Cloud and the Three IT Geographies (Silicon Valley, US and Rest of the World)

In the last 3 years I spent most of my time advocating that the cloud world is marching at a (very) different pace based on where you are and who you are.

If you are a professor consultant working with the like of Google, Facebook and such your vision of the world may be a bit skewed compared to “the average”. I am sorry if I shocked you.

Similarly, if you consult for a big manufacturing company in Italy you may be skewed as well (but in a different way and for different reasons).

The former consultant may be bored about promoting Amazon as “the next big thing” and may already be looking for “what’s coming next”. The latter may think that the coolest thing on earth is the next version of the AS/400. I am sure you appreciate the 20 years disconnect between the two.

Back in January I visited Palo Alto and I was out for dinner with Mathew Lodge and James Watters when I remember telling them that “this [Silicon Valley] is not the real world”. From there I started building my theory that, in IT and specifically with “cloud” (whatever that means), there are really three geographies in the world and they don’t map to the traditional Americas, EMEA and APAC.

They are instead: “The Valley“, “US” and “the Rest of the World“. Graphically this means:

Note: I had to hurry up writing this post (that I had drafted a long time ago) because Rodrigo was starting to use the same parlance with his Silicon Valley PaaS and I didn’t want to be left behind. Mark Thiele also has a good piece on this subject.

If you think this may be a joke I think one good metric to measure the level of innovation in the world is to show where cloud is actually being used (rather than being talked). So I am going to use an infographic where the AWS resources distribution are nicely summarized:

Now, regardless how big AWS is in absolute terms, it’s interesting to notice the distribution of its racks across the globe. Quick (rounded) math shows:

US: (5030 + 41 + 630) / 7100 =  roughly 80%

EMEA: 814 / 7100 = roughly 11%

APAC: (314 + 246) / 7100 = roughly 8%

(South America would account for the remaining rounded 1%… never mind, it’s irrelevant).

Now one would need to cross data between # of businesses across the world, their revenues, how much they spend in IT and the distribution of the servers in the infographic above. I am not going to do such a detail analysis. It is however pretty clear that the world is marching at a very different innovation pace. If you discount exceptions like (perhaps) London or Singapore, the US is leading at a speed that seems to be roughly 8x that of the other two geographies (i.e. the generic rest of the world).

Why is that? One can only speculate but wouldn’t fall far from truth: innovative culture, inertia, money, country laws and regulations. You name them.

Virtualization was an easy play for everyone. There wasn’t a real change to the IT processes: a sysadmin used to deploy a physical box, now he/she can deploy a virtual machine instead. It changed the world but no big deal per se. Totally transparent to everyone except the sysadmin. Also the decision to go down this path was typically ROI based (and with virtualization you’d typically have a very tangible short term ROI).

With cloud everything changes. Things like self-service expose the change to a much wider audience other than the sysadmin. Also, going down the cloud path isn’t anymore a “cost reduction” thing but rather a “business alignment thing”. Especially in a tough economy, many are ready to spend money to “save money” (ROI)… but you really need to be bought into something (or very enlightened) before spending money to be “more agile”…

Not to mention the public cloud dimension (which is what Amazon is all about) Vs. the more traditional way of running workloads inside the datacenter. Do we want to talk about that?

Long story short, the US are just much better prepared (IMO at least) to a change like this and have a much more innovative attitude compared to the rest of the world (on average at least).

In my new “IT Geographies layout” I however specifically call out Silicon Valley. Not because of the number of particularly innovative deployments (after all the area is full of very innovative vendors rather than buyers) but to make the point that there the pace of the cloud innovation march is just insane. There is where most of the IT professors consultants and vendors keep arguing that “if you don’t design your data centers like Google you are a dumb”.

My dear friends in the rest of the world… fear not, they don’t know what the real world looks like. They don’t understand what’s happening on this planet, they live in their little IT paradise.. In particular:

  • They have no clue that, in the rest of the world, big insurance companies are still using the Novell client on their 5 years old Windows PCs (true story, worth mentioning that not only the product doesn’t exist anymore, but the vendor as a whole went belly up).

  • They have no clue that, in the rest of the world, big banks are building clouds (or so they call them) because their CEO went to an event where they said cloud was the way to go.. but no one had an idea what it is (true story, classic).

  • They have no clue that, in the rest of the world, in (other) big banks developers would bring ESXi servers to put under their desks because they think Amazon only sells books (true story, albeit I can only speculate on why they would bring a server from home!).

  • They have no clue that, in the rest of the world, databases are pretty much all protected by boring OS level failover clusters (mostly on Unix) and not by some fancy distributed database technology (true story, albeit I am sure all will get there sooner or later)

  • They have no clue that, in the rest of the world, a big telco hires a string of consultants for “overnight P2V activities” of their legacy Windows servers (true story, a moment of silence for these consultants please)

I could go on and on with these (true) nuggets of real world experience but I think you get the point. I am wondering how much of this is true in the US (I am sure not every company there is a zero-legacy organization albeit the attitude is much better).

I am sorry but it makes me smile when I hear “oh that is not cloud, that is virtualization 2.0″. Really? For many, even virtualization 2.0 is very much going to be a 2018 project! Look, seriously, I am convinced that what you are pitching is where we are going. I am totally bought. You just need to accept the fact that what’s been thought in Silicon Valley in 2010 is probably going to go mainstream on the planet around 2015-2020.

I always advise my HQ that we clearly need to be ahead of the curve of what’s going but in doing so we can’t afford to have our customers lose sight of us if we accelerate too much. Being too ahead of your time is as much of a failure as being too behind of your times.

By the way, I want to share something with the professors consultants that keep mentioning the war is over and that Amazon is a 1B$ cloud business. I have a tremendous respect for Amazon and for what they are doing and they are obviously extremely well positioned in this battle… but, just for your information and as a reminder, 1B$ is (more or less) what IBM still makes out of the AS/400 line of business (talking about history). Welcome to the real world folks.

No, I am sorry, with all respect for Amazon, this battle has just begun IMO.

Massimo.

UPDATE (Sept 6th): There have been some comments below and on Twitter that give me the impression my segmentation was misunderstood. I just want to make clear that Silicon Valley, in the context of this post, is a state of mind and not (just) a physical location. Certainly it’s not a place where the deployments are. My only point in this post was that that there is an innovation theory (Silicon Valley) and then there are two “execution realities” (US and rest of the world). Silicon Valley is years ahead compared to the US execution ability as a whole. And the US execution ability is years ahead of the rest of the world execution ability.

34 comments to Cloud and the Three IT Geographies (Silicon Valley, US and Rest of the World)

  • Fabio

    “overnight P2V activities”

    My heart is bleeding ;)

  • An excellent and well thought out article, and completely in line with my thought process. The US and also Silicon Valley are completely out of phase with what is going on in the rest of the world, I agree it may be a culture thing, them being less risk adverse to the rest of the world, but I can confirm most of your examples there are still Councils in the UK that are running Netware, and plenty of z-series and i-series still in full production, and many organisations still are at 100Mb to the desktop and 10Gbe on their wish list.

  • Oliver Reeh

    They have no clue that, in the rest of the world, there are legal requirements that make it difficult to actually use “the cloud”.

  • Oliver Reeh

    They have no clue that, in the rest of the world, there are a lot of legal requirements (or should I say restrictions). that make it almost impossible to actually use “the cloud”.

  • I was in a UK hospital not that long ago that was still running 10Mb ethernet via hubs (not even switches). They mentioned that they were having issues with latency on MRI imagery!

  • Allwyn Sequeira

    Massimo, very true. But there is one small thing in play here in Silicon Valley:
    From “garage to Wall Street” is as much of a driver in Silicon Valley culture, as “product to Main Street” (the latter is the focus of your article – nicely written, btw) i.e. it sometimes does feel like the IPO or M&A milestone is an end in itself!

    /Allwyn

    • Massimo

      Absolutely Allwyn. Even at 6000 miles I can smell of startups that are created not to win the market with a product but to win the lottery with an acquisition. This however just increases the lag I was talking about. There are roughly a 3 light-years distance between the Italian manufacturing company mentality and the “Garage to Wall Street” startup mentality.

  • Completely agree. As someone who used to track and forecast technology adoption across the planet, I can tell you there are numerous examples with hard data proving out your theory – at least at the US/Canada -> Western Europe -> Advanced APAC -> Rest of World. I used to actually build this type of lag into my market models.

    You have to be a little careful because occasionally “good enough” products can come back the other way or regulatory differences can throw a wrench in the works. However, from a reality distortion zone, absolutely yes.

  • smoot

    so…with this in mind,explain the East vs West %s within the US…if the valley is so far ahead, why no servers here (thereby increased latency/bandwidth issues for us)

    • Massimo

      I just want to make clear that Silicon Valley, in the context of this post, is a state of mind and not (just) a physical location. Certainly it’s not a place where the deployments are. Note I did not break the US data centers because of this. It’s irrelevant. My only point in this post was that that there is an innovation theory (Silicon Valley) and then
      there are two “execution realities” (US and rest of the world). SV is years ahead compared to the US execution ability as a whole. And the US execution ability is years ahead of the rest of the world execution ability.

      I think people are reading too much into this post if they want to go that deep in the “analysis”.

  • Hi Massimo,

    I enjoy your thought provoking blog articles.

    I had written a reply and hit the send button and to reinforce my point, the link dropped out… haha

    I was saying that I thought part of the reason is that CIO’s are a conservative bunch who are happy to dip their toe in this thing called Cloud, to understand its value or if it’s another new buzzword from the IT industry.

    I’ve also heard a number of legitimate concerns around data privacy/ownership when data is hosted in the cloud particularly when it’s offshore and also in the US. (with its Patriot Act). There are ways of protecting data, but effective might this be? Some companies feel uncomfortable with their data outside of their state let alone in another country!

    Finally, I’m sure in Europe you have data services more like those in the US (bandwidth/speed) due to population and competition. In AP our data services are generally a lot more expensive and less reliable. I still know of customers using 9.6kbps links!! So cloud services in another country is light years away.

    When I worked in services, I remember a US colleague saying a “global rollout” was when they considered Hawaii (tongue in cheek)

    Daz

  • Joe Baguley

    Two reference to add as some form of corollary to this:

    First East Coast vs. West Coast PaaS – http://apprenda.com/blog/general/east-coast-vs-west-coast-paas-psychology-and-why-it-matters/

    And of course Simon’s Enterprise Adoption curve, which I love – http://blog.gardeviance.org/2012/07/adoption-cycles.html

  • John D

    Well.. Here is an article in forbes that says completely opposite.

    US Lags Much of World in Cloud Computing Adoption: Study
    http://www.forbes.com/sites/joemckendrick/2012/03/29/us-lags-much-of-world-in-cloud-computing-adoption-study/

    • Massimo

      Interesting. Certainly BRIC countries could be advantaged in the “migration” to cloud given they have little to migrate. Essentially they are HUGE startups if you will. Those 25 AWS racks in LATAM just tell another story.

  • Nice article my friend. Love the “Valley”, “US”, “ROW” graphic. I can think of many other places where that could be used in some of my working life ;) talk about rate of adoption, heard some nice quotes this week from some projects where the first hurdle is to migrate to Cat5….or better :)

  • Simon Wardley

    Only comment is the rate of diffusion of change varies not only with geography but industry as well, in particular with the level of competition in that industry and the impact of the change on the existing value chain.

    In some cases, certain changes to an activity don’t diffuse out of an industrial ecosystem (i.e. bessemer convertor). In other cases the change to an activity is a change to the value chains of multiple industries. Estimating diffusion would appear to be a complex mix of geography, industry, value chains and competitive pressures.

    However, unfortunately even that’s a gross simplification because an activity that commoditises to a component enables new higher order systems which can in turn create further competitive pressures i.e. cloud enables big data or nuts & bolts enable machines (e.g. motors) enables electricity enables radio … alas these new higher order systems are uncertain (by definition).

    If this wasn’t bad enough, the process of evolution (i.e. change) is also governed by user and supply competition which depends upon the actions of the players involved in the market and those actions are uncertain.

    So, overall diffusion appears to be governed by geography, industry, value chains, competitive pressures in that industry, uncertain impacts of higher order systems that are created and the uncertain actions of the actors involved.

    Predicting diffusion over time is incredibly hit and miss but as a rule of thumb, diffusion of changes in IT can take at least 8-12 years from first introduction to widespread adoption.

    Now of course diffusion (which is difficult to predict over time) should not be confused with evolution (which is practically impossible to predict over time) i.e. to map evolution you need to abolish time completely and view across alternative axis (i.e. ubiquity vs certainty is one way).

    Interesting post.

    • Massimo

      Thanks Simon for the comment. You obviously handle this matter much better than I do.

      Interestingly I originally shaped this as a “two axis” table where there was the GEO on one and “size” in the other (original thought was that a small organization would/could change quicker than a big organization). I came to the conclusion that two axis were not enough as this was multidimensional (I hinted to a few of these dimensions in the blog post when I said “innovative culture, inertia, money, country laws and regulations”). I didn’t mention size because it is controversial in the end: a small startup may be more flexible to move to the cloud compared to a big mammoth bank with lots of legacy, but at the same time a small traditional SMB in Turkey may be less willing to move to the cloud compared to a big bank in New York.

      All in all it was too difficult to nail down those additional dimensions so I decided to leave only one dimension (which I still believe is the most important) which is the GEO.

      Thanks again.

      • Massimo

        Oh and I would also add that “diffusion of changes in IT can take at least 8-12 years” …. I think this depends on the type of change. Virtualization was easier to introduce and there wasn’t so much “GEOs lagging”, all GEOs were progressing pretty much at the same pace so location wasn’t really one of the dimension of the lag in virtualization introduction. Moving to the cloud this is different… diffusion will take longer than it took for virtualization, all the other dimensions are relevant and on top of it we also have a GEO dimension to primarily to culture and regulation.

        Massimo.

  • Simon Wardley

    “as a rule of thumb” was the apt bit of the quote.

    With virtual data centres, the first virtual DC I was involved in was around 03/04 (Fotango) and we were not the first by any stretch of the imagination. By 2011 they were mainstream.

    Cloud (in terms of infrastructure) which distinguishes itself on the commodity aspect i.e. volume operations provision of good enough components kicked off around ’06. Around 2014+ would seem right for widespread mainstream adoption.

    The rule of 8-12 years is a rule of thumb, but in general it’s not bad.

  • egrigson

    Very well expressed as always. I wrote an opinion piece a few days earlier after letting the VMworld announcements sink in and came to much the same conclusion – the technology is outstripping most company’s ability to implement it although my thoughts were focused on the impact that could have on VMware specifically (http://www.vexperienced.co.uk/2012/08/29/vmworld-2012-the-hare-and-the-tortoise/)

  • Mike

    1. Maybe it’s an issue of different workloads? Cloud is godsend for web-based startups, but I don’t think they do lot of typical corporate workloads in SI.
    2. For me, clouds (and devOps, infrastructure-as-code, etc.) sounds great when all you have is only one, (and self-coded!) tier-a web-application to deal with (aka. Facebook), but they’re less great when you have to manage 100+, mostly 3′rd party sourced applications.
    3. Maybe, just maybe – people from other parts of the world are using local solutions, instead of AWS (which is purely US-focused company, with still a piss poor understanding of, as you put it “rest-of-the-world”).

    • Massimo

      #1 Yes I think it is. You can argue that most of these web-based startups are based in the US / Silicon Valley hence the trend.
      2# Couldn’t agree more. Albeit one could argue that there are some sort of “clouds” to address other use cases. We can argue forever whether they are “real” clouds or not (http://it20.info/2012/02/the-cloud-magic-rectangle-tm/)
      #3 No, I think that, right now, the AWS competition in the rest of the world are tower servers under user’s desks ;) It’s a matter of market maturity and use cases.

  • andrea

    Molto interessante, soprattutto scritto in un inglese fluido e comprensibile (almeno per me).
    un buon titolo avrebbe potuto essere .. bagno di realta.
    ciao
    ac

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