This one’s been eating at me since September 17 at 10:09 AM.   That was when a speaker from Tier 1 Research concluded a presentation at the 4th Annual Hosting Transportation Summit (HTS) at the Mirage Hotel in Las Vegas.

HTS is a great event for anyone involved in the hosting industry.  It was attended this year by about 400 people representing everything that’s anything in the U.S. hosting industry.  Attendees, for the most part, have profit and loss responsibilities and were there to find new weapons for their arsenals to increase revenues.   I love these focused conferences.  Having them in Las Vegas is really smart.  That makes it easy to gauge attendees’ interest by seeing how much of the audiences at the various sessions are lost to the casino.  The sessions at HTS were well attended!

By contrast, that week was VM World, right across the street (which in Vegas means only a 15 minute stroll) at The Venetian.  VM World was impressive – close to 15,000 attendees, I am told.  My sense walking around there, though, was that the majority of the attendees were more technology oriented – looking for cool new technology – but were not the people in their organizations responsible for P&L, who make spending decisions, and, most importantly, who make strategic business decisions.

So, what happened at 10:09 AM Las Vegas time on 9/17?  I just finished watching and listening to a very well researched and prepared presentation by a Senior Analyst at Tier 1, who organizes the event.  He very thoroughly described how the Cloud people, the compute on demand people – people like Amazon and Google, were kicking the hosting providers’ butts as they remain a commodity whose ability to compete with these Cloud giants is starting to wane.

What he didn’t do, though (and this is no criticism of him – he did his job), was talk about what the hosting providers can and should do to combat this.

So, why now?  If it’s been eating at me 7 weeks, why am I writing about it now?

Well, for the last couple of months, enterprise interest in Cloud Computing seems to have emerged in spades (pardon the Las Vegas pun).  VMware, Citrix, Microsoft and others have all made announcements readying themselves for enterprise Cloud Computing.  Our own marketing efforts have been focused around the enterprise as, though we are largely used by hosting providers and our customers are largely hosted, we have a full Cloud Computing platform that can run behind a corporate firewall, and our number customers who do that, particularly enterprise customers, are definitely growing.

So, let’s not forget our hosting providers.  They are not only the salt of the Cloud, but they will be an integral part of Cloud Computing’s future.  In fact, as Clouds begin to interoperate globally, it will be the hosting providers who jump on that bandwagon who will fuel it with much of its resources.

Note to Hosting Providers:

If you are worried about how you are going to cope with this new competition, there is something you can do about it.  This advice might sound like an “if you can’t beat ‘em, join ‘em” mentality, but it is far from it.  The mentality is more of the nature that you should join a movement that they, too, will eventually have to join.

Whatever people think, there will not be a single dominant Cloud from any of these guys.  Cloud Computing, like any other utility, will evolve into a series of Clouds that can interoperate among themselves and are connected globally.  These interoperating Clouds will be run by hosting providers, will be proprietary Clouds like EC2, AppEngine, etc. and will be corporate data centers.

So, how does a hosting provider get on board?

Hosting providers need to implement Cloud Computing platforms in their data centers (of course, I think that platform needs to be 3tera’s AppLogic – plug, plug – surprise, surprise).  They need to build product offerings on these Cloud platforms.  Once there is a critical mass of applications hosted in all of these Clouds, the leaders will start interoperating with one another as people will want to share and reuse technology components, and, more importantly, companies will want to effect business to business transactions with companies in running in other Clouds.

It will be inevitable that businesses running applications in proprietary Clouds will want to have the same capabilities, and in order to do so, their Clouds are going to have to start interoperating in the same ecosystem that yours do.

And guess what.  Many of the new enterprise customers we are attracting are and are wanting to run their web applications in external Clouds - HOSTED BY YOU.  So, there’s a whole new customer base here ripe for the picking.

So, hosting providers unite.  Get on board the Cloud train and in time, and not a real long time, the Amazons, Googles, Microsofts, Akamis, Salesforces, etc, of the world will have to join you or be beaten by you!

Congratulations to Albert Wu and his team at SilkFair on their recent mention in the Wall Street Journal. Albert contacted 3tera shortly after we came out of beta, and have been using AppLogic for well over a year through our hosting partners. He also had the distinction of being the first user to ever publicly post about his experience with AppLogic.

I’ve had the pleasure of talking with Albert a few times about business and technology. He’s a heck of an entrepreneur so it’s exciting to see him succeed and to be able to be small part of SikFair’s ongoing success.

With well over 18 months of data, 3tera’s metering system is starting to provide some interesting statistics. One example I can share for instance, is the graph below which illustrates that since January 2007 the average resource consumption per AppLogic user has quadrupled even as we’ve added more and more new users.

I’ve been reviewing the metering data from AppLogic installations recently to determine uptime and for the first 7 months of 2008, our users experienced 99.9% availability. I’ll be sharing more stats over the coming days, but for the moment I want to congratulate our operations team and all our data center partners!

Now, on to get the next two nines.

Sys-con ran a three page piece today with 20 experts trying to define cloud computing. The results run the gamut from the uselessly broad “internet centric software” to the only somewhat more pragmatic ”infrastructural paradigm shift that enables the ascension of SaaS” to the disbelieving “Clouds are the next hype-term for the next year or two.” So, why are folks having so much trouble defining cloud computing?

IMHO there are two reasons. First, cloud computing really is still being defined as those of us developing the technology work closely with early adopters putting the new technology to work. In other words, whatever cloud computing is today, it will evolve before it stabilizes. Don’t fret this as a bad thing, though, because it’s quite the opporiste. A little competition will benefit all as more vendors produce useful technology and elevate user expectations of cloud computing. Second, as most readers will already have noticed, a great deal of the noise in the space is being propagated by companies with no new technology; they simply want to share in the attention. While this creates noise, it’s actually normal in developing spaces. So, rather than provide yet another definition, let me provide a use case to show just how real and different cloud computing makes infrastructure.

About four months ago one of our customers was having an issue; a small percentage of page requests were getting dropped. The application involved was a search engine, and ran on around 100 servers in production. The problem wasn’t severe, but was evident to customers. After investigating the issue on their own, they requested our assistance along with a couple other vendors. A two hour Webex trial and error session ensued, but the problem persisted. If you’ve ever had to hunt for intermitant errors then you know what we were going through. At this point, though, the story diverts from your typical experience. The customer application was running on AppLogic after all, so it was a packaged system, literally scalable and portable as a unit.

Rather than proceed with tests on the production system, the customer agreed to send us a copy of their application! Yes, that’s right, a complete copy of the search engine - ready to run in our labs. Just as easily as you exchange Word documents with coworkers, they sent us a complete 100 server application. We then made several copies, each of which ran on just a few servers, and started destructive testing. We failed servers, dropped connections, deleted volumes - anything we could think of to exacerbate the error and make it repeatable. A few hours later the problem was solved - a simple misconfiguration in a third party piece of software.

Had this application been running on standard infrastructure, no doubt this story would have had a completely different ending. In all likelihood the error would have persisted for days or even weeks, because the type of troubleshooting we did wouldn’t have been possible. Cloud computing provided this customer a new way to deal with errors in production resulting in a better user experience, reduced manpower, and of course lower cost. 

So yes, there is a very real difference provided by cloud computing technology and its impact will be felt across our industry. Just don’t expect anyone to agree on exactly what it is for a while.

I’m packing my bags to return home, having spent the past week in Japan at a private show hosted by our new partners at NetOne Systems. Attendance was excellent and the event was very impressive, even having its own tradeshow floor featuring dozens of booths complete with fully operational demonstration equipment, including an IBM mainframe.  Our sessions for press interviews and customer demonstrations or AppLogic were packed to standing room only thanks to the excellent organization and customer relations of NetOne. Xseed, the first Japanese service provider to begin offering commercial AppLogic services, used the event as a venue for making their service announcement as well. If you read Japanese, you can see some of the press coverage on Atmarkit.

More than two years ago, when we first came out of stealth mode, some of our first inquiries came from Japan. Unfortunately, at that time we weren’t ready to service customers here. My visit with customers this week has shown that the Japanese market is ready to embrace cloud technology. They respond to the efficiency, the scalability and the energy savings. And today, in conjunction with NetOne, 3tera can provide the service needed. Cloud computing is on the horizon in the land of the rising sun.