Alan Weissberger Cloud Computing

2013 Cloud Connect Part III: Cloud as IT Disrupter; SDN as a New Virtual Network Infrastructure


One consistent theme during Cloud Connect 2013 was the cloud as a disrupter of IT organizations.  During the Cloud Executive Summit workshop on April 2nd, Avery Lyford of LEAP Commerce said that there were three huge areas of disruption: the mobile cloud, Big Data (analytics) and Software Defined Networking (SDN).  Each of these areas were then explored as disrupters by three excellent speakers.   We were especially impressed with the presentation by Andre Kindness of Forrester Research who candidly stated that SDN is an evolution; not a revolution and it will take 5 to 7 years for the technology to mature.

PLUMGrid’s SDN presentation on  April 5th was also very enlightening.  It’s described later in this Cloud Connect wrap-up article.

While the majority of Cloud Connect 2013 sessions focused on building private or hybrid clouds, McKinsey & Company consultants Will Forrest and Kara Sprague proposed a very different, and extremely disruptive scenario for cloud adoption.  Like IDC, McKinsey sees the future of IT (“New IT”) in  public cloud computing.  But McKinsey goes a lot further.  The prestigious market consulting firm thinks public cloud operations may be managed by a separate IT organization, created specifically to reside outside of the existing “Old IT” shop.

Leading-Edge Cloud Research and Industry Analyst View from McKinsey & Company:

“Current IT, as we know it is no longer a game-changer,” said Mr. Forrest of McKinsey.  In fact, “spending on IT is not a differentiator anymore and it doesn’t correlate with business success,” he added.  Much of the available improvement made possible by traditional IT has already been achieved.  And IT use cases have reached diminishing marginal returns– significant increases in productivity or financial savings are unlikely for most.  Probably the greatest contribution IT can make today is to trim budgets to the minimum levels  within a given market segment.  According to Mckinsey, the highest IT priority for most companies should be to move IT spend to the industry average (rather than overspend on IT).

As a result, thought leaders in the technology world are advocating for a rethink of enterprise and corporate IT.   Cloud is seen as a key lever to decrease IT costs and reach the industry average.  Mckinsey’s emphasis on using the cloud for cost reduction is in sharp contrast to the results of Everest Group’s Enterprise Cloud Adoption survey which found that flexibility and agility were much more important (see Cloud Connect Part II article).

McKinsey sees significant disruption in many business models.  They say that CEOs recognize that future revenue growth will come from new business models.  Furthermore, economic conditions are changing, demanding business model transformation.

“New IT” is rising to fill the place of “Current IT,” according to McKinsey.  The “New IT” drives business model transformation, team and corporate productivity growth and digital-only products.

Examples of companies pursuing the “New IT” are:  Amazon transforming e-retail by driving customer preference and share of wallet gains (Amazon is the market leader among online retailers in average order size, driven by “push” sales), Deloitte teams using Yammer to collaborate and Google offering digital products (AdWords and AdSense deliver data-driven, custom advertisements, resulting in $36B of annual revenues for Google).

Image suggesting that CEOs are hoping to see improvements due to the cloud beyond just those received by having more efficient IT.
Image courtesy of McKinsey & Company

CEOs are hoping to see improvements from cloud other than current IT cost reductions, such as increased business flexibility and ability for IT to scale up (or shrink) to meet business needs.  These expectations for cloud computing are shown in the adjacent figure to the right:

CEOs really don’t believe their current IT organizations can implement the “New IT.” They’re suggesting public cloud computing for the “New IT” infrastructure and may create a separate, but parallel IT organization to manage public cloud operations.

In summary, Forrester said that “Old IT” expects cloud computing to achieve incremental cost reductions within the context of established business practices, while CEOs are looking at public cloud to create new business offerings that are flexible, agile, and scalable.

McKinsey’s Kara Sprague, stated that a survey will soon be launched to determine the effect of cloud computing on SMB customers.  “Hardware OEMs are increasingly turning to service partners to access the customers, at the same time that independent software vendors are using the SaaS model to go to the customer directly. This is bad news for VARs, integrators and distributors, many of whom are trying to either become cloud service providers themselves or move into a cloud brokerage model,”  said Ms Sprague.

In a panel titled, “Disruptive Tools and Technologies,” Scott Bils of Everest Group and Randy Bias, CTO of Cloud Scaling detailed a laundry list of disruptions brought on by cloud computing.  Those included:

  • Public cloud is creating a “shadow IT” organization focused on achieving business agility, flexibility and dramatic time-to-market compression.  “Business users stand to gain significantly by evaluating public cloud options for ‘spiky’ workloads, such as development/test environments, or for non mission-critical workloads,” said Mr. Bils.
  • Open Source Software is causing redesign of cloud resident data centers (e.g. using OpenStack or CloudStack), enables an organization to move faster, reduces vendor lock-­in and risk, eliminates licensing fees.  But it dramatically increases reliance upon the community maintaining or improving the open source code.
  • Innovation in Hardware Design, e.g. ARM processors and solid state drives in cloud resident servers, Taiwanese Original Design Manufacturers (ODMs) selling direct to IT enterprise customers.
  • Building a private or hybrid cloud requires building a “net new infrastructure,” according to Mr. Bias.  It should be able to scale up or down, based on workload demand.
  • Software Defined Networking (SDN) is a huge potential disruptor, especially in data center network architecture.  However there are several important questions that have not been answered:  What is it really?  Why is it important? And is it ready for prime time?
  • It was agreed that existing network infrastructure (e.g. IP-MPLS VPNs or private line) “is not going to disappear,” especially for cloud access.  That’s due to its ability to achieve: QoS, bandwidth guarantees, low latency, multi-cast, stability and connectivity.  Therefore, SDN will need to work with that existing network architecture, perhaps as an overlay or adjunct.

In a session titled, “SDN is Here to Stay- Now What?”  PLUMGrid CTO Pere Monclus talked about SDN as a new virtual network infrastructure.  “As a way of simplifying operations and enabling a solution view of the networking space, SDN brings the additional value needed in cloud and datacenter environments to complement current hardware trends,” he said.  PLUMGrid believes that SDN, rather than traditional switches and routers, is the glue that will hold the new network together.

SDN is the layer that decouples virtual data centers from physical data centers.  It must be exensible- in both the data and control planes- as a platform to deliver better network functionality.  Those include: multi-tenancy, self service, virtual topologies, faster provisioning, and “Network as a Service.”  When deployed, SDN will result in operational simplicity, capital efficiency, and an elastic, on-demand, self service network.  However, there are many real problems to be solved before that vision can be realized.

Image depicting architecture gridlock to platform ecosystem.
Image Courtey of PLUMgrid

The functional SDN block diagram on the right was said to transform the current network architecture “gridlock” to a “SDN Platform ecosystem,” while facilitating innovation in both the control and data planes.


On that note, we conclude our three part coverage of the information packed Cloud Connect 2013 conference.  Next week we’ll be attending the Open Networking Summit- the happening of the year for SDN techies and afficionados (this author is NOT one of them). We will be reporting on what we learn to Viodi View readers.

Till next time…….



Author Alan Weissberger

By Alan Weissberger

Alan Weissberger is a renowned researcher in the telecommunications field. Having consulted for telcos, equipment manufacturers, semiconductor companies, large end users, venture capitalists and market research firms, we are fortunate to have his critical eye examining new technologies.

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