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Nantucket Conference: Who Wins and Loses in Cloud Computing

May 8, 2008

A few weeks ago Scott Kirsner from the Boston Globe invited me to give a talk at the Nantucket Conference about my new book Creative Capital. Scott invited me because the subject of my book, venture capital pioneer Georges Doriot, operated out of Boston and was a New England legend of sorts.

It’s the first time I’ve been to the conference and I had a blast. What makes the conference special is its location, its focus on entrepreneurship in New England, and its relatively small size—about 150 people. The intimate setting–you are basically trapped on the most quaint island in the world–makes it easy to strike up conversations and relationships with leading entrepreneurs and venture capitalists.

There have been a bunch of great panels. One that I went to the morning of May 3 focused on one of the hottest and most-hyped trends in tech, cloud computing. Having written about utility computing and grid computing over the last few years (remember IBM’s On Demand effort), I’ve been a bit skeptical about the growing buzz over cloud computing. The tech industry, after all, is great at pouring old wine in a new bottle.

But the panel convinced me that there are some incremental developments in computing that add up to a new paradigm. John Landry, the former CTO of Lotus and IBM exec who today runs the angel investing shop Lead Dog Ventures, opened up the panel with a pretty good explanation of what he sees has changed.

1. The move to managed Web hosting away from running your own infrastructure
2. The rise of virtualization, which makes computing much more efficient
3. Consolidation of grid computing, which makes it easier and cheaper to tap into resources by the drink

These three changes have enabled the rise of so-called software as a service. That is, software delivered over the Web as a service, rather than software sold for licensing fee on your PC. That’s what does. More recently, it has also enabled the newer idea of platform as a service. It sounds really geeky (and is) but that’s what Facebook, Google and Amazon are trying to do–creating new computing platforms that can be accessed and used as a utility-like service.

“These are really fundamental shift that never occurred before,” argued Landry. ‘The whole back end is different. Leading the way is Amazon.”

The big question, of course, is who wins and loses as a result of this shift?

Landry believes the winners will be the companies that have “enormous operational competency” in Web infrastructure such as Amazon and Google. “IBM, Oracle and Microsoft don’t get it. There may be a whole new class of leaders in computing.”

Web 2.0 startups are embracing the cloud model in a big-time. Stevie Clifton of Animoto Productions, told a revealing story that shows how Web-based computing and platforms can combine to create explosive, cheap and easy-to-manage growth. His company, which lets people create music videos on the Web, used Amazon’s Web computing services to build and host their application. Then they ported the application to Facebook, and in two weeks they exploded to 750,000 users, without having to worry about scaling their technology to accommodate that spike in growth. In other words, Animoto deftly coupled software as a service with platform as a service.

“You just can’t do that in the old world,” says Sim Simeonov, Technology Partner with Polaris Venture Partners. “We’re entering an era where you can experiment much more cheaply and quickly. You can focus on the core more and not worry about the me-too stuff.”

But while the rise of cloud computing presents a great opportunity, it also brings a new set of challenges. “It means new competitors can pop up all over the place, and they can scale quickly without me even knowing it,” says Sim Simeonov, Technology Partner with Polaris Venture Partners. Panelists such as Frank Gillett from Forrester Research say that lack of security and service-level agreements are also hurdles that need to be overcome before clouds are embraced by big corporations.

Top 10 Potential Tech Surprises for 2008

January 16, 2008

Arnie Berman, the Chief Technology Strategist and head of telecom/media/technology research at SG Cowen, is one of the more creative tech analysts working on Wall Street today. I’ve been a long-time fan of his work, going back to when he was at Soundview. On January 14, Berman and the TMT team released their “Top 10 Potential Surprises for 2008.” It’s a really clever report filled with contrarian predictions. Among my favorite:

* Telcos will capture 20% to 25% share of the TV market in the homes they pass with Internet connections, compared to the consensus view of 3% to 5%, converging valuations of telecom and cable companies.

* A slowing economy slams On Demand software providers such as and Concur, sending shares down as much as 30% to 50%.

* Corporations begin to adopt Google Apps Premium, driving 10% to 20% appreciaiton in the search giant’s stock.

What are your top surprise predictions?

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