Friday, June 17, 2011

Government Regulation and Platform as a Service

The consolidation of data centers into service clouds will reduce the capital and operating costs in data centers. However, cloud solutions do not cut all of the total life cycle costs of IT. They do not improve interoperability across different clouds. They do not increase the rate of innovation of applications.  They do not strengthen security and assure a high level of availability. They do not offer a solution to the proliferation of chaotic IT applications.
Data center hardware depreciation accounts for not more than 10% of total annual cost of information technologies. A rationalization of information processing by means of virtualization does not attack most of the operating costs. These are the costs of customer-operated devices, applications development, application maintenance, administrative management, costs of user support and communications expenses.

Implementing information-as-an-Infrastructure (IaaS) will take care only of hardware costs, expenses for electricity and the payroll of support personnel. Although IaaS is the first step how to migrate into cloud computing it delivers only a portion of potential savings.

By far the largest IaaS firm in the world is Amazon EC. It has estimated 2011 revenue of about $500 million. Other IaaS firms in the world do not exceed Amazon revenues.  With total global IT revenues of $3.4 trillion, a policy that concentrates exclusively on the savings from IaaS clouds cannot catch up with the market.

There is very little that the government can do to regulate IaaS. Every customer will port their existing application stack into proprietary hosting offered by an IaaS firm. IaaS solutions are set up as custom solutions. Standards are dictated by each vendor who will do their best to keep a customer captive.

Software-as-a-Service (Saas) offerings are attractive. If they could be scaled up to include a wide range of applications SaaS could solve many of the prevailing IT problems. However the SaaS approach to cloud computing requires an unusually high level of uniformity in meeting customer needs. Applications are dictated completely by the supplier of the SaaS services.  A total reliance on only pre-fabricated applications is not feasible. The enormous customer diversity will always limit what can be ever delivered through standard offerings. The largest SaaS firm, SalesForce has revenues of only $300 million. Although it is growing rapidly, it cannot catch up with the size of the market.

There is very little that the government can do to regulate SaaS. Every customer will use whatever proprietary services are offered by their SaaS supplier. Standards are dictated by each vendor who will do their best to keep a customer captive.

The future of IT calls for the adoption of different methods how to cut the costs of the IT infrastructure and to simplify IT operations.  The solution is Platform-as-a-Service (PaaS).

A PaaS the customer’s unique data and applications are placed on top of a standard (prefabricated) computing “stack”. The “stack” takes care of all of the infrastructure services such as communications and security. The customer needs to worry only about applications and data. The rest is taken care of without further intervention from a customer.

PaaS requires the placement of a standard software overlay on top of the existing IT coding “stack” acting as an intermediary between what belongs to the customer’s and what belongs to the cloud. The intermediation layer allows for the diversity of IT solutions to function while residing on a standard “stack” that supports a wide range of applications.
The PaaS arrangement makes it also necessary for applications and data to be constructed using a cloud specified development “framework”. Such standardization is necessary to enable applications to relocate easily from one PaaS cloud to another PaaS cloud, whether these clouds are private or public.  With such standardization applications and data can relocate to take advantage of competitive offerings from various PaaS suppliers.

To prevent PaaS firms to offer cloud solutions that capture customers by means of proprietary runtime and middleware solutions it will be necessary to institute to define the interoperability across several PaaS services. That can be done by government regulation or through the adoption of open source interfaces that can be tested for compatibility. 
Achieving PaaS interoperability through government regulations is not likely to happen. The PaaS technologies are global whereas the reach of governments is national.  The ability of customers to migrate from one PaaS vendor to another PaaS vendor is required to preserve competitive services, to prevent cartel-like hold on services and to enable smaller firms to participate in offering various forms of cloud offerings.


It will take government support of dominant software firms to prevent a monopolistic lock-in by major telecommunication firms. In various places it is the national communication carriers that are losing their voice business to the Internet. These firms are now seeking new opportunities by shifting to PaaS services that could offer much large profit margins.  It should be the policy of the government to insert itself into the business of cloud firms to assure that competition can prevail.

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