Amazon Web Services Set To Launch AWS China Region In Limited Preview In Early 2014

Scarcely days after Azure’s VP, Scott Guthrie, claimed that the Azure platform differentiated itself from Amazon Web Services by virtue of its “coverage” in China, Amazon Web Services revealed details of its forthcoming China region for the Amazon Web Services platform. Available in limited preview in early 2014, the China region will be realized through partnerships between AWS and Chinese IT providers such as ChinaNetCenter and SINNET that will support delivery of the required infrastructure and bandwidth. Today, AWS China signed a Memorandum of Understanding with the municipal government of Beijing and the Government of Ningxia Hui Nationality Autonomous Region featuring a shared commitment to deliver “high-performing, reliable, and economical AWS cloud computing services” that use “facilities and resources” in Beijing and Western China. According to the Amazon Web Services press release, the Government of Ningxia Hui Nationality Autonomous Region will use the AWS China platform to host government-related applications.

The AWS China region represents its tenth region worldwide and fourth in the Asia-Pacific region. All told, the decision by Amazon Web Services to deploy an AWS Region in China represents an astute strategic move to gain early market traction in a geography where all major U.S. and European IaaS players, with the exception of Windows Azure and Joyent, have little or no market penetration, due largely to the morass of government relations specific to doing business in China. The AWS strategy of partnering with local Chinese vendors and governments enhances the credibility of its offering and is likely to convert a subset of the thousands of current Chinese customers that use regions in the U.S, Europe and elsewhere into users of the AWS China region. Accurate estimates of the market for cloud computing in China are tough to come by, but the AWS China region clearly has the potential to contribute significantly to the platform’s quarterly revenue figures assuming that its operations, in collaboration with local partners, run smoothly and without notable disruption.

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Joyent and Qihoo 360 Technologies Poised to Gain Traction in China’s Cloud Computing Market

Recent announcements by Joyent and Qihoo 360 Technologies indicate that the use of cloud computing technology in China is poised to proliferate dramatically in 2011. On May 16, Joyent revealed details of an alliance with ClusterTech whereby ClusterTech would become the provider of public cloud services to companies in the gaming, media, mobile and social media space in China. Under this arrangement, ClusterTech will provision Joyent’s cloud computing SmartDataCenter 6 software to “service providers, data center operators and systems integrators” that will, in turn, provide Joyent’s cloud computing technology to media, gaming and mobile companies in China. In licensing its cloud computing software to a third party distributor, Joyent leverages a business model that differs markedly from most of its U.S. competitors such as Amazon Web Services and Rackspace that retain control over the deployment of their cloud computing operating systems. Joyent’s partnership with ClusterTech builds upon its previous entry into the Chinese cloud computing market in 2009 with a public cloud data center in the Qinhuangdao Economic and Technological Development Zone (QETDZ), Hebei Province, China. Meanwhile, Qihoo 360 Technologies, developer of China’s most popular internet security software, recently announced plans to enter the cloud computing space by providing online data storage. Qihoo CEO Zhou Hongyi mentioned the possibility of acquiring relevant companies in order to expand into the cloud computing and data storage space. The company’s first quarter revenue more than doubled to $22.9 million as compared to $9.7 million from last year, largely as a result of increased online advertising revenue. Qihoo went public in March through an IPO that valued the company at $202 million, with the IPO share value at $14.50. As of June 1, the stock is trading at $26.25 a share, up more than 81% from its IPO value.

Top 3 Cloud Computing Market Trends for 2011

2011 has been an extraordinary year for cloud computing so far. Amazon Web Services (AWS) set the pace with an aggressive roll-out of products such as Elastic Beanstalk, CloudFormation, Amazon Cloud Player and Amazon Cloud Drive. Just when AWS seemed poised to consolidate its first mover advantage with respect to cloud computing market share, the landscape exploded with a veritable feast of product offerings, business partnerships and acquisitions. Every month another Fortune 500 IT or telecommunications company throws its hat into the cloud computing ring: Dell’s vStart, Dell’s recent partnership with SAP, IBM’s SmartCloud, Apple’s iCloud and HP’s BladeSystem Matrix mark just some of the big names and brands that have entered the cloud computing dohyo, or sumo circle. The cast of new actors has rendered the cloud computing space painfully difficult for analysts to quantify for the purpose of understanding relative market share and growth within the industry. But within this bewildering sea of change, three industry trends have emerged that deserve attention:

1. Outages across the industry signal demand outweighs supply
Demand for cloud computing services has begun to outstrip supply to the point where vendor processes for guaranteeing system uptime have become increasingly challenged. The Amazon Web Services outage of 2011 was the most glaring example of a lack of effective, scalable processes for one of the world’s premier IaaS vendors, but 2011 has witnessed notable outages specific to Sony PlayStation, Twitter, Gmail and Google’s Blogger as well. Expect more outages and service disruptions until the industry fathoms the time to develop processes for delivering on 99.99% SLAs as opposed to merely promising them.

2. Early Consolidation vs. the Proliferation of New Entrants to the Market
The past five months have witnessed Verizon’s acquisition of Terremark, Time Warner Cable’s acquisition of NaviSite, CenturyLink’s acquisition of Savvis and rife speculation that Rackspace lies next on the totem pole of potential buyouts. In tandem with the finalization of these acquistions, a slew of other companies such as Appistry, CA Technologies, Engine Yard, Flexiant, GigaSpaces, RightScale and ThinkGrid have emerged on the landscape and promise to collectively cobble together a non-trivial slice of the market while potentially transforming into significant niche players themselves. Expect new entrants on the scene, particularly in the open source space that will increasingly complicate the IaaS market share dominance of AWS, Eucalyptus, Rackspace, GoGrid and Joyent. Consolidations will continue but the market is unlikely to congeal into a few dominant players for quite some time.

3. The Rise of Open Source Cloud Computing Solutions
Rackspace, Dell and Equinux’s launch of a demonstration environment of OpenStack promises to change the industry by enticing customers to consider toying with its open source platform for free while paying for consultative support services associated with cloud design and management. Meanwhile, Canonical’s decision to change the cloud computing provider for its Ubuntu Enterprise Cloud (UEC) offering from Eucalyptus to OpenStack testifies to the strength of OpenStack and conversely, underscores Eucalyptus’s challenge in defining its value proposition as an Amazon EC2 compatible open source IaaS platform. RedHat’s open source PaaS product called OpenShift marks another leading contender in the open source ring by virtue of its deployment flexibility across the Java, Python, PHP and Ruby environments. Expect that open source IaaS and PaaS offerings will become increasingly robust and scalable. If open source solutions can demonstrate reliable, high quality portability across platforms, the market for less portable, private sector IaaS and PaaS solutions is likely to shrink dramatically. The fortunes of OpenStack, OpenShift and the recently formed Open Virtualization Alliance merit a close watch, in particular.

Company Profile: Joyent and Application Virtualization

Joyent is a cloud computing vendor based in San Francisco. Founded by David Young (CEO) and David Hoffman (Chief Scientist) in 2004, Joyent is an Infrastructure as a Service vendor whose business model targets large scale enterprises, particularly in the online gaming space. Joyent has created its own technology stack called SmartDataCenter that it either licenses to third party customers or uses to deliver cloud computing services directly to customers such as LinkedIn, Kabam and the Gilt Groupe. Unlike other cloud computing vendors, Joyent takes virtualization a step further than hardware virtualization by virtualizing its cloud computing operating system over a pool of hardware resources that guarantees applications access to hardware resources. Because Joyent’s cloud computing operating system is virtualized, every application that operates on its SmartOS platform has access to its entire fleet of servers, with the result that customers need not create procedures for provisioning additional server resources as necessary. Applications on Joyent’s SmartOS platform are de facto deterritorialized across Joyent’s collective pool of hardware resources.

Joyent’s website describes its application virtualization as follows:

The SmartMachine has been designed to be very transparent to the underlying operating system, Joyent SmartOS. SmartOS uses this visibility into the SmartMachine to provide all SmartMachines with as-needed access to a pool of all available resources on a single piece of hardware while still providing each SmartMachine with minimum guaranteed access to resources based on a pre-established fair share schedule. This transparency also allows the underlying operating system, Joyent SmartOS, to identify underutilized resources and use them to provide enhanced application performance management. In normal operating conditions, all RAM and CPU resources are either directly used by applications, or are being used by the operating system to optimize disk I/O and provide other performance enhancements to the SmartMachines.
Source: “Joyent: Application Virtualization Hosting”

Joyent’s claim here is that the virtualization of the SmartOS operating system on which all of its applications run enables it to maximize productivity by identifying “underutilized resources” that can in turn be deployed to enhance “application performance management.” A series of third party benchmarking tests by the IMS company claimed that Joyent SmartMachines, Windows Virtual Machines and Linux Virtual Machines outperformed its Amazon EC2 server counterparts. Specifically, the IMS company claimed that Joyent SmartMachine’s disk I/O, Linux Virtual Machine CPU and Windows Virtual Machine disk I/O were faster than the corresponding Amazon EC2 machine by factors of 14, 5 and 2 respectively. Everyone in the cloud computing space knows that benchmarking tests are notoriously difficult to appraise, but Joyent’s willingness to position itself directly against Amazon EC2 in both press releases and company webinars speaks volumes about its confidence to execute.

Joyent’s CTO Mark Mayo attributes its performance to its application virtualization design: “Most people have resigned themselves to painfully slow disk I/O in the cloud,” Mayo noted. “But these results demonstrate that they don’t have to settle for mediocrity. Joyent’s cloud architecture uses lightweight virtualization that doesn’t impose overhead on I/O, so SmartMachines are as much as 14 times faster than Amazon’s EC2 machines.”

Performance marks one of many factors to consider when choosing a cloud computing vendor, but the IMS Company’s results nevertheless beg the question of whether Amazon’s market share leader position has compromised the performance and speed of its EC2 product offering. Conversely, cloud customers will need to consider whether Joyent has the capacity to accommodate more and more enterprise customers that are likely to strain an infrastructure that already supports computationally intensive applications from customers such as Kabam, Social Gaming Universe and Neverbug Entertainment and ZooLife.

Amazon Web Services and the Large Scale Enterprise Space

In a December 2010 article titled “Magic Quadrant for Cloud Infrastructure as a Service and Web Hosting”, Gartner positioned Amazon Web Services (AWS) as a visionary within its Magic Quadrant in the Cloud Computing Space. Within the “Visionary” category, Amazon was joined by GoGrid, CSC, Joyent and IBM whereas the “Leaders” box was occupied by Savvis, AT&T, Rackspace, Verizon Business and Terremark Worldwide. Gartner’s designation of AWS as a visionary was widely controversial given its first mover advantage in the cloud computing space, its dominance of cloud computing market share and the unparalleled depth of its features and functionality. In its critique of AWS, Gartner noted that Amazon lacked managed services that catered to the needs of customers who required customized management of data and applications that have been transferred to the cloud. Moreover, Gartner claimed that Amazon lacked colocation and dedicated non-virtualized servers, charged separately for items that are often bundled for free in the offerings of its competitors, and was fundamentally developer-centric, rather than enterprise oriented.

This article claims that Gartner’s criticisms about Amazon’s “lack of managed services” are misguided and reveal a fundamental misunderstanding of its business model and strategic objectives. On one hand, Gartner is right to claim that Amazon’s EC2 cloud computing service lacks managed services that provide enterprise customers with the personalized attention to which they have been accustomed when purchasing IT services from vendors such as IBM, SAP or Siemens Soarian. That having been said, Amazon’s cloud computing business model is designed to eschew the personalized attention specific to the procurement process and subsequent customized management of its cloud computing services. Amazon’s EC2 platform provides the most flexible, easily configurable, streamlined process for deploying software applications in the cloud computing space, today. In exchange for Amazon’s low pricing and array of applications for provisioning servers and associated applications with a few clicks of the mouse, enterprise customers will need to abandon the expectation that they will receive customized attention from their cloud computing vendor. Just as Wal-Mart bifurcated the department store experience into those stores that compete in price and those that offer customers personalized attention during the shopping process, Amazon intends the same in the cloud computing market: take advantage of its low pricing and bevy of applications for streamlining the deployment experience such as Hadoop, Elastic Beanstalk and CloudFormation, or go elsewhere. Gartner is right to claim that Amazon is fundamentally developer-centric, but it misses the reality that Amazon’s business model conflates developer-centric with enterprise oriented by providing large scale enterprises with unparalleled ease of deployment and application management experience. To repeat: for Amazon Web Services, developer-centric is enterprise oriented, but in a way that departs from the traditional model by which large-scale enterprises have been used to procuring IT services by receiving customized pricing, product demonstrations and walk-throughs for C-level stakeholders, negotiation about customized features and functionality, and customized management of services, post-signing. Instead, Amazon CEO Jeff Bezos, its CTO Werner Vogels and the rest of AWS’s executive team have thrown the ball into the court of C-level executives at the enterprise level and its development managers, daring them to take or leave the flexibility of its deployment platform and attractive pricing.

Our next postings will elaborate more on precisely how Amazon’s product functionalities and 2011 product roadmap simplifies and streamlines the development experience for large scale enterprises. We will examine Elastic Beanstalk, CloudFormation, its VMWare Plug-in, integration of Zeus Load Balancer and its premium support services in more detail.