Cisco Tries to Corral Cloud Networking’s ‘Unmanageable Mess’

A cloud network in which Cisco Systems Inc.CSCO +0.48% is investing $1 billion could help CIOs more easily manage data spread across disparate computer systems, analysts say. They also say the network, which Cisco calls the Intercloud, addresses CIO concerns on meeting local data protection regulations.

Cisco’s idea of bridging cloud systems through technology and relationships with telcos also got a boost with the announcement, Monday, of 30 partners, including British Telecom, Deutsche Telekom and Equinix Inc.EQIX +1.13% The initiative pits the networking giant against Inc.AMZN -0.43%, Google Inc.GOOGL -0.02% and IBM Corp.IBM -0.22%

Intercloud will allow customers to rent computing power — similar to the way AWS,Microsoft and IBM sell cloud to customers, said Carl Brooks, an analyst who covers cloud computing with 451 Research. But while those companies typically build and operate their own data centers. Cisco is largely relying on its network of telcos to house its cloud systems and help run them. “Intercloud is basically a partner and channel strategy for serving up infrastructure as a service,” he said. “They’re basically saying we have a stake in this game, and even though we’re not Amazon, you can’t ignore us,” said Mr. Brooks. However, he added that the full details of Cisco’s Intercloud remain to be seen.

Leaving aside the strategy behind Cisco’s cloud stake, the question from CIOs is to what extent Intercloud can make things easier.

With funding and more partnerships, Cisco’s cloud vision—something it has been talking about for a while — could create a standard way to connect networked computer systems, Andre Kindness, a Forrester Research Inc. analyst who covers networking technologies, tells CIO Journal. Large companies, especially multi-national conglomerates, can rely on dozens of telecommunications carriers, all of which offer their own connectivity systems and protocols, to connect their users, data centers and regional offices together. Adding cloud service providers to that mix creates an “unmanageable mess for any company,” he said. Something like Intercloud, that promises to let CIOs connect to multiple cloud providers and manage them as if they were a single cloud, sounds enticing. “Cisco is saying: ‘Look to us to help you create a consistent hybrid connectivity cloud for you,’” Mr. Kindness said.

Another possible sell for CIOs could be Intercloud’s promise to help international businesses meet local regulations for storing data collected from citizens in local data centers, says Leslie Rosenberg, an IDC analyst who covers IT service providers. Countries have become sensitive to enforcing such data governance in the wake of news of U.S. government spying on cloud software providers. “Governance and compliance, and the ability to have standardization globally is a major concern,” for CIOs, she said.

To help address this concern, the new partnerships include 250 data centers in 50 countries, said Rob Lloyd, Cisco president of development and sales, in a blog post. In a March interview with CIO Journal, Mr. Lloyd said the Intercloud would address demands from governments around the world for cloud infrastructures that protect domestic commercial interests from prying eyes and subpoenas from U.S. and Chinese government agencies. He said a lot of telecommunications carriers “will have mandates to build national clouds.”

Cisco’s Intercloud includes servers, networking gear and software that allow IT departments to shift workloads from their private clouds and data centers to and from public cloud settings running governance rules baked into the cloud operating system. Mr. Lloyd said Cisco is developing an “application-centric infrastructure” that will dictate “how data can and can’t move” and will be based on a new standard called OpenStack.

Intercloud isn’t for every company. BMC Software Inc., which builds software to manage computers, runs and operates its own private cloud comprising 17,000 virtual machines, said Scott Crowder, the company’s CIO. He said that BMC views most of its software development as strategic, and prefers to keep most of this work in-house to protect its intellectual property. “We’re very careful about what we put into the cloud,” Mr. Crowder said. However, he said Cisco’s system could suit startups who lack the requisite expertise to run computer systems, or companies looking to switch from their current cloud vendors.

Ellison: Oracle already dominates cloud computing

The enterprise technology company already offers more applications in the cloud than any rival. Now its “database as a service” will stoke more competition with Amazon Web Services, Google, and Microsoft.

Oracle CTO Larry Ellison famously dismissed the high-tech industry’s “nonsensical” obsession with cloud computing just five years ago. Now, he calls it an “inflection point” for the company he founded in 1977.

“Our cloud strategy has been about building and buying,” Ellison proclaimed during his speech Sunday night at Oracle’s annual customer conference in San Francisco, referring to the massive investment it has made since 2008.

For starters, Oracle ORCL -1.13% offers 100s of enterprise planning, human resources and marketing applications delivered as a service—more than any other company. He offered mind-numbing product lists and customer statistics as proof to the detriment of competitors, particularly Salesforce (mentioned frequently during his hour-long talk), Workday and SAP.

Far more compelling to long-time Oracle customers are new technologies outlined by Ellison that let them “move any Oracle database to the cloud by pushing a button.” This service—supported with 19 state-of-the-art data centers—will position the company as a formidable competitor to Amazon Web Services, Microsoft and other companies that offer storage and server capacity as a service.

“Oracle helps you modernize while preserving your investment,” Ellison said.

This particular technology was actually first introduced and hinted at two years ago. What’s different now is Oracle’s decision to offer the same commodity pricing as Amazon, Google and others, plus its big focus on embedding transaction acceleration and data protection into this service. “It’s the most important piece of engineering we’ve done in security for a long time,” Ellison said.

By the way, if businesses want to move a database back into an on-site data center later, that’s not a problem with Oracle’s service, he said. It’s also not something that’s easy to do with competitive cloud offerings.

All of these things are a major point of differentiation between Oracle and its enterprise application rivals.

“We have to do this because of the promise we made to our customers more than 30 years ago,” he said, referring to Oracle’s long-time commitment to ensuring compatibility between different generations of its software.

Another thing Oracle will use to support its sales argument: 19 out of the 20 top players in the software-as-a-service (SaaS) world use Oracle’s database to run some or all of their services including Salesforce, SAP and NetSuite, according to Ellison. The holdout is human resources apps company Workday.

Larry Ellison’s head will be in the cloud Sunday

Oracle Corp. ORCL is expected to make a further push into cloud computing next week when its Oracle OpenWorld user conference takes over downtown San Francisco.

Executive Chairman Larry Ellison is scheduled to give the Sunday evening keynote at Moscone Center, where he usually takes questions from customers after discussing Oracle’s products and bashing the competition. Ellison recently stepped down from the CEO job.

Wall Street will be watching Oracle OpenWorld closely because they are expecting a new database as a service product. Ellison, who is also chief technology officer, told analysts last week on the company’s earnings call that the software giant would be launching a “database cloud service” which will let customers access their Oracle databases and the data within them in a secure manner over the Internet. But that news was overshadowed by his decision to step down as CEO, while remaining as executive chairman.

“Database is our largest software business and database will be our largest cloud service business,” Ellison said on the call.

Oracle, one of the oldest software developers in Silicon Valley, is going through a seismic shift as more customers demand software services in the cloud. About half of the company’s revenue comes from recurring software revenue and maintaining software hosted on the systems of its customers.

The user conference will also be a sort of debut for Mark Hurd is his new role as Oracle Co-Chief Executive. Hurd shares the title with Safra Catz, who is also the company’s chief financial officer. Hurd who has the salesforce reporting to him, is more visible than Catz and will be giving a keynote on Monday morning.

The news that Ellison stepped down as chief executive was unexpected and made some investors jittery, but Ellison stressed on the call that not much will change within the company. Investors will be looking for any clues as to whether or not that is true or not.

Taxing The Cloud

Cloud computing is all the rage, and likely to remain that way. Businesses aren’t just implementing cloud computing as an add-on to their current business technology strategy, they’re changing their technology strategies to use cloud computing. Because of this, it’s unlikely that there will be a shift back to traditional software models. (Who really wants to return to a time before Google, anyway?) Suffice it to say, cloud computing is here to stay. And in the next decade, those technologies will continue to develop.

The cloud is not a singular place any more than the Internet is. The cloud consists of thousands of servers located at data centers. Those servers, in a variety of locations, can be harnessed on demand to run tens of thousands of applications accessed by individual users. At any given time, there are millions of users accessing applications in the cloud. In essence, there is a shared infrastructure that works like a utility. Businesses pay only for what they need, upgrades are automatic, and scaling up or down is easy.

To generalize in non-IT-professional terms, cloud computing differs from traditional means of accessing business applications in that cloud computing encompasses off-premise, on-demand computing. Traditionally, businesses had to purchase hardware and software and then have both configured and maintained on their own servers. With cloud computing, a cloud service provider can provide both the software and the hardware necessary for a business to access an application via the Internet.

Historically, state governments have been slow to adapt their tax codes to technology. Most states are just now getting a handle on the taxation of digital products, but technology doesn’t stand still. While states were trying to figure out digital products, businesses moved on to the cloud. The problem now is that states are issuing guidance on an ad hoc basis addressing specific situations and trying to fit a modern concept into antiquated rules and statutes.

At a recent conference in Washington, D.C., practitioners highlighted many of the regulatory changes that have occurred in the past year. Interestingly, of nine states that have recently issued administrative guidance on the taxability of cloud computing services, only two have found the services taxable. The remaining seven have determined cloud computing is not taxable.

Other states will continue to debate the taxation of cloud computing, but it’s not going to be an easy discussion. Cloud computing is borderless, so location is irrelevant — it doesn’t matter that a company is in Nevada, a software user in New York, and the servers on which the company runs its application in Texas. Yet sales and use taxation is predicated on location. Expecting the two to play nicely together may be a pipe dream. But until reality sets in, taxpayers must continue to monitor the ways in which states try to shoehorn cloud computing into existing laws.

Pirate Bay fools the system with cloud technology

Despite years of persecution, the world’s most notorious pirated content exchange continues to flout copyright laws worldwide. The Pirate Bay team revealed how cloud technology made their service’s virtual servers truly invulnerable.

Two founders of The Pirate Bay (TPB) file exchange are in prison, but their creation continues to receive millions of unique visitors daily and remains among the 100 most popular websites worldwide.

Today The Pirate Bay has 21 “virtual machines” (VMs) scattered around the globe with cloud-hosting providers, and the new setup works just fine, reported TorrentFreak, having anonymously questioned the Pirate Bay team. The cloud technology made the site more portable, eliminated the need for any crucial pieces of hardware and therefore made the torrent harder to take down. Costs have decreased and better uptime is now guaranteed.

True geeks cannot follow up hardware and server setup anymore, but the advantages of the new tech set-up for the notorious torrent site outweigh any inconveniences.

After operating ‘in exile’ in Guyana and Peru without much luck, two years ago The Pirate Bay team made a landmark decision and decided to move away from operating physical servers and switched all of their operations to the cloud.

Two years ago there were just four VMs, but the increased traffic has heralded a five-fold growth of virtual machines.

Out of 21 VMs, eight are busy serving web pages. Six machines are processing the searches, while TPB’s database is being run on two VMs. The remaining five VMs are needed for load balancing, statistics, torrent storage, the proxy site on port 80 and controller functions.

The system operates using 182 GB of RAM and 94 GPU cores, with total storage capacity of 620 GB, which are not used in full, actually. Considering the scale of The Pirate Bay website, these characteristics are quite modest.
One of the secrets of the modern day TPB is that the commercial cloud providers hosting the torrent site have no idea that the PTB is among their clients. The load balancer VM that funnels all the traffic to other TPB virtual servers masks their activities, which means none of the IP-addresses of the cloud hosting providers are publicly linked to TPB. This makes the new TPB virtually ‘raid-proof’ and very hard for police to track it down. There are no more physical servers to be seized, too, as happened in 2006, when Swedish police raided TPB’s hosting company, seizing everything from servers to fax machines and blank CDs.

Despite occasional difficulties that hit the service from time to time, there have been no major breakdowns recently and no agency has attempted to shut the torrent site down.

It is true that cloud servers can be disconnected like any physical server, but even in that case restoration of the operation is much easier than before and services can be restored from a different provider relatively quickly.

Still, The Pirate Bay remains The Pirate Bay, and this name is widely known among registrars as the root of evil, burning through five separate domain names the last year alone. But that doesn’t dampen the spirits of the TPB team, as operators have dozens of alternative domain names waiting in the wings.

Two of TPB’s original founders, Gottfrid Svartholm and Peter Sunde, are currently serving terms in prison and TPB has posted a banner asking visitors to send their support to the site’s founders.

“Show your support by sending them some encouraging mail! Gottfrid is only allowed to receive letters, while Peter gladly receives books, letters and vegan candy.”

When Svartholm and Sunde are out of jail, they’ll find that the rules of the pirate game have changed – and most probably in their favor.

SAP Clearly Heading for the Cloud

SAP SAP -4.37% has sent the clearest signal yet that its head is squarely in the cloud.

SAP’s $8.3 billion agreement, including debt, to buy U.S.-based Concur Technologies,CNQR +17.64% which makes software to help companies manage travel and expense accounts, is the German company’s biggest acquisition. SAP will become the second-largest enterprise cloud-service company by revenue behind +1.01%

Cloud services deliver software online to business customers on a subscription basis. This allows enterprise customers more predictable expenditures, with a steadier, recurring revenue stream for the provider. Cloud-based spending among businesses globally will increase about 23% annually until 2018, or about five times the rate of the broader IT industry, says International Data.

Adding a cloud-based travel and expenses business to SAP’s existing stable of finance and logistics services is a sensible move as businesses migrate from on-premise software licensing, SAP’s bread and butter.

While growth in the company’s core business has stalled, SAP Cloud is expected to increase sales about 35% in 2015, albeit from a much smaller base, according toUBS. UBSN.VX +0.30% The business accounted for only about 5% of SAP’s 2013 revenue.

Concur, which broke even this year, is a one-stop shop allowing customers to get the best prices when they book travel and then file expenses. It should add at least $700 million in sales to SAP, about 55% of SAP’s cloud revenue last year. Concur could also enhance SAP’s existing businesses, such as Ariba, which offers cloud-based business-procurement software.

But at 9.6 times 2015 sales, SAP may be sacrificing profit for scale with Concur unless it can deliver more growth. Improving Concur’s growth rate should be possible. The bulk of its sales are in the U.S. The majority of SAP customers don’t use Concur, while just 30% of Concur customers do business with SAP, so there is plenty of room for cross selling.

The risk to SAP is that additional revenue in the cloud could come at the expense of its server-based business. Moreover, competition is rising. Oracle, ORCL -4.21%which also faces a challenge expanding in the cloud-computing business, said in July that it plans to buy TOA Technologies, its third acquisition this year in cloud-based applications.

Investors should applaud SAP for reaching for the cloud. But to make pricey deals work, the company will need its feet firmly on the ground.

Square Enix announces Shinra Technologies, a new cloud gaming service for 2015

Square Enix unveiled Shinra Technologies at Tokyo Game Show today, a new cloud gaming business to be led by Yoichi Wada, former president of Square Enix.

Shinra Technologies, named after the organization from Final Fantasy 7, is headquartered in New York City with offices in Tokyo and Montreal. The new company has partnered with Just Cause developer Avalanche Studios, which also has offices in New York, to develop games and technology.

Wada said that the newly established company will provide a "new ecosystem for the games industry." The AAA game industry requires huge investments, and older business models — reliance on consoles as dedicated game-playing devices — have been unable to maintain this ecosystem, he said.

"The industry will only continue its expansion, but in due time a correction to this path is necessary," Wada said.

More and more game players are able to play software without the need for a dedicated game console or a powerful PC, Wada said, adding, "I think this is the right direction, but if we continue on this path, game experiences will become diluted." Wada said he wants Shinra Technologies to provide the means to deliver AAA games via streaming cloud-based architecture.

He sees 2016 as a key year for cloud gaming, a technology he’s seen as the future for the past few years.

Jacob Navok, senior vice president at Shinra Technologies, said the announcement is "the first flag in the final frontier for the game industry" and hopes it "will be a call to action to other developers … shackled by" existing technology and processes.

Ultimately, Wada said he hopes Shinra Technologies’ server-based game streaming tech will empower new kinds of games.

"We needed a technical breakthrough to make this happen," he said. "If we simply bring traditional games to the cloud, you will never get a game experience that surpasses current games. We want developers to create entirely new games with revolutionary game experiences."

A technical beta for Shinra Technologies’ cloud gaming service will begin in early 2015 in Japan. The beta will include a version of Agni’s Philosophy, the next-gen game engine tech demo, that players will be able to manipulate in real-time.

Also included in the Japanese beta are Space Sweeper, a new game developed by Kengo Nakajima, as well as Square Enix-published titles Final Fantasy 7, Deus Ex: Human Revolution, Hitman Absolution and Tomb Raider. The titles available in the Shinra Technologies beta are not necessarily indicative of the company’s service lineup, said Kristina DeRosa, director of marketing at Shinra.

Beta service for Shinra Technologies is slated to begin in the United States sometime in 2015.

CloudFlare Delivers Cloud Alongside User-Control

Often we think of the cloud as a series of choices involving lots of use of the word ‘or”. You can have cloud agility OR security. You can have the ease of cloud applications OR easy freedom to move. Given that I’ve heard “or” so many times in the past, it’s exciting to hear a vendor shouting an “and” message. CloudFlare is one of those vendors. CloudFlare is a vendor that promises to speed organizations’ websites up. The company offers a cloud content delivery network alongside distributed domain names. The upshot of all that geekery is that CloudFlare does the impossible – overcomes the limitations of physics to speed up the internet. CloudFlare acts as a proxy between the outside world and an organization’s website.

One of the issues around using the cloud however has been that of SSL keys. SSL keys are cryptographic keys that allow secure connections between a web server and a browser. To anyone transmitting confidential information, SSL (or secure socket layer to the uninitiated) is a non-negotiable requirement. The issue is that SSL security, and the requisite keys that go alongside it, make it hard to use the cloud. To utilize services like CloudFlare, organizations need to turn over their SSL keys to the third party cloud provider. For a lot of regulated industries that’s a complete no-go.

What CloudFlare is introducing today is Keyless SSL. Keyless SSL is a server-side security technology that allows sites to use cloud services for SSL-encrypted HTTPS traffic, without giving up custody of their private keys.Keyless SSL works because the private key is used only during initial connection setup. The connection establishes a “session key”, and then encrypts future communication traffic with that session key. Because the session key is short-lived and only protects one user’s communications, it is not as sensitive as the long-lived private key. It’s an elegant solution to a Catch-22 problem.

It’s a great solution and a pretty big deal for CloudFlare who gets to remove the last barrier that regulated organizations had to using their service. It looks like being something that CloudFlare will be able to leverage to further grow its business.

Adobe ends Q3 on mixed note but Creative Cloud subscriptions continue to climb

Adobe published third-quarter earnings after the bell on Tuesday, and the results were a bit of a mixed bag.

The software giant reported a net income of $44.7 million, or nine cents per share (statement).

Non-GAAP earnings were 28 cents per share on a revenue of $1.005 billion.

Wall Street was looking for earnings of 26 cents per share but with revenue of $1.02 billion.

Despite quarterly results leaving something to be desired, CEO Shantanu Narayen remained optimistic in prepared remarks, predicting a strong finish for 2014 by highlighting acceleration for Creative Cloud and Adobe Marketing Cloud adoption.

Adobe CFO Mark Garrett concurred on the Marketing Cloud note, adding that "In Q3, 63 percent of our revenue was recurring, demonstrating the continued success of our business model transformation."

The Adobe Marketing Cloud unit accounted for $290 million in Q3 revenue, which Adobe asserted was propelled by strong subscription growth.

Adobe didn’t break out Marketing Cloud subscriber numbers, except to note that "the number of customers with annual contract value of greater than $500,000 grew by more than 40 percent year-over-year" in Q3.

As for Creative Cloud, the San Jose-headquartered firm ended the quarter with more than 2.81 million paid subscriptions for the cloud-based design software bundle, up 502,000 from last quarter.

Narayen noted that Adobe plans to fuel Creative Cloud growth further through three primary methods: aggressively convert more desktop Adobe software customers to Creative Cloud, target new customers with tailored offerings (i.e., Creative Cloud for photographers, etc.), and add more mission critical services (i.e., mobile apps built on Adobe’s SDK).

"Digital marketing is an explosive category that is fundamentally transforming every business," Narayen remarked. "In order to enable the personalized experience that every consumer expects, companies need to invest significantly in a modern technology platform. This revolution is beginning in marketing, but is extending to include the entire real-time enterprise."

Looking forward, Wall Street expects Adobe to deliver fourth-quarter earnings of at least 31 cents per share on top of revenue of $1.09 billion.

Adobe followed up with a softer Q4 revenue guidance range of $1.025 billion to $1.075 billion.

While NSA ‘maps’ the Internet landscape, German tech companies want Cloud cover

Microsoft Germany wants Cloud services to be regulated at home in a bid to protect data from foreign espionage. The announcement coincides with a new report pointing to NSA activities targeting German telecommunications.

In the latest efforts toward warding off foreign hackers, the head of Microsoft Germany is planning to develop Cloud technology that would be offered only within Germany.

Microsoft’s current computing centers in the Netherlands and Ireland are becoming more popular with the company’s biggest clients, Microsoft Germany head Christian Illek told the German daily Tagesspiegel on Sunday.

"But this is obviously not enough for medium-sized German companies," Illek said.

Cloud computing refers to a storage system, which allows computing devices to share their data within a defined network online. This includes software, firewalls and platforms, as well as memory and technical services.

Considering that the expansion of computer networks has increased security risks for companies, Microsoft Germany wants data to be kept within Germany’s own borders and hosted by a data center, which would be subject to German or European law, Illek emphasized.

"The data management…would be [hosted] by a German partner," he said.

The head of Hewlett-Packard (HP) Germany, Heiko Meyer, had a similar message on Sunday, in which he called for a common Cloud space for Europe, similar to the concept of the EU’s economic area.

Meyer told news agency DPA that HP had already submitted plans for "Cloud 28+" to the EU research program Horizon 2020, which is aimed at streamlining European research and innovation to make the 28-member bloc more competitive globally.

The ex-head of German telecommunications Telekom, René Obermann, made a similar proposal last year.

Spiegel: ‘NSA has access to Telekom’

Calls for better data protection coincided on Sunday with a new report by the widely-circulated German news magazine Der Spiegel, which purported to reveal a new NSA program known as "Treasure Trove."

According to the newly unveiled documents leaked by NSA whistleblower Edward Snowden, "Treasure Trove" seeks to map the Internet in a manner which Der Spiegel described as similar to that of Google Earth. The program was reportedly able to watch network access points "in real time", including routers and individual devices.

The NSA and the British intelligence agency GCHQ had also reportedly gained access to concealed online entryways into German telecommunications giant Telekom and a local provider NetCologne, the Spiegel report said.

However, when given the leaked information, both German providers said that they had been unable to find any signs of outside violations.

"We will pursue every indication of possible manipulation. Moreover, we have now involved the authorities," Telekom security head Thomas Tscherisich said in response to the allegations.

Revelations of US espionage on German interests – including on Chancellor Angela Merkel’s cell phone- has created a rift between the allied nations and has threatened negotiations for a free trade agreement between the US and the EU.