ClickSoftware – Great Case of an AWS Cloud Adoption: Part 1, Operations

imageOver the last year I had endless conversations with companies that strive to adopt the cloud – specifically the Amazon cloud. Of those I met, I can say that ClickSoftware is one of the leading traditional ISVs that managed to adopt the cloud. The Amazon cloud is with no doubt the most advanced cloud computing facility, leading the market. In my previous job I was involved in the ClickSoftware cloud initiative, from decision making with regards to Amazon cloud all the way to taking the initial steps to educate and support the company’s different parties in providing an On-Demand SaaS offering.

ClickSoftware provides a comprehensive range of workforce management software solutions designed to help service organizations face head-on the challenges of inefficiency. With maximizing the utilization of your resources is the lifeblood of your service organization and has developed a suite of solutions and services that reach the heart of the problem.

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Amazon Cloud and the Enterprise – Is it a love story? (Free Infographic Included)

As befitting any great online vendor, Amazon cloud product guys listen carefully to their market targets and ensure fast implementation and delivery to satisfy their needs. It is clear that Amazon cloud is eager to conquer the enterprise market, as I already mentioned in my past post, “Amazon AWS is the Cloud (for now anyway)”.

Cloud Reserved Capcity Card

Key buzzwords that I expect are being used in Amazon HQ holes are “adoption” and “migration”. In order for the AWS cloud to reel in the big enterprise fishes, the cloud giant must go with the flow. This week Amazon cloud announced “AWS Cost Allocation For Customer Bills” – As a matter of fact Amazon announced that it believes in instances’ tagging – why? in the cloud, where a single instance doesn’t count, do you need a tag? The answer is simple – enterprise customers’ requests.

Adoption, TCO and ROI

In the past I had an interesting discussion with a cloud oerations VP of a great known traditional ISV (independent software vendor) about how after their POC on AWS they found that the costs are not feasible, and they wanted to go back on-premises. The winds of rejection, such as “our servers are better” and “why pay so much when I already could buy these”  (someone once called these IT guys the “server huggers”) are still there. Amazon understands that and strives to fill the gap between their advanced “cloud understating” and the traditional perception of the enterprise.

This week Amazon published an important white paper – The Total Cost of (Non) Ownership of Web Applications in the Cloud . Finding it important AWS marketing guys promoted it everywhere from Werner’s (AWS famous CTO) blog  all the way to TechCrunch. The PDF write-up done  by Jinesh Varia, one of the most respected Technology Evangelists at Amazon. The article presented three cases of online site utilization, starting from a “Steady State Website” to “Spiky but Predictable”, all the way to “Uncertain and Unpredictable”. The article discusses the cost differences between on-premise and on AWS. Without a doubt, AWS is much better if only because of its on-demand elastic capacity. Besides being a great informative educational piece, the article serves as an important support guide for enterprise CIOs who wishes to prove that AWS is worth the investment and that ROI exists.

Reserved is the new Dedicated

Yesterday, Newvem cloud usage analytics published a cool infographic that reveals details behind AWS including the types of customers and their cost improvement opportunities. Check it out below (disclosure: I am the company cloud evangelist and community Chief). It is not a surprise that the enterprise customers start small with AWS on-demand instances, while suffering from major costs. Many enterprise CIOs and DevOps that use AWS are confronted with the dilemma  of whether or not to move their cloud off AWS to a private cloud, usually when they’re footprint has scaled to a high level and opportunities for cost savings from alternatives become more attractive. The only way to understand the exact balance point between on-demand and reserved capacity is by analyzing your past patterns – Newvem does exactly that and more.

It is all about your usage. For example, in order for a Costco membership purchase to make sense, you have to know how much you and your family will use for the year (for example, how much cereal your children will eat).The same principle applies here with Reserved Instances (at least for the light and medium plans). AWS cloud customers are not buying the actual instance as a dedicated server but pay upfront to get an ongoing discount point. In order for Reserved Instances to make sense, a consistent amount of usage over a 1-3 year period must be identified. Though the fact it is not a dedicated hardware the reserved instance feature can help the AWS sales guy to offer a dedicated capacity to the potential enterprise CIO.

Last Words

I believe that Amazon already has a significant toehold inside the enterprise. The AWS cloud enables innovation and makes a great difference in how IT is consumed. Enterprise changes in perception take time and AWS understands that. The cloud hype is everywhere, but at the end of the road the cloud elasticity just makes sense – not only for the small niche SaaS vendor but also and maybe even more so for the traditional enterprise. Indeed a love story!


Demystifying Amazon Web Services
by newvem.Check out our data visualization blog.
(Cross-posted on CloudAve)

The IaaS Management Market: Evolution, Vendors and More

A lot has already been said about the false cloud use where the IaaS platform utilized as an hosting extension of the IT organization’s data center and not taking advantage of the elasticity benefits to generate a cost effective and scalable IT operation. Using the public IaaS whether it is Amazon, Rackspace or any other vendor means using a highly dynamic environment which presents an increasing complexity hence loss of control. Checking the list below I can say that cloud (including all its layers IaaS, PaaS and SaaS) control basically contains the same aspects as the good old system management.

What is “System management” ?

“refers to enterprise-wide administration of distributed systems including (and commonly in practice) computer systems.”

“System management may involve one or more of the following tasks:

  • Hardware inventories
  • Server availability monitoring and metrics
  • Software inventory and installation
  • Anti-virus and anti-malware management
  • User’s activities monitoring
  • Capacity monitoring
  • Security management
  • Storage management
  • Network capacity and utilization monitoring”

Read More on Wikipedia

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The Cloud Lock-In (Part 1): Public IaaS is Great !

It always good to start with Wikipedia’s definition as it helps to initiate a structured discussion, here is Wiki’s definition for Lock-In:

“In economics, vendor lock-in, also known as proprietary lock-in or customer lock-in, makes a customer dependent on a vendor for products and services, unable to use another vendor without substantial switching costs. Lock-in costs which create barriers to market entry may result in antitrust action against a monopoly.” Read more on Wikipedia

Does the cloud present a major lock-in ? Does the move create substantial switching costs?

“Yes !” is the common answer I hear for those questions. In this article I will debate it basing my findings on real cloud adoption cases.

Generally in terms of cloud’s lock-in, we face the same issues as in the traditional world where the move includes re-implementation of the IT service. It involves issues such as data portability, users guidance and training, integration, etc.

“I think we’ve officially lost the war on defining the core attributes of cloud computing so that businesses and IT can make proper use of it. It’s now in the hands of marketing organizations and PR firms who, I’m sure, will take the concept on a rather wild ride over the next few years.”

The above statement I bring from David Linthicum’s article “It’s official: ‘Cloud computing’ is now meaningless”. Due to my full consent with Linthicum on that matter, I will be accurate and try to make a clear assessment of the cloud lock-in issue by relating each of the three cloud layers (i.e. IPS aaS) separately.

In this part, I will relate to the most lower layer, the IaaS lock-in.

It is a fact that IT organizations take advantage of the IaaS platforms by moving part or even all of their physical resources to the public clouds. Furthermore, ISVs move at least their test and development environments and making serious plans to move (or already moved) part of their production environment to the public clouds.

Read more about shifting legacy systems to the cloud by Ben Kepes

Discussing with a public IaaS consumers, it always come to the point where I ask “do you feel locked on your cloud vendor ?” most, if not all of the companies’ leaders claim that the public clouds’ values (on-demand, elastic, agility,ect) overcomes the lock-in impact so they are willing to compromise. As a cloud enthusiastic it is great for me to see the industry leaders’ positive approach towards moving their businesses to the cloud (again too general – any of them refer to a different layer). I do not think that the lock-in is so serious.

For sometime this claim sounded pretty reasonable to me though on second thought I find that the discussion should start from a comparison with the traditional data center “locks”. Based on this comparison I can already state that one of the major public cloud advantages is the weak lock-in, simply because you don’t buy hardware. Furthermore, companies that still use the public cloud as an hosting extension to their internal data center, don’t acquire new (long term or temporary) assets that they can’t get rid of without having a major loss. In regards to its lock-in the public cloud is great !

Another important explanation related specifically to Amazon AWS products which support SaaS scalability and operations. Smart SaaS architect will plan the cloud integration layer, so that the application logic and workflow will be strongly tied with the underlying IaaS capabilities such as on-demand resources auto provisioning.

Read more about the relationship between web developers and the cloud

For example, the web can use the cloud integration layer to get on-demand EC2 resources for a specific point when a complex calculation occurs. In a superficial glance, the fact that the cloud API used as a part of the application run-time script holds an enormous lock-in risks. I disagree and let me explain why.

As a market leader, Amazon AWS will be (already is) followed by other IaaS vendors. Those will solve the same scalability and operational issues by the same sense and logic of AWS. Basically this means an evolution of IaaS platform standards. Smart cloud integration layer will enable “plug & play” a different IaaS platform or even orchestrate several in parallel. To strengthen my point I bring as an example several cloud start-ups (solving IaaS issues such as governance, usage and security) that developed their product to solve issues for Amazon AWS consumers and seriously target support of other IaaS vendors’ platforms such as Rackspace cloud and vCloud. In regards to lock-in the public cloud is great !

The IaaS vendors in the market recognize the common lock-in drawback of moving to the cloud. Vendors such as Rackspace brings the OpenStack which is a cloud software platform, so cloud vendors can build IaaS solutions upon it. Rackspace showing off on their blog site –

OpenStack™ is a massively scalable cloud operating system, powering the world’s leading clouds. Backed by more than 50 participating organizations, OpenStack is quickly becoming the industry standard for public and private clouds. Read More

It should be noted that applications and data switching between clouds is still complex and in some cases not feasible though believing in the public cloud’s future comes with understanding of its weak lock-in and will lead to visionary and long term strategic plans.

What about the private IaaS ?

Following my on going research on what is the best cloud option (i.e public, private or hybrid), I found that outsourcing the IT environment to a private or an hybrid includes a major lock-in. Implementation of a private or an hybrid cloud includes lots of customization, hence lack of standards. Private and Hybrid clouds have their benefits though lock-in is not one of them. The contract with the vendor is for 3 to 5 years at least (a data center’s typical depreciation period) on a non standard environment leads to an extreme, long term lock-in in terms of the “on-demand world”.

In order to decrease lock-in the IaaS consumer must prove the organization need for a private cloud by planning strategically for long term. Besides the ordinary due diligence to prove the vendor strength, the contract must include termination points and creative ideas that can weaken the lock-in. For example renewal of initial contract under re-assessing of the service standards, costs and terms in comparison with the cloud market, including the public one. The private cloud vendor must prove on-going efficiency improvements and costs reductions accordingly.

In his article Keep the ‘Cloud’ User in Charge”, Mark Bohannon, VP at Red Hat, Warns:

by vendors to lock in their customers to particular cloud architecture and non-portable solutions, and heavy reliance on proprietary APIs. Lock-in drives costs higher and undermines the savings that can be achieved through technical efficiency. If not carefully managed, we risk taking steps backwards, even going toward replicating the 1980s, where users were heavily tied technologically and financially into one IT framework and were stuck there.”

Some of the private cloud offering today have similar characteristics as the traditional data center, to me it seems that the former comes with a stronger lock-in impacts. In case of an IT transition companies who decide to go that way should expect a considerable switching costs and long term recovery of their IT operations hence of their business.

The second part will discuss the cloud lock-in characteristics in regards to the SaaS and the PaaS layers.

Private Cloud Interview with Mr. Joe Weinman

As the founder of, Joe Weinman is one of the most known cloud computing evangelists in the world. Weinman researches the economics of the cloud. Among other cloud aspects he examines, he also relates to the cloud financial operational costs together with its buisness benefits. Following I Am OnDemand last posts summarizing and discussing several Cloudonomics researches, we asked Mr. Weinman to meet for a brief discussion. Last week I had the honor to interview him for about an hour and hear his clouds’ perceptions and vision.

> > > What is a private cloud ?

I started the interview with this basic (?) question. The intuitive answer of most IT managers will be that the private cloud is the company actual own dedicated on-premise resources that are behind a firewall. The advanced ones will probably add that it can be hosted on the MSP premise as well and even managed by a smart virtualization layer. I can add that a private cloud might even be a hosted and outsourced environment inside a public cloud. Furthermore Weinman said that others in the industry relate to this question from aspects such as security, network, performance and architecture. Relating to this question Weinman brought, for my opinion, the best answer as it was driven from the economic side of things. From his perspective and experience, he bases his answer only on the business aspect: 

“… the way those cloud resources are priced. Basically the idea of private cloud is owning dedicated servers with a flat fee rate”, Weinman defined.

I think that this answer might wins as the formal definition.

> > > Why hybrid ?

One of the main reasons to move to the hybrid cloud Weinman mentioned, is adoption of cloud by the enterprise. The migration from the on-premise can be a pain point with a lot of risks including adding an enormous weight on the overall cloud costs. The enterprise will want to remove the hassle and the responsibility including unknown economic risks, hence will prefer to outsource it while the costs are known a head and are flat per year. Weinman concluded that using a hybrid cloud leads to a well balanced expense. It can be achieved using a main private cloud and use of the public for load bursts, storage capacity increase or for any other resources that have costs and their demand changes over time. To learn more about cloud bursting I suggest you to Check Weinman’s article ”4 ½ Ways to deal with data during cloud bursts”.

HP, one of the cloud giants presents the hybrid cloud as one of its main cloud services and recently announced its dual bursting, Weinman noted. The dual bursting feature is part of the HP CloudSystem that supports demand changes using on-premise or public cloud resources supported by the pay-as-you model.

Discussing the flat rate model, Weinman noted that Amazon AWS public cloud offers the option to reserve instances though he claimed that:

“It is still not fully inside the flat rate”

and continued with explaining that:

“There are other issues above the infrastructure such as the environment architecture, strategy, integration and maintenance”.

According to his opinion the enterprise (and from his experience I assume) interests on purchasing full managed cloud service solution and get a deal for at least 3 years. I know about a company the closed a cloud deal for 10 years! with HP for $130M. It makes sense that the enterprise will want an external provider to manage its IT environment as it becomes more complex praticulary in the cloud. Another main reason to go with flat rate, is simply because it cost less when there is a stable, maybe fixed need of resources over time, said Weinman. Click here and check his proof for that matter.

> > > Is hybrid cloud a temporary stage ?

The second half of the “hybrid discussion” started with my question about the option that hybrid and even the private are temporary stages and in the long run, the cloud will develop to be fully public. It is a fact that today this matter is still under a major non-consent among the cloud computing leading evangelists. Weinman is obviously one of the leading enterprise cloud evangelists and as I am originally from the SaaS industry it was very educational for me to hear his “cloud vision”.

… So many things and questions”, Weinman expressed is feeling regarding the current public cloud infrastructure state and capabilities.

Weinman gave as an example the huge cost and complexity of moving the enterprise enormous amount of applications and data to the public cloud. The basic reason for the transition to the public will be only when it is most cost effective for moving all the enterprise applications to the public in comparison to the “do it yourself” approach, though today this is still not align with the public cloud offerings.

> > > The Cloud is just like Airlines, Car Rental and Electricity

Here we entered to discuss the “economies of scale” aspect that the public cloud presents. Weinman started with the basic economic principal saying that you would like to get a better price than the price you currently pay for the same product. Enterprises will buy their IT resources from the public clouds only if those will cost less, hence IaaS vendors try to utilize their economies of scale to get a better price on the infrastructure than the price the medium or the large enterprise can get.

Weinman presented the common analogue of the cloud industry to the air lines company and debated its accuracy:

“When demand grow the airlines company will use bigger airplanes, that is not the case for the public cloud. A better analogue is between the IaaS vendor and the Rental car company”, he said.

When demand growth, the rental car company will not buy bigger cars but will just buy more cars so does the IaaS vendor. This takes me to the post “Cloud made of atomic units” talks about the drive of all the industry participants to increase the granularity of the cloud. Weinman added that if you use a car every day you will want to buy it, though no doubt that we still need the option to rent a car from time to time to fulfill a temporary need and it is a fact that it costs more.  Weinman concluded the “transportation part” by saying that the world of car transportation contains rental cars, leasing, taxis and private cars, the same goes for the world of cloud.

When describing the cloud computing evolution most of us will say that the evolution of hosting is the same that happened in the electricity industry. The economies of scale principal is the heart of the major power plant economy. Weinman said that together with the electricity economy of scale, one can also see that there is a trend in enterprise perception, hence changes in the ways the which companies acquire their electricity capacity. Mega enterprises (including the cloud giants themselves) own their power resources or buy chunks of capacity for a flat rate, again the same goes for the cloud industry.

> > > Public cloud use cases

Together with the the economic benefits of the hybrid cloud it is an evident that the public cloud is a game changer.

There are use cases where public cloud is the cause of making them reality, Weinman said.

In his article “Compelling Cases of Clouds”, he presents several use cases for the public cloud. In our conversation and on several interviews I saw with Weinman, he keeps mentioning the telecommunication service provider who should utilize the cloud as it brings a pure economic benefit over its complex private infrastructure hard wire network.

“It’s cheaper to connect to a hub or network once rather than have multiple point-to-point connections” he writes in his article.

He mentions the following use cases as well: collaboration and sharing of data, social networks, cross device access, change from CAPEX to OPEX, support demand peaks, outsource peripheral applications, use of PaaS to accelerate application development , distribute application updates, build a blog and create an online community.

Revolution or Evolution?

Such as almost every industry, Weinman said the move to pay per use model of the industry is an evolution. Even in the money industry you can find the “banking cloud provider” that will sell you a credit.

“Although it is “only” an evolution, the cloud is a truly wonderful evolution and it is proven !”, Weinman concluded with enthusiasm. 

I want to thank Mr. Weinman for sharing his knowledge and vision with `I Am OnDemand` readers. I assume that if I will have the chance to continue this discussion with Mr. Weinman I will probably would pick to discuss the implications of the increasing amount of new SaaS applications (pay per use) adoption by the enterprise.


This interview is one of the important mile stones on the cloud journey of `I Am OnDemand` blog including its readers, authors and contributors. The amount of knowledge that we gather is increasing on a weekly basis as well as the amount of our new readers and it slowly but surely becomes one of the main knowledge resources in the world of cloud computing.

Stay tuned,


Hybrid Cloudonomics – Part 2

The first part of Weinman’s lecture discussing the basic “go to the cloud” and demonstrating cloud environments’ loads of different corporations’ web applications. In this part we will bring 6 scenarios presented by Weinman, each includes a brief analysis and proof of its cost and benefits.

First lets start with several assumptions and definitions:

> > > 5 Basic assumptions Pay-per-use capacity model:

  1. Paid on use – Paid for when used and not paid for when not used.
  2. No depend on time – The cost for such capacity is fixed. It does not depend on the time or use of the request.
  3. Fixed unit cost – The unit cost for on-demand or dedicated capacity does not depend on the quantity of resources requested (you don’t get discount for renting 100 rooms for the same time).
  4. No other costs – There are no additional relevant costs needed for the analysis.
  5. No delay – All demand served without any delay.

> > > Definitions:

D (demand): Resources demand in a specific time interval. D is characterized by mean (average) and a maximum P (peak) . T (time) is the time duration in which the demand existed {D(t) ,0<t<T}. For example the average demand A can be 5 CPU cores with a peak P demand of 20 CPU cores.

Define C (cost) to be the unit cost per unit time of fixed capacity.

Define U to be the relation between the cost of resources in the cloud (pay-per-use) and a pure dedicated IT solution.

The following six cases presented by Weinman are part of the total eight cases presented in his article “Mathematical Proof of the Inevitability of Cloud Computing”:

Case 1:   U < 1

The simplest case where utility cost less than dedicated ==> Pure pay-per-use solution costs less than a pure dedicated solution.

Proof: The cost of the pay-per-use solution is A (average) * U (premium) * c (unit cost per time) * T (time of use), A*U*c*T. The cost of a dedicated solution built to peak is P(peak of D)*c*T. Since and A<=P and U<1 ==> A*U*c*T < P*c*T

Explanation: It is intuitively understood that if the cloud is less expensive per unit per time period, then the total solution based on paying only for the demand is a less expensive one.

Case 2 :   U = 1 and A = P

The utility premium is the same as the dedicated, and demand is flat (no peak) ==> a pay-per-use solution costs is equal to dedicated solution built to peak

Proof: The cost of the pay-per-use solution is A*U*c*T. The cost of a dedicated solution built to peak is P*c*T. Since U=1 and A=P, ==> A*U*c*T = P*c*T

Explanation: If there is no variability in the demand and the cost is the same, both alternatives have the same cost. That being said, we should remember the assumptions we are under, the very narrow scenario and the fact that we are not considering financial risks.

Case 3 : U = 1 and A < P

Pure pay-per-use solution costs less ==> a pure dedicated solution.

Proof: The cost of the pay-per-use solution is A*U*c*T. The cost of a dedicated solution built to peak is P*c*T. Since U=1 and A< P, Then: A*U*c*T = P*c*T

Explanation: This is very important for the understanding of the benefits for pay-per-use: if there is an element of variability, there is a major benefit to choosing this approach. Now let’s find out what happens in the case that the utility cost is greater than the fixed utility cost.

Case 4 : 1 < U < P/A

If the utility premium is greater than 1 and it is less than the peak-to-average ratio P/A, that is, 1<U<P/A then a pure pay-per-use solution costs less than a pure dedicated solution.

Proof: The cost of the pay-per-use solution is A*U*c*T. The cost of a dedicated solution built to peak is P*c*T. Since U<P/A, Than: A*U*c*T < A*PA*c*T = P*c*T

Explanation: What this means is that the utility unit cost can be higher than a fixed solution up to a certain point and still be the right economical choice. That point is a variable of the variation of the demand. In simple terms, we save money by not possessing unused resources when the demand is low.

Case 5 : U > 1 and TpT < 1U 

Lets add some definitions to the ones above:

  • Tp (peak duration) to be the duration where the demand was at peak
  • ε to be the gap between the actual peak and the per-defined peak (that is, if the resources demand exceeds (P – ε) we’ll use the cloud for our resources).

If U stands for how much more expensive the cloud is versus a fixed solution, in this case it will be easier to look at the Inverse of U (how much the fix solution is more expensive than the cloud). This case means that the percentage duration of the peak is less than the inverse of the utility premium, than a hybrid solution costs less than a dedicated solution.

Proof: The hybrid solution consists of (P ε) internal resources and the rest, ε will be handle on-demand by pay-per-use Tp of the time. The total cost equation is: 

 Given [(P ε) * T * c]+ [ ε * Tp * c * U ] and Our assumptions were: TpT  <  1/U   ==> Tp * U < T  and [ε * Tp * c * U] < [ε * T * c] ==> combine those ==> [(P ε) * T * c]+ [ ε * Tp * c * U ] < [(P ε) * T * c]+ [ε * T * c] ==> A dedicated solution cost is: [(P ε) * T * c]+ [ε * T * c] = P * T * c

Explanation: What that means is that there might be a less expensive way than internal fixed solutions if there is some variation of demand. Obviously an optimal solution should be according to its your own characteristics of demand.

Case 6 : “Long Enough” Non-Zero Demand

Lets define:

  • The total duration of non-zero demand to be TNZ. TNZ is the sum of all periods where the demand was above zero. 
  • Define ε to be the dedicated resources.

If the utility premium is greater than the dedicated and the percentage duration of non-zero demand is greater than the inverse of the utility premium, i.e., U > 1, and TNZT > 1/U than a hybrid solution costs less than a pure pay-per-use solution.

Proof – (This proof is the mirror image of the prior one). The cost of serving this demand with utility resources is: ε * TNZ * U * c. The cost of serving the demand with dedicated resources is: ε * T * c. Since TNZT > 1/U than T < TNZ * U Than ε * T * c < ε * TNZ * U * c 

Explanation: This means that you’ll need to consider using the cloud even if it’s more expensive to satisfy a portion of the demand and the baseline of your demand you use dedicated resources.

Let’s Summarize – 

The analysis Weinman does is basic including very strict assumptions. It ignores cloud enhanced pricing options (such as AWS spot and reserved instances). It is important to add that those options still doesn’t provided by most IaaS vendors hence this should be taken in mind when selecting an IaaS vendor. Nevertheless, this important research gives us an excellent opportunity to understand the overall approach and mechanisms which affect out cloud architecture decision.

 It is the the enterprise leader’s responsibility to treat their cloud establishment as part of the organization strategy including its architecture decision. From our experience and study of this evolving trend we found that sometimes the cloud decision might be taken by the operational leader (i.e. IT manager) without any intervention of the enterprise higher management. This is totally wrong, going forward the company will find itself suffer from huge cloud expenses and issues (such as security and availability) and will need to reorganize hence reinvest and hope it is not to late. In this post we presented another option for cloud deployment when a mixture of resource allocation from within the enterprise and from the cloud might be the best economic solution. We also saw that it depends on several factors like the variation of the demand and its prediction.

This is only a sneak peek to Weinman’s complete article “Mathematical Proof of the Inevitability of Cloud Computing” . To Learn more about the above scenarios and more, we strongly suggest to read it.

Hybrid Cloudonomics: a Lecture by Joe Weinman – Part 1

Posted by Nir Peled

Joe Weinman is well known in the cloud computing community as the founder of Cloudonomics. Presenting complex simulation tools, Weinman characterizes the sometimes counterintuitive business, financial, and user experience benefits of cloud computing including its on-demand, pay-per-use and other buisness aspects. Last month I had the pleasure of participating in Weinman’s webinar. Weinman discussed several interesting points which I would like to share with you.

Weinman started by contradicting what seem to be the fundamental assumptions regarding the Cloud and its benefits. There was nothing radical about what I heard but it made me think and challenge all the things I took for granted –

1 – Cloud is a brand new technology and business model  > > >  The same business model and attributes are being applied in hotels, rental car services, etc’.

2 – Cloud encompasses services accessed over the web via browser  > > >  The cloud is a general architecture module and the Web/IP/Browser (is as important as they may  be) are far from telling the whole story. There are other types of networking technologies such as Optical Transport MPLS and VPLS that need to be leveraged to unlock the value of the cloud. You don’t necessarily need to use a browser to get services in the cloud (examples include – audio conferences, webinars, M2M etc.)

 3 – Large clouds have great economies of scale > > > Not completely true because today the large cloud providers are using the same architecture that is available for any enterprise, therefore there is no major benefit from their scale in terms of economy. However,  they do benefit from other characteristics like scalability, geographic dispersion and statistic of scale.

 4 – IT is like electricity, so all IT will move into the cloud  > > > IT is not like electricity, from the economic perspective, electricity has the benefit of the economies of scale. While IT decisions are complex and the economic decision on how much of your IT to keep in the enterprise and how much to put in the cloud is based on numerous factors such as flexibility, cost, nature of the application etc.

5 – It’s important to replace CAPEX with OPEX > > > It is not always important to do so and it very much depends on financial decisions that the company makes regarding its financial and funding activities.

6 – Cloud cost reduction will drive lower IT spending > > > Weinman mentioned the Jevons paradox effect, is the proposition that technological progress that increases the efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource.

Joe refers to the argument (from his work) that “The mathematical proof of the inevitability of cloud computing” is the economic rationale for hybrid. He demonstrated demand variability of several corporations as you can see below:

Example 1: – There is not so much variability

Example 2: Large search provider – Weekends Vs. Monday to Friday

Example 3: Tax preparation firm– Growth of the early filers and then April 15th (tax day in the USA) drop to 0 on the 16th of April.


In the second part of his lecture, Weinman demonstrated six optional cases for cloud deployment including detailed calculations for the IT environment costs. He defines a variable U which is the relation between the cost of resources in the cloud (pay-per-use) and a pure dedicated IT solution. For example if U<1, that is, the utility premium is less than the unity, a pure pay-per-use solution costs less than a pure dedicated solution. In the Part 2 we will present those six options in details and will be able to give you a great insight about your hybrid cloud plans.

Stay Tuned !


The author of this article is Nir Peled, a reporter and a contributor `I Am OnDemand` .

Nir Peled