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Disrupting IT Infrastructure Business Models

Disrupting IT Infrastructure Business Models

Overall IT infrastructure spending has slowed over the past year, and EMC is projecting only 3% annual market growth going forward-see EMC and VMware Strategic Forum 2013. But underneath this overall trend there are several segments of the infrastructure that are experiencing strong secular growth, in part by disrupting existing technology business models. These segments include:

1. Public Cloud Computing

2. Flash Storage

3. Software defined storage.

There is an interesting connection between these segments which is worth exploring. The common link is distributed computing and storage architectures. And distributed compute and storage systems are likely to be very disruptive to legacy infrastructure going forward, not just in the cloud, but in the enterprise.

Public Cloud Computing

The growth of advertising supported web services businesses such as Google and Facebook, and SaaS offerings like Salesforce, is not news to anyone, and the three of them alone have created $350 Billion is market value over the past decade.  Bain & Company estimates that the cloud computing market will grow by 20-30% over the next five years.

The Amazon Web Services Infrastructure as a Service story is less well known since Amazon doesn’t break out financials.  But a recent Bernstein Research report estimates that they have been growing on the order of 100% per year, are 5 or 10 times as large as their nearest competitor, and have an implied market capitalization of $24 billion. Right now AWS runs a lot of small businesses and small corporate projects together with some big customers like Netflix. It allows them to rent infrastructure by the hour to run their existing applications without rewriting them, and frequently lowers its price.  The question is: how quickly can AWS solve the issues of application availability and easy portability of applications and data between legacy on-premise infrastructure and the Amazon Cloud, in order to allow it to capture more of the enterprise market?  They are a very agile organization. VMware and Microsoft, the on-premise virtualization and server application incumbents, are VERY concerned about their customers moving to Amazon.

The hardware vendor incumbents in the on-premise data center are very concerned as well. Look around a public cloud data center.  You may see a lot of servers from Quanta. A lot of Fusion-io cards. Not a lot of NetApp or EMC storage arrays.  When workloads shift from on-premise to cloud data centers, the total available market for the branded server and storage vendors declines. Public cloud datacenters typically have better utilization rates than on-premise deployments, reducing the amount of hardware required. And the hardware that is used is less likely to be from a branded vendor.

Software Defined Storage and Flash

But the branded IT hardware vendors face an even bigger problem.  The cloud data centers use a different architecture than on-premise infrastructure. And that architecture is starting to find its way back to the enterprise.

Since they buy a LOT of hardware each year, the public cloud companies pay a lot of attention to pricing and supplier cost position. Facebook standardizes around 5 server architectures so they can put large volumes of each out to bid.  Quanta sold 1.2 million servers in 2012, and expects to grow 50% this year.  85% of those sales will be direct to a handful of public cloud companies. These companies have also noticed that server vendors operate on margins of less than 20%, disk drive makers operate at 30%, while storage vendors operate at 60%. There is a lot of expensive software and services packaged with the hardware in a storage array.  And…their hardware is not very flexible and doesn’t scale well.

So the public cloud data centers build their own massive storage systems out of commodity servers and storage drives with proprietary storage software to provide storage services. They learned to incorporate high performance, but expensive, Flash storage to handle workloads like file system metadata, while putting sequential content data on cheap SATA drives.  Fusion-io, the PCIe flash leader, has grown from nothing to more than $1.5 billion in market capitalization, and Facebook alone accounted for more than a third of their revenue in 2012. The public cloud storage systems have to be big, they have to be fast, and they have the flexibility to occasionally present old data or lose it entirely (would you miss the last million results on your search?) But they work really well. And they cost a lot less than enterprise infrastructure.

These distributed compute and storage systems run on commodity hardware, abstract the data from the hardware, and provide availability, resiliency, and storage services in software.  Most of the public cloud companies have a lot of really smart engineers and PhDs to write and maintain these systems. But what if this type of distributed storage solution was available in an integrated off-the-shelf software package for the enterprise and could use both legacy SAN and commodity storage? Software that not just abstracted and pooled data, and provided a basic level or resiliency, but one that provide enterprise storage services like multiple RAID levels, snapshots, remote replication, and granular quality of service? Software that incorporated flash storage into a highly available primary storage tier in hybrid flash/HDD volumes, while intelligently placing data within the volome based on file system access profile?  Software that scales out to thousands of nodes in shared data clusters, to Exabytes of storage, and to more than 500,000 IOPS per node? What if the software data abstraction layer made it easy to distribute workloads across large virtual server clusters running on any on-premise hypervisor, or to cloud platforms like AWS or Rackspace?

This type of software could dramatically reduce the cost of enterprise IT infrastructure by enabling commodity hardware, improving availability, and providing the flexibility to assign workloads to on-premise or cloud infrastructure based on both workload requirements  and cost/capacity utilization. It would provide public cloud economics on commodity hardware with enterprise reliability.

Well, you can wait for EMC or NetApp to cannibalize their existing high margin business models to deliver this type of solution. And maybe they will.  Or you can try Melio5 today.

Read the original blog entry...

More Stories By Momchil Michailov

Momchil Michailov is CEO and Co-Founder of Sanbolic. He has served as CEO since 2000. Prior to founding Sanbolic, Momchil was a co founder and CEO of Number One GM, Inc. where he oversaw the company from a SAN hardware distribution start-up to a leader in the broadcast workgroup software space. The company was acquired by Autodesk in 1999. Mr.Michailov brings over 15 years of storage expertise and has a background in technology and media production.

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