TWIS#24- Cast Iron acquired and what it means for the Cloudsourcing Glue

• Cloudsourcing- why is it important?
• IBM to buy Cloud integrators Cast Iron- the boys in blue just got very serious about cloud
• How to price your SaaS app
• HP to buy Palm- the Mobile OS world just got a whole lot more interesting….
• Apple vs Adobe- the war continues
• Closed vs Open Garden- what should we think and who’s side should we take?
• The Very disappointing VMforce announcement.
• How many flavours of PaaS do we need?
• Analysis of James Hamiltons Mix10 presentation- it’s not all that rosy you know…
• Positive statistics on SaaS adoption from interop and Gartner
• Interview with IDC Security Guru Eric Domage
• Plus naming a startup, Amazon in Asia, Sean Murphy on SLL, Trident SaaS market update and KaChing on Continuous Deployment

TWIS#24

Dilbert of the week:

Breaking news- as I begin to write this IBM is to buy Cast Iron Systems- providers of cloud to cloud and cloud to on-premise integration.

Why is this important? Don’t API’s do everything?

The reason it’s important is cloudsourcing.  What is Cloudsourcing?

Cloudsourcing is sourcing complete solutions to run your business from the cloud—by knitting together cloud applications, cloud platforms, and cloud infrastructure. Each stage in the path towards complete cloudsourcing presents unique challenges but comes with step change in benefits. When you go from adopting point SaaS solutions to multiple cloud platforms, you need to deal with more complex data management, user management and governance issues. However, this will also come with step change in business agility and user effectiveness.

By running your entire business on cloud-based IT applications and services, cloudsourcing can dramatically lowers your IT costs.  And, running your business on a pre-integrated suite of cloud-based applications results in a better-integrated, more flexible and elastic technology foundation for your business operations.

It’s important to put this in context:

Or another way:

OK- you get cloudsourcing but why does Cast Iron matter? Integration companies like Cast Iron and Boomi provide the integration glue that enables the various SaaS and Cloud solutions to integrate with eachother- Quickly and Easily. James Governor (@monkchips) posted:

What’s the big idea?

Take companies onto the cloud. That’s right folks- its a cloud onboarding play. The firm has 75 employees, was founded 2001, and has a stellar list of partners… and adapters to integrate with them. Pretty much every SaaS company of note is on the roster. We’re not just talking Netsuite salesforce.com and RightNow technologies though- ADP is another example.

He went on:

One interesting element of the Cast Iron “cloud” play is that its OmniConnect is an on premise integration appliance. The software allows for drag and drop integration of on premise and cloud apps. So now IBM Software Group has another appliance play to join Datapower.

In fact as Hayman said:
“In the early days we said “jeez- you could do that with Datapower. But… they had specific application integration patterns for the space.”

In other words IBM acquired Cast Iron Systems to accelerate its own cloud play. IBM is being onboarded to the cloud as much as its customers are…

The case studies IBM talked this morning were pretty compelling.

Companies like ADP that normally take 4 months to bring a new customer onboard are now able to do it in a matter of weeks.

“The biggest issue is migration of data and so on. They said yeah we’ve heard it all before…. But they were “a little taken aback”. “you guys and your drag and drop technology are removing the effort of building code.”

Cast Iron’s CEO continued:
“Google is doing a lot [in terms of application capability]. Its great, but the data they need – for example in SAP, is held behind the firewall. So we help with integration of that data through Google App Engine.”

“You can’t have a SaaS app that talks to quick time to value, if it then needs three months to integrate…”

Cast Iron is available as an appliance, or cloud, by monthly charge. Its already available on the IBM product list.

One issue I keep hitting is that IBM doesn’t do enough to simplify operations. Hayman spoke directly to that.
“In terms of simplicity- you have beaten us up on that, and rightly so…”

Cast Iron generates adapters that run on existing integration tools such as WebSphere MQ, or JPA.

I think in summary that the play is really interesting. If we think of classic hub and spoke supply chains – the dominant companies always demand better integration with their suppliers. Cast Iron will be great for that.

IBM’s cloud play just got a boost with a very clear business message. Nice.

+1 from me for James’s analysis. IBM just grabbed themselves a very nice piece of cloud glue. I reached out to Boomi this afternoon for comment- CEO Bob Moul posted:

For Boomi, the announcement came as no surprise. IBM has a long history of acquiring appliance-based companies, from DataPower in the XML world to Diligent in the backup area.  Cast Iron has been offering an integration appliance for many years to traditional on premise focused enterprises and WebSphere is an appliance-centric business unit so it’s a good fit for both groups. Boomi, on the other hand, has focused exclusively on the cloud computing space – having built a pure cloud-based integration platform that does not require software or appliances. IBM is obviously a very large company and other areas of the company are quite active in pursuing cloud integration strategies so we continue to view IBM as a very attractive partner prospect for Boomi.

If anything, it probably helps to clarify the cloud integration space. Boomi remains the industry’s largest integration cloud with hundreds of global customers, a vibrant open community with over 60 partners (including the major SaaS ISVs such as salesforce.com, NetSuite, Taleo, RightNow and SuccessFactors), the broadest range of connectivity with 75+ SaaS apps and hundreds of on-prem apps supported, and handling the greatest volume of transactions – over 130 million transactions a month and growing rapidly.

We remain convinced that a pure cloud integration platform built entirely as SaaS, is the best model to power the continued growth and success of the cloud computing industry. We made a decision in 2006 to go completely into the cloud ala salesforce.com and we remain committed to that path of execution. In our minds, it only makes sense to integrate SaaS applications with SaaS integration solutions. Our platform also provides a natural on ramp for traditional enterprises to migrate to the cloud, as we offer seamless SaaS-based connectivity to on premise applications (70% of our use cases).  We think the amazing traction we’ve had since launching AtomSphere in the fall of 2007 is a testament to that vision.

I didn’t realise Cast Iron was appliance focused though… I’m with Bob on the need for Cloud Glue rather than appliance to Cloud glue… Anyway- I think it’s very positive news nonetheless.

I often get asked- how much should I charge for my SaaS product? Here is a really really good way to quantitativly test pricing via Dave Concannon:

Hiten Shah (@hnshah) of Kissmetrics had some great suggestions in relation to an audience question on pricing to his Lean Startup Circle talk (given with Cindy Alvarez@cindyalvarez, and John Butler) last week.

He described three useful strategies to test pricing:

1. Set a relatively high price and then send out various discount codes: e.g. 10% off, 20% off, 30% off.  Analyze which discounted price point brings you the most value on a cost vs volume basis.
2. Split-test landing pages with different prices
3. Test a price increase, and if a user buys only charge them the “normal” price. This is useful to prevent any bad feeling that option 2 might cause. (See Amazon’s lessons on this one)

If you’re in the Bay Area, join the group!  There was some great advice from Cindy and John in this session, including some great points on what types of questions to ask in a Customer Development Process. Watch the full video, courtesy of David Binetti (@dbinetti) -

KISS Metrics at LSC from David Binetti on Vimeo.

The big tech news this week was that HP is to buy Palm for 1.2bn. GigaOm posted- Does HP want to become the new Apple?:

With HP’s $1.2 billion planned acquisition of Palm, the computer giant hopes to turn Palm’s webOS operating system into a platform to rival Apple’s mobile computing franchise. “Ultimately the Palm webOS and Apple are the two that can scale best over multiple devices and we are going to compete with Apple going forward in the broader mobile category,” said Brian Humphries, SVP of corporate strategy and development at HP.

I spoke with Humphries last night after the deal was announced, but he declined repeatedly to give details as to when or what devices may get webOS. So we have no idea if the HP Slate that Steve Ballmer, the CEO of Microsoft, was waving about at CES will continue to have Windows or webOS, but we do know that HP has a big vision for webOS — it hopes to put it across an array of mobile devices, creating a platform backed by the power of HP’s sales and distribution channels to which developers will flock.

I guess it makes sense- HP mobile devices have been rubbish and they don’t seem to want to back Android- so owning WebOS seems to fit.

Yet I really don’t understand how HP could hope or want to become Apple without destroying their core business of shipping commodity PC’s. Apple is design obsessed, charging a premium price for beautiful products. HP hasn’t displayed that DNA in the past and I don’t think Palm brings any of that designed obsessed DNA to the company…. Interesting to see that WebOS is not dead! I guess that’s why HP dropped Windows 7 for the slate last week….

The other mobile news is the whole Apple vs Adobe wars- fuelled on by Steve Jobs post. Mark Bernstein had a brilliant take:

I find the whole Apple-Flash brouhaha to be unpleasant to watch. Lots of good people happen to make a living from their Flash expertise. When people criticize Flash, that takes groceries off their table. It makes them angry and resentful. When Apple pokes holes in Flash, it hurts their livelihood and damages their careers. The popular metaphors of the internet community – rich in jargon terms like “open”, “free”, “evil” that have acquired very technical meanings but retain their primal resonances – have been profoundly unhelpful.

John Gruber’s recent analysis of Apple’s policy is, I think, almost exactly correct. He is right to pinpoint PowerPlant/Metrowerks as a source of Apple’s anxiety. (Tinderbox is still struggling with that one.) Java was another bad memory for Apple. An even worse memory, I think, is OpenDoc – the platform on which Apple bet the company, and lost.

But Gruber forgets the emotional memory behind all of this.

In 1997, Apple was on the ropes. Every trade press story speculated that Apple would soon go out of business. Apple’s computers were toys, hapless, hopeless. The only hope seemed to be that Microsoft’s antitrust problems would extend the struggling company’s life a year or two and something might turn up.

The last straw — what everyone feared and anticipated — was the seemingly-inevitable Microsoft announcement that Apple’s market share was too small to be worth Microsoft’s trouble, and that Office for Mac would be cancelled. On that day — and we all expected it — Apple would for all practical purposes cease to have a business.

It didn’t happen. Microsoft didn’t want to face the anti-trust consequences. They promised to extend Office a few years, and lent Apple $150M, and Jobs came back.

And somewhere in the recovery was a moment when Apple stood on a hill, before the setting sun, and shook its fist at the heavens and vowed that it would never be hungry (and powerless) again Never again would another company decide whether the Macintosh lived or died. So, Apple supplanted Metrowerks and wrote its own IDE. It wrote Keynote to inform Microsoft and the world that, should Microsoft discontinue Office for Mac, Apple would be prepared to replace it without delay. It wrote Safari to ensure that it would have a Web browser option, come what may.

This is the key to modern Apple. It’s a big company, and it’s now wildly successful. It assumes that it can write a successful software product in any niche. It’s very talented and very confident. But always, at the back of its collective mind, is fear — the fear of depending on the kindness and competence of others, and the fearful memory of the days when it was cowering in a dark closet, waiting for the blow to fall, while the trade press laughed and jeered

But where do we go from here? There are some serious open vs closed garden unresolved debates going on in my head…

Chris Dixon moves the Closed vs Open Debate forward:

When having the “open vs closed” debate regarding a technology platform, a number of distinctions need to be made. First, what exactly is meant by “open.” Here’s a great chart from a paper by Harvard professor Tom Eisenmann (et al).:

(Eisenmann acknlowledges the iPhone isn’t fully open to the end user – in the US you need to use AT&T, etc.  I would argue the iPhone is semi-open to the app developer and mobile app development was effectively closed prior to the iPhone. But the main point here is that platforms can be open & closed in many different ways, at different levels, etc.)

The next important distinction is whose interest you are considering when asking what and when to open or close things.  I think there are at least 3 interesting perspectives:

The company: Lots of people have written about this topic (Clay Christensen, Joel Spolsky, more Eisenmann here).   In a nutshell, there are times when a company, acting solely in its self-interest, should close things and other times they should open things.  As a rule of thumb, a company should close their core assets and open/commoditize complementary assets. Google’s search engine is their core asset and therefore Google should want to keep it closed, whereas the operating system is a complement that they should commoditize (my full analysis of what Google should want to own vs commoditize is here). Facebook’s social graph is their core asset so it’s optimal to close it and not interoperate with other graphs, whereas marking up web pages to be more social-network friendly (open graph protocol) is complementary hence optimal for FB to open.  (With respect to social graphs interoperating (e.g. Open Social), it’s generally in the interest of smaller graphs to interoperate and larger ones not to – the same is true of IM networks).  Note that I think there is absolutely nothing wrong with Google and Facebook or any other company keeping closed or trying to open things according to their own best interests.

The industry: When I say “what is good for the industry” I mean what ultimately creates the most aggregate industry-wide shareholder value.  I assume (hope?) this also yields the maximum innovation.  As an active tech entrepreneur and investor I think my personal interests and the tech industry’s interests are mostly aligned (hence you could argue I’m talking my book).  Unfortunately it’s much easier to study open vs. closed strategies at the level of the firm than at the level of an industry, because there are far more “split test” cases to study.  What would the world be like if email (SMTP) were controlled by a single company?  I would tend to think a far less innovative and wealthy one. There are a number of multibillion dollar industries built on email: email clients, webmail systems, email marketing, anti-spam, etc.  The downside of openness is that it’s very hard to upgrade SMTP since you need to get so many parties to agree and coordinate.  So, for example, it has taken forever to add basic anti-spam authentication features to SMTP.  Twitter on the other hand can unilaterally add useful new things like their recent annotations feature.

Here’s what Professor Eisenmann said when I asked him to summarize the state of economic thinking on the topic:

With respect to your question about the impact of open vs closed on the economy, the hard-core economists cited in my book chapterhave a lot to say, but it all boils down to “it depends.” Closed platform provides more incentive for innovation because platform owner can collect and redistribute more rent and can ensure that there’s a manageable level of competition in any given application category. Open platform harnesses strong network effects, attracting more application developers, and  thus stimulates lots of competition. There’s some interesting recent work that suggests that markets may evolve in directions that favor the presence of one strong closed player plus one strong open player (consider: Windows + Linux; iPhone + Android). In this scenario, society/economy gets best of both approaches.

Society:  I tend to think what is good for the tech industry is generally good for society.  But others certainly have different views.  Advocates of openness are often accused of being socialist hippies.  Maybe some are.  I am not.  I care about the tech industry.  I think it’s reasonable to question whether moves by large industry players are good or bad for the industry.  Unfortunately most of the debate I’ve seen so far seems driven by ideology and name calling.

Spot on Chris. Interesting to think of Closed vs Open in the context of Core business…

The somewhat disappointing news of the week is that the Salesforce VMforce announcement is not IaaS, but another PaaS language- namely Java using the SpringSource framework. William Vambenepe, Cloud Philosopher-at-Large, Oracle posted:

Overall, I like what I see. Let me put it this way. I am now a lot more likely to write an application on force.com than I was last week. How could this not be a good thing for SalesForce, me and others like me?

On the other hand, this is also not the major announcement that the “VMforce is coming” drum-roll had tried to make us expect. If you fell for it, then I guess you can be disappointed. I didn’t and I’m not (Phil Wainewright fell for it and yet isn’t disappointed, asserting that “VMforce.com redefines the PaaS landscape” for reasons not entirely clear to me even after reading his article).

The new thing is that force.com now supports an additional runtime, in addition to Apex. That new runtime uses the Java language, with the constraint that it is used via the Spring framework. Which is familiar territory to many developers. That’s it. That’s the VMforce announcement for all practical purposes from a user’s perspective. It’s a great step forward for force.com which was hampered by the non-standard nature of Apex, but it’s just a new runtime. All the other benefits that Anshu Sharma lists in his blog (search, reporting, mobile, integration, BPM, IdM, administration) are not new. They are the platform services that force.com offers to application writers, whether they use Apex or the new Java/Spring runtime.

It’s important to realize that there are two main parts to a full PaaS platform like force.com or Google App Engine. First there are application runtimes (Apex and now Java for force.com, Python and Java for GAE). They are language-dependent and you can have several of them to support different programming languages. Second are the platform services (reports, mobile, BPM, IdM etc for force.com as we saw above, mostly IdM for Google at this point) which are mostly language agnostic (beyond a library used to access them). I think of data storage (e.g. mySQL, force.com database, Google DataStore) as part of the runtime, but it’s on the edge of the grey zone. A third category is made of actual application services (e.g. the CRM web services out of SalesForce.com or the application services out of Google Apps) which I tend not to consider part of PaaS but again there are gray zones between application support services and application services. E.g. how domain-specific does your rule engine have to be before it moves from one category to the other?

I think it’s really disappointing that a) they made so much hype about adding Java and b) they’re not adding IaaS! I guess you’ve got to give the marketing machine credit…

William Vambenepe’s blog is brilliant at the moment- I really liked his post on How many flavours of PaaS do we need?

• PaaS for business apps
• PaaS for toy apps (simple form-based CRUD) and simple business front ends (e.g. restaurant web sites)
• PaaS for games, mash-ups and social apps
• PaaS for multimedia delivery and live streams
• PaaS for high performance and scientific computing
• PaaS for spamming, hacking and other illegal activities (Zombies as a Service)

He recognises that not all clouds are created equal and we need different clouds for different services which is why James Urqhart’s analysis of James Hamilton’s Mix10 presentation from TWIS#23 was interesting:

All of that being said, I would be remiss if I didn’t highlight a few things that Hamilton glossed over in this presentation:

• “You can have any color you want, as long as it’s black.” That paraphrasing of a famous quote from Henry Ford in 1909 when discussing the Model “T” is reflected in a basic fact about today’s large-scale infrastructure and platform clouds: you can build any application you like, as long as it fits into the infrastructure architecture prescribed by the provider. Configuration of the infrastructure itself is extremely limited, if not nonexistant.For example, several users of Tomcat have had to rework that application server’s clustering mechanism to allow it to work in Amazon EC2. Why? Because Amazon does not allow multicasting, and has shown no indication that they will anytime soon.Another common example is the limited set of security configuration options, and the amount of “do-it-yourself” left for the users of large-scale IaaS offerings. I’m not saying that’s a deal breaker, as you may not need much more than is provided and you can get additional security capabilities through management platforms like enStratus, but risk mitigation is a key part of data center investment in the enterprise. It pays to be aware of what you will have to accept from the cloud in that regard.
• Price isn’t everything. If computing was all about getting basic CPU, storage and networking capabilities at the lowest possible price, there would be no markets for such things as high-availability infrastructure, high-performance computing, and the wide plethora of data center security software and hardware. Driving to maximum economies of scale for those basic services without enabling support for more specialized needs means that those large-scale services won’t be right for all workloads.Now, let me be clear that I think Amazon knows that, and we will see some pretty significant innovation from them to address alternative architectures and configurations in the coming year.
• Enterprise data centers aren’t going away overnight. Building new applications in the cloud is one thing, but transferring existing systems is something else entirely. Hamilton’s calculations is entirely from the perspective of operating a data center. The cost of re-architecting and moving applications and data is not factored in, and is cost is the “barrier-of-exit” that will keep many applications in internal data centers for some time to come. They may or may not move to private cloud infrastructures, but they’ll stay in house until replaced or savings justify the cost of rework.Joe Weinman, VP of Business Strategy at AT&T, has a great site discussing how you calculate the savings that public cloud computing brings to your applications.

One has to be impressed by the true disruption that infrastructure and platform services is having on data center economics. Both enterprise IT customers and vendors should pay close attention, and understand exactly how they will play in the changing data center landscape.

But he too is right- we need Clouds for different purposes! EC2 isn’t for everyone…

Positive news on SaaS adoption from interop this week:

A survey of network managers and other IT pros attending this week’s Interop Las Vegas business technology conference found that more than 40% have some form of public cloud resources available on their corporate systems.

Of the 104 respondents, 41% said their companies tapped the cloud for apps and services such as Google’s Google Apps productivity software and Salesforce.com’s online CRM tools.

29% of respondents to the survey, which was conducted Network Instruments, said their organizations have adopted private clouds, while 19% reported using some form of Infrastructure-as-a-Service (IaaS), like Amazon’s Elastic Compute Cloud (EC2).

33% indentified lower infrastructure costs as the primary reason their organization is adopting cloud computing services. Another 30% moved to cloud services to leverage the added flexibility it gave their IT departments to answer business changes. Just 3% said they didn’t see any benefits to cloud computing.

I’m really pleased that not only 41% say their using SaaS but 30% recognise that moving to SaaS and Cloud is about flexibility. IW went on:

Indeed, 22% percent said they lacked the tools necessary to monitor and manage cloud activities. 15% said they lacked sufficient knowledge to manage cloud issues, and 12% reported being unable to resolve delays caused by cloud service providers.

“It was significant to note the number of organizations without adequate monitoring technologies and network resources in place,” said Brown.

The top concern (27%) among potential cloud users was the fear that network bandwidth costs would exceed estimates. “Cloud implementations can be fraught with challenges that consume troubleshooting time and bandwidth, jeopardizing the organization’s ability to realize cost savings promised by these services,” said Brown.

Still, cloud computing has many backers. Earlier Wednesday, IBM cloud CTO Kristof Kloeckner, said organizations that embrace cloud computing could cut IT labor costs by up to 50% and improve capital utilization by 75%.

Yet I’m surprised to see security not top the SaaS issues list- my week was certainly dominated defending them- OK, I was at infosec, but even still, the quantitative data doesn’t back this up- for example the Mimecast Cloud Adoption Survey which I help look after, last ran in October last year and found 46% of people surveyed were not moving to the cloud because of security (disclosure- I work at Mimecast).

I’m bringing some thoughts together on Cloud Security post infosec- but check out my interview with IDC security guru Eric Domage:

Interesting thoughts, but I remain sore after being beaten up by those infosec people who don’t think anything is secure if it’s outside their data center! We as an industry need to sort the security issues out…

Gartner thinks SaaS is on the way up too this week:

More than 95% of organisations expect to maintain or increase their use of software as a service (SaaS), according to a survey by research firm Gartner.

Unrelated- but a brilliant rant- Coming up with a startup name (i.e. the 6th circle of hell) is a classic read! Naming a company is a total nightmare!

In other news:

• Amazon announces long awaited Asian AWS zone- Singapore Availability Zone Launched
• If you missed it- Sean Murphy’s roundup from the Lean Startup Conference- Startup Lessons Learned is well worth a look
• 1Q10 SaaS Market roundup by Evangelos from Trident- definitely worth a read as he spends a lot of time looking at the economics of SaaS
• Wondering about Continuous Deployment? KaChing have written a great post on how they deploy it.

Have a great week!

Justin

jp@justinpirie.com