Public Cloud is Better than On-Premise and Netflix vs Zynga proves it

There is a common myth that for super large scale companies it makes sense to build their own data center instead of using a public cloud.

In many cases I believe this is exactly the opposite. For many companies, time to market, focus and top line are more critical than a theoretical saving 20% on the cost.

The Killing , Wikipedia

Consider Netflix and Zynga. Both companies are large and smart enough to build their own private clouds.

Zynga chose to leave AWS and build their own cloud infrastructure. Netflix chose to stay on AWS, probably with a huge discount.

Their stock price might hint on which company made the right choice.

Netflix Vs Zynga

Netflix focused the company’s energy on moving from a tech company into  a movie production studio with shows like “House of Cards” , “Arrested Development”,”The Killing” and “Orange is the new Black”. Zynga was busy in becoming a data center company. Instead of focusing on social games and preparing for the next big change into Mobile.

The more generic point is that the bottleneck in most companies is a person.  More specifically, it is management attention. If everyone is busy in building a private cloud and purchasing 1000’s of servers, no one has time to create a new business line.

The thought is that a private cloud becomes attractive with huge scale because the number of devops people to write software  has an upper bound.

This might be true, but there are very few people in the world who have already done it, and hiring takes a lot of time.

The other option is to hire inexperienced people, at least on this scale, and they would make mistakes.

Companies like Netflix and Zynga are supposed to have 70-90% gross margin. Reducing cost of hardware from 20% to 15% is nice, but even that is not straight forward. And in any case, it is much less important than losing or creating a new $1B on the revenue side.

 

 

 

 

Americana 2013

Green Robot – Tomo Hotel,

• I like Hotel Tomo, cute Japanese design makes a lot of difference.
• Going green. Why do American hotels provide 9 (as in  3*3, 4+5, 99/11) pillows for a single guest?  And then they ask me not to replace the towels everyday.
• Continental was bought by United. No major difference. Upgrading to business is now $600 instead of $500. All the rest is the same.

Snowy Boston

• I’m not a virgin for Virgin anymore. First time flight from Boston to San Francisco. The only difference is that the crew is much more beautiful. Old fashioned stewardesses (meaning young and good looking ).
•  FaceTime is amazing. High quality video calls with family and 10 months old kid. Mac to iPhone, iPhone to iPhone and Mac to iPad.
• The Windows store in Palo Alto mall is quite empty. It is three times bigger the the Apple store and has 25% people in it. The Sony store is somewhere in between.

Apple Store,Stanford Mall

Empty Windows Store,Stanford Mall

• The new Windows 8 Laptops\Tablets from Sony and Microsoft are actually pretty nice, at a glance. The touch screen + Keyboard make a good combination and offers an interesting alternative to iPad. The price point is why they would probably fail.
• iPad mini is even better than Ipad. Better form factor.

San Francisco, Fillmore and Broadway

• Go Wireless! I physically broke three cables and adapters this trip. The American plugs are always loose and the Mac power adapter is quite heavy 😦
• In the “Cheese Cake Factory” choose the classic Cheesecake. Don’t be tempted for three layers of chocolate.
• Could not see a big difference in 4K pixels TV. Probably need newer movies.

Granola in Boston

Commodity Clouds? You must be kidding

A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. Commodities are substances that come out of the earth and maintain roughly a universal price. Wikipedia

I find it hilarious when some people describe clouds or the IaaS market as a “commodity”, or even worse – “legacy”.

It is a common mistake that I see again and again by people who don’t have a clue in what they are talking about or just ignore the little details.

These are the little details you might call “reality”.

[picapp align=”none” wrap=”false” link=”term=oil+rig+sea&iid=8827400″ src=”http://view4.picapp.com/pictures.photo/image/8827400/file-photo-ocean-guardian/file-photo-ocean-guardian.jpg?size=500&imageId=8827400″ width=”500″ height=”341″ /]

The first point I want to make is that “Commodity” is often misinterpreted as “Easy to Produce” or “Low Margin,Bad Business”.

Take a look at oil production. While the end product does not have qualitative differentiation,its production requires some of the most sophisticated technology available. Drilling oil from the bottom of the sea necessitates huge investments, great science and an amazing technology.

Moreover,  six of the ten biggest companies of the world are in the oil production sector, so maybe it is not such a bad business to be in.

Another example would be X86 chips. The X86 architecture is more-or-less the same as it was 30 years ago. It is available universally and there is no qualitative differentiation between different items. However, building a new FAB costs around $2B and Intel is one of the most successful companies on earth. No one would argue that there is no intellectual property in chip design.

[picapp align=”none” wrap=”false” link=”term=slow&iid=285366″ src=”http://view1.picapp.com/pictures.photo/image/285366/road-leading-the-ocean/road-leading-the-ocean.jpg?size=500&imageId=285366″ width=”380″ height=”380″ /]

The second important point is that vision is nice, but reality is nicer. My friend  told me that in the late 90’s the technologists in Check Point thought that Intrusion Detection technology is an erroneous direction to follow. They thought that comparing signatures of attacks is reactive and it does not help the customer  to passively monitor the attacks.

[picapp align=”none” wrap=”false” link=”term=inception+stills&iid=9386959″ src=”http://view4.picapp.com/pictures.photo/image/9386959/stills-from-christopher/stills-from-christopher.jpg?size=500&imageId=9386959″ width=”500″ height=”333″ /]

While they were right  in their long-term vision, ISS sold hundreds of millions in IDS software ,in the meantime. Moreover, when the market shifted to IPS ( Intrusion Prevention systems) , ISS had good solid technology to start from, which took Check Point  five more years to accomplish. As my father, the CFO, used to say, “The markets fix themselves in the long run, but in the long run we all die”. Technology adoption cycles are longer than they seem.

Some analysts are looking too far ahead. For example, two years ago everyone talked about hyper-visors as being commoditized. Microsoft and Citrix will give it it for free, KVN is for free anyway and VMWARE would have to follow. Surprisingly, in the last 12 months VMWARE sold more than $2B worth of , guess what, hypervisors.

Why are 200,000 customers being so silly and paying so much money when the analysts say differently?

For one reason, because Microsoft Hyper-V does not support NFS, yet, which is probably used by 40% of customers. Because Hyper-V can not handle memory over-commit, which means you’ll get about 30% less capacity from the same hardware. Because VMWARE Virtual Center is two generations ahead of Microsoft’s management server, and there is not much use for a hyper-visor that can’t be managed. See a nice post from 2008 about it.

So are the analysts the stupid ones?

Of course not. But they have not installed a hypervisor in the last five years. Furthermore , they are probably right in the long run. In three years from now (five years from 2008:) ) hypervisors might become a commodity. But it is much slower pace than it seems at first.

Remember how in 2000 Broadband Internet was just around the corner ? We’re in 2010 and only South Korea has upload and download speeds above 20Mbps . More on the commodity subject and especially in clouds in my  next post.

Related Articles

• VMware Has More Of The Market Than IDC Figures Show (informationweek.com)

An Israeli Cloud on Israeli Gas, in the Sea

an angle on Israeli cloud computing

Israeli Hi-Tech faces many challenges : The Shekel\Dollar rate, the tough IPO market , the rise of India and China, the disappearance of many VC’s and the move from infrastructure markets  to consumer models.

Michael Eisenberg suggested a few very interesting ideas and I believe our new-found Gas might create another one.

The idea is to  build an Israeli Mega public cloud,   in the ocean , using the power from our newly discovered $10B natural  Gas.

Here are a few good arguments:

• Because power is 50% of computing costs, the cost per CPU could be much lower, because of the cheap gas.
• Exporting gas is hard and expensive. Exporting CPU cycles is easy and cheap. The Fiber optics connections are in the ocean, much like the gas.
• It would drive a huge infrastructure industry of start-ups and services , in an area where we already have an advantage.
• It can be a great foundation for Bio-information cluster of large and small companies.
• It  can be a great foundation for a financial software cluster of large and small companies.
• The cost  is not that big and the government can help with initial  funding
• There is a potential to make the international development centers of Microsoft, Cisco,HP and EMC more strategic
• It is simpler than building Data-Centers on ships 🙂

If building  the data center in the Mediterranean is too expensive, it can be built cheaply in Acre and boost the city’s economy, providing wealth to its Arab and Jewish citizens. That would be a nice added value.

While I haven’t built the detailed economical model , it does seem like fascinating idea. Anyone cares to push it forward?

Potpourri – Apple,Antitrust,Greece and Dog Food

Team by team reporters baffled, trump, tethered
crop. Look at that low plane! Fine then. Uh oh, overflow, population,common group, but it’ll do. Save yourself, serve yourself. World serves its own needs, listen to your heart bleed. Tell me with the rapture and the reverent in the right – right.

1. How come Apple does not get more Antitrust suits?

• It does not allow Flash to Run on iPhone.
• It didn’t allow Skype to run over 3G.
• Does not allow competitors to run Ads in iPhone.
• Does not Allow running Mac OSX on VMWARE.
• Draconian developer agreement

2. I love the iPad. Tried it in the Store. Much faster than iPhone. I will buy one when 3G is out.

Well,  if the Israeli ministry of communication will allow it 🙂

3. How come Listerine costs 3.85 times in Israel than in San Francisco?

It’s $6 (17.28 NIS)  for 1.25 Liter in Walgreen and 50 NIS for 0.75 Liter in Israel

4. The new version of Google Docs , finally seems useful. Next One should be a killer.

5. Did you notice that Firefox knows your exact location in the world ?

It using WiFi and IP’s to triangulate your browser and can show it to any web site.

No more privacy.

6. Did you notice voice recognition is finally here ?

YouTube has now released the ability to view closed captions on any video, even if they did not upload a transcript. This software is based on Google’s speech recognition technologies.

7. Rhapsody in iPhone rocks. 8 Million songs for $15 a month , always available.

The new version finally works. On Wifi. In the States.

8.  Most American restaurants burn their Hamburgers to death. Probably to match the coffee. Even at 3000 Sand Hill road.

But Harry‘s gets it right. Even the sliders are Juicy. AKA as bloody.

9. Being sick and Jet-Lagged is a horrible combo.

10. USAIR’s food is even worst than Continental’s. For $1500 one gets free dog food.

11. Microsoft is trying to push Azure very hard.

12. Greece went bankrupt.

Lady Ga-Ga or: How I Learned to Stop Worrying and Love the Facebook

The western world ended quite suddenly.

The news, and pictures, about Lady Ga-Ga actually being a man, were first reported by Steve Jobs as he presented Apple’s new iPlot gadget at a secret location.

127 journalists immediately tweeted the story , and it was soon re-tweeted by 13,068 followers.

[picapp align=”none” wrap=”false” link=”term=lady+ga+ga&iid=6140998″ src=”1/7/b/5/Lady_GaGa_performs_c55e.JPG?adImageId=9661170&imageId=6140998″ width=”500″ height=”612″ /]

The tweets were automatically converted 1675,042  LinkedIn notification which turned into automatic 300,000 WordPress Updates.

Than Google picked the news up and sent alerts to 1,020,068 Lady Ga-Ga followers and 1,002,900,3 day traders.

However, the big problem started as the new automatic “Google Alert” to “FaceBook comments” mechanism kicked in.

Since Facebook comments are automatically generting Tweeter alerts ,a vicious positive feedback cycle was created.

Tweeter->LinkedIn->WordPress->Google->Facebook->Tweeter.

Soon, 95% of the computing power of the western world was targeted at breaking the (false) news to the same people again and again.

When New York  lost its electric power, due to the high consumption by data center. Google decided to cancel Google wave and create a super algorithm to solve the problem.

They took five of their Nobel prize winners, who have been working on JavaScript optimizations, and asked them to solve the problem.

Google Geniuses quickly realized the problem is similar to solving the “ipartite graphs with no induced cycle of length > 6”  problem, but just when they were ready to solve it, the network on their Android t-Mobile crashed. The only person to hear about Amazon’s EC2 explosion  was President Obama, with his secure Blackberry.

As San Francisco,Tel Aviv, Rome and London lost all electric power the mob started rioting the food supplies. Unfortunately they starved after two days because all of the food was organic.

Luckily , China was saved, as Google decided to block them, or vice versa.

Why Won’t The Big Big Giant Eat You for Lunch ?

Oh, man! We killed Mr. Burns! Mr. Burns is gonna be so mad! – Homer Simpson

Giant Stepping On A Small Company

One of the most annoying questions I had to answer in last couple of years was “Why can’t Cisco\IBM\Microsoft\VMWARE\HP easily copy what you do?”

To some extent, it is another variation of the annoying “What’s your intellectual property?”

Both of the questions are studied in first year MBA courses  .They seem to make sense at a first glance, but I would try to show they are highly overrated questions.

The underlying assumption is that BBG (Big Big Giant) can use its amazing resources, huge capital , loyal customer base and brand to kill any small company if the small company does not have a great barrier to entry, which is typically a technological one.

Having worked in few BBG’s and couple of Start-Up I beg to differ. The giants tend to fail themselves.

StartUp Beats Big Big Giant Corporate

Lets start with some questions:

• Why was Sun unable to succeed with its own firewall (SunScreen?) when it tried to stop OEM’ing Check Point’s?
• Why was Check Point repeatedly unable  to take the SOHO firewall market  (FireWall-First, Small-Office, Safe@Home,Secure-1) ? NetScreen took if from CP. Then Fortinet did the same thing for NetScreen.
• Why does Microsoft still lack  significant footprint in the Firewall business?
• Why does Microsoft  ten billion dollars research budget fails to copy Google’s search algorithm for ten years?
• How come Google Video lost to YouTube?
• Why is VMWARE leading over Microsoft in virtualization?  Microsoft acquired Connectix in 2003. Connectix virtualization technology was almost as good as VMWARE’s at the time. Today there is a big gap in market share.
• How come IBM , with years of building super computers does not have an elastic cloud solution?
• How does small Riverbed perform  so well among the networking giants?
• What was the huge intellectual property in Windows that OS2 lacked?

Here is a hint to my proposed answer to why giants fail, details to follow on part II :

1. Time.
2. Focus.
3. Execution.
4. Constraints.
5. Culture.
6. Investors.
7. Golden Cage Syndrome.

An American-Israeli Sushi-Humus Grill-Bar

In my May post A Mexican, a Sicilian and a Greek Walk Into a Restaurant I discussed  how three different restaurants,in the same location, next to our start-up office, went out of business one after the other. Just after I posted it, a fourth restaurant opened in the same location with the brilliant name “Grey, an Israeli-American Bar- Diner”.

Guess what happened last week to the American-Israeli diner that served  sushi, Asian noodles, middle-eastern grilled meats, American burgers and breakfasts.

Restaurants,like start-ups, should  be very focused in their messaging and efforts. It is very hard to market excellence in five different areas.We had to decide whether  to deliver our cloud solution as a service (“Public Cloud”) or an on premise product (“Private Cloud”) . Both options were viable, and there were good arguments for each road. Despite the similarities and temptation it would have been a mistake to aim at both markets at very beginning.

Even “The Cheesecake factory” focuses on a single  item (with 40 variations 🙂 ) from its huge menu – when it comes to branding. Personally, this is also the only item I Like to eat there. And yes, I know the picture is from another Deli …

New York style Cheesecake with strawberries

VMWORLD 2009 – Cannes and Paris

Some pictures form IT Structures booth at the show and views of Paris, preparing for next conference.

Starting with a cheap trick to get the audience attention.

Nice Car of the Future in Paris, not like my Peugeot 206

girl picture in paris winter

Moving to the important keynote we attended

Paul Mauritz and Zvi guterman on vmworld 2009 vcloud keynote

IT Structures Vmworld vCloud Keynote The Big Screen

it structures vmworld vmware 2009 vcloud pavilion

it structures vmworld vmware 2009 vcloud pavilion booth ophir and zvi

VMWORLD Europe 2009 Pictures

vmworld 2009 clouds and signs

vmworld 2009 clouds and signs

vmworld 2009 Europe stairs

vmworld 2009 Europe stairs