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November 14, 2011
Volume XXXVII, Issue 4

Recession Worries? Not for Cloud Computing

Excerpted from ZDNet Report by Larry Dignan

A rocky economic picture is likely to speed up the migration to cloud computing - again.

In the 2008-2009 downturn, companies moved to Software-as-a-Service (SaaS) vendors en masse. Chief financial officers liked the ability to shift capital spending (build your own data centers and applications) to monthly expenses (subscribing to your software) and gave technology executives a shove to the cloud.

Fast forward a few years and technology executives are mostly on the cloud computing bandwagon. But just like 2008 any stragglers are going to get shoved to the cloud.

Multiyear, expensive deployments just don't add up amid economic uncertainty. In 2008, small and midsized businesses ran for the cloud. In 2011 and 2012, large enterprises are going to make the move.

Large software vendors have gotten the message. Oracle CEO Larry Ellison has talked up cloud computing for his company and then bought RightNow. Ellison sees where the IT waves are about to break and is working to hedge his bets.

The evidence that cloud computing may just be recession proof is beginning to stack up. Rackspace, NetSuite, and SuccessFactors are all showing no signs of slowing down. Rest assured that Salesforce CEO Marc Benioff will preach his cloud migration sermon when his company reports earnings November 17th.

Pierre Nanterme, CEO of Accenture, the company that focuses on large IT deployments, said at the end of September that, "We continue to extend our cloud capabilities, and are seeing increased demand for SaaS."

"We're doing one of the largest global SaaS implementations, involving work in 70 countries and almost 20,000 users," said Nanterme.

Rackspace CEO Lanham Napier said on the company's third quarter earnings conference call:

"During the quarter, demand from enterprise customers was strong, both from a new customer acquisition and install base growth standpoint. During the early years of Rackspace, our services were adopted and validated, mainly by small- and medium-sized businesses.

And those companies remain a vibrant part of our company. At the same time, more and more large corporations today are discovering that using a specialized service provider like Rackspace is the better, faster, cheaper way to address their IT needs. And we are optimistic that enterprises will represent a larger share of our revenue going forward.

With 9 months of the year behind us, we are not seeing any significant slowdown in demand for our services."

Now Rackspace as currently constructed is more hosting company than one focused on cloud computing. However, the two businesses are blending together as large companies need both. Rackspace's third quarter cloud revenue was $51 million, up 89 percent from a year ago, but still represents less than a fifth of the company's total sales.

That enterprise spending showed up in Rackspace's results. The company added 8,884 customers in the quarter, but that was less than JMP Securities' estimate calling for 10,000.

However, Rackspace's average selling price was higher than expected at $6,560 compared to JMP Securities' estimate of $6,500. Patrick Walravens, an analyst at JMP Securities, noted "higher ASP illustrates how Rackspace is gaining traction with larger enterprise accounts."

Napier noted that Rackspace is growing in a rough economy because the migration to the cloud outweighs tight budgets. If you look at install base growth this year, it has stayed real consistent. It is not at that pre-recession level of 1.5%, but it is pretty strong at 0.9%.

It is almost double this year versus what it was last year. The question becomes, what is causing this? Why has it stabilized, given all of the macroeconomics choppiness out there? A couple things are driving it. The number one thing driving it is our enterprise business," he said.

NetSuite also managed to show strong third quarter billings. Why? NetSuite is moving up market from mid-sized companies to large enterprises. As those large enterprises move to NetSuite, the company will garner a great stream of recurring revenue.

Zach Nelson, NetSuite CEO, has been on a large enterprise tour of sorts. He was working the crowd at the Gartner Symposium in Orlando. "As you see the market begin to tilt towards the cloud as I've seen it happen over the last year with all of these very large companies really establishing a strategy now," said Nelson.

SuccessFactors CEO Lars Dalgaard agreed that enterprises are going to ramp their cloud spending. Dalgaard also noted that SuccessFactors' focus - business execution software - is also countercyclical to the economy. Dalgaard said:

"We see the current economic environment as an opportunity for us to help companies navigate uncertain times. So in that context, we have a countercyclical offering it seems, which enables customers to better understand the importance of linking their performance management strategy with their business strategy to ensure effectiveness at all levels of the company."

On the cloud movement, Dalgaard said:

"Obviously Oracle's acquisition of RightNow is a huge validation of what's going on in this market and we've known that from day one. And it's been 10 years that we've been in the cloud, but it is clear that legacy vendors have not been able to do it themselves and we have a unique opportunity to take this leadership and go very deep in these accounts everywhere we go in the world."

Report from CEO Marty Lafferty

Photo of CEO Marty LaffertyThis week, the Democrat-controlled US Senate voted 52-46 along party lines to reject a resolution being pressed by Republicans that would have overturned the Federal Communications Commission's (FCC) "Open Internet" order.

The Senate vote clears the way for the agency's network neutrality regulations to take effect later this month.

Consumer advocacy groups, including Public Knowledge (PK), which strongly supported the Commission on this issue, rejoiced at this news.

PK's Director of Government Affairs, Ernesto Falcon, said, "Today is a great day for the open Internet! For the first time in history, it is the official position of the United States Senate that it supports rules that preserve an open Internet. Now the opponents of an open Internet have to come up with a new plan."

As DCINFO readers may recall, the FCC's December 2010 order created a framework of Open Internet rules to regulate how broadband network operators manage Internet traffic over their local networks, with stricter requirements for wire-line than for mobile companies.

At the time, there was considerable disagreement among affected parties regarding the Commission's classification of the Internet in general as a "Title I" or "Title II" class of service, and its resulting authority to exert influence over the way the web develops.

In a compromise to defuse that issue, while also in an attempt to lay fundamental ground rules, the FCC's order imposed certain net neutrality regulations on fixed/wire-line broadband providers - including a prohibition of "unreasonable" discrimination - but less so on mobile/wireless broadband providers.

The Senate's action this week is considered by industry observers to be a win for "Edge of the Internet" providers of online "applications, content, and services" - from leading companies like Amazon and Google to start-up streaming media and cloud-computing solutions providers.

Software firms will now have the right to complain to the Commission if they believe Internet service providers (ISPs) are violating these rules.

Ironically perhaps, the DCIA's view of this matter was most closely expressed by Senator Kay Bailey Hutchison (R-TX), who sponsored the resolution, during the debate preceding the Senate vote, when she said the FCC has granted itself power over the Internet that Congress did not grant it: "The success of the Internet should not be tampered with."

There could be additional Republican initiatives to reverse or alter the FCC's Open Internet regulations - including through denying the funds to implement them - but despite the GOP majority in the House of Representatives, it is unlikely these efforts will succeed during this Congress.

However, the Commission's Open Internet order continues to face a more serious challenge in court, where it's being opposed by Verizon and other companies representing broadband provider interests.

The case is being heard in the DC Circuit Court of Appeals, the same court that overturned the FCC's 2008 net neutrality order that faulted Comcast's P2P traffic management.

Meanwhile, the private sector resolved differences among ISPs and software suppliers regarding traffic-shaping for the most part and moved on to other issues.

With the court's judgment in that case, however, the Commission's broadband regulatory authority under Title I was effectively undermined.

A decision in the current Verizon case will probably not be reached until 2012, and even so, could then be appealed to the US Supreme Court and reversed there. And a major FCC defeat as a result of that judicial consideration could set off a new round of regulatory hearings and debates in Congress.

After what has now been an extended post-adoption review period, the rules are scheduled to take effect on November 20th, opening the door for affected parties to file new complaints.

The DCIA continues to believe that the Commission's 2010 rules were unwarranted - at best intended to fix a problem that does not exist - and we are even more concerned given recent legislative proposals in Congress, that such government regulation will be detrimental to innovation and investment, including jobs creation, in Internet-based businesses.

If it's not broken, don't try to fix it. And in this economy, there are clearly a myriad of areas where the federal government's attention and intervention could be more beneficial to its constituents than the Internet, which, along with cloud computing, represents one of the brightest growth areas in the country today. Share wisely, and take care.

Internet Raises Alarm over HR 3261, Allows Sites to Be Shut Down

Excerpted from Streaming Media Report by Tim Singlin

A bill before Congress could allow sites to be shut down without due process if streaming content or other "counterfeit goods" are deemed to infringe on copyright or intellectual property (IP) rights.

"Under this bill, a foreign or domestic Internet site that has broken no US law can nevertheless have its economic lifeblood cut off upon a single notice from a copyright or trademark owner," the Consumer Electronics Association (CEA) protested in a letter to Congressional members opposing House Resolution 3261.

Hearings will begin next week on HR 3261, which is known by a variety of names. The act is officially called the "Enforcing and Protecting American Rights Against Sites Intent on Theft and Exploitation Act" (E-PARASITE) but is also known as the "Stopping Online Piracy Act" (SOPA).

HR 3261 was introduced by Congressman Lamar Smith, Chairman of the House Judiciary Committee.

"HR 3261 will stop the flow of revenue to rogue websites and ensures that the profits from American innovations go to American innovators," said Smith. "It expands international protections for IP, and protects American consumers from dangerous counterfeit products."

When it comes to streaming media content, which does not constitute counterfeit goods per se, but could be considered copyright infringement, the SOPA act has the potential to make uploading copyrighted material to any site a felony.

The most pressing concern is that HR 3261 will provide an end-run around the Digital Millennium Copyright Act's (DMCA) fair-use safeguards.

We've written on DMCA take-down notices, and their fairly wide use within the streaming media industry, but DMCA at least provides fair use or "safe harbor" protections that are wholly lacking in the SOPA bill.

"Think about this for a second: think how many bogus DMCA takedown notices are sent by copyright holders to take down content they don't like," writes TechDirt's Mike Masnick. "With this new bill, should it become law, those same copyright holders will be able to cut off advertising and payment processing to such sites. Without court review!"

The first clause of the SOPA bill states that it should not be "construed to impose a prior restraint on free speech," and yet the fundamental requirements of DMCA due-process are bypassed by SOPA when a site's domain name can be seized for a single failure to comply with a request, which may or may not even be valid.

Opposition to SOPA has been swift, with the Electronic Frontier Foundation (EFF) calling it a worse bill than the PROTECT-IP act that recently passed the Senate. According to Corynne McSherry, EFF's intellectual property director, E-PARASITE / SOPA is the House's version of PROTECT-IP but with much broader powers.

"Instead of complying with the DMCA, a copyright owner may now be able to use these new provisions to effectively shut-down a site by cutting off access to its domain name, its search engine hits, its ads, and its other financing even if the safe harbors would apply," wrote McSherry.

"It requires search engines, payment providers (such as credit card companies and PayPal), and advertising services to join in the fun in shutting down entire websites."

In the Senate's PROTECT-IP act, "rogue websites" were defined as those operated outside of the United States, including foreign domain name extensions (eg, .fr, .co.uk), in much the way that "rogue nations" are defined in terrorist legislation.

Yet, McSherry points out, the SOPA legislation can affect sites operating within the United States, allowing the federal government to seize domain names, as it has already done 82 times in the past year.

"This sends a troubling message to the world," McSherry writes. "It's okay to interfere with the Internet, even effectively blacklisting entire domains, as long as you do it in the name of IP enforcement.

Of course, blacklisting entire domains can mean turning off thousands of underlying websites that may have done nothing wrong."

CEA says it supports the general concept of a bill to protect US trademarks and copyrights, but that the bill needs an overhaul.

"While we support the concept of protection from foreign 'rogue' websites," CEA stated, "it puts lawful US Internet and technology companies at risk."

A History of Hyperbolic Overreaction to Copyright Issues

Excerpted from TechDirt Report by Mike Masnick

It seems that the entertainment industry has settled on its hilarious key talking point against people who are concerned about SOPA/PROTECT IP.

I've been seeing variations on this in a bunch of different places, but the entertainment industry's biggest shills are focusing on the idea that the concerns being raised by actual technologists, entrepreneurs, innovators, creators, and investors are somehow "hysterical hyperbole."

A key example is RIAA boss Cary Sherman's "rebuttal" posted this week, which starts out with "let's all take a deep breath," and goes on to say that passing SOPA "won't kill the Internet." That's all well and good, though no one has said it will kill the Internet, but just change it in massively significant ways that the RIAA/MPAA and its ilk don't understand.

Remember, these are the folks who once admitted that they were too clueless to even know how to hire a good technologist, let alone understand how a massive change to the fundamental regulatory and technological framework of the Internet will impact innovation. But, really, let's go back to a key point. In the last century or so, which industry has a habit of being hysterical and hyperbolic about copyright issues? And which has a history of being right?

Let's start about a century ago, with John Philip Sousa, the composer. In 1906, he went to Congress to complain about the infernal technology industry and how it was going to ruin music:

"These talking machines are going to ruin the artistic development of music in this country. When I was a boy, in front of every house in the summer evenings, you would find young people together singing the songs of the day or old songs. Today you hear these infernal machines going night and day. We will not have a vocal cord left. The vocal cord will be eliminated by a process of evolution, as was the tail of man when he came from the ape."

Yes, the tech industry was going to kill music, because of "these infernal machines." Around that time, Thomas Edison, who tried to monopolize the entire "moving pictures" industry as both a content provider and a tech provider, freaked out over the idea of others providing machines that could show movies, claiming that if there were ten such movie "screen machines" in the US, it would kill the industry:

"If we put out a screen machine there will be a use for maybe ten of them in the whole United States. With that many screen machines you would show the pictures to everyone in the country - and then it would be done. Let's not kill the goose that lays the golden egg."

Jump forward to 1932 and that great technological innovation called "radio." Once again, fear permeated the entertainment industry, leading to calls for massive changes to the laws and complaints about how radio was killing the industry:

"Tin Pan Alley is sadly aware that Radio has virtually plugged up its oldtime outlets, sheet music and gramophone discs. The average music publisher used to get $175,000 a year from disc sales. He now gets about 10% of this. No longer does a song hit sell a million copies. The copious stream of music poured out by Radio puts a song quickly to death. The average song's life has dwindled from 18 months to 90 days; composers are forced to turn out a dozen songs a year instead of the oldtime two or three."

Evil stuff. Okay. Jump forward a few years, to the rise of cable TV. Once again, the MPAA freaks out, because some cable TV stations are "rebroadcasting" network TV. The MPAA argues in court that cable TV effectively kills off copyright law, as noted in a dissent in one of the key cases concerning the legality of cable TV:

"We are advised by an amicus brief of the Motion Picture Association that films from TV telecasts are being imported by CATV into their own markets in competition with the same pictures licensed to TV stations in the area into which the CATV - a nonpaying pirate of the films - imports them. It would be difficult to imagine a more flagrant violation of the Copyright Act. Since the Copyright Act is our only guide to law and justice in this case, it is difficult to see why CATV systems are free of copyright license fees, when they import programs from distant stations and transmit them to their paying customers in a distant market. That result reads the Copyright Act out of existence for CATV."

Jump forward a decade or so, and we have the infamous statement of Jack Valenti comparing the VCR to the Boston Strangler:

"I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone."

Around the same time, over in the UK, the British Phonographic Industry (BPI) - the equivalent of the RIAA - began its infamous campaign telling the world:

"Home taping is killing music."

Okay, how about the DVR? The wonderful device that made TV watchable and useful again? The entertainment industry attacked that big time, focusing its legal guns on ReplayTV, who it effectively forced out of business. As part of the arguments against Replay, the entertainment industry's lawyers claimed that:

"What's happening here is much more than just delaying the time in which I watch a show that I taped off the television. I'm delaying it, and watching it without commercials, and that is something that our courts have never said is acceptable."

Yes, watching TV without commercials goes against the law. Turner Broadcasting boss Jamie Kellner put it more succinctly:

"People who watch TV without commercials are stealing from the entertainment producers."

Okay. MP3 players? The thing that's such a huge part of the music industry today? Cary Sherman's RIAA did everything it could to kill them in its lawsuit against the Diamond Rio. From the RIAA's filing in that case:

"While the proliferation of MP3s over the Internet has been a serious problem for the recording industry, the scope of that problem has been bound by a natural limitation. MP3 files can be played only by computers, and enjoyed only while operating a computer. The introduction of the Rio devices - and a number of anticipated look-alike devices from other vendors - will change that by making MP3 files portable. The growth of illicit MP3 files will injure not only the record companies and artists whose work will be pirated, but also the music publishers, musicians, background singers, songwriters and others whose existence is dependent on revenue earned by record sales."

How about the XM + MP3 device that let paying subscribers to XM radio record what they listen to - just like you could record radio over the air or off a computer? Yeah, the record labels sued over that, claiming $150,000 in statutory damages per recorded song. And, finally, how about Viacom's attack on YouTube, claiming it was the equivalent of a "Grokster for video." While that case is still ongoing, Viacom has argued that if the district court ruling stands, it would completely destroy the value of content:

"If affirmed by this Court, that construction of Section 512(c) would radically transform the functioning of the copyright system and severely impair, if not completely destroy, the value of many copyrighted creations. It would immunize from copyright infringement liability even avowedly piratical Internet businesses."

Given this little tour through history, it's pretty damn funny to see the RIAA and MPAA and their supporters insisting that it's the tech industry which has a history of hyperbole on these subjects.

As far as I can tell, there isn't a technological innovation that has come along in the last century that the entertainment industry hasn't had a hysterical negative reaction to, even as it later turned out to be a massive help to the industry. Thus, when the entertainment industry seeks to totally overturn the basic technological and regulatory underpinnings of the Internet, over its latest freakout (rogue sites! cyberlockers!), forgive those of us who have seen this hyperbolic overreaction play out before, from pointing out that (a) the entertainment industry is totally and completely overreacting and (b) rushing into broad regulatory changes without the input or help of the tech industry is a big, big mistake.

As with nearly every technology discussed above, if the RIAA and MPAA would just stop freaking out and falsely believing it's a legal or enforcement issue, and recognize that it's all a business issue, then the tech industry can actually help them innovate, support new services and make more money. Instead, in typical hyperbolic overreaction fashion, they're seeking to kill the very infrastructure that is their path to solve their current financial woes. So, when the RIAA and the MPAA insist that "something must be done!" as quickly as is humanly possible to deal with the "threat" of so-called "rogue sites" domestically and abroad, we say back to them, "let's all take a deep breath."

And suggest that, perhaps it is they who are hysterically overreacting - as they've done for over a century.

The $8 Trillion Internet: McKinsey's Bold Attempt to Measure the E-conomy

Excerpted from The Atlantic Report by Derek Thompson

The Internet - that 2 billion-person, $8 trillion global economy - accounted for 21% of GDP growth in the world's largest economies over the last 5 years, McKinsey found in a report released this week.

As an entity, it accounts for more GDP than the Spanish or Canadian economies, and it's growing faster than Brazil. As a sector, it is now larger than these countries' agriculture or energy industries.

Sweeping statements about the size and growth of the Internet are tough to swallow. So here are three highlights from the new McKinsey report:

1. What is the Internet economy?

There is a lot of Internet to measure, with two billion global consumers and $8 trillion in total revenue. So McKinsey's report limited its scope to the online economy in the G-8 countries plus five more: Brazil, China, India, South Korea and Brazil.

It defined Internet activities as private consumption (electronic equipment, e-commerce, broadband subscriptions, mobile Internet, and hardware and software consumption); private investment (from the telecommunications industry and the maintenance of extranet, intranet, and websites); public expenditure (spending and buying by government in software hardware and services); and trade (which accounts for exports of Internet equipment plus business-to-business services with overseas companies).

2. How big is the Internet economy?

As an industry, the Internet contributes more to the typical developed economy than mining, utilities, agriculture, or education. In Sweden, fully one-third of economic growth in the five years leading up to the recession came from Internet activities.

For the entire G-8, the average was 21%. In an analysis of France since the mid-1990s, McKinsey found that the Internet created more than twice the number of jobs it destroyed.

Much of the Internet's contribution to our lives is nearly impossible to measure. For example, I use e-mail. How much is that worth to me? I can't even begin to say. I read hundreds of news sources a day. What is that worth to me, or to the news organizations?

Pricing this kind of thing is exhausting to think about. But since analyzing what the rest of us find "exhausting to think about" is McKinsey's job, their researchers looked at the "consumer surplus" of the Internet, concluding that the total annual benefit to the United States comes out to $64 billion.

3. Where is the Internet economy growing fastest?

The United States is the world leader in the online industry, grabbing 30% of global Internet revenues. But the UK is the world leader in online retail. The British spent $2,535 on e-stuff in 2009, more than twice the average of the world's largest countries and still 1.4 times the amount of the typical US shopper.

Sweden leads the world in Internet's contribution to GDP. Fully 6.3 of the country's economy is online - twice Germany, France, or India. In Russia, the Internet contributes not even one percent of GDP.

China and India have a peculiar Internet economy - in addition to the fastest growing Internet sectors. They are the only countries that McKinsey studied where private consumers didn't make up a majority of the industry. Instead, both countries rely on exporting online services for a plurality of their economies.

Cloud Computing Investment Soars towards $90 Billion

Excerpted from Fresh Business Thinking Report by Marcus Leach 

Big-spending global banks and members of the Open Data Alliance are investing heavily in cloud computing, which will see deployment triple in the next two years. 

According to a new report, the adoption rate of the technology is five times faster than broad market forecasts predicted and shows a growing confidence in the cloud services provided to businesses. 

Open Data Alliance, which is a group of over 300 companies with an annual $100 billion spend on IT, was formed last year to invest $50 billion over three years into the $90 billion cloud industry. 

"We're delighted by the rapid progress to set standards for cloud security and management, and collaboration with data center industry leaders to deliver open, interoperable cloud solutions," Marvin Wheeler, the Alliance's Chairman, told the Financial Times. 

There had been concerns over the security of the cloud, but Mike Small, member of security advisory group ISACA, has reassured people. Writing for The Guardian, he said that by making sure the ownership rights are clear there will be no such risks.

Who Did Coin the Term "Cloud Computing?"

Excerpted from Multichannel News Report by Leslie Ellis

In the October 31st edition of MIT Technology Review, writer Antonio Regalado delves into the origin of this ample ingredient in tech jargon: "Cloud computing."

His research puts the date at November 1996 - almost exactly 15 years ago. That's when a renegade group of technologists inside Compaq Computer (later bought by Hewlett-Packard) coined the phrase as a strategy to sell more servers to Internet service providers (ISPs).

Not Google in 2006. Or Amazon, with its Elastic Compute Cloud (abbreviated "EC2"). Or Dell Computer, which tried to trademark the term in 2008, only to get lambasted by the ever-vocal computer programming community.

Given the reach of the publication and the incendiary nature of such a topic, I'm betting a dime that Regalado gets lots and lots of comments (and e-mail flames) on his linguistic time stamp.

Think of this in plain old cable terms. Ever ask an old-timer who built the first cable system and where? It always comes out at least two ways: Oregon and Pennsylvania, in a dead heat.

Besides, it just seems to me that "cloud computing" must twist back farther than 15 years.

Here's how the National Institute of Standards and Technology recently defined the term: "A model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications and services) that can be rapidly provisioned and released with minimal management effort or service-provider interaction."

"Or service-provider interaction?" Not to quibble with the nation's standards-setting body, but for the readers of this publication, and as this column has pointed out before: Cable is a cloud. That's even more the case these days, as operators and programming networks race to place clickable icons on all of our screens that can play video, but aren't necessarily connected via a set-top box.

Think about it: Headends are morphing into "data centers," and every operator in the land is readying its "as-a-service" suffixes - in the cloud world, these go by "infrastructure-as-a-service (IaaS)," "software-as-a-service (SaaS)" and so on.

That brings into question whether "cloud computing" is synonymous with "network-based computing." I'd say yes.

Regardless of where you stand on the matter, you can't ever go wrong in reading MIT Technology Review, which last year brilliantly asked whether what's going on is a cloud - or a swamp.

One line stood out to me in Regalado's piece: "'Cloud computing' captures a historic shift in the IT industry as more computer memory, processing power, and apps are hosted in remote data centers, or the 'cloud.'"

So, be super-nice to your IT people. They're the folks who will make sure you're a cloud, and not a swamp.

Apple's $7 Billion Cloud Warchest

Excerpted from TelecomTV One Report by Guy Daniels

Despite a lackluster start for its iCloud service, financial reports suggest Apple could be ramping up its cloud strategy and spending big to make it a success.

According to Apple's latest financial documents, the company has allocated $7.1 billion to non-retail capital expenditure next year. The biggest beneficiary of this warchest could well be iCloud, as Apple moves away from IaaS outsourcing with Microsoft and Amazon.

Barclays Capital analyst Ben Reitzes was quoted on All Things D as saying:

"We believe Apple gets some help for partners in delivering iCloud, but we believe the company would like to do it all itself. We envision iCloud's capabilities further expanding with potential moves into entertainment. In our opinion, iCloud is one of Apple's most important services since the launch of the iTunes store in 2003, given its role as a convenience factor for customers - fostering loyalty within the Apple ecosystem and driving the 'halo effect' that helps sell more devices."

It was The Register that first revealed that iCloud was being run on both Microsoft's Azure cloud service and Amazon's AWS. Here's what the news site had to say back in September about the iCloud infrastructure.

"Apple is understood to have elected to outsource the plumbing of iCloud because its core competence lies in 'building great consumer experiences'. It didn't make sense for Apple to become a cloud provider. By selecting two suppliers, both very different in their services and their level of maturity, Apple is reducing its risk of becoming hostage to a single supplier."

The Register cited the cost and delay involved in building supporting infrastructure as the reason behind Apple's outsourcing move. It estimated the cost for a full-scale data center roll-out as being around $1 billion. Microsoft, on the other hand, has over 24 data centers running Azure worldwide. However, Apple is currently building a $500 million data center in North Carolina, with plenty of capacity to support iCloud.

Apple's reticence to jump headlong into a fully-owned and financed cloud service is understandable. Let's not forget the disaster that was "mobileMe" - Apple's first attempt at a cloud service back in summer 2008. It was so bad that CEO Steve Jobs released a memo to all staff and indulged in a spot of high profile firing:

"The launch of MobileMe was not our finest hour. The MobileMe launch clearly demonstrates that we have more to learn about Internet services. And learn we will. The vision of MobileMe is both exciting and ambitious, and we will press on to make it a service we are all proud of by the end of this year."

It took Apple a further three years before it felt it was ready to step back into the cloud arena with the launch of iCloud. My own personal opinion, as a lifelong Apple user, is that it should have waited another year. At the moment, iCloud is light on features - we're still waiting for the much-vaunted iTunes Match service, and its Documents in the Cloud feature is limited to its iWork software (and no self-respecting business user would touch Pages or Numbers with a barge-pole.)

Here's how Apple describes its iCloud service, in its SEC filing of last week:

"In October 2011, the Company launched iCloud, its new cloud service, which stores music, photos, applications, contacts, calendars, and documents and wirelessly pushes them to multiple iOS devices, Macs and Windows-based computers. iCloud's features include iTunes in the Cloud, Photo Stream, Documents in the Cloud, Contacts, Calendar, Mail, automatic downloads and purchase history for applications and iBooks, and iCloud Backup."

Pretty basic; nothing given away here. So we need to dig deeper. Horace Dediu, the Finland based analyst behind the Asymco website, took a look at Apple's balance sheet and SEC 10k filing, and how they related to its tangible assets, such as data centers and store investments.

"The data shows that there is a consistent pattern of investment in pursuit of strategic goals: extending reach into distribution through stores, extending services through cloud infrastructure spending, and extending control over the supply chain."

Money spent on store expenditure over the last two years was pretty much in line with budget, suggesting that Apple's store roll-outs are predictable and work to an agreed schedule. But it's not the same for Machinery and Equipment (M&E) and Real Estate, where Dediu finds that Apple typically over-spent what it forecast.

"This suggests that unlike retail, production for Apple has been far less predictable and it might imply that production was higher than expected as well. Some of that might be due to increased costs, but some may be due to changes in capacity."

Apple has stated in its regulatory filings that it will spend $8 billion on capital expenditures in the next 12 months, an increase of 73% from last year. While Apple expects retail expansion costs to increase 50% to $900 million, it expects M&E costs (i.e., infrastructure) to increase 110% to a staggering $7.1 billion.

Just how much of that $7.1 billion is earmarked for an expansion of its North Carolina data center - the future home of iCloud? - is not revealed. After all, what would Apple be without its George Smiley levels of secrecy?

Enteracloud Identifies Top Five Emerging Cloud Computing Trends

Excerpted from TMCnet Report by Mini Swamy

Enteracloud, a provider of cloud computing and cloud connectivity solutions, recently analyzed more than 35,000 online forum and social media posts by CIOs and CTOs and concluded that the impact of cloud computing was definitely gaining worldwide traction. It released a whitepaper that documented its findings regarding cloud usage.

The whitepaper found that the overwhelming majority, vendors and users alike, were inclined toward adopting the cloud and far outnumbered the number of dissenters.

"The cloud has become an expectation rather than a novelty in IT today, so it's not surprising that discussions among top IT pros are taking a new turn, focusing on the type of cloud solution that can be of most benefit to a company, the best ways to deploy a cloud strategy and the kinds of value-added services that can be bundled with that cloud offering," says Tim Doscher, CTO of Enteracloud.

According to the whitepaper, private cloud deployment was accelerating rapidly as companies moved beyond the traditional colocation centers and tended to focus on "service stacks" and frameworks that enhanced business agility while reducing cost.

Another interesting trend was that hybrid clouds were preferred by large and mid-sized enterprises. Companies appeared to be inclined to architect applications with sensitive information to reside within the premises while it deemed messaging, CRM, and collaboration applications more appropriate for the public cloud. Doscher advocated the use of The Enteracloud Enterprise Cloud Platform to build a blueprint according to their specific needs.

Demand for the consolidation of cloud delivery models - IaaS, PaaS and SaaS - in the form of a unified stack as a service delivery model seemed inevitable. An elastic infrastructure for building and running custom applications appeared to be the popular demand.

Application-specific cloud communities are increasing, especially in Application Performance Regulatory and Location-Based Services Communities. Last but not least, organizations are once again looking toward managed services to reassess their resource strategy.

In recent news, TMCnet reported that Enteracloud entered into a non-exclusive partnership with Time Warner Cable, a leading North American network and cable provider, to deliver streamlined Hosted Private Cloud Solutions to small business and enterprise customers in Southern California.

Tech Giants Battle to Control Your Living Room

Excerpted from PC World Report by Daniel Ionescu

If you want thrills, forget the prime-time action dramas on network television this season. The real high-stakes TV action is taking place among tech titans battling it out for boob-tube dominance.

Amazon, Netflix, and YouTube are all competing to beef up their content offerings. Meanwhile, Apple and Google are racing to deliver new TV technologies for your living room.

The future of television consumption is at stake. Since the rise of online video, TV companies have feared the impact of people dumping their cable subscription in favor of content they watch on the Internet.

But so far, no mass defection has taken place: according to the latest earning reports by major cable companies, most American households still pay for their cable TV subscriptions. For the most part, analysts say, people who are cutting the cord and dropping their subscriptions are doing so not because the alternatives are so attractive, but because they can't afford the monthly bill. In fact, most of them don't have a broadband connection.

Old-school TV is doing just fine at the moment, with around 100 million cable subscribers - a lucrative market that technology companies hope to tap into by changing the way we enjoy video content. In addition, more than 70% of online Americans visit video-sharing websites such as YouTube, according to Pew Internet research, so demand for good-quality online video--and new ways of consuming it - is on the rise too.

That's where content services and technology companies come in, hoping to offer consumers a convenient way to watch whatever they want whenever they want it. On one front, streaming services such as Hulu and Netflix are securing deals with content creators to provide viewers with more than just old movies and TV series. On another, Google has revamped the software for its web-connected Google TV, and Apple is said to be developing products that may revolutionize our interaction with our television sets.

The three major players in the content streaming arena are Amazon, Hulu, and Netflix. All are battling to get exclusive rights to certain studios' movies or certain networks' TV shows. They hope that exclusive content will entice users to join or stick with their service.

For consumers, exclusive content is not a particularly welcome development, since it means that they may have to subscribe to a number of services, each with its own fees, to gain access to the best movies and TV shows available.

Amazon's Prime Instant Video service is basically an entertaining add-on to the online retailer's $79-per-year fast shipping service. Prime Instant Videos work on computers and on nearly 200 models of set-top boxes, Internet connected TVs, and Blu-ray players, including the Roku box and Google TV devices.

Netflix charges $8 per month to let you stream advertising-free movies and TV shows on consoles (including the Wii, PlayStation 3, and Xbox 360), as well as online, on iOS and some Android devices, and on the Apple TV, Roku, and TiVo boxes. Hulu Plus also charges $8 per month and works on as many devices as Netflix does, excluding Apple TV.

Yet in their current form, these streaming services aren't yet ready to replace your cable provider. For one thing, many new movies are unavailable for streaming for at least one month after they're released on DVD. And TV series are often embargoed until a month after the last episode of a season has aired.

But if you like reruns and older TV shows, streaming services can be a great supplement to your TV subscription. Cases in point: Netflix and Amazon last week unveiled separate deals to expand their lineups of Disney and ABC series, including "Alias" and "Switched at Birth," plus old episodes of "Grey's Anatomy" and "Desperate Housewives," and all episodes of "Lost," "Brothers & Sisters," and "Ugly Betty."

If you don't want to pay increasingly pricey monthly fees for streaming TV and you don't mind watching ads, consider YouTube, which has some interesting plans to shift from its current reliance on user-generated kitten clips to high-quality video. The Google-owned site is set to unveil some 100 channels of original programming from partners such as the Wall Street Journal, Madonna, and Ashton Kutcher. These channels, for which YouTube is reportedly paying producers some $100 million in advance advertising revenue, are set to debut early next year.

Apple and Google, the ultimate mobile-space rivals, are making slow but steady progress in their campaigns to penetrate consumers' living rooms, with set-top boxes to complement cable or satellite receivers. Google's initial effort, the Google TV-equipped Revue box, was a flop at $299 - but this summer Logitech lowered the Revue's price to a more palatable $99.

And late last month, Google began pushing a free update to Google TV OS, which includes (at launch) some 30 new TV-optimized Android apps. The apps consist mainly of casual games and screensaver-like animations (a faux fireplace, for instance), but apps on your TV have the potential to become the channels of the future. For example, video content providers might launch a video app in the Android Market that offers you either free, advertising-supported content or subscription-based, advertising-free content. What the subscription price turns out to be is one of the biggest unknowns that may help determine whether this approach will stick.

So far, CNBC, CNN, Fox, and Wall Street Journal are on board with apps. Apps on your TV will help transform Google's set-top box OS into a casual gaming platform (eight simple games are currently available, including an Angry Birds clone).

Still, don't place your bets on Google TV until Apple has taken its shot. Steve Jobs biographer Walter Isaacson reports that, at the end of his life, the Apple CEO was excited about a project to create an "integrated television set that is completely easy to use." The Apple set wouldn't need to include complex remotes or a bunch of set-top boxes (STBs), Jobs believed.

It's unclear whether Apple's approach will take the form of an integrated television or an inexpensive box - essentially an overhaul of the currently available Apple TV. The new Apple TV may ship as early as 2013, according to reports, and it could be based on Siri, the voice-enabled virtual assistant technology found on the iPhone 4S. A Siri-controlled TV would not be without difficulties, however, as my colleague Ian Paul notes. Siri needs a permanent Internet connection to work, so if your connection went down, you wouldn't be able to control the set, unless there's a backup pushbutton remote.

Who's going to prevail in the battle for your living room? It's too early to pick winners among the competing companies. But the winning approach will surely give you much more control over your entertainment options - allowing you to pay for only the content you're interested in and letting you watch that content when you want to.

The Eight Things "The Simpsons" Can Teach You about Cloud Computing

Excerpted from ReadWriteWeb Report by David Strom

When "The Simpsons" started out back in 1987 as animated shorts for the Tracey Ullman show, no one knew they would become this powerhouse and continue to this very day.

Given that cloud computing is now a higher priority than overall security (at least according to this E&Y report), it is time to think more creatively about cloud deployments.

How can we learn from this cartoon's success in our own enterprise IT departments as we get ready to deploy cloud computing? Here are a few ideas:

Be like Bart: under-promise and over-deliver. Bart is the perennial slacker, but that doesn't mean goofing off at work. Instead, make sure your cloud project doesn't promise the moon and the stars, and can deliver on the basics.

Test and test again. Just as the idea for the show started small and grew into its own show, so should your cloud deployment. Take some time to try out various vendors, and make sure that they offer what you need.

Don't be afraid to piss off someone in power. If you are going to really understand cloud computing, chances are you are going to skewer someone's sacred cow. But don't let that stop you, or put a kibosh on your efforts. Some of the more memorable Simpsons episodes used these plot lines.

Find the D'oh! moments and make sure you share them with your team. Like Homer, we all do some stupid things, but the key is learning from our mistakes. The trademark Homer expression can be a useful reminder here that when you slip up, make sure you know why and how not to have it happen again. This goes for a lot more than just cloud computing, but recognize that we are all new to some aspects of this technology, so mistakes will happen.

Not every cloud service has the same color. Unlike the yellow-hued Simpson characters, not every service is going to appear the same to you. The whole idea of cloud computing is being able to mix and match services with ease. Spend some time looking at how they interact with other vendors' offerings and whether you can combine the parts to be bigger than the whole.

Understand your corporate culture. One of the reasons why the Simpsons works so well is that it makes fun of our culture from many different angles. Keep your own corporate culture in mind when you are putting together your own cloud deployment so you can match your risk levels and understanding of data models with the technology that you are selecting.

Just like Springfield, the cloud can be anywhere. One of the charming aspects of the show is that you never really know where Springfield is. But this can be a problem for your data in the cloud. Make sure you vet your vendors and know where their data centers are located, and how you are connected to them.

Unlike the nuclear plant in the show, prepare for disasters. The movie plot line and many of the shows posit a nuclear disaster or some such mishap and the hijinks that ensue. Spend some time thinking through what this means for your cloud data and what backup and recovery systems need to be in place, and what your recovery time objectives should be.

Coming Events of Interest

Future of Television - November 17th-18th in New York, NY. Top television and digital media industry executives discuss the increasing importance digital media for the future of the television industry. Topics include viewer trends; programming for non-traditional platforms including online video, VoD, HD, IPTV, broadband and mobile.

2012 International Consumer Electronics Show (CES) - January 10th-13th in Las Vegas, NV. With more than four decades of success, the International CES reaches across global markets, connects the industry and enables CE innovations to grow and thrive. This is the world's largest consumer technology tradeshow. 

CONTENT IN THE CLOUD at CES - January 11th in Las Vegas, NV. Gain a deeper understanding of the impact of cloud-delivered content on specific segments and industries, including consumers, telecom, media, and CE manufacturers.

2012 NAB Show - April 14th-19th in Las Vegas, NV. From broadcasting to broader-casting, the NAB Show has evolved over the last eight decades to continually lead this ever-changing industry. From creation to consumption, the NAB Show has proudly served as the incubator for excellence, helping to breathe life into content everywhere. 

THE CLOUD COMPUTING CONFERENCE at NAB - April 16th in Las Vegas, NV. Don't miss this full-day conference focusing on how the software sector is addressing security and reliability concerns, as well as the impact of cloud computing solutions on all aspects of production, storage, and delivery of television programming and video.

Copyright 2008 Distributed Computing Industry Association
This page last updated November 20, 2011
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