Dr. Owen Rogers
Digital Economist, 451 Research
I grew up in a small Welsh valleys town called Risca. My grandfather was an electrician and I was fascinated by how he could build things that to me appeared to be magical. I too wanted to build things that, 100 years ago, people would have said were impossible, so I decided to study engineering at Cardiff University in the Welsh capital.
At around the same time, mobile phones were growing in popularity and I found it incredible that I could hold a little gadget in my hand, dial a bunch of numbers, and talk to someone else on the other side of the globe. Technology is so commonplace, I think we sometimes lose touch of how astounding it is, but if you step back and look at how far we have come, it’s mind-blowing. It was because of this that I applied to communications provider Cable&Wireless as a Graduate Engineer.
I eventually became Product Manager for Managed Security at C&W. I then moved to Claranet as Hosting Product Manager.
After completing my PhD, I joined 451 Research as a Digital Economist. My role is to help customers understand the economics behind digital and cloud technology, so they can make informed choices when costing and pricing their own products and services, and those from their vendors, suppliers and competitors. I help customers develop their own digital infrastructure strategies by navigating them through the issues and trends in cloud economics.
About 451 Research:
451 Research is a division of The 451 Group, parent company of the Uptime Institute and Yankee Group, focused on the business of enterprise IT innovation. Through its global deployment of analysts, 451 Research provides valuable insights into the competitive dynamics of innovation in emerging technology segments, serving end-users, service-providers, vendors and investor organizations.
JM: An increasing number of organizations are turning their data centers into private clouds. What should Chief Information Officers be taking into account when considering this option?
OR: I think the biggest issue to be aware of is scalability. Public clouds remove the need to worry about capacity away from the consumer, so that the consumer can grow and shrink as they need without thinking about the underlying hardware. Private cloud CIOs need to forecast their capacity accurately or they may face problems. If too much hardware capacity is purchased which is subsequently underutilized, it is essentially a sunk cost which isn’t providing any value. If too little capacity is purchased, users may struggle to gain access to the capabilities they need when they need it. In procuring a private cloud, it’s important to accurately forecast likely demands over the life of the investment and perform an analysis of the worse case scenarios, and to ensure the timeframes and cost of additional hardware purchases are defined contractually, so that scaling can be performed to cost and time requirements.
JM: You completed your PhD thesis on public cloud planning through derivative pricing. What inspired you to focus on that topic and what were some of your biggest findings?
OR: Whilst at Claranet, the hype around cloud computing was building and I realized that Cloud Computing was going to be more than just a trend or a novelty, and it had the potential to revolutionize the IT supply chain. I decided that I wanted to be part of this revolution, so I would have to get my hands dirty, get under the bonnet, and understand what was happening. As a product manager, it was my job to understand cost and pricing, and cloud computing brought about new challenges for both provider and consumer. So I approached the University of Bristol and asked them if they’d take me on as a PhD student to investigate cloud economics full-time.
In my thesis, I found that the flexibility of on-demand pricing is ideal for the consumer, but fraught with risks for the provider in terms of capacity and financial planning. As a result, providers offer a range of pricing models as alternatives to on-demand pricing, such that the provider lowers its risk profile. In return, the consumer increases its risks but receives a financial discount. As a result of these alternative models, and the need to capture all costs at the provider-end, the IaaS market is a complex mix of pricing that is difficult for consumers to understand and predict.
I proposed that by combining different pricing models and using brokers, consumers could benefit with reduced costs for cloud resources, whilst providers could lower their risk profiles.
JM: What trends are you seeing in pricing models for cloud service?
OR: Recently, I’ve continued the investigations started in my PhD thesis by surveying a large number of cloud providers and categorizing IaaS pricing models into just eight categories, each with their own characteristics, benefits, issues and risk profiles for both consumer and provider. These categories will be released in a full report over the next few weeks called “The Cloud Pricing Codex,” together with an analysis of billable attributes and cloud units of measurement, and the results of the survey. The aim of the codex is to simplify the range of pricing models for IaaS services currently in the marketplace for both consumers and providers, and to explore trends and developments in the cloud economics space.
JM: Are the pay-as-you-go models offered by AWS and others actually helping customers save money and avoid buying excess space?
OR: I think the cloud is often cheaper than dedicated infrastructure, but cost savings should not be the main driver for moving to the cloud. For me, the cloud is all about the ability to make best use of opportunities by allowing entry into new markets, allowing rapid development, and meeting consumer demand – deriving revenue from these opportunities should be the driver behind the cloud.
JM: How do you think open marketplaces for IT infrastructure (the cloud as a commodity) will disrupt the market, and who will benefit most from them?
OR: Cloud markets have huge potential, but there are still many stumbling blocks before they are a reality. A market needs liquidity, so a supply of resources; commodity, so an understandable and tradeable unit of the cloud; and variability, so that spiky demand can be fulfilled by all sellers in the market. We are still quite far from having this liquidity, commodity and variability in the cloud, but there are a number of companies building cloud exchanges and they are addressing these points. I think it will be disruptive, but it will take time, as the whole IT supply chain will need to change. Service providers are used to building their own infrastructure and selling it; in the world of the cloud exchange, service providers will need to act as brokers, and will purchase commodity infrastructure from cloud exchanges and then add their own service wrap on top.