SpectralShifts Blog 
Sunday, 11 March 2012

I first started using clouds in my presentations in 1990 to illustrate Metcalfe’s Law and how data would scale and supersede voice.  John McQuillan and his Next Gen Networks (NGN) conferences were my inspiration and source.  In the mid-2000s I used them to illustrate the potential for a world of unlimited demand ecosystems: commercial, consumer, social, financial, etc…  Cloud computing has now become a part of everyday vernacular.  The problem is that for cloud computing to expand the world of networks needs to go flat, or horizontal, as in this complex looking illustration to the left.

This is a static view.  Add some temporality and rapidly shifting supply/demand dynamics and the debate begins as to whether the system should be centralized or decentralized.  Yes and no.  There are 3 main network types:  hierarchical, centralized and fully distributed (aka peer to peer).  None fully accommodate metcalfe’s, moore’s and zipf’s laws.  Network theory needs to capture the dynamic of new service/technology introduction that initially is used by a small group, but then rapidly scales to many.  Processing/intelligence initially must be centralized but then traffic and signaling volumes dictate pushing the intelligence to the edge.  The illustration to the right begins to convey that lateral motion in a flat, layered architecture, driven by the 2-way, synchronous nature of traffic; albeit with the signalling and transactions moving vertically up and down.

But just as solutions begin to scale, a new service is borne superseding the original.  This chaotic view from the outside looks like an organism in constant state of expansion then collapse, expansion then collapse, etc…

A new network theory that controls and accounts for this constant state of creative destruction* is Centralized Hierarchical Networks (CHNs) CC.   A search on google and duckduckgo reveals no known prior attribution, so Information Velocity Partners, LLC (aka IVP Capital, LLC) both lays claim and offers up the term under creative commons (CC).  I actually coined the CHN term in 2004 at a Telcordia symposium; now an Ericsson subsidiary.

CHN theory fully explains the movement from mainframe to PC to cloud.  It explains the growth of switches, routers and data centers in networks over time.  And it should be used as a model to explain how optical computing/storage in the core, fiber and MIMO transmission and cognitive radios at the edge get introduced and scaled.  Mobile broadband and 7x24 access /syncing by smartphones are already beginning to reveal the pressures on a vertically integrated world and the need to evolve business models and strategies to centralized hierarchical networking.

*--interesting to note that creative destruction was original used in far-left Marxist doctrine in the 1840s but was subsumed into and became associated with far-right Austrian School economic theory in the 1950s.  Which underscores my view that often little difference lies between far-left and far-right in a continuous circular political/economic spectrum.

Related Reading:
Decentralizing the Cloud.  Not exactly IMO.

Network resources will always be heterogeneous.

Everything gets pushed to the edge in this perspective

Posted by: Michael Elling AT 08:42 am   |  Permalink   |  0 Comments  |  Email
Sunday, 26 February 2012

Wireless service providers (WSPs) like AT&T and Verizon are battleships, not carriers.  Indefatigable...and steaming their way to disaster even as the nature of combat around them changes.  If over the top (OTT) missiles from voice and messaging application providers started fires on their superstructures and WiFi offload torpedoes from alternative carriers and enterprises opened cracks in their hulls, then Dropbox bombs are about to score direct hits near their water lines.  The WSPs may well sink from new combatants coming out of nowhere with excellent synching and other novel end-user enablement solutions even as pundits like Tomi Ahonen and others trumpet their glorious future.  Full steam ahead. 

Instead, WSP captains should shout “all engines stop” and rethink their vertical integration strategies to save their ships.  A good start might be to look where smart VC money is focusing and figure out how they are outfitted at each level to defend against or incorporate offensively these rapidly developing new weapons.  More broadly WSPs should revisit the WinTel wars, which are eerily identical to the smartphone ecosystem battles, and see what steps IBM took to save its sinking ship in the early 1990s.  One unfortunate condition might be that the fleet of battleships are now so widely disconnected that none have a chance to survive. 

The bulls on Dropbox (see the pros and cons behind the story) suggest that increased reliance on cloud storage and synching will diminish reliance on any one device, operating system or network.  This is the type of horizontalization we believe will continue to scale and undermine the (perceived) strength of vertical integration at every layer (upper, middle and lower).  Extending the sea battle analogy, horizontalization broadens the theatre of opportunity and threat away from the ship itself; exactly what aircraft carriers did for naval warfare.

Synching will allow everyone to manage and tailor their “states”, developing greater demand opportunity; something I pointed out a couple of months ago.  People’s states could be defined a couple of ways, beginning with work, family, leisure/social across time and distance and extending to specific communities of (economic) interest.   I first started talking about the “value of state” as Chief Strategist at Multex just as it was being sold to Reuters.

Back then I defined state as information (open applications, communication threads, etc...) resident on a decision maker’s desktop at any point in time that could be retrieved later.  Say I have multiple industries that I cover and I am researching biotech in the morning and make a call to someone with a question.  Hours later, after lunch meetings, I am working on chemicals when I get a call back with the answer.  What’s the value of bringing me back automatically to the prior biotech state so I can better and more immediately incorporate and act on the answer?  Quite large.

Fast forward nearly 10 years and people are connected 7x24 and checking their wireless devices on average 150x/day.  How many different states are they in during the day?  5, 10, 15, 20?  The application world is just beginning to figure this out.  Google, Facebook, Pinterest and others are developing data engines that facilitate “free access” to content and information paid for by centralized procurement; aka advertising.  Synching across “states” will provide even greater opportunity to tailor messages and products to consumers.

Inevitably those producers (advertisers) will begin to require guaranteed QoS and availability levels to ensure a good consumer experience.  Moreover, because of social media and BYOD companies today are looking at their employees the same way they are looking at their consumers.  The overall battlefield begins to resemble the 800 and VPN wars of the 1990s when we had a vibrant competitive service provider market before its death at the hands of the 1996 Telecom Act (read this critique and another that questions the Bell's unnatural monopoly).  Selling open, low-cost, widely available connectivity bandwidth into this advertising battlefield can give WSPs profit on every transaction/bullet/bit across their network.  That is the new “ship of state” and taking the battle elsewhere.  Some call this dumb pipes; I call this a smart strategy to survive being sunk. 

Related Reading:

John Mahoney presents state as representing content and context

Smartphone users complaints with speed rise 50% over voice problems

Posted by: Michael Elling AT 09:54 am   |  Permalink   |  0 Comments  |  Email
Sunday, 30 October 2011

Without access does the cloud exist?  Not really.

In 2006, cloud computing entered the collective intelligence in the form of Amazon Web Services.  By 2007, over 330,000 developers were registered on the platform.  This rapid uptake was an outgrowth of web 1.0 applications (scale) and growth in high-speed, broadband access from 1998-2005 (ubiquity).  It became apparent to all that new solutions could be developed and efficiencies improved by collapsing to the core a portion of processing and storage that had developed at the edge during the WinTel revolution.  The latter had fundamentally changed the IT landscape between the late 1980s and early 2000s from a mainframe to client server paradigm.

In late 2007 the iPhone was born, just as 3G digital services were introduced by a competitive US wireless industry.  In 2009 “smartphone” penetration was 18% of the market.  By the 3rd quarter of 2011 that number reached 44%.  The way people communicate and consume information is changing dramatically in a very short time. 

The smartphone is driving cloud (aka back to the mainframe) adoption for 3 reasons: 1) it is introducing a new computing device to complement, not replace, existing computing devices at home and work; 2) the small screen limits what information can be shown and processed; 3) it is increasing the sociability, velocity and value of information.   Information knows no bounds at the edge or core.  And we are at the very very early stages of this dramatic new revolution.

Ice Cream Sandwich (just like Windows 2.0 multi-tasking in 1987) heralds a radical new world of information generation and consumption.  Growth in processing and computation at the edge will drive the core and vice versa; just as chip advances from Intel fed software bloat on desktops further necessitating faster chips.   

But the process can only expand if the networks are there (see page 2) to support that.  Unfortunately carriers have responded with data caps and bemoan the lack of new spectrum.  Fortunately, a hidden back door exists in the form of WiFi access.  And if carriers like AT&T and Verizon don’t watch out, it will become the preferred form of access.

As a recent adopter of Google Music I have become very attuned to that.  First, it is truly amazing how seamless content storage and playback has become.  Second, I learned how to program my phone to always hunt for a wifi connection.  Third, when I do not have access to either the 3G wireless network or WiFi and I want something that is stored online a strange feeling of being disconnected overtakes me; akin to leaving one’s cellphone at home in the morning.

With the smartphone we are getting used to choice and instant gratification.  The problem with WiFi is it’s variability and unreliability.  Capital and technology is being applied to solve that problem and it will be interesting to see how service providers react to the potential threat (and/or opportunity).  Where carriers once imagined walled application gardens there are now fertile iOS and Android fields watered by clouds over which carriers exert little control.  Storm clouds loom over their control of and ROI from access networks.

Posted by: Michael Elling AT 09:10 am   |  Permalink   |  0 Comments  |  Email
Sunday, 24 April 2011

A couple of themes were prevalent this past week:

  • iPhone/Android location logging,
  • cloud computing (and a big cloud collapse at Amazon),
  • the tech valuation bubble because of Groupon et al,
  • profits at Apple, AT&T vs VZ, Google, most notably,
  • and who wins in social media and what is next.

In my opinion they are all related and the Cloud plays the central role, metaphorically and physically.  Horowitz recently wrote about the new computing paradigm in defense of the supposed technology valuation bubble.  I agree wholeheartedly with his assessment as I got my first taste of this historical computing cycle over 30 years ago when I had to cycle 10 miles to a High School in another district that had a dedicated line to the county mainframe.  A year or two later I was simulating virus growth on an Apple PC.  So when Windows came in 1987 I was already ahead of the curve with respect to distributed computing.  Moreover, as a communications analyst in the early 1990s I also realized what competition in the WAN post-1984 had begat, namely, Web 1.0 (aka the Internet) and the most advanced and cheapest digital paging/messaging services in the world.  Both of these trends would have a significant impact on me personally and professionally and I will write about those evolutions and collapses in future Spectral issues.

The problem, the solution, the problem, the solution, etc….

The problem back in the 1970s and early 1980s was the telephone monopoly.  Moore’s law bypassed the analog access bottleneck with cheap processing and local transport.  Consumers and then enterprises and institutions began to buy and link the PCs together to communicate, share files and resources.   Things got exciting when we began to multitask in 1987, and then by 1994 any PC provided access to information pretty much anywhere.  During the 1990s and well into the next decade, Web 1.0 was just a 1.2-way store and forward database lookup platform.  It was early cloud computing, sort of, but no-one had high-speed access.  It was so bad in 1998 when I went independent, that I had 25x more dedicated bandwidth than my former colleagues at bulge-bracket Wall Street firms.  That’s why we had the bust.  Web 1.0 was narrow-band, not broadband, and certainly not 2-way.  Wireless was just beginning to wake up to data, even though Jeff Bezos had everyone believing they would be ordering books through their phones in 2000.

Two things happened in the 2000s.  First, high speed bandwidth became ubiquitous.  I remember raising capital for The Feedroom, a leading video ASP, in 2003 and we were still watching high-speed access penetration reaching the 40% “tipping point.”.  Second the IP stack grew from being a 4 layer model to something more robust.  We built CDNs.  We built border controllers that enabled Skype VoIP traffic to transit foreign networks “for free.”  We built security.  HTML, browsers and web frontends grew to support multimedia.  By the second half of the decade, Web 2.0 became 1.7-way and true “cloud” services began to develop.  Web 2.0 is still not fully developed as there are still a lot of technical and pricing controls and “lubricants” missing for true 2-way synchronous high-definition communications; more about that in future Spectrals.

The New “Hidden Problem”

Unfortunately, over that time the underlying service provider market of 5-6 competitive service providers (wired, wireless, cable) consolidated down to an oligopoly in most markets.  Wherever competition dropped to 3 or fewer providers bandwidth pricing stopped falling 40-70% like it should have and only fell 5-15% per annum.  Yet technology prices at the edge and core (Moore’s Law) kept on falling 50%+ every 12-18 months.  Today, the price differential between “retail” and “underlying economic” cost per bit is the widest it has been since 1984.

That wouldn’t be a problem except for two recent developments:  the advent of the smartphone and the attendant application ecosystems.  So what does this have to do with cloud computing, especially when that was “an enterprise phenomenon” begun by Salesforce.com with its Force.com and Amazon Web Services.  A lot of the new consumer wireless applications run on the cloud.  There are entire developer ecosystems building new companies.  IDC estimates that the total amount of information accessible is going to grow 44x by 2020 to 35 zetabytes.  And the average number of unique files is going to grow 65x.  That means that while a lot of the applications and information is going to be high-bandwidth (video and multimedia), there are also going to be many smaller files and transactions (bits of information); ie telemetry or personal information or sensory inputs.  And this information will be constantly accessed by 3-5 billion wireless smartphones and devices.  The math of networks is (N*(N-1))/2.  That’s an awful lot of IP session pathways.

Why is That A Problem?

The problem is that the current wireless networks can’t handle this onslaught.  Carriers have already been announcing datacaps over the past 2 years.  While they are falling over themselves to announce 4G networks, the reality is that they are only designed to be a 2-3x faster, and far from being ubiquitous, either geographically (wide-area) or inbuilding.  That’s a problem if the new applications and information sets require networks that are 20-50x faster and many factors more reliable and ubiquitous.  The smartphones and their wireless tether are becoming single points of access.  Add to that the fact that carriers derive increasingly less direct benefit from these application ecosystems, so they’ll have less and less incentive to upgrade and reprice their network services along true technology-driven marginal cost.  Neustar is already warning carriers they are being bypassed in the process.

Does The Bubble Have to Burst?

Just as in the late 1990s, the upper and middle layer guys really don’t know what is going on at the lower layers.  And if they don’t then surely the current bubble will burst as expectations will get ahead of reality.  That may take another 2-3 years, but it will likely happen.  In the meantime, alternative access players are beginning to rise up.  Even the carriers themselves are talking about offloading traffic onto femto and wifi cells.  Wifi alliances are springing up again and middle layer software/application controls are developing to make it easier for end-users to offload traffic themselves.  Having lived through and analyzed the advent of competitive wired and wireless networks in the 1990s, my sense is that nothing, even LightSquared or Clearwire in their current forms, will be significant enough to precipitate the dramatic restructuring that is necessary to service this coming tidal wave of demand.

What we need is something that I call centralized hierarchical networking (CHN)™.  Essentially we will see three major layers with the bottom access/transport layer being controlled by 3-4 hybrid networks.  The growth and dynamic from edge to core and vice versa will wax and wane in rather rapid fashion.  Until then, while I totally get and support the cloud and believe most applications are going that route, let the Cloud Players be forewarned of coming turbulence unless something is done to (re)solve the bandwidth bottleneck!

Posted by: Michael Elling AT 09:34 am   |  Permalink   |  0 Comments  |  Email
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Information Velocity Partners, LLC
88 East Main Street, Suite 209
Mendham, NJ 07930
Phone: 973-222-0759
Email:
contact@ivpcapital.com

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