Turbo Talk

Over the last few days, there have been a couple of interesting developments and posts from the cloud community that have me thinking about the economic ramifications of cloud computing.

Amazon just announced spot pricing for EC2 instances:  Amazon users can now name their price for an EC2 instance and if capacity is available at that price, the instance will be purchased.  Werner Vogels (Amazon CTO) discusses this in more detail on his blog.

Hedging Your Options for the Cloud:  In this GigaOM post, Joe Weinman of AT&T discusses a variety of economic and business models for cloud computing.

Taking pricing models used in other industries (e.g. airlines, hotels, manufacturing, internet advertising) and applying them to the management of clouds makes sense – especially as compute power and application capacity becomes commoditized.  However, there is still much work to be done to achieve the same level of pricing and service granularity in the application world.

For instance, a unit of cloud CPU power or cloud storage is somewhat fungible, and it is fairly clear what you’re purchasing for your money.  On the other hand, trying to appropriately value, sell, or trade a unit of specific application capacity running within an enterprise is not.

For these new pricing models to have the most impact and business value to end users of IT, they’ll need to be viable in the cloud as well within the four walls of the enterprise.

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• New From Amazon: Spot Pricing on Cloud Computing (datacenterknowledge.com)
• Amazon Slashes the Price of Reserved Instances (techcrunchit.com)

A good presentation on the future of the datacenter by Richard Scannell, founder of the IT services firm Glasshouse.  Food for thought!

Greg Ness of Infoblox recently posted about the benefits of virtualization and how it (along with other trends) would enable “Just In Time IT”.  Greg made one point in particular that I wanted to reblog and discuss here:

While some network equipment vendors watch, others will be replacing manual tasks and processes with policies and mouse clicks. History will repeat itself once again.

I agree 100% that moving to a more policy-based approach of managing IT is superior to the mostly manual approach taken by many organizations today, and that most vendors will want to support these approaches in their products.  Customers who implement policy-enabled products, especially if they have not invested in IT automation products in the past, should see big benefits from adopting this kind of approach, assuming they manage a large and somewhat complex IT environment.

However, with any investment,  the marginal benefit due to each incremental dollar of spending will eventually start to decrease.  I would think that investment in IT automation technology should be no different.  As virtualization and cloud computing trends accelerate the move to a more automated IT stack, optimization of automation processes and tools will become critical in order to maintain those marginal benefits.