Eric Knipp

Large enterprises are very interested in the PaaS value proposition, but much less interested in making strategic commitments to public PaaS. This is generally true of public cloud overall. Only in the SaaS area do we see substantially less durdling by our enterprise clients. My working theory is that this is mostly because popular SaaS options are a cut above their packaged counterparts in capability, usability, and spending flexibility; plus, the business won’t take no for an answer. The differentiation available in some SaaS is too alluring to ignore. 

The same has so far not proved consistently true for public cloud IaaS and PaaS. To be sure, these areas are growing; recent financial analyst AWS revenue estimates are impressive indeed. Step back a minute and let the reality sink in that the market for cloud services is at least as large as the existing market for enterprise IT (hardware, software, and hosting) itself – then, the AWS number doesn’t look nearly as big. There’s still a lot more cash burned in traditional data centers than there will be in public cloud IaaS and PaaS for some time. We can argue until we’re blue in the face about whether that’s a good thing or not, but it is what it is…

And, what IT is, at least with respect to PaaS, is a growing enterprise desire for Private PaaS. Mock it at your peril – just like private cloud, the ship has sailed and will be pulling into a harbor within an enterprise data center near you. The value proposition for Private PaaS seems compelling – an increasing number of stories suggest that Private PaaS can get you both reduced operational burden and higher developer productivity. As anybody who reads my blog knows, I think that developer productivity is a big deal.

Private PaaS is coming, but how do you adopt it if you’re the “classic” enterprise IT organization with a diverse portfolio of home-grown applications and integrations, running on what I will for the purposes of this discussion call “classic” middleware? Do you wait around until 2015 (or later) for Java EE 8 to bring you the cloudy features you’re looking for, now that we know for sure that Java EE 7 won’t have any? Or, do you just wait for your preferred IT megavendor to get around to offering you a for-real, multitenant, cloud-native, Private PaaS that goes beyond simply slapping a pre-built middleware stack onto a virtual machine?

If for your enterprise, technology is just a necessary evil, a cost of doing business, then the answer is probably yes: wait until the early movers have wrung all the new value from the PaaS model and pick it up when prices are cheap and the systems commoditized. My guess is nobody reading this blog feels that way about IT.

If for your enterprise, technology is expected to expand the business, to serve as a differentiator in your market, to deliver what MBA types like to call competitive advantage – then Private PaaS can no longer be ignored.

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Category: Cloud Cloud Application Platforms Private PaaS     Tags:

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I am heading back to Germany after a few fun days in London at the Gartner AADI conference. We had a good show, with a high level of attendee enthusiasm and interaction. I had good 1-on-1s and a very engaged (if small) set of workshops on .NET in the cloud, private PaaS, and cloud application architecture. I have a few quick takes on my experience.

Professional Effectiveness is a Big Issue

At lunch today I presented to a set of interested attendees on Gartner for Technical Professionals (GTP) – our value proposition, resources available to clients, and so on. In a nutshell: as GTP analysts our mission is to accelerate time to competency for the solution architects using our material. When you get a new project, we provide objective advice and how-to guides that will shorten your effort’s time-to-value.

Among our technical coverage areas (which include application platforms, data centers, cloud computing, mobility, social software, and so on) we also include one focused on “soft skills” which we call Professional Effectiveness. The idea here is to help the propellerheads communicate more effectively, manage up better, manage their careers more competently and just generally function at a higher level than their purely technical skills might suggest. The attendees to our GTP lunch focused laser-like on this topic, sharing with us numerous challenges around staff development. This is a great way to leverage GTP research and I was glad to see it. As a broader trend, I think it bodes well for the next generation of techies to have engaged managers who care deeply about professional development. And, it’s neat to see how our PE agenda is helping to shape at least a small number of the next generation of IT Leaders.

.NET Shops are Interested in a Hybrid Cloud Future

My workshop on “Choosing .NET Platforms for Cloud Computing” was my best session of the conference. Workshops are a great forum, providing an extended time (90 minutes) for analyst expository on a topic, incorporating several exercises and group discussion. The intimate environment of a large boardroom makes for a crackling atmosphere when the audience is truly engaged, as the attendees of my session were. We worked through the framework I developed for my soon-to-be-published paper on assessing .NET alternatives.

Capacity utilization rose to the top as the most important consideration among session attendees, followed closely by reduced time-to-market. Further, all reported very strong interest in hybrid cloud deployment models that preserve the enterprise’s option to choose runtime location at a later date. Basically, .NET shops represented in my session are looking to get elastic, cloud-native solutions out the door as fast as possible but without compromising portability by mitigating vendor lock-in as much as possible (or as much as is possible once you’ve already locked yourself to Microsoft by virtue of the choice of .NET). These were interesting findings for me, and I didn’t see as much desire for lift-and-shift style cloud adoption as I expected.

API Management is Really Popular

As usual, 1-on-1 topics were diverse and interesting, but the most often asked question had to do with Web APIs. API management came up frequently but it was good to hear more clients asking about API design issues, which I think are so much more important than which API product suite you end up buying (or consuming as a cloud service). API management has been a hot space lately and there was no shortage of vendor representation at the event, but attendees were also very interested. I saw a great appetite for my API design paper – which I hope will prevent some GTP clients from making major design mistakes.

Did you attend Gartner AADI? What were your most important take-aways?

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According to Forbes, the “API market is on fire“. My conversations with Gartner clients on this topic would seem to confirm the article’s top line. In the first quarter, only application PaaS crowded out APIs as the most popular topic for my client dialogues (and that’s counting the fact that for the month of March, I picked up all of a departing analyst’s PaaS client calls). I have covered APIs at Gartner since mid-2009 and have seen a steady growth in client interest. If you’re an API aficionado, that’s great news.

Now, for the not-so-great news. A great many API initiatives from non-technology companies suffer from poor, or entirely absent, design. Beside the usual REST-vs.-SOAP impedance mismatch that experienced object-oriented developers have to work out, there is a darker, more sinister force causing problems with enterprise-created APIs: laziness.

We want to get our APIs out the door as fast as we can so that we can start leveraging them, monetizing them, seeding the market with them, powering our mobile apps with them, and so on. In our haste to get the API to market, we can easily be tempted to take a short cut – simply expose our existing domain models (which include our databases, web services, SOA repositories, and so on) to the world with a thin veneer of REST generated by some development tool. Presto! API. Not so fast.

The practice of “domain model dumping” is sure to be a scourge of poorly-designed APIs in the coming years, especially if the recent acquisitions have lit a fire under the hindparts of previously oblivious CIOs and CTOs. As the API landscape becomes increasingly crowded, developers will discover that they have several (or even many) functionally identical APIs to choose from – so don’t give them a reason to avoid yours. Gartner’s approach to API design focuses on several key factors, in an approach we call Consumer-Driven API Design.

A Consumer-Driven approach decouples API design from the underlying data model it exposes to its intended audience. It forces the design team through a repeatable and transparent methodology that produces demonstrably better outcomes than an ad-hoc and hackneyed approach. And the best part: you don’t even need a fancy-pants API management product to do it. If you’re interested in getting better at API design, as a Gartner for Technical Professionals client you can have a gander at my document on the topic, and follow it up with a conversation with me.

Finally, I am still looking to hire a couple of great analysts in the UK. Click here if you’re interested!

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Category: Web APIs     Tags: API

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While attending the Gartner BI Summit in Grapevine, TX yesterday I had a meeting with a client that made me facepalm a little.

The client in question was telling me about his need to educate his development staff in a number of critical areas, ranging from application lifecycle management, to data access patterns, to SOA governance, and on. The organization he works for is in the middle of a major hiring binge, and within the 200+ IT group there are few technologists with more than a year’s experience inside the company. This is a challenging situation, even when you can assume (as you should be able to) that most of your programmers know the difference between a library and a service! Many of the programmers in this organization prefer to create code libraries rather than services, and most of them don’t understand why they should build a service instead of a library. So, let’s get into that here.

In a nutshell: a library is shared code that you compile into your application. A service is a shared capability that you access from your application:

I am a (mostly) strong proponent of relying on services whenever possible, instead of building custom code libraries for inclusion in many programs. The agility, reuse, and transparency benefits of a service are just too hard to ignore. Having said that, I recognize that there are specific cases where creating libraries could be more appropriate:

• When you’re building an application that will be deployed to a device with inconsistent network access (making remote service consumption unreliable)
• When you’re building an application that will be hardened with wrapper technology for security reasons (and network access to remote services is seen as an unacceptable compromise)

A few more details that I quickly came up with which you might find worthwhile (let me know if you have any to add here):

A final word.

Ever thought about being an analyst? You’re in luck! I am hiring two analysts in the UK (preferably the Greater London area) to join the Application Platform Strategy (APS) team. If you think you’d like to cover application design, development, and delivery for fun and profit, have a look at this link.

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Category: Applications Programming     Tags:

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PaaS reduces the incremental cost of a custom application. Because demand for custom applications is elastic with respect to price, maturation and proliferation of PaaS will drive growth in custom application development.

The Debate.

I’ve been engaged in a discussion with a colleague about the relative importance of application development vs. application delivery. This might seem like splitting hairs but I assure you, it is not:

Application Development - Designing, coding, testing, implementing, and maintaining a custom software solution over time.

Application Delivery – Selecting, implementing, and maintaining a software solution over time. This may or may not include application development and that development may be part of a complete custom system or it may simply be coding a few connectors as part of an integration effort.

The crux of my colleague’s hypothesis is derived from a simple and intuitive idea: the proliferation of cloud services represents the biggest outsourcing maneuver in IT history and will lead to the decline of internal Application Development because “the business” will instead choose from a smorgasbord of SaaS offerings that model every conceivable business process. Implicit in this assumption is the decline of enterprise IT in general and operations in particular (if you’re using SaaS you don’t much need a data center). This is future state stuff, 3-5 years down the road at least. And even then hybrid IT will be around for a while. Let’s continue without getting into the hybrid private/public cloud war zone, shall we?

I have a difference of opinion. While I don’t debate that “the business” will have more “packages” to choose from (loosely referring to packages as both traditional deployed solutions and cloud-sourced SaaS), I also believe that enterprises will be developing more applications themselves than ever before.

Economics 101.

The reason why I believe a golden age of enterprise application development is upon us is Economics 101: elasticity.

A good or service is considered to be highly elastic if a slight change in price leads to a sharp change in the quantity demanded or supplied.

Gartner analysts spend time on the phone talking to clients. A lot of time. Not once have I or my close colleagues ever heard a client say any of the following:

• We don’t have a backlog of desired applications with provable ROI.
• We can’t find any applications that we think are a good idea but without provable ROI.
• We don’t need any new applications. We’re all out of ideas!

No, if you’re in an Application Development or Application Delivery organization you’ve never heard this stuff. In fact, you’ve heard the opposite and your daily life is at least in part about ignoring managing demand. The business doesn’t stop making new demands but rarely does it ask for existing stuff to be decommissioned.* Its a continuous effort to get the resources to build the stuff with provable ROI that has by hook or by crook managed to ease its way to the top of the prioritization pile. The fact is, I can’t think of a single organization that doesn’t have a big backlog of applications it’d like to get delivered.

Furthermore, the backlog is even bigger than you think. By default, people self-edit and don’t put forward ideas for which they know there is no value proposition. If it doesn’t have a positive ROI, it doesn’t even get on the list.

But what if the incremental cost of a new application were to fall – dramatically? What would happen then?

Application Development and Elasticity.

I submit that the demand for applications is elastic with respect to price. Meaning that as the incremental cost of a new application falls, enterprise demand will increase. I submit as evidence:

• The fact that application delivery prioritization in most organizations has ROI as the #1 driver after compliance.
• The fact that applications without a positive ROI don’t even get considered (unless compliance).
• The fact that SaaS and Web startups have exploded since the incremental cost of delivery decreased (thanks to IaaS and then PaaS).

The last point I find the most instructive because it is the one that my colleague is arguing in favor of. He believes that precisely because SaaS is so abundant and cheap there will be fewer applications developed in-house in the future. I say just the opposite:  the drivers that make SaaS cheap also reduce the incremental cost of applications developed in-house.

PaaS and Cheap Development.

Quite simply, a good PaaS makes development cheaper. That’s why you see so many startups using PaaS as the market matures. PaaS is all about outsourcing the plumbing work so that developers can focus on building the business logic and important features that differentiate one application from another. Let me say that very clearly:

The single best way to reduce the cost of application development is to improve the productivity of your application developers.

The story of platforms the last decade is one of increased developer productivity. Its the main reason why we have Ruby on Rails, Groovy on Grails, Node.js, and on and on. It’s why we have cross-platform development tools like Appcelerator, Sencha, PhoneGap, and on and on. It’s why we pay certain developers more than others (well I guess not everybody does that – which is a big mistake but that’s a conversation for another time). You know in your gut that a highly productive developer isn’t just a little bit more valuable than an average developer – he’s ten times more valuable than the average developer (and more recent research puts this even higher). Productivity is the single most important area of cost optimization for application development today. The PaaS value proposition is almost completely focused on productivity.** It is a match made in heaven.

Build, Buy, Borrow, Steal, Rent, Etc.

But back to the sourcing question. Because the perceptions that drive enterprises to develop their own applications aren’t changing, I expect to see even greater demand for new custom applications than in the past. What are those common perceptions?

• Available packaged solutions are not suited for my company or industry
• I can do it cheaper or better with my own development staff
• My business processes are top secret and there’s no way I’m handing them to an outsider

I’m not debating whether those perceptions are right or wrong. They are what they are. And they haven’t changed in forever, and the cloud isn’t going to change them either. Let’s call them human nature. Taking into consideration human nature and economics 101, the outcome seems pretty obvious:

• PaaS reduces the incremental cost of a custom application.
• Enterprises have a backlog of applications without adequate ROI under old cost assumptions.
• Demand for new applications will grow as cost assumptions shift downward.

It’s PaaS-O-Nomics. As PaaS matures we will see more applications developed, period. Whether from Web startups, SaaS providers, or enterprise IT organizations – it is a rising tide that lifts all development ships. So the correct answer isn’t Application Development vs. Application Delivery – it’s both.

I’d love to hear your opinion. Am I right? Am I wrong? Is there another story that I’m entirely missing?

—

* Shameless plug: Val Sribar and I will be presenting on the topic of preparing to address future demand while simultaneously addressing the existing application portfolio in our Apps 2020 presentation at Gartner Symposium.

** I recognize that there are numerous other good reasons to consider PaaS, including geographic distribution, quality of service, fault tolerance, and so on. But for most organizations productivity should be the only thing they think about because it is all you need to think about to make the right decision, public or private.

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Category: Cloud Cloud Application Platforms Programming     Tags:

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I just returned home to Dallas after participating in my first Gartner Catalyst conference. The event was impressive with tons of content and almost 1800 attendees on-site, not including Gartner staff. I’ve presented at a number of Gartner Symposia and Summit events and I was struck by the deep level of attendee engagement at Catalyst. Our attendees are in the midst of mobile, cloud, and big data initiatives and it was great to hear about their experiences and challenges in my conference sessions, roundtables, and of course copious analyst-attendee 1-1 sessions. As I cover Web APIs in depth these days (and to a lesser degree mobile development) I thought I would share my top 3 “aha” moments from the conference, based on attendee feedback and questions:

The mobile bone is connected to the Web API bone. I’ve advised for some time that clients consider a Web API as the first step of a mobile development initiative, in particularly one that depends on connections to existing back-end systems that have not yet been ‘mobile enabled’. My conversations at Catalyst make clear that practitioners have come to this conclusion as well and are embarking on a variety of Web API initiatives in support of mobile app enablement. I have one further piece of advice beyond establishing a Web API at the outset of a mobile app initiative – don’t treat it as just a part of or infrastructure for your mobile app, but as a product in its own right. Done well, your Web API will power multiple mobile apps, partner integrations, and Web applications, but that requires a commitment to design that is easy to skip if you think you’re just doing it as a one-shot deal for a single app.

The majority of Web API initiatives leave versioning for later. I believe this is a dangerous idea for a variety of reasons. First and foremost, if you run just one version of an API you risk introducing a breaking change anytime you extend it. While you can potentially work around this with a very robust set of test cases (which I would strongly encourage), it is easy to paint yourself into a corner when you are unable to fix a bad implementation that seemed like a good idea at the time. Over time your code gets crufty and filled with technical debt and eventually you might be forced to declare bankruptcy – basically starting over with a new Web API and disenfranchising all of your existing API consumers all at once. On the flipside, versioning isn’t something you should automatically commit to. Running multiple versions has its own costs – multiple code bases and the overhead that comes with that, multiple groups of API consumers and the service levels you must provide them, and so on. My advice on this one is just to take it seriously – if you choose not to decide, you still have made a choice.

Consuming Web APIs from external providers can be a serious challenge. If you deal with a lot of niche players with screwball ideas about Web API design you have your work cut out for you. While the cloud and social leaders like Facebook, Salesforce.com, Twitter and so on get a lot of pub for the quality of their Web API designs, there are myriad small SaaS providers who treat the Web API as an afterthought. Understandably, they instead spend their R&D dollars on slick GUIs and worthy business processes which the business selects without even considering integration. If you are unlucky enough to be asked to integrate some of these niche apps with your existing systems it isn’t going to be a lot of fun, especially if you use the brittle point-to-point style of integration. My advice is that you consider using a gateway to shield your applications from direct exposure to external Web APIs.. this will provide you a single logical layer to deal with and the better API gateways on the market can do some basic transformations and quality of service improvements that allow you to homogenize the interfaces somewhat, which can be very useful if you’re part of a larger team that delegates the business logic implementation to different hands than the actual service consumption/integration.

Web APIs are growing in popularity and that makes it a fun time to cover them. Web API gateways, servers, and management technologies are proliferating at the hands of cloud and product vendors alike. If you’re a Gartner for Technical Professionals client I would love to talk to you about it.

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Category: Web APIs     Tags: API

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It is a bittersweet thing to say goodbye to a great team member while opening the door for a new, potentially great team member. Sean Kenefick is leaving our team to pursue entrepreneurial interests. Sean has done a great job covering ALM, DevOps and other software development life cycle issues. I wish Sean all the best in his new focus and I hope that our professional paths will cross again.

We now have an opportunity to bring a great newcomer to the Application Platform Strategy (APS) team. Our team covers every aspect of application development (AD) you can imagine – from middleware, to mobile, to user experience, application architecture, cloud platforms, business process management, SOA, agile and SDLC practices, and so on. If you’re a solution architect seeking guidance on AD-related technology and practices we are the best group in Gartner to speak with. We’re looking for one more great analyst or analyst wannabe to fill out the team.

We’re not looking to “replace” Sean. While there’s clearly an opportunity to address a gap in our coverage, we’re looking for the “right person” more than the “right coverage”. When we’re qualifying candidates, we will closely examine:

• Depth of practitioner experience
• Customer-centric thinking
• Demonstrated willingness to take a position, articulate it well, and engage others in doing so
• Ability to write, including technical documentation, books, and articles
• Ability to verbally communicate, including presentations for large and small audiences
• The right temperament and a heavy dose of intellectual curiosity

If you’ve always wanted to be an analyst but never had the courage to ask, this is your opportunity. Please use the below link to learn more about the job, and feel free to contact me or Anne Thomas Manes directly if you want to find out what being an analyst is all about.

Application Platform Strategy Analyst – Gartner Research

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Yesterday I had the good fortune to attend a breakfast talk given by Cowboy great Drew Pearson at the SMU campus here in Plano. Besides earning a place in the Dallas Cowboys Ring of Honor last year in recognition of his NFL greatness, Drew is a successful marketing executive, life coach, and motivational speaker. Drew gave a talk on the subject of identity. Until I saw a post from my colleague and friend Tom Austin on the subject of digital vs. personal self, I had no plans to blog about Drew’s talk. Tom poses several questions:

• Does your digital self reflect your real-world self?
• Is it desirable or even possible to separate your personal self from your digital self?
• How do you deal with this challenge?

Yesterday morning, Drew talked about the importance of identity at both an individual and organizational level. Having an identity means you know who you are and what you believe, and you never have to guess how you should behave. For individuals, your identity is the set of constraints that dictates who you associate with, how you treat people, how you make decisions, and how you will be remembered. For organizations, identity dictates what people you should recruit, who you should fire, how you develop your strategic and operational plans, how your culture evolves, and how your customers and competitors see you in the market. Businesses try to codify identity through the mission statement. Religious organizations use creeds. Nations use constitutions. Weirdly, individuals often don’t codify identity at all. Some of us opt for an affirmation statement. For most of us, our identity is something of an accident that we fall into, rather than something we deliberately choose.

Identity is hard enough to get right in the real world. How many of us are consistent in our values, our friendships, our goals? How many of us have been willing, from time to time, to pursue avenues other than those our probable identities would suggest? How many of us have never even taken the time to decide what we are or who we want to be? If you’re constantly negotiating with yourself, you probably don’t have a perfectly-formed identity. But don’t feel too terrible, because most of us are in the same boat.

If it’s hard to nail down an identity in the real world, it’s damn near impossible in the digital world. Every Facebook status update, every Tweet, and every LinkedIn post is another chance for us to betray our identities, revealing painfully short attention spans, feeble convictions, failures to be who we say we are (or even who we would like to be able to say we are). And that’s just the stuff we do on purpose – Google, Microsoft, and hundreds of government agencies around the world are no doubt compiling frighteningly detailed dossiers on our “true” digital selves.

I don’t pretend to have the solution to this conundrum. I think we’d all benefit from being more deliberate about our real-world identities. If we can do that, we’ll have a fighting chance at effectively managing our digital identities by aligning our digital and real-world values and choices.

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Category: Personal Effectiveness     Tags: Personal Effectiveness

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Sitting on a flight from Dallas/Fort-Worth to Orlando for Gartner’s Orlando Portals, Content, and Collaboration Summit, I just observed an event that reminded me of why I believe so strongly that architects ought to cut code themselves. We’re being redirected around the leading edges of a storm line stretching from southwestern Arkansas all the way down to Houston. I am lucky enough to be riding my frequent flier status to an upgrade at the front of the bus, while coach is filled with already-exhausted parents and screaming kids excited to spend “quality time” with the Rat. Yeah, I am pretty happy to be up here.

Anyway, the row in front of me is filled with a familial unit, including 2 kids. I love kids (especially my 2 boys). But more to the point: I love kids who behave themselves. And for the most part these kids behave (if only due to their mobile electronic distraction units). That probably shouldn’t surprise anyone – if you’re in business class as an 8-10 year old kid, it’s because your parents are either very well-off financially, or because one or both parents work in a field demanding a lot of travel, and upgrades were made. In the latter case, these kids are probably still pretty well-off. Children of financially secure parents tend to be children of well-educated, well-behaved parents. Maybe not fair, but there it is.

Because we are being diverted around a storm system, we are enjoying a bit of a bumpy ride. The pilots have turned on the fasten seat belt sign, made announcements about the importance of remaining in your seat with the belt fastened, and our flight attendants have reinforced these ideas. When the plane is rocking side to side, the pilot is telling you to stay in your seat, and your friendly flight attendant is doing the same thing, you should probably stay in your seat.

So, back to my in-flight neighbors. Well-behaved in general, they don’t know how to follow the simple request to stay in their seats for their own safety. It is patently obvious why they don’t “get it” – their parents don’t get it either; they get up and use the bathroom, change seats, and so on, generally serving as a bad example of how to behave yourself as an air traveler. Kids parrot their parents. Fortunately, in the case of in-flight turbulence, most of the time nobody gets hurt, even if they can’t follow rules.

How does this relate to your role as an architect? Well, line programmers parrot you the way that kids parrot their parents. If the rules don’t apply to you, they won’t be taken seriously by the people you’re to nurture and develop. If you act like coding is a big imposition, gifted yet ambitious developers will aspire to a role where coding no longer matters. If you don’t experiment, create prototypes, and research new technologies, you certainly won’t engender interest in same from your programmers. Unfortunately, most of the time, someone or some project will get hurt by such behavior.

I don’t mean to draw an unfair comparison between developers and children (although in some rare cases, such a pure comparison is appropriate). What I mean to say is that everybody needs to be led. In your organization, architects probably don’t lead people in a traditional hierarchical sense – but architects certainly lead by example. How you conduct yourself matters. Choose to spend some of your time coding, even if you believe it isn’t the most valuable use of your time in a pure business sense. In terms of the example and inspiration you supply your organization’s line developers, it matters a lot.

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Category: Applications Programming     Tags:

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Amazon Web Services (AWS) announced yet another cut in its infrastructure-as-a-service (IaaS) pricing (it also announced cuts in select PaaS capabilities, including the relational database service). I’ve been telling Gartner clients for years that this will never stop. Amazon.com is a retailer and at its core, AWS is a retail business. It is a mistake to look at AWS as a traditional IT services business, even though it competes against some megavendors in that space. AWS is like all retailers, ultimately about volume, not operating margin.

OK, you say, no volume, no business. True. But the incumbent IT industry megavendors are much more focused on margin, enjoying profitability between 20 (for professional services and hosting) and 40 percent (for traditional software). On its very best day a discount retailer like Amazon would dance a jig over a 6 percent margin. Simply put, if you’re Amazon or any of its component businesses, you’re not going to be undersold by any competitors that focus on value over price.

IaaS is for all practical purposes the closest thing to a commodity that exists in the cloud services market. I believe that eventually it will be a perfect example of a commodity, where service providers become price takers and there is very little room, if any, to command a premium on differentiated features and functionality. I believe that AWS itself proves this out through its increasing portfolio of higher-order, platform-as-a-service (PaaS) style offerings.

If IaaS is becoming a commodity, volume business, the logical move for value players who prefer margin to volume is up the chain to PaaS, or even software-as-a-service (SaaS). It makes a lot of sense – if you’re a company with a history of winning in the market with a differentiated value proposition, then it’d be natural for you to compete in an adjacent market in similar fashion.

Which is why I keep scratching my head over the things I see happening in the IaaS market. I see a number of large enterprise-oriented players who’d like a piece of the exploding cloud infrastructure market. They’re aiming money, and more importantly, time and leadership focus, at the IaaS opportunity. Now, these are not players from a retail background – they’re in the high-value, high-margin bucket I talked about earlier. And they think they’re going to go out and eat Amazon’s lunch by competing in the IaaS market. How likely are they to be successful?

So I keep asking myself this – why are companies with an obvious path to sustainable, high-margin growth – winning in the PaaS space – sinking so much effort into competing in the IaaS space? Do they really want to die the death of a thousand cuts at the hands of a retailer?

Or, in other words, don’t bring a differentiated knife to a commodity gun fight.

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Category: Cloud Cloud Application Platforms     Tags:

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