The virtuous cycle: The cloud drives innovation

The reach of the cloud is unprecedented in technological innovation. Service providers, ranging from local telcos to international long-haul carriers, are seeing new business in providing direct cloud connectivity for enterprises, establishing and in retrofitting their networks with SDN and NFV to better accommodate cloud applications.

That's only the beginning. We have entered an accelerating virtuous cycle: Today's cloud applications and use-cases are spurring vendors and service providers to innovate.

Follow the money

The best place to start when examining cloud innovation: The money trail.

According to Sean Hackett, 451 Research managing director, "You should look at spending and adoption largely being driven by the enterprise.

"There is a change underway: If you follow the money and you look where enterprises are spending, they're definitely moving more revenue from on-premises to off-premises.

Most of that money is really, from a cloud context, being navigated toward hosted private cloud which is a fairly rough definition of what I would think of as a traditional cloud environment.

Dan Pitt, executive director of the Open Networking Foundation, also sees global telcos investing in private clouds.

"They want to host enterprise services, starting with elastic cloud provisioning, to enable offload into their clouds.

He also sees investment in software-defined networks, where telcos "will start a new greenfield business with new technology to offer an enterprise-class cloud that's technically a little bit separate from their current network. And so that's how they're getting experience. They're starting small.

Moving from building networks to thinking broadly about IT is another area of investment, sats Chris Rezentes, Verizon regional manager Asia/Pacific.

"The change from building network to new IT solutions means you still need network experts that know the network, but you need also those folks that have the IT experience to make things more efficient and reduce your cost and having the new ideas for revenues.

"That impacts where investment is going as well. At Verizon we're not seeing as much investment in global networks. We have the global network out there already. So you're seeing a shift away from that to more of the IT solutions and internal investment on that area," he says.

Applications: Big data, analytics, and more

One enterprise benefit of being in the cloud is architecture and reach - the cloud is everywhere, the data center is not.

Another is the shift of many expenses to OPEX from CAPEX, and in many cases, better fitting ongoing expenses to current demand, without needing to scale up data centers to handle peak demand.

For many organisations, however, it's not just about technology and infrastructure. High-quality of cloud-based applications are irresistible for line-of-business workers.

Angus Robertson, vice president at Hubble, talks about customers signing up to use his company's Web-based financial analytics platform.

"One of our customers, a sports promotion company, has many different Excel spreadsheets. Whenever management wanted to understand the revenue streams from an individual sports event, they got three different answers.

"It's such a simple question but they get three different answers! By integrating the different data from their ERP, from Google Analytics, and from DIRECTV on pay-per-view, at a glance they can see very visually, very clearly what any particular event or fight they got the revenue for," says Robertson.

Common definitions and standards

Enterprises want cloud services and cloud connectivity – but it's hard to shop for services if every vendor uses its own terminology, and if there are no interoperability standard to help define those services.

Two strong advocates for such standards are the MEF and OpenCloud Connect (OCC). The latter is the industry organisation behind the OpenCloud Project, and the chair of that project, Sebastien Jobert, is also director of engineering with Iometrix.

He explains, "This is the beginning of a cycle, of a migration cycle; certainly not the end of the cycle. Let's focus on the migration of business-critical application to the cloud, maybe in a context that is not necessarily a greenfield,  but where there are legacy applications running for larger enterprises.

The answer, though, is innovation. Kevin Vachon, chief operating officer at the MEF, explains it best: "There is an awful lot of innovation going on with respect to service development and new services.

"Obviously there is a general global trend towards development of more dynamic, on-demand type connectivity services.  Much of that is driven by the cloud, but it's equally driven by the customer need for being able to run their businesses in a more agile way as well.

"SDN and NFV become critical enablers of that, the ability to control the network from software, obviously cloud-driven, the ability to have virtual interfaces turned up to provide the time to market for new service types," Vachon says.