OnApp touts cloud platform unions to stop oligarchy

OnApp, a UK maker of a cloud platform for service providers, wants them to club together to fight giants

Is computing power one of the great necessities of life, along with food, water, light and electricity? There’s an argument to be made that it is, and that without a balance of computing power and productivity, no country or region can keep pace with global competition.

And if we accept the premise that computing power is a basic necessity, this raises another question. Do we really want one of the world’s most vital resources to be dominated by an oligopoly of companies? With the global IT industry in the process of metamorphosis into cloud computing, Amazon Web Services (AWS) and Microsoft now find themselves in an incredibly strong position. Microsoft, with ten per cent of the cloud infrastructure services market, has the fastest growth rate by percentage of its size (124%). However, AWS’s volume of growth is even more imposing, expanding by 64% every year, a phenomenal boom given that it already owns 31% of the entire global market. The source of these figures, Synergy Research Group, estimates that in 2016 AWS (31%), Microsoft (10%), IBM (7%), Salesforce.com (4%) and Google (4%) already dominate the cloud computing market and their power is expanding.

A new theory for the growth patterns of the cloud industry, dubbed Bezos’s Law after the Amazon CEO Jeff Bezos, postulates that the unit of computing power price falls by half every three years. If this theory holds water, it suggests that only the companies with the capacity for massive economies of scale can compete in the cloud computing infrastructure market. This in turn creates a massive barrier to entry in the market now colonised by the cloud giants named above. Cloud computing is already an oligopoly, formed by companies that aren’t all recognised for the generosity of their tax contributions.

Do we really want a world in which a vital resource is dominated by companies that are very good at, how shall we put this, exploiting opportunities? Look what happens when they get the chance to avoid tax. They’ll use the intellectual capital of each nation, but won’t make a fair contribution to the roads, schools and hospitals that deliver those human resources. Do we want an oligarchy ruling over a life-giving utility?

That is the question that Bernino Lind, CEO for retail at cloud platform for service providers firm OnApp, put to a meeting of the United Nations in March. The 193 member states of the UN Security Council had invited Lind to address them at a conference in its New York HQ. Their appetite had been whetted by Lind’s appearance at the January 2016 Davos World Economic Forum in his native Switzerland, where he proposed a way to allow smaller cloud players to compete in what was becoming a highly polarized global duopoly.

In the OnApp alternative cloud market all the thousands of smaller cloud service players can compete with AWS by banding together and matching its global coverage. It achieves this union of cloud players by installing software that achieves two important functions. First it manages all the disparate cloud resources, aggregating them so they appear as a single manageable entity for the end user. For the supplier, it monitors and measures every transaction on its cloud infrastructure, so every megabyte of storage, every CPU core and every compute instance that is used by clients can be accounted for. In short, the software achieves macro-economic output at micro-second levels of billing detail.

The upshot is that by pooling resources, cloud service providers in different countries can get the breadth of geographical coverage they need to pitch for multi-national contracts. Headquartered in London, England, OnApp started in 2010 by creating a federation of content delivery networks, to help smaller cloud players share resources and compete with the bigger players. Last year it started doing the same with public cloud, with its Infrastructure Federation.

The UN was interested in OnApp’s proposal to help cloud players create a sort of union of cloud operators, enabling them to pitch for big contracts by using each other’s facilities as local offices in each nation. If 20 cloud service companies, previously restricted to 20 different countries, can team up together, they can start pitching for global contracts.

One telecoms company in Tunisia, for example, won a global cloud contract with a French utility after joining the federation. Previously, it had only ever been invited to pitch as some sort of quota-filling obligation to corporate social responsibility, says Lind, but the Federation gave it muscle - or scalability, as they say in this business.  

According to Lind, it would take each company at least $5m to build its own presence in each country. So a union of 20 companies effectively gives them $100m worth of coverage. It’s also helping to save the planet, because each new datacentre would consume up to 10 megawatts of power and millions of gallons of water in order to run all the processors and cooling units. Not to mention the thousands of gallons/litres of diesel burnt by the standby diesel generators, which have to be regularly tested even if there’s never a power failure. Why build vast, underused capacity when it can be shared?

“All major US companies want to get into emerging markets like Africa and Latin America,” says Lind. Latin Americans currently pay the highest tariffs for cloud computing in the world, a price difference that could be eroded if there was more competition, Lind argues. OnApp’s proposal is an alternative to over development of datacentres.

The Federation is created by linking up all the allocated resources and creating a glorified, omnipresent load balancing and resource allocation system that spans the membership. There are now 3,500 service providers in 93 countries and, technically, computing workloads could be spread across all of them. Each participating member ring fences and donates its spare capacity to the global cloud created by OnApp.

Could companies create new revenue streams by running their own cloud business, using spare cloud resources? Could banks or hospitals sell off their excess capacity to the public cloud? These are questions to ponder in the future perhaps.

The UN delegates received the presentation from OnApp with “great enthusiasm”, reports Lind. Though one in three public cloud services now run on OnApp there is still much to be done to level the playing field in this market. To that end the OnApp federation recently appointed risk derivative market operator the Chicago Mercantile Exchange to be a “branding agent” for its Infrastructure Federation. This is more likely to persuade global enterprises to give this cloud co-operative a hearing. 

“It’s a brand that the Walmarts and the BPs of this world will recognise,” says Lind.

Meanwhile, the UN is to use its influence to persuade Fortune 5000 companies to give more business to female-owned cloud service companies, since women are under-represented in IT boardrooms and only five per cent of cloud companies are owned by women.

So OnApp could help to combat climate change, colonialism and gender imbalances. For once, the term ‘revolutionary’ might be justified.