But the crux of the argument being made isn’t really that there are too many startups – it’s that the effect of having so many small startups is the talent pool for the high potential startups and growing businesses has shrunk significantly. The talent war is no longer fought on which company and benefits package to go for, but also whether to found or join a startup. So if you’re trying to grow a business – where do you get talented, self-motivated, value-adding hires? All the good ones are setting up on their own.

I’m on the fence about this – I agree that there are too many acquisitions done purely for talent, and too many short lived companies or startups that lack a big vision – making those startups nothing but a slow and financially very effective (for the founders) recruitment mechanism. But I am a big believer in the startup culture – and ultimately the entrepreneurial drive that got someone to create a business, will lead a lot of them to found another one in future.

Many second or third time entrepreneurs build phenomenally successful and long-term companies, but when you look back to their beginnings, they were not quite so ambitious. Isn’t it better that they cut their teeth in the startup world, even if they got acqu-hired? Sure there’s short term pain for the superstar companies struggling to get good staff now – but over a 10-20 year period – will we (as a global economy) be better off with a larger pool of experienced entrepreneurs than we would be with those smart people driving someone else’s mission within a bigger entity?

I think this argument will continue to play out for a while longer. To be honest, I’m not sure where I side on it myself. As a startup founder, of course I’m on the side of startups – but if all my team decided to leave tomorrow and create their own companies – especially if those ventures looked more like feature-companies (a product that really is just a better feature than the existing players – and won’t last once they match it) and my company would suffer from the talent drain – I think my stance would change. ”There’s too many startups”!

Of course looking at the team we have in CloudVertical – I know some are dedicated engineers who love the challenges that brings; and I fully expect a one or two to go on to either run or found businesses. Right now we’re all laser focussed on making CloudVertical a success – the leader in Cloud IT Management Software – and what better training ground for any future aspirations.

Cloud Computing is a fantastic way to get access to world-class, extremely resilient and scalable infrastructure – for a pay-as-you-go price – with no minimum entry cost. However once you get past the initial win of getting access to Infrastructure as a Service rather than ‘investing’ in hardware it becomes clear that the Cloud has a few cost surprises.

So with that in mind, here is 10 Simple Steps to Reduce your Amazon Web Services – AWS  - costs.

1. Scale DOWN as well as UP

Every application is different, and every business has different tolerances for uptime and performance. Find yours. Agree it. Lets say when an instance hits 80% CPU usage average for more than 5 minutes – you add another instance to your pool; and when it hits 20% usage average for more than 5 minutes, you terminate it. Set auto-scaling rules based on acceptable thresholds – and remember – auto-scaling is not only for scale-UP, you can scale down in line with business activity. Maybe you don’t need your entire instance pool online at 10pm on Friday.

2. Pre-pay if you have a known minimum usage

For most people, the Cloud isn’t about temporary one-off resources, it’s a about not having to buy equipment, and getting access to a massively scalable platform, on-demand. That means there’s likely to be a minimal load that will always be running. Figure out what this is, and buy Reserved Instances to match it. You can pay On-Demand prices in line with your Scaling, but for you minimal load, pre-pay for instances. You’ll easily save 35%+ over 12 months.

3. Stop Your Instances!

Are you or your developers working 24×7? No? Then why is your dev environment on all the time? What about that payroll server that gets used once a month? Or your back office applications that get hammered from 9-5, and then nothing out of hours and at the weekends. If you shut servers off out of business hours, just as an example, you’re going to save 70% of your costs (168 hours in a week : you should only pay for 40 of them in this case) - you don’t pay for servers that are not running.

Bonus Tip: If you can’t turn them off – resize them. Use an EBS volume and re-map it to a smaller server for those applications that need to be available 24×7, but whose load drops dramatically outside of standard hours.

4. Watch out for Waste – Cloud Sprawl

The Cloud is a variable resource, which means it’s easy to add resources and forget about them. VM sprawl happens internally all the time – but the cost can be managed with periodic audits, whereas in the Cloud, you pay for everything – whether or not you’re not using it. Prime examples here on AWS are Elastic IPs that you have detached from an instance, but have not released back to the pool – are charged per hour; also any EBS volumes you have mounted to instances, and then terminated the instance but forgot to get rid of the EBS volume, can start to add up.

5. Set Smart Alerts

Alerts don’t only need to be used to in times of crisis. Set alerts based on a daily budget, or specific usage alerts per instance, or across your cluster. Use these to manage your costs when usage is below a certain amount – you should be able to reduce the resources you have deployed.

6. Cost is a proxy for Usage

Not to harp on about the variable nature of the Cloud, but it is the primary fundamental difference between Cloud Computing and On-Premise Infrastructure. Because it’s a variable resource and your cost goes up or down in line with your usage – if your cost suddenly jumps up, or massively drops, it’s likely that something unplanned has happened – either a mis-configured auto-scaling group, or script, or a few instances have gone off-line (and you’re no longer billed for them …). Use Cost as a base level to monitor your Usage – you can do it right down to an hourly level – and get a feel for what the ‘normal’ is. Any deviations should be questioned.

7. Spot the Difference

AWS have a fantastic marketplace that sells off unused capacity for a (normally) heavily discounted price. Spot instances seem to run at an average of 40% of the on-demand price, so effective use of spot instances can save you big time. Not every workload suits this – but even aside from one-off data crunching jobs – adding spot instances to your pool makes a lot of sense if you want to ‘average’ a good performance benchmark, but you can tolerate minor service degradation in favour of the huge cost savings that can be made.

8. Understand Performance

Performance doesn’t mean your CPU and RAM usage – those metrics are really only useful to see what your server is doing. What if your application is massively inefficient in how it’s using those resources? Or a recent deployment has caused a memory leak, or processes to stall? Get a performance management tool  to analyse your log files and events – and try not just to get a high level of usage from your infrastructure, but to make to understand what your application performance benchmark is, and how to map your costs against that line. This is really the holy-grail of effective Cloud management.

9. The Clouds ‘Dirty Little Secret’

The web is abuzz about how Cloud enables startups to get going for near zero, and how businesses can now start AND SCALE in ways never before possible, the capital requirement to get up and running has completely left a startups financial model. Enterprises are disintermediating their IT departments and firing up instances so they can test new ideas and run their own applications. Great! But the ‘Dirty Little Secret’ is that Cloud is only cheap when you start; and only if you take advantage of its variable nature. For a static load – say 5 instances that run 24×7 at maximum efficiency – the Cloud can be more expensive that running managed or co-located infrastructure.

The major caveat here of course is that outsourcing is very attractive in most cases – but this is a common argument – the best Cloud use cases involve a hybrid model – we’ll cover this in another post. Understand your total ‘loaded server cost’ which is how much your internal or colocated server costs to depreciate, maintain and power – and compare that to the Cloud – baring in mind it’s not a like for like comparison unless you have a large redundant infrastructure in-house.

10. Know the Numbers

It’s amazing how many people don’t actually know the detail of their Cloud costs. What’s driving change? What will the estimated cost this quarter be? If we add 1,000 users or records, how will that impact cost? How efficient is our usage? Its common for someone on the management team to press for budgeting and analysis too – especially as the cost grows month on month. (Hint: that’s why we launched CloudVertical!)

In a later post I’ll go into specific use cases and how to manage costs in a more granular way, but for now I hope the few simple tips above are the start to getting control over your Cloud costs.

Then AWS (Amazon’s Web Services division) came along, and from a standing start only a few years ago, have created what is likely a billion dollar run-rate business, and ripped the carpet from underneath Rackspace as well as the big hardware manufacturers HP, IBM and Dell – all who are now chasing AWS – and lagging far behind.

Rackspace launched their own Cloud platform a couple of years ago (and a couple of years AFTER Amazon entered the market – hard to believe the industry leader could be caught so unawares) after acquiring JungleDisk (storage/backup) and Slicehost (VPS hosting). To me Rackspace’s Cloud offering is entry level  – easy to use, well priced, but not a true competitor to AWS – and why would it be – a true competitor would also be a substitute for Rackspace’s core Managed Hosting business.

But with OpenStack, Rackspace have shown the ‘third leg’ of their new strategy and I think they have absolutely nailed it. I can imagine the board room discussion … marketing guy says this Cloud explosion means every IT company in the world – large, local, value added resellers and systems integrators, are going to get into the business – so Rackspace will have literally tens of thousands of competitors – all who already own the customer relationship – in direct competition with them. So strategically, Rackspace decided to now only encourage these companies, but actually enable them.

Rackspace bought OpenStack, gave it to the community and let all the wannabe Cloud entrants use it to power their platform and compete. But how will they install OpenStack and get their environment ready to sell? Engage a consultancy to do it. So Rackspace bought Cloud Builders – now anyone that wants to use the free OpenStack software (and why wouldn’t they!) can call Rackspace to deploy it for them. What about support? Cloud Builders can provide ongoing platform support – but these new Cloud Platforms also bring new end-user support challenges that most IT companies are not geared up for. Rackspace is famous for their Fanatical Support – so why not extend that into the OpenStack community and charge for it? So Rackspace technicans will support the IT companies end-user. Rackspace haven’t announced this (that I’m aware of) but I would be surprised if we don’t see something like this happen.

The result? A large percentage of the thousands of new Cloud entrants will use free software for their platform (OpenStack), pay Rackspace to build it out for them, and pay Rackspace for the end-user support. Now it looks like the more competitors the better – Rackspace could grow revenue faster in this ‘channel’ space than they ever did direct in the market.

Genius.

OpenStack is flying, and I’m personally excited about the potential – it has an incredible partner network already. For my part – in Digital Mines we’ve integrated OpenStack so any providers that want a white-labelled end-user interface for managing deployments, and a utility billing engine, can now use our control panel on their OpenStack deployment.

The Irish government have placed Cloud Computing firmly in their programme for government, although agencies to date have shied away (and been officially warned off!) from using Cloud services themselves.

I propose that the main controller of government IT – be it CMOD in the Department of Finance or the LGCSB or a combination – contract the building of ‘GovCloud’ in a dedicated area of a secure (or government owned) data centre.  Implement a Cloud Management Platform to allow local IT managers and users from all government agencies to provision their applications and servers from a web based control panel. This would address the compliance issues governments have with putting data off-site, and give them the benefit of Cloud Computing that businesses enjoy today.

The benefits:

• Consolidate all existing servers and data centres into one central place.
• Increase recovery and failover time as only one environment to administer and replicate.
• Massively increase efficiency by managing capacity and resource utilisation across ALL government servers rather than in many disparate departments with their own IT infrastructure.
• Reduce capital costs – no department needs to purchase their own under-utilised equipment – they can provision, upgrade or decommission servers from a web based control panel, instantly.
• Save money and time on maintenance and IT administration by centralising all IT infrastructure – redeploy IT staff to adding value to the governments IT agenda (ie: Open Data).
• Allow IT managers and users to provision their servers and applications in minutes, not weeks (no requisition order, no deliver wait, no installation time, no stock issues).
• Meter costs internally and charge-back usage to each departments IT budget so costs are understood and can be evaluated and managed at department level.

The end result is giving more control and flexibility to users, while massively reducing capital requirements and administration time, and still maintain the borders of a secure government network. All the benefits of Cloud Computing, with none of the downsides.

Naturally the government could build this themselves, in fact I would be surprised if they were not already looking at it. However would it not make more sense to make it a commercial project, and support local companies (companies IN Ireland, and Irish companies) and also support some startups (Enterprise Ireland supported Digital Mines for example – which I have some natural bias towards!)

Some benefits of making it a commercial project:

• Ireland is seen as a leader in Cloud Computing – with it’s own platform, delivered through a public-private partnership, and cements the country as ‘Cloud-friendly’.
• Commercial nature of the project means the companies involved may be able to bring this model to other European countries and increase export revenue.
• It furthers Ireland’s ambition to be seen internationally as a destination for Cloud investments and multinationals looking for a base in Europe where Cloud Computing is core to their business.

There’s no doubt there will be a Government Cloud in the near future in Ireland – I would just like to see us take this opportunity to lead the space by engaging with innovative startups and proven leaders in the space and build a commercially driven infrastructure-as-a-service platform.

Strong Hosting Growth in Ireland due to Amazon EC2

Ireland is winning as the premier location in Europe for Cloud Computing. While Ireland has always been a key location for data centres, the country has not been a market leader in the sector.

In Cloud Computing terms though, Ireland has the two fore most Cloud providers in Amazon and Microsoft Azure located in data centres in and around Dublin, and is the European base for these operators.

Furthermore with large presences of HP, IBM, SunGard and Intel, I expect we will see those companies, and their network of local partners, get into the Cloud business. 

State of the Cloud – January 2011 :: Jack of all Clouds :: Guy Rosen on Cloud Computing

Is it real? Rackspace have caught up on Amazon? Does this mean soon they will surpass AWS? Hard to believe with the pace of innovation and the coverage AWS get for their solutions. Perhaps it’s because Rackspace just make it so EASY to use their services!

I’d like to ask, what features do you want in your mobile Cloud Management apps? We’re working on one in Digital Mines and would love to hear user feature requests.

Management Apps

AWS

• iAWS Manager
• S3 Cloud
• Cloud-IA
• iEC2Cloud
• Mobile Scale

Heroku

• Netzumi

Xen

• iXCP
• iXenLite

VMWare

• Rove Virtual Machine Manager
• OPS1

Monitoring Apps

• Cloud Status
• iStat
• iPRTG
• Host Monitor
• Server Density
• iSysInfo
• Network Utility Pro
• Net Status (Remote Server Monitoring)
• Pingdom
• AWS Watch
• AppFirst
• iCacti
• Server Remote

Providers Apps

• Rackspace Cloud Pro
• Rackspace Cloud
• Linode Manager
• Softlayer Mobile Client
• Savvis Station Portal
• Cloud Server Management (1&1)
• GoGrid
• DreamAdmin (DreamHost)
• AppEngine Manager
• Server Admin (Plesk)
• SliceHost Pro

General Infrastructure

• myServers
• iSSH VNC
• Server Control

DNS

• DNS Simple

(For a primer, you might want to read our previous post - State of the Cloud 2010)

• Adoption: Cloud Computing is mainstream now and there are many solutions and plenty of providers to implement them. While developers have been the early-adopters, in 2011 IT Managers and IT Services Providers will move to utilising Cloud Computing within their service catalogue. 2011 will be the year businesses begin to adopt Cloud Computing in a serious way.

• EcoSystem:  The ecosystem of applications on top of base-level infrastructure and platform providers will emerge as a force controlling a lot of Cloud deployments. This year saw the ecosystem begin to solidify, with a couple of acquisitions, but a lot of startup funding. This paves the way for 2011 to be a big year for ‘value added providers’ in the Cloud. We expect a lot of innovation and a few more ‘Heroku’ like big wins. (Heroku was acquired by Salesforce for over $200m).

• Public/Private & Hybrid Cloud: Public Cloud Computing (IaaS - providers like Amazon) has dominated the spectrum so far, and industry professionals spent much of the first half of 2010 arguing over the technical definition of ‘Private Cloud’. To us, a Private Cloud is an infrastructure which is controlled BY or FOR the users’ organisation and meets the core tenets of Cloud Computing - which are: self-provisioning, elasticity (bi-directional) and utility-based billing or metering. Virtualising an internal IT infrastructure is a step in the right direction, but it is not a Private Cloud. A large percentage of companies have already implemented virtualisation, and we will see this progress to Private and Hybrid Cloud Computing in 2011 as these IT managers seek better measure and manage their IT resources, and to take advantage of the Public Cloud for portions of their workload. Hybrid Cloud Providers will emerge in 2011 and this will be a hype space for a while as use-cases need to be demonstrated.

• Infrastructure as a Service Providers: Amazon currently lead the charge and will continue to dominate in 2011, although we expect to see strong challenges, from both existing entrants like Microsoft and potentially other large IT companies not yet active in the space - IBM/SunGard/EMC/Cisco. It makes sense for the large infrastructure suppliers to enter this space eventually - despite the fight they have put up against it thus far - as customer demand is strong. Lots of local Cloud providers started to emerge towards the end of 2010 and this trend will continue, although it is hard to see how they can effectively compete at the commoditised layer of Cloud Infrastructure with the big players.

• Hosting Companies: As traditional IT Companies start to move into Cloud Computing, so too Hosting Providers will move to offer more traditional IT services such as applications, communication and collaboration, and managed services. The hosting industry is changing - with platforms like Wordpress and Salesforce small businesses no longer need basic web or application hosting; and on the other side large businesses like Amazon and Microsoft are competing for the ‘bread and butter’ business. Hosting Providers will start to re-brand their existing services as ‘Cloud Services’ to try and stay relevant.

• Data Centres: The growth in the need for Data Centre space will not diminish with the growth in Cloud Computing. Quite the contrary - Cloud Infrastructure needs to be located in Data Centres - the change may be the smaller customers go with an IT provider (that resells Public Cloud space, or provides their own Private or Managed Cloud Services) so Data Centres see a reduction in customer numbers and a shift of power to the IT provider. Some Data Centre enterprises may acquire into the Managed Service space and become a ‘New Age Systems Integrator’ and compete with traditional MSPs and IT Service Providers.

• Managed Cloud Providers: We see a new type of business emerging in 2011, that sits between Public and Private Cloud providers. A so-called ‘Managed Cloud Provider’ is one which delivers IT Infrastructure, from first customer meeting through to deployment, SLA implementation and technical support, on a mix of dedicated Private Cloud (on-site or co-located), Local Managed Cloud (infrastructure deployed and managed by the service provider for multiple clients) and Public Cloud resources. The industry will likely debate this heavily as the definition of Private and Public Cloud is barely agreed, but what matters is customer acceptance, and these IT companies that transform into Managed Cloud Providers already own a vast amount of the available customer base, and so they will win business regardless of industry experts acceptance of their offerings and marketing collateral.

• Cloud Software: Already this area can be segmented into Cloud Enablers, Cloud Platforms and Cloud Management. Cloud Enablers are those companies whose application enables an organisation to offer it’s own Cloud Services. Enomaly, OnApp, Flexiant, Eucalyptus, Cloud.com, OpenStack, are just a few, and VMWare is entering the space with vCloud, which will test the mettle of the smaller independent software businesses. Cloud Platforms make up a lot of the EcoSystem mentioned above - companies such as Heroku and EngineYard, and we will see more in 2011. Finally, Cloud Management providers, like ourselves in Digital Mines, are businesses that build on top of commodity Cloud providers and virtualisation applications, and provide value-added services, such as monitoring, support, and managed services to enable Cloud Computing in organisations.

Disclaimer: This blog post is an opinion piece only and by no means exhaustive. We welcome discussion on any of the topics above, these opinions were formed based on our experiences in the industry, and we are more than happy to discuss them.

• Definition: The term ‘Cloud Computing’ was a bandwagon in 2009 and everyone decided they were ‘Cloud Companies’, in 2010 the definition of Cloud Computing was generally accepted as being 3 layers -  IaaS (Infrastructure as a Service), PaaS (Platform as a Service) and SaaS (Software as a Service). While we feel it adds less value being so generic (the term originally emerged for the IaaS space - hence the word ‘computing’), we welcome that the area now has a definition.

• Mainsteam Acceptance: Cloud Computing is now generally known and accepted as a service within business IT departments. However, it is not well understood and adoption is still low.

• Startups: A vast amount of money poured into a large number of startups, purely doing ‘Cloud Computing’. Infrastructure Providers, Management Applications, Storage Systems - a whole new breed of IT company is being created around this new ecosystem.

• Microsoft: Microsoft are investing heavily with Azure, and are moving into the general IaaS area with their latest server offering, Azure has yet to gain any measurable traction though, and is still an early stage service, trailing in features and innovation from Amazon Web Services. Hyper-V and System Centre Operations Manager are MS’s Private Cloud products and they ares selling them hard. While small ground was made 2010, momentum seems to be shifting their way.

• Salesforce: The Force.com platform is gaining momentum, although we do not see a lot of interest - it seems to be primarily an extension for existing Salesforce customers. The buy of Heroku, and launch of Database.com could extend Salesforce into the main Cloud Computing arena next year.

• Amazon Web Services: AWS has had another huge year. By all accounts, AWS is the industry leader by some distance. They continue to increase the pace of innovation, with regular new product introductions and feature enhancements. AWS appeals mainly to developers, due to it’s complexity, and Rackspace is winning here as it’s offering is much lower-level, but is easier for hobbists and IT managers to work with.

• The Other Big Co’s: IBM, HP, Dell, Oracle/Sun - a lot of announcements but nothing concrete from these players. The typical not-invented-here syndrome and protecting the existing ‘tin sales’ may be what’s holding them back. We felt Sun had great potential to become a competitor with their Cloud plans, but these were shelved with the acquisition by Oracle.

• EcoSystem: The Cloud Computing ecosystem is only beginning to emerge, with AWS as the primary platform for these applications. Heroku was the big winner this year with a 200m+ buy out. EngineYard, Cloudkick (acquired by Rackspace), Rightscale (raised an additional 25m in funding this year to bring it to 45m total), Digital Mines (that’s us!) and a few more are defining a new type of IT Company, building atop of giant, commodity infrastructure suppliers, and delivering a host of value-added services.

• VMWare: VMWare made some big acquisitions this year in the drive to get away from deriving most of their revenue from the hypervisor (which is basically an nonchargeable commoditised piece of software now). They now have application offerings in platform (Springsource) and collaboration (Zimbra) and with ex-Microsoft employee Paul Maritz at the helm, it seems their strategy playbook is very similar to Microsoft’s own - ‘extend and dominate’. vCloud Director, their product to enable a VMWare based network of Cloud Providers, was launched and well received, but as yet not a lot of use cases have been shown, and parts of the product need further development.

• Citrix Xen: Xen became an enterprise player this year, with statistics that a large number of the Fortune 500 are now using it instead of VMWare. Citrix have created an application stack for Cloud Computing - with Xen Cloud, Xen Desktop and Xen App and this year moved from developer into mainstream IT. VMWare still control the enterprise, but Citrix are becoming an able challenger.

• Local IT Providers: Predictably, a large tranche of IT Providers, VARs and ISV’s, launched ‘Cloud Offerings’ this year. Some are partnering with Microsoft on BPOS, or Salesforce, others are investing in their own infrastructure platforms, and yet others are re-branding their existing services as ‘Cloud Services’. There will always be a need for these companies - the local provider of IT services - but in 2010, following the trend in 2009, they were under pressure to find new revenue channels as businesses stopped spending capital on IT resources and drove to reduce IT service costs.

• Storage: Storage has to be mentioned as an area with a lot of activity this year. Servers and Networks continued their usual pace of development, but storage companies were funded, bought & sold, and many new entrants emerged with ‘value-added’ services such a local gateways to Cloud Storage & better synchronisation and collaboration. The storage space was ‘hot’ in 2010, with a healthy amount of user adoption, not just product and press releases. Noteworthy were the HP acquisition of 3PAR (after a fight with Dell) and Dell of Compellent. The Cloud Storage battle has yet to be fought, and new alternatives, methodologies and providers are emerging all the time. We think a Cloud Storage ‘format war’ is brewing and no clear contender has emerged - hence the amount of money being spent in the area.

Disclaimer: This blog post is an opinion piece and not to be taken as facts. Many developments and companies were not included in this post - it is not intended to be exhaustive - but merely to provide a short, useful snapshot of Cloud Computing in 2010. We welcome discussion on any of the topics above, these opinions were formed based on our experiences in the industry, and we are more than happy to discuss them.

State of the Cloud for November shows Rackspace gaining on Amazon - which I have to admit is surprising given the power of AWS. Linode is now probably the leading VPS provider, but I would not call them an enterprise class IaaS provider like Rackspace or AWS. All the rest are ‘also rans’ for now.

It would be interesting to get localised (country) demographics and see how local IaaS guys are stacking up against the big public clouds.