets in the virtualization space.

But one can hardly blame Oracle. Increasing competition is a sign of the IT industry times. How long could Oracle grow revenues with a single flagship product that has captured a large portion of the market? Oracle is doing what well-managed companies do...return value to shareholders. Cisco reached the same conclusion earlier this year, and has since expanded into the server hardware market with the UCS announcement. Yes, it's an interesting time in the IT industry, there simply isn't enough market share to go around anymore. Competition among the bigger players was inevitable at some point.

[posted by: Drue Reeves]

Amazon, Citrix, Xen, and KVM - the catalyst for change

A series of events have been unfolding over the past nine months that leads one to speculate on what Amazon will be doing in the future with its EC2 infrastructure.  For those not aware, EC2 is built upon an Amazon customized version of the Xen Hypervisor plus Red Hat Enterprise Linux 5 code. 

Here goes my speculation:  Taking from where Drue Reeves left off in his blog on this subject earlier this year, Amazon has got to be looking for a way to reduce its engineering maintenance investment into the EC2 infrastructure.  What better way than to partner with a technology supplier.  The announcement on May 6th at Synergy of Citrix-Amazon collaboration on internal/external cloud interoperability has “we’re moving to Citrix XenServer as our EC2 hypervisor infrastructure” written all over it.  Let’s look at some interesting points:
•    XenServer with live migration is now free.  Amazon has got to like “free.”
•    Citrix is collaborating on the same API and hopefully AMI as EC2
•    RedHat is abandoning Xen in favor of KVM (see Drue’s blog)

Amazon can continue to use Red Hat Linux as the guest operating system for EC2 as Citrix and the community will supply Xen paravirtualized device drivers moving forward.

So what do you think?

[Posted by Richard Jones]

Shhhh! Burton Group Website Easter Egg

Just in time for Easter, Burton Group has put an Easter Egg on the Catalyst Doorway page, offering a big discount for our Catalyst Conference coming this July.

If you've never been to Catalyst, then I highly recommend you go. As always, Catalyst is an intense, 3-day event that covers some of the most important topics in the IT industry. If you've been to Catalyst, then you know what I'm talking about....it's like drinking from an information fire hose. This year, I'm especially excited about our cloud and virtualization coverage. For cloud, we are launching our coverage in earnest (actually the launch is April 20th, another secret) by defining the cloud, discussing usage models, how to build an internal cloud, security, cloud economics, and pitfalls. For virtualization -- client, server and storage virtualization --  we'll delve into top-of-mind concerns such as storage connectivity, virtualization security, network connectivity and virtual switches, application development, new HW technologies, management....basically the whole enchilada.

As always, the DCS team (Richard Jones, Chris Wolf, Nik Simpson, Gene Ruth, and myself) will there to give our perspective and analysis on these topics, but we also have some killer speakers in Paul Maritz (CEO VMware), Mark Templeton (CEO Citrix), Bret Hartman (CTO, RSA), Simon Crosby (CTO, Citrix) there to discuss some of these important issues. 

OH -- and it's in San Diego again this year (my favorite Catalyst venue).

OK, to crack open the Easter Egg (and get the discount), here's what you do:

1. Go to the Catalyst home page (http://catalyst.burtongroup.com/).

Either: click and then drag your mouse off the logo and release the button. OR: roll over the San Diego button but do not click, wait about 20 sec.

2. A message will pop-up stating

"Congratulations! You’ve found an exclusive discount code for Catalyst 2009. Use promo code: Easter Egg and get General Sessions for only $999! Register today – this discount is limited to 50 users and could disappear at any time!"

3. Register.

That's it. Good luck and hope to see you at Catalyst.

[posted by: Drue Reeves]

IBM and Sun: On Again, Off Again Relationship

Well, you had to see this one coming. The NY Times is reporting that IBM has now withdrawn its $7 Billion acquisition offer for Sun Microsystems. This is after IBM lowered its offer from $10 per share to $9.40. Sun, reportedly was "OK" with the deal as long as IBM would make guarantees not to walk away from the deal. Why would Sun want a guarantee that IBM would not walk away from the deal? Because of exactly what has happened. Think about it...how does the market view Sun now? How do customers view Sun now? A.M. Sacconaghi (interviewed in the NY Times article) hit the nail on the head... "For I.B.M., given its size, this was never a transformational deal, but in Sun’s case, it’s an extremely material event. This leaves Sun in a tough situation,Sun was on a path to selling itself, and this will inevitably raise questions in customers’ minds, no matter what Sun says, about its commitment to a go-it-alone strategy.”

Personally, I don't think we've heard the end of this deal. IBM really doesn't want Sun to fall into HP, Dell, or Cisco's hands. Sun really doesn't want to go-it-alone until another suitor arrives.

Last time I posted a blog on this deal, I described what this meant for other server vendors in this market. Given this situation, let's do that again.

• Hewlett Packard:  There's not a lot for HP to be gained by buying Sun. HP's server line is superior. It's storage line is competitive to Sun. And, HP's software division is the management leader. HP isn't really into applications the way Sun is, so taking on Java would be a stretch. BUT -- HP could play a little chess. HP could feign interest in Sun, thereby driving Sun's price back up, and scaring IBM that they perhaps made the wrong move. IBM might then come back to the table and Sun would be off the market again. HP would make IBM spend a little more cash than they wanted. In the server market, it's dog-eat-dog. If you can get your competitor to spend a few extra bucks so that they can't use it against you, you do it.
• Dell: <sigh>....For Dell, it doesn't get to look any better than this. If IBM and Sun are truly on the outs, and Sun's perception in the market is headed downward, then now is the time for Dell to get Sun. This is now the 3rd time I've blogged about this [1,2]. Dell needs to stop moving down market into PCs and gadgets and start thinking enterprise. The margins are better, the customers have deeper pockets, and Dell's brand needs a credibility boost. Dell, do yourself a favor and throw your hat into the ring.
• Cisco: I would say "See Dell" and be done, but Cisco actually has even more to gain than Dell. Dell, compared to Cisco, has a much more well-rounded enterprise portfolio. Cisco is in need of rack servers, storage, server customers, service people with server knowledge, etc, etc, etc. Cisco can't afford to build their server product portfolio organically. That would take too long. Cisco simply can't compete in many enterprise accounts without a more well-rounded portfolio. Will enterprise customers who need rack servers, storage, service, and blades buy the blades from Cisco and everything else from other vendors? No. Cisco's strength is its brand. Scooping up Sun would prove to the IT industry that Cisco is a player to be reckoned with and not a flash-in-the-pan.
• Fujitsu: Fujitsu gets a reprieve from having to buy SPARC from IBM. Plus Sun is now their new best friend since Sun will need the revenue. Fujitsu needs to put their SPARC exit strategy into motion. Fujitsu, meet Intel and AMD, they have nice chips.
• AMD and Intel: These two shouldn't get too excited about Sun coming back. Its only a matter of time before something happens. AMD, just like Fujitsu, time to figure out that Sun exit strategy.

[posted by: Drue Reeves]

IBM and Sun: Slight of Hand or Twist of Fate?

Wow, what a week it's been for the server market...and it's still only Wednesday!

Most of us, by now, have seen the speculation regarding IBM acquiring Sun Microsystems. If the story is true, there are some serious implications for other vendors in the server market. If untrue, then let's just say the rumor served its purpose.

Cisco's entry into the server market, termed "Unified Computing System", which Burton Group has blogged about here [1, 2, 3, 4, 5], was perhaps the biggest news in the compute space for, well, years. But just as the buzz around Cisco's announcement reached a feverish pitch, a story regarding IBM potentially acquiring Sun appears in the Wall Street Journal, drawing attention away from Monday's announcement. Coincidence? Mmmmm....maybe. At the very least, these rumors are a nice side benefit for any server vendor other than Cisco. And, I suspect, IBM and Sun have/are discussing a deal, which gives each company "plausible deniability" that the story was leaked early to intentionally rain on Cisco's parade.

Be that as it may, if IBM does acquire Sun (it's hard to believe they won't at this point), here are some implications for the remaining server vendors.

• Dell. Dell is the big loser in this acquisition. Dell's lack of high-end compute products in its portfolio puts them at a disadvantage in many enterprise accounts. Large enterprises require more than x86 compute resources for some workloads. Because Dell doesn't offer high-end compute, they capture only a portion of the total IT budget, exposing them to competition. Also, the incomplete portfolio further reinforces Dell's poor enterprise brand credibility. Sun was the one company that could really help Dell in the enterprise. Sun had both the high-end compute products AND the enterprise brand credibility to raise Dell to an HP or IBM level (or at least put them on that path). With Sun off the map, who else is out there than can give Dell the boost they need? At this point for Dell, one has to start asking the question if Dell is better off being acquired than acquiring someone else. Burton Group blogged about Dell and Sun a few months ago.

• HP. For HP, the acquisition is more of a market share and software issue than hardware. Adding Sun's products and capabilities to IBM's portfolio is probably not a big deal from a hardware standpoint. HP already has competitive offerings to both Sun and IBM in many aspects. There are, however, some serious software implications for HP, such as identity management, virtualization, data base, open source, that help propel IBM forward beyond where HP can go today. But the mad scramble will be for Sun’s customers who are forced to choose between the hardware platforms and software IBM chooses to keep versus switching to HP. If IBM can execute crisply -- which they rarely do -- then HP may need to make a move too.

• Cisco. Welcome to the game Cisco. This is how we roll. The implications here are not as big for Cisco, except this rumor has effectively squelched Monday’s news (seems like forever ago). However, this acquisition demonstrates the enormity of the players in this market and the depth of their pockets. One interesting idea would be for Cisco to acquire Dell (or merge). Similar companies, different business models. But -- if Dell and Cisco could convince large enterprises that the scalability and agility afforded by x86 platforms (along with virtualization) are better than big iron, they might do well. Throw in a tight EMC relationship, the game changes again.

• Fujitsu. Some of Fujitsu's server platforms depend on SPARC. Depending on what IBM does with Sun's portfolio, Fujitsu may need to change their product portfolio. What a pain. Not only will Fujitsu spend cash to change their product lineup, but also support a dying platform whose original hardware partner is now gone. Fujitsu, meet IBM. Make them an offer to buy SPARC.

• Intel and AMD. For these guys, they have to be bummed that another independent hardware vendor (IHV) won't be selling their wares. AMD in particular has much to lose because Sun is a heavy consumer of their chips.

Funny. Two days after the server market gets a new player, one (potentially) drops off.

[posted by: Drue Reeves]

Unified Computing System: A Move Cisco Had to Make

Cisco's Unified Computing System announcement yesterday -- which was one of the worst kept secrets in the industry -- was a move Cisco probably had to make. Why? Several reasons. Let's take a look at some of them.

Networking market. Look, Cisco owns the networking market...and has for years. Their numbers speak for themselves. While they may be able to squeeze a few percentage points out of various switching and routing markets (WAN, storage, Wireless, etc), there's a point of diminishing returns. Cisco has an obligation to return value to shareholders....something their executive management is very good at. The networking market simply isn't a place where they felt Cisco had a significant revenue growth opportunity.

Competition. HP's position in the server market puts Cisco's data center Ethernet strategy at risk because HP sits atop of the x86 server market (ProLiant), has iSCSI ambitions (see LeftHand acquisition) and -- most importantly – have a viable and growing ProCurve business. This means HP can do without Cisco I/O modules in their blade chassis, but can also drive 10Gb lossless Ethernet market share. Not in Cisco's best interest.

But most importantly, Cisco has noticed -- correctly -- that the data center is a market in transition. Obviously, network, storage and computing are converging. Server virtualization has catalyzed this convergence. But Cisco believes that the next-gen data center is being held back by poor resource utilization and a lack of mobility/agility. Most of us agree that workload mobility is a key to a truly dynamic data center. But Cisco asserts that workload mobility needs a ubiquitous converged fabric, with rich network services, that can connect compute and storage (even across data centers -- think internal and external cloud). Cisco felt that rather than sitting back and have the competition define this new data center era, and have the market dictated to them, they would seize the opportunity to drive the dynamic data center and gain a greater share of the IT budget.

Thus, Cisco created UCS. Looking at UCS, they have an interesting solution. Their modular design is unique in the way that they tie their backplane with the I/O modules, but also how they unify chassis with the network. Cisco also stated (in the video announcement today) that they believe they can reduce capital and operational data center costs around 30%. This means they believe that UCS has a competitive advantage in terms of price (at least). But the question is, how long will this innovation last? Is USC innovative enough that Cisco felt like they needed to get into the server market? No lead in the x86 server market lasts very long. Competition in this space is extremely tough. Technological leads last 3-6 months at best.

On Cisco's data center blog, Doug Gourlay stated that Cisco is creating a sub-category of the server market- a specialized market we call Unified Computing.  This is not the ‘Clash of the Titans’ or us ‘coming after HP or IBM or Dell’.

Pure hogwash. What Doug is saying is that Cisco has created it's own server market segment, and thus, really isn't in competition with the other blade server vendors. When you produce a product that is aimed at taking customers away from your competitors sweet spot (even if you believe your product is in a class by itself), you are competing. Make no mistake, Cisco has a target on their back.

There are some go-to market-issues too. Audience is a key issue. Cisco has the network administrator's mindshare...no doubt. But what about the server administrator? IBM and HP have significant mindshare with server administrators. How will Cisco overcome that barrier and gain the trust of server admins everywhere?

Furthermore, the market is full of customers with existing gear. In many data centers, it will be a tough proposition, especially in this market, to convince IT organizations to switch vendors. At best, IT organizations may slowly replace their existing infrastructure with Cisco's UCS during product lifecycle upgrades. But in many circumstances, IT organizations think more holistically when choosing a compute vendor. IT organizations look at the vendor's product portfolio breadth at then make a vendor choice. The lack of product breadth (x86 rack servers, mid-range servers) may be problematic going forward.

Some may ask, why didn't Cisco partner their way to a blade server solution? Well, perhaps they could have. Dell or Sun might have been willing partners (Dell is already a Cisco VAR channel and FCoE partner). But IBM and HP -- the leaders in blade space -- were not a realistic option. When Cisco gets into a market, they intend to dominate. Choosing the #3 or #4 blade server vendor as a partner probably isn’t what Cisco would deem as a winning strategy.

In the end, UCS was a move Cisco had to make to ward off competition AND increase shareholder value. Cisco has a strong brand, enterprise credibility, the technical chops and finances to pull it off. Is UCS a business risk? Sure. But the greater risk for Cisco is to do nothing.

[posted by: Drue Reeves]

Beware the Ides of March – Cisco Sends a Warning to the Server Industry

It’s not every day that we see a major new player in the x86 server world, but that’s just what Cisco announced today. Both Drue Reeves and I will comment in detail about the announcement and its implications for the rest of the industry, so stay tuned.

I will update this entry with pointers to our blog entries as they get published.

Post #1: Cisco UCS: Why Now?

Post #2: Cisco the Computer Company, Act IV

Part #3: Unified Computing System: A Move Cisco Had to Make

Part #4: Winners and losers, and don't get caught on the wrong side of that line!

Posted by: Nik Simpson