Reuven Cohen is the founder and CTO of Toronto-based Enomaly Inc. Founded in 2004, Enomaly develops cloud computing products and solutions, with a focus on service providers. The company’s products include Enomaly ECP, a complete revenue-generating cloud platform that enables telcos and hosting providers to deliver infrastructure-on-demand (IaaS) cloud computing services to their customers. Reuven is also the founder of CloudCamp, which takes place at cities worldwide, and Cloud Interoperability Forum. He has consulted with the US, UK, Canadian, and Japanese governments on their cloud strategies.

In this interview, we cover:

• Cloud spot pricing.
• The places for commoditization and differentiation in cloud computing.
• While people think that with cloud, datacenter location doesn’t matter, but the opposite is true. The cloud will allow ultra-localization.
• There will be many spot markets for cloud. Some private, and some public.

Robert Duffner: Could you take a moment to introduce yourself?

Reuven Cohen: Sure. I’m the co-founder and CTO at Enomaly Inc., here in Toronto, Ontario. I’m also the instigator of several other cloud-related activities, including Cloud Camp, which is a series of advocacy events held around the globe, in something like 150 locations at this point.

In very broad terms, I am involved with advocating the use and adoption of cloud computing, and I’ve been very involved in the cloud world for the last several years. The first version of our software was created in 2004, which predates things like Amazon EC2 by a number of years. We also helped define the U.S. Federal definition for cloud computing.

Most recently, we’ve launched SpotCloud, a spot market for cloud computing.

Robert: You’ve done a lot of thinking about cloud compute as a commodity. What are your current thoughts on this subject?

Reuven: Most providers of cloud computing resources don’t want to be treated as commodity brokers. It’s important to make the distinction that, while there is an opportunity around applying a sort of commodity economic model, that doesn’t mean that all offerings are necessarily the same.

I’ve been trying to create a method in which you can commoditize certain computing resources, while not commoditizing the providers of those resources. That’s the challenge we face.

Robert: Do you think that offerings in the cloud market are inherently something that’s identical, no matter who produces them?

Reuven: The answer is yes and no. We fragment the cloud computing market into a few different pieces. First, at the top, there’s software as a service, and to take advantage of software as a service offerings, you need to have a platform. So typically, you’re building scalable systems on a platform provided as a service.

Underneath that, you need the actual interface to things like storage, networking, and CPU. Finally, you need an infrastructure that can be provided in an autonomous, easily managed way, so you need an infrastructure as a service. Those are, very generally speaking, the three main parts.

One key issue is the lack of standardization in any of those three parts at this point, although there are similarities. I have focused on the bottom-most layer, and my company provides infrastructure-as-a-service software to hosting providers.

The most basic capabilities required by all infrastructure-as-a-service providers are the ability to start a machine or a virtual machine, the ability to stop a virtual machine, and the ability to handle networking requirements.

When we started to look at commoditizing these functions, we focused on the idea that any infrastructure-as-a-service provider is going to have those three basic requirements, and we created a marketplace that commoditizes those three things.

So we provide the ability to find a cloud provider anywhere in the world based on price and geographic location. That location could be as broad as a whole continent or as narrow as a specific city. For example, we could choose Seoul and deliver a raw disk image that could run on any virtual environment or even actually potentially on a physical environment. We commoditized it based on those criteria.

Robert: You have also said, “To avoid directly competing with regular retail sales of cloud services, spot cloud uses an opaque sales model.” Can you take a minute to explain what that means?

Reuven: To understand that, I should probably start with a bit of background on how the spot cloud product came to be. As I mentioned previously, we were one of the first infrastructure-as-a-service companies out there. We created the first version in 2004 and adapted over the years based on the emergence of cloud computing.

Our current customers are generally public cloud-service providers, and most of them are outside of North America. Many of them have just built clouds and hoped that customers would adopt their platforms, but the reality is that they actually need to market their platforms, services, and so forth.

That created a dilemma for us, in the sense that, in order to be successful, we need our customers to grow, and grow quickly. In order to do that, they need to increase their utilization levels, and that doesn’t always happen. We were seeing fluctuations in utilization levels based on factors such as time of day, how successfully they were selling services in various parts of the world, and so on.

We needed a way to help our customers increase their utilization rates, making them successful, which ultimately benefits us as well, of course. We had to avoid cannibalizing their retail sales, and in looking at various models, one that really jumped out at us was the concept of an opaque market.

In this model, the buyer specifies what they want to buy, in terms of a quality rating, an amount of RAM, a number of processors, and so on, but they don’t actually know who they’re buying from until after they’ve agreed to buy.

And that provides the ability to avoid cannibalizing your existing retail sales, which makes it attractive to service providers who are obviously not keen to sell something that could sell otherwise at a higher margin.

Robert: You recently tweeted that it looks like the top one percent of spot cloud buyers represent 99 percent of the capacity purchased. Can you expand on that?

Reuven: I freely admit that I’m learning a lot in this whole process. First of all, I never expected the amount of interest in this platform that we’ve received. It’s been astounding. We’ve had so much interest from both the buy and sell sides that it’s been spectacular.

And in a sense, we’re the first to ever really try this opaque spot market for excess compute capacity, so we don’t really have a lot to base the actual business model on. We’re learning as we go, and we’re also getting a lot of market research done in terms of people who are signing up for it on both the buy and sell sides.

There appear to be some really interesting use cases on the buy side. People who want to buy capacity often need very large amounts of tasking for a very short time, but they’re very concerned about where that tasking is.  

Consider the case where I need to task a platform or application that I am going to be launching next week. If I get a million users from a particular city, let’s say Paris, I want to know how that application performs for a million users from Paris. Although we have a maximum number of people firing up on the buy side, there are likely to be a few in particular who utilize significantly more capacity than the others.

Robert: So infrastructure tends to gravitate toward being a commodity, whereas solutions are differentiated specialty items. Platform as a service is probably somewhere in between. Where do you see platform and software as a service fitting in the future where a significant amount of raw compute is available as a commodity?

Reuven: I was talking to one of our partners a while back, and I asked him what he thinks the future holds for of infrastructure as a service. His answer was, “Platform as a service.” The value is in the implementation of the infrastructure, and infrastructure becomes a commodity because that’s what it’s there to do.

Where some people look for globalization, I look at it the opposite. I look at ultra-localization, or regionalization, which is the ability to adapt to the constraints and fluctuations on the ground in particular places. If I am having a lot of sales success in Tokyo, it makes little sense for me to scale my infrastructure in London. It makes sense for me to scale my infrastructure where my customers are.

If my customers have a better experience on my platform or my application, I’m going to have a happier customer, better sales, more return users, and a more successful company. And that’s the opportunity that this cloud of clouds, or this regionalization of compute resources, is really enabling.

The reality of today is that we’ve got one-size-fits-all clouds, but that’s not where we’re going. We can’t just blindly scale for everyone, anywhere.

Robert: When I’m out meeting customers, we talk about infrastructure, platform, and software as a service. I’m seeing the lines blurring between infrastructure and platform as a service. Heroku, which offers a platform as a service, but built on Amazon infrastructure, is a really good example of that.

Reuven: That’s true, and the fact that Microsoft has been building data centers around the globe is a good indication of where things are moving. We’re moving to a network-based world where unfortunately, the desktop is less important than the app. The Internet is the platform, and the location matters. I think you’re right that there is a blurring of where the underlying infrastructure is and where the platform is.

Ultimately, I think that when we talk about cloud computing, we’re really talking about the Internet as the operating environment.

Robert: Last February, James Urquhart wrote a post called “Cloud Computing and Commodity,” where he states that commoditization will happen at a granular level. He says, “technologies will standardize various components and features, but services themselves can and will be differentiated and often add significant value over those base capabilities.” What are your thoughts on that?

Reuven: I completely agree. I think he’s saying that it’s the application that matters, not the infrastructure. If you look at the companies that are most successful today, they are the ones who are able to adapt quickly. They are the ones who are able to take mountains of data and transform them into information, because it’s not the data that matters, it’s the information. That transformation of data requires an adequate amount of computing resources to actually work on that transformation.

The cloud provides the basic engine that enables anyone with a credit card to compete with the largest companies on the globe. Anyone with a really good idea can scale quickly and efficiently, and that is revolutionary in a lot of ways.

Robert: Some data centers meet certain levels of regulatory compliance, and others don’t. Because some applications are governed by very specific regulations, I run into a lot of examples where customers are fundamentally prohibited from putting certain kinds of data in a public cloud. How does that factor into a spot market?

Reuven: As I mentioned before, we’re learning as we go here, and a lot of the specifications for clouds being built are the result of requests from end customers. One interesting possibility is a sort of private exchange, or private spot market, for companies that are all governed by similar regulatory controls.

Those requirements could be based on an industry vertical, or they could be based on geography, for example. The European Union has introduced requirements that compute capacity on exchanges must be located within the EU.

I think we’re going to see rapid evolution in the area of specialized requirements such as these, and that’s going to be quite an exciting part of this new opportunity.

Robert: One of our major data centers is located in San Antonio, and one of the customers there is the taxing authority for their country, i.e., the equivalent of our IRS. Starting this year, they’re going to automate the electronic storage of invoices for tax purposes. So, for example, if you go to Wal Mart and purchase office supplies, all those receipts get stored in the cloud. It blows me away that they’re storing them in the United States.

As far as I know, they are the only government that’s doing this, but I wonder what it could mean, as a case study to other governments. They might see the need to look at getting past regulations to deliver innovative solutions to their citizens.

Reuven: It shows that their government is treating their tax IT system in the same way a business would. So when you look at the opportunities in business, you’ll see a French company hosting their data in United States, not because it is in the United States but because they can get the best price, so they can get the best bandwidth, and they can get a deal that works best for them as a business.

The problem for a lot of governments is that they’re constrained by the regulatory controls of their own country. Particularly in countries that may be referred to as having fast-growing or emerging economies, they don’t have that infrastructure in place. They’ve got one of two options: either to build infrastructure at great cost or go find the infrastructure somewhere else and hopefully not put their mission-critical data in there.

In Canada, we actually have the exact opposite problem, although we do have a much more developed infrastructure. Basically the Canadian government says you can’t host Canadian government data, websites, and so on outside the Canadian geography.

That’s also an opportunity for cloud providers, and that’s why Microsoft is spending billions of dollars on data centers all over the world. You might build cloud data points in Mexico, Japan, and Korea so you can serve those local populations better.

Robert: Do you see certain aspects of cloud, such as storage for example being commoditized faster than things like compute?

Reuven: Well, storage has always been more easily commoditized because of the file system. The big differentiation we have today is the object-based approach versus that traditional approach that I always call the POSIX style.

They both solve different problems, but POSIX is a perfect example of commoditization. We’ve got a general way to interact with file system. I think it certainly is easier in some regards, because it is lower in the stack, and I think the lower in the stack you get, the easier it is to commoditize. The object-based approach was popularized by things like Amazon S3.

Robert: Obviously, it’s a lot harder to take existing applications and move them to the cloud versus architecting a brand new application for the cloud. At the same time, the specific operating system and type of hardware that you’re running are becoming less important.

How do you think that’s going to impact how development languages are going to play into cloud application development? I’m anxious to see if that’s going to change the adoption of certain languages that are used to write cloud applications. Do you have any thoughts on that?

Reuven: That inevitably leads to the question of lock in, and specifically where and how you are going to be locked in. The answer isn’t a simple one. Regardless of the platform, at some point you’re always going to have to choose a programming language, a development environment, and a number of other things.

The question is what that means down the road, when the technologies inevitably evolve. Generally, my rule of thumb is that the value is going to be in your information and how easily and readily you can work with that information.

Developers making those sorts of decisions must always ask themselves how easily they can take their information, move it, and work on it somewhere else. Where possible, you should develop in such a way that you don’t care about any particular machine, whether it’s physical or virtual. You should build applications to consider that the underlying architecture may come and go.

Likewise, you should build fault tolerance into applications that takes into consideration that you may lose a node, or even part of the world. That shouldn’t affect the overall availability of the application. The Internet should be applied as an architectural model, and the cloud is a metaphor for the Internet in a lot of ways.

Robert: Where are you seeing the most uptake or developer interest with regard to cloud apps; is it Ruby, Java, Python?

Reuven: Programming has always been a personal relationship, and it goes through phases. Ultimately, most programming languages do the same thing, just in slightly different ways. For example, we’re a big Python shop. I like Python as a CTO because I can read it and understand it. I don’t do much programming anymore, and so I just look at it occasionally.

I don’t think you should be constrained by the popularity of any given particular programming language. You should choose what works best with your brain.

Robert: Do you have any closing thoughts?

Reuven: I think we are on the verge of the transformation to really treating computing resources like a commodity, the same way we treat energy. Eventually, we will have the ability to do things like futures, derivatives, and buying and selling things that may not exist today.

But you can’t do that until you have a spot market, so the first step in this commoditization of computing is to be able to sell what is available right now, and that’s the spot market. The next step is going to involve things like futures and derivatives. I think that that’s going to happen in the short term, and there’s a lot of interest in this from a whole variety of sectors.

I believe that computing resources are going to be the next big commodity market. All the signs I see today are pointing in that general direction, so it’s a pretty exciting place to be.

Robert: Thanks, Reuven. This has been a great talk.

Reuven: Thank you.

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