Saturday, April 9, 2011


Computing services are both bigger and smaller than assumed
Clouds bear little resemblance to tanks, particularly when the clouds are of the
digital kind. But statistical methods used to count tanks in the second world war
may help to answer a question that is on the mind of many technology watchers:
How big is the computing cloud?
This is not just a question for geeks. Computing clouds—essentially digital-service
factories—are the first truly global utility, accessible from all corners of the
planet. They are among the world’s biggest energy hogs and thus account for a
lot of carbon dioxide emissions. More happily, they allow firms in developing
countries to leapfrog traditional information technology (IT) and benefit from
advanced computing services without having to build expensive infrastructure.
The clouds allow computing to be removed from metal boxes under desks and in
firms’ basements to remote data centres. Some of these are huge, with several
hundred thousand servers (high-powered computers that crunch and dish up
data). Users pay for what they use, as with electricity. As with electricity, they
can increase their usage quickly and easily.
The “cloud of clouds” has three distinct layers. The outer one, called “software as
a service”, includes web-based applications such as Gmail, Google’s e-mail
service, and, which helps firms keep track of their customers.
This layer is by far the easiest to gauge. Many SaaS firms have been around for
some time and only offer such services. In a new study Forrester Research, a
consultancy, estimates that these services generated sales of $11.7 billion in
Going one level deeper, there is “platform as a service”, which means an
operating system living in the cloud. Such services allow developers to write
applications for the web and mobile devices. Offered by Google,
and Microsoft, this market is also fairly easy to measure, since there are only a
few providers and their offerings have not really taken off yet. Forrester puts
revenues at a mere $311m.
The most interesting layer—the only one that really deserves to be called “cloud
computing”, say purists—is “infrastructure as a service” (IaaS, pronounced eyearse).
IaaS offers basic computing services, from number crunching to data
storage, which customers can combine to build highly adaptable computer
systems. The market leaders are GoGrid, Rackspace and Amazon Web Services,
the computing arm of the online retailer, which made headlines for kicking
WikiLeaks off its servers.
This layer is the hardest to measure. It is growing rapidly and firms do not report
revenue numbers; nor are they very forthcoming with information, arguing
unconvincingly that this would help their competitors. Amazon, for instance, only
reveals that it now stores more than 200 billion digital “objects” and has to fulfil
nearly 200,000 requests for them per second—impressive numbers but not very
useful ones (an object can be a small file or an entire movie).
This reluctance to share information has inspired analysts and bloggers to find
out more, in particular about Amazon. That is where the tanks come in. During
the second world war, the allies were worried that a new German tank could keep
them from invading Europe. Intelligence reports about the number of tanks were
contradictory. So statisticians were called in to help.
They assumed that the Germans, a notoriously methodical lot, had numbered
their tanks in the order they were produced. Based on this assumption, they used
the serial numbers of captured tanks to estimate the total. The number they
came up with, 256 a month, was low enough for the allies to go ahead with their
plans and turned out to be spot-on. German records showed it to be 255.
Using this approach, Guy Rosen, a blogger, and Cloudkick, a San Francisco startup
which was recently acquired by Rackspace, have come up with a detailed
estimate of the size of at least part of Amazon’s cloud. The results suggest that
Amazon’s cloud is a bigger business than previously thought. Randy Bias, the
boss of Cloudscaling, a IT-engineering firm, did not use these results when he put
Amazon’s annual cloud-computing revenues at between $500m and $700m in
2010. And in August UBS, an investment bank, predicted that they will total
$500m in 2010 and $750m in 2011.
These numbers give at least an estimate of the size of the market for IaaS.
Amazon is by far the market leader with a share of between 80% and 90%.
Assuming that Cloudkick’s and Mr Bias’ numbers are correct, revenues generated
by computing infrastructure as a service in 2010 may exceed $1 billion.
So how big is the cloud? And how big will it be in, say, ten years? It depends on
the definition. If you count web-based applications and online platforms, it is
already huge and will become more huge. Forrester predicts that it will grow to
nearly $56 billion by 2020. But raw computing services, the core of the cloud, is
much smaller—and will not get much bigger. Forrester, reckons it will be worth
$4 billion in 2020 (although this has much to do with the fact that even in the
cloud, the cost of computer hardware will continue to drop.

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