By Sramana Mitra and guest author Saurabh Mallik
SM: Or products, and people who may be able to provide technology to cloud vendors. One of the solutions could be that they provide is the segmentation of software or appliances. I think these are niche opportunities, but they seem like problems that need to be solved.
MW: Absolutely. So, when we talk about business models in the cloud, Deloitte uses four layers. Layer 1 is the cloud service subscriber, layer 3 is the cloud service provider, and layer 4 is the cloud service enabler. I skipped layer 2 because it is the cloud service broker. We see innovation in the business model of companies as cloud service subscribers, because of the speed of solutions, and so forth. Ultimately, in terms of white spaces and true disruptive innovation, we see innovation in the business model of cloud service providers. It’s not totally new, since people are doing managed service and outsourcing and other types of things, but now it’s much more clarified and classified. The cloud service enablers, which is the example you used, are those that build a piece of software to help the provider appropriately route the information according to certain business rules and constraints. Now, if you look at services like telecommunications services, we have the same thing. Telecommunication services consumers, like you and me on this call, have telecom providers like AT&T or Verizon, we have the enablers like the Nortels and Ciscos, and we also have brokers. Time has sort of passed by brokers like VoiceCom and Datacom. During the breakup of Bell, people were doing the breakup of minutes. So, this is all occurring in the cloud space as well.
I think that there are definitely opportunities for entrepreneurship in the cloud service provider layer. New providers are arising, particularly in the software and business process layer, because they are offering solutions and getting those solutions to market.
SM: Right. We have five hundred to six hundred companies in the marketplace.
MW: Exactly. I think with the enablers what we are missing right now is a mature OSS/BSS. I don’t know if you are a telecom person, but the operating supporting system is in the business support system. An example is, How do I ensure information separation based on the business policies of multiple subscribers in a multi-tenant environment with this diverse distributed infrastructure? The broker layer is very interesting. It’s sort of a continuum of this layer. One end is the storefront, a common storefront to multiple subscribers in the space. The other end is full-on arbitrage reverse brokerage. The arbitrage example is easily talked about with computing as a service, with storage as a service. It needs to be commoditized because there is a need for uniformity and standardization. Given that, and given oversupply, arbitrage could easily happen given the competitive nature of the market. I am going to get arbitrage and reverse auction. If storage and computing are truly commoditizable and standardizable, then I as a CIO of a very large enterprise periodically have a lot of computing [power] idle.
SM: You could auction it off and offer it to other people. It’s like electricity. If I am Alcoa and I run an aluminum smelter, there are times of the day where I am sucking electricity off the grid like nobody’s business. I also cogenerate in order to manage risk and cost for other times of the day when my generators are running to put power back on the grid, and that’s when my electricity meter runs backward. You could see something like that happening with computing and storage. That is a little bit of science fiction, but it paints the picture very well.
Well, thank you, that covers all I had. Obviously, there are a lot of moving parts to the story, but this decade is going to be interesting for this industry.
MW: It is. Our overarching message is that the cloud from a technology standpoint is evolutionary. It’s just the next stage of virtualization, automation, IP ubiquity, and so on. The revolutionary potential is what it can do to subscribers’ business models where the cloud enables them to do new things, or to the provider where the cloud is a new marketplace as well as to the broker and enabler. The business model piece is fascinating. Deloitte, you know, is business led, technology enabled. We start with a business problem and bring technology as the solution. And the cloud is bringing us not only new technologies to the solution but new business problems and opportunities.
SM: From what I see, the kind of holy grail is utility computing. You were talking about CIOs having ideal capacity. They auction it out to the people who need to use it and so on. It’s better utilization and business models in that area that are able to monetize and to better manage the costs of everything.
MW: Yes. And that’s sort of blocking and tackling. So, we will do some blocking and tackling and play some whole new games.
SM: There probably will be significant cost savings as a result.
MW: There are, and we have addressed that over the past five to seven years with consolidation and virtualization. Five years ago, we did a big data center strategy for a client. Part of the strategy was a significant amount of consolidation of physical, and then just tech refresh purposes and so forth. And what followed was essentially a dramatic level of virtualization. The physical to virtual ratio was 8:1. You look at that today and you go, duh! Because people are now running twenty or thirty to one now. That will continue.
SM: Great, thanks very much for your time.