Welcome!

Microservices Expo Authors: Pat Romanski, Thanh Tran, Carmen Gonzalez, Anders Wallgren, Elizabeth White

Related Topics: @CloudExpo, Microservices Expo, Microsoft Cloud, Containers Expo Blog, Agile Computing, Cloud Security

@CloudExpo: Article

Licensed to Print Money (In the Cloud)

New approaches are emerging with the goal of minimizing upfront investments in both hardware and software

One of the major issues facing cloud service providers is the expense of building out infrastructure without knowing how or when revenues will follow. As a result, cloud providers are reevaluating their approach to hardware and software investments and engaging with technology and networking vendors to develop creative pricing models that are aligned with cloud business principles and engineered to reduce risks.

In a perfect world, cloud service providers would pay for infrastructure only after a customer has made a purchase - in order to maintain a tight correlation between revenues and expenses. In the real world, however, implementing this type of model is easier said than done. This was especially true during the ‘iron' age, when hardware and software were highly coupled and there were very few alternatives to big vendors that focused on selling high-dollar, high-performance networking gear.

Today, however, new approaches are emerging with the goal of minimizing upfront investments in both hardware and software. One of the most compelling new approaches takes advantage of performance improvements in server virtualization. Leveraging virtualization has several benefits, one of which is the ability to maximize the use of compute resources. Although specialized hardware can provide some performance advantages, the downside is that unused compute resources cannot be utilized or shared by other functions. For many service providers operating on thin margins, idle resources that cannot be monetized can mean the difference between profit and loss.

In contrast, virtualized server resources can be spun up and spun down to perform a wide range of functions and enable a wide selection of services. While hardware will always remain a large expense, standardizing on server virtualization generates savings in the form of volume discounts and also provides the flexibility to ensure maximum ROI is being extracted from the infrastructure. In other words, a virtual machine that ran load balancing yesterday for one customer could just as easily run application services today for a different customer.

The other major benefit of server virtualization is the ability to decouple expensive software and networking functionality from the underlying hardware. While hardware needs to be purchased up front to provide the foundation for services, software does not. Software can be purchased on demand. In fact, software can enable service providers to be real-time technology resellers - seamlessly making products from a range of technology vendors available to their customers. Or software may be purchased on demand in direct proportion to the provider's need to scale or support services purchased by their customers.

A notable example of this trend is software-based networking products - as exemplified by virtual load balancing, secure access and WAN optimization. Instead of focusing only on high-performance dedicated hardware, networking vendors now give cloud service providers the ability to run essential functions in virtualized environments on commodity servers. By giving service providers the ability to move application networking functions onto a common virtualized server infrastructure - and focusing on integration with orchestration and cloud management systems - networking vendors are giving service providers the ability to significantly lower the cost of service creation.

Although significant, this shift is only the beginning. Service providers are demanding even greater creativity from technology and networking vendors. Although virtualized solutions lower capex and opex and provide the ability to respond quickly to customer needs, they still require service providers to invest up front in costly perpetual licensing. Even with the advent of lower-cost and time-bound subscription models, service providers are still required to purchase licenses up front on the expectation of turning a profit as they resell services.

In response, some technology and networking vendors are breaking new ground and turning traditional pricing models on their heads. As an example, a vendor may charge service providers a nominal amount to run software load balancing in a virtualized environment and forgo traditional licensing schemes. In this new model, service providers pay nothing in the way of user licenses until such time as they ramp customers.

Whether the load balancing is used "under-the-cloud" to support and scale software services, or made available "over-the-cloud" as infrastructure services, these new models offer service providers "map-of-the-earth" pricing. In other words, the service provider pays the networking vendor in direct proportion to demand.

Customers simply purchase services on-demand and get charged by the service provider according to metrics such as time or bandwidth. As customers pay, the cloud service provider and application delivery networking vendor generate revenue simultaneously based upon a predetermined arrangement. Depending on the type of networking service being resold and depending on the nature of the service provider's business model, billing could be driven by throughput, users, connections or transactions per second or any variation that provides the most compelling offering to customers and the greatest margin to the service provider.

On the flip side, for these new business models to gain traction, billing and provisioning for customers, providers and vendors must be automated and integrated with service provider cloud management systems. For technology and networking vendors, that means putting as much effort into orchestration as they put into core capabilities - an effort that is well underway.

By standardizing on a common hardware architecture, leveraging virtualized to maximize ROI, decoupling hardware from software and evolving to new on-demand software business models, cloud providers gain a massive improvement in their ability to be profitable. With less risk and less outlay, service providers are better able to manage and grow their business and a rising tide lifts both service providers and technology and networking vendors. As business increases for the cloud provider, technology and networking vendors can also build automated volume discounts into the business model, which may be triggered to encourage growth and further control costs.

As cloud computing and cloud services continue to accelerate, cloud providers - whether offering software, platform or infrastructure services - are well advised to seek out technology and networking vendors with a broad suite of virtualized offerings and a willingness to work with providers on pricing strategies and business models that enhance profitability for both parties.

More Stories By Paul Andersen

Paul Andersen is the Marketing Manager at Array Networks. He has over 15 years’ experience in networking, and has served in various marketing capacities for Cisco Systems, Tasman Networks and Sun Microsystems. Mr. Andersen holds a Bachelor’s Degree in Marketing from San Jose State University.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@MicroservicesExpo Stories
Many banks and financial institutions are experimenting with containers in development environments, but when will they move into production? Containers are seen as the key to achieving the ultimate in information technology flexibility and agility. Containers work on both public and private clouds, and make it easy to build and deploy applications. The challenge for regulated industries is the cost and complexity of container security compliance. VM security compliance is already challenging, ...
While there has been much ado about interoperability, there are still no real solutions, same as last year and the year before that. The large EHR vendors who continue to dominate the market still maintain that interoperability is all but solved, still can't connect EHRs across the continuum causing frustration by providers and a disservice to patients. The ONC pays lip service to the problem, but that is about it. It is time for the healthcare industry to consider alternatives like middleware w...
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York and Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty ...
Our CTO, Anders Wallgren, recently sat down to take part in the “B2B Nation: IT” podcast — the series dedicated to serving the IT professional community with expert opinions and advice on the world of information technology. Listen to the great conversation, where Anders shares his thoughts on DevOps lessons from large enterprises, the growth of microservices and containers, and more.
The 19th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit y...
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 19th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo New York Call for Papers is now open.
SYS-CON Events announced today the How to Create Angular 2 Clients for the Cloud Workshop, being held June 7, 2016, in conjunction with 18th Cloud Expo | @ThingsExpo, at the Javits Center in New York, NY. Angular 2 is a complete re-write of the popular framework AngularJS. Programming in Angular 2 is greatly simplified. Now it’s a component-based well-performing framework. The immersive one-day workshop led by Yakov Fain, a Java Champion and a co-founder of the IT consultancy Farata Systems and...
IoT generates lots of temporal data. But how do you unlock its value? How do you coordinate the diverse moving parts that must come together when developing your IoT product? What are the key challenges addressed by Data as a Service? How does cloud computing underlie and connect the notions of Digital and DevOps What is the impact of the API economy? What is the business imperative for Cognitive Computing? Get all these questions and hundreds more like them answered at the 18th Cloud Expo...
@DevOpsSummit taking place June 7-9, 2016 at Javits Center, New York City, and Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 18th International @CloudExpo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world.
Just last week a senior Hybris consultant shared the story of a customer engagement on which he was working. This customer had problems, serious problems. We’re talking about response times far beyond the most liberal acceptable standard. They were unable to solve the issue in their eCommerce platform – specifically Hybris. Although the eCommerce project was delivered by a system integrator / implementation partner, the vendor still gets involved when things go really wrong. After all, the vendo...
Small teams are more effective. The general agreement is that anything from 5 to 12 is the 'right' small. But of course small teams will also have 'small' throughput - relatively speaking. So if your demand is X and the throughput of a small team is X/10, you probably need 10 teams to meet that demand. But more teams also mean more effort to coordinate and align their efforts in the same direction. So, the challenge is how to harness the power of small teams and yet orchestrate multiples of them...
SYS-CON Events announced today the Docker Meets Kubernetes – Intro into the Kubernetes World, being held June 9, 2016, in conjunction with 18th Cloud Expo | @ThingsExpo, at the Javits Center in New York, NY. Register for 'Docker Meets Kubernetes Workshop' Here! This workshop led by Sebastian Scheele, co-founder of Loodse, introduces participants to Kubernetes (container orchestration). Through a combination of instructor-led presentations, demonstrations, and hands-on labs, participants learn ...
The initial debate is over: Any enterprise with a serious commitment to IT is migrating to the cloud. But things are not so simple. There is a complex mix of on-premises, colocated, and public-cloud deployments. In this power panel at 18th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists will look at the present state of cloud from the C-level view, and how great companies and rock star executives can use cloud computing to meet their most ambitious and disruptive business ...
The demand for organizations to expand their infrastructure to multiple IT environments like the cloud, on-premise, mobile, bring your own device (BYOD) and the Internet of Things (IoT) continues to grow. As this hybrid infrastructure increases, the challenge to monitor the security of these systems increases in volume and complexity. In his session at 18th Cloud Expo, Stephen Coty, Chief Security Evangelist at Alert Logic, will show how properly configured and managed security architecture can...
Last week I had the pleasure of speaking on a panel at Sapphire Ventures Next-Gen Tech Stack Forum in San Francisco. Obviously, I was excited to join the discussion, but as a participant the event crystallized not only where the larger software development market is relative to microservices, container technologies (like Docker), continuous integration and deployment; but also provided insight into where DevOps is heading in the coming years.
Admittedly, two years ago I was a bulk contributor to the DevOps noise with conversations rooted in the movement around culture, principles, and goals. And while all of these elements of DevOps environments are important, I’ve found that the biggest challenge now is a lack of understanding as to why DevOps is beneficial. It’s getting the wheels going, or just taking the next step. The best way to start on the road to change is to take a look at the companies that have already made great headway ...
Agile teams report the lowest rate of measuring non-functional requirements. What does this mean for the evolution of quality in this era of Continuous Everything? To explore how the rise of SDLC acceleration trends such as Agile, DevOps, and Continuous Delivery are impacting software quality, Parasoft conducted a survey about measuring and monitoring non-functional requirements (NFRs). Here's a glimpse at what we discovered and what it means for the evolution of quality in this era of Continuo...
You might already know them from theagileadmin.com, but let me introduce you to two of the leading minds in the Rugged DevOps movement: James Wickett and Ernest Mueller. Both James and Ernest are active leaders in the DevOps space, in addition to helping organize events such as DevOpsDays Austinand LASCON. Our conversation covered a lot of bases from the founding of Rugged DevOps to aligning organizational silos to lessons learned from W. Edwards Demings.
SYS-CON Events announced today BZ Media LLC has been named “Media Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. BZ Media LLC is a high-tech media company that produces technical conferences and expositions, and publishes a magazine, newsletters and websites in the software development, SharePoint, mobile development and Commercial Drone markets.
When I talk about driving innovation with self-organizing teams, I emphasize that such self-organization includes expecting the participants to organize their own teams, give themselves their own goals, and determine for themselves how to measure their success. In contrast, the definition of skunkworks points out that members of such teams are “usually specially selected.” Good thing he added the word usually – because specially selecting such teams throws a wrench in the entire works, limiting...