Posted by Brian McCallion ● Jun 8, 2011 7:11:00 AM

Sequencing the DNA of cloud computing. Understanding the Ecosystem by Examining the Nature of Web Services

[This rambles, but I decided to publish first then edit over the next couple of days. I start out looking at the nature of web services interfaces and in the process leap to the story of how Eucalyptus started by setting the goal of creating an Amazon AWS interface indistinguishable from AWS. At that point I realize that AWS is really just the catalyst for the Cloud and start on an analysis of why Amazon decided to tip over the entire data center / server industry apple cart]

What happens if you build an application, it becomes popular, customers integrate their application using the api you publish--it's all good so far!

Six months later you learn a competitor is taking market share from you and you wonder what is going on. At this point in time the SaaS industry leaders assert that if customers integrate with your application most likely these customers will be long term customers. In other words, integration is "sticky" and when your customers integrate their applications or third party SaaS web services with your SaaS services, your business will see higher retention and renewal rates. In other words, providing a "good" web service interface to your SaaS is good business and worth the time and effort to do well. Yet in this scenario, you do some research into your competitor and learn that your competitor has not only taken your customers, but also implemented an web service interface identical yours.

As a result of cloning your web service interfaces, it's much easier for your competitor to entice your customers to move from your service to the other service was very easy for your customer. Integration is hard work and once achieved, customers are reluctant to move. It's the equivalent of a seed sprouting a growing roots once it has found an environment that offers the right mix of inputs for growth: sun, water, soil, shade, and compatibility with other organisms in the vicinity.

There's much talk of "open-ness" at a platform level and of openness of source code. This discussion focuses on the competitive advantages of web interfaces and asks questions about how and what advantage these web services interfaces and asks how the competitive landscape will evolve as the software industry fundamentally alters the software service delivery model.

Identical web services interfaces which enable easy substitution of one service for a similar service is great for your customers. At some point it make become "table stakes" and customers will expect standardized services for business analytics web services, or other broadly scoped services. Yet from the perspective of a SaaS vendor, designing an interface requires imagination, skill, experience and doesn't seem separate from the creative act of developing software. Delivering SaaS requires your organization to develop and publish web interfaces. Yet what are the "rules of road," so to speak?

Five  (Actually Six) Questions Regarding Web Interfaces
Questions I have are as follows: Does your firm own the intellectual property for the web interface and if so what does a SaaS vendor need to do in order to protect, manage, and play well with other web service providers. For example, 

  1. Did you publish the WSDL for the web service on your website?
  2. Did you include an end user license agreement when your customers signed up for a free trial? 
  3. Does this EULA include provisions for the scope and acceptable use of your API?
  4. Is an interface expose to the public protected intellectual property?
  5. Is the use of your API limited to the period for which users subscribe to the specific service for which you provide the API, or does integrating with your service using the API grant the user more durable rights to use the API, including using it with 'substitute' services?

I don't know the answer to these questions. I suspect interfaces are intellectual property. And I think it's important to answer these questions because I believe SaaS and other web service providers don't always clearly define or communicate the rights of uses and other vendors as they relate to web service apis. I suspect in the rush to the cloud many SaaS vendors have defined, documented and published the interfaces to their applications without any notice to this effect, EULA, or other formal means of limiting how, who, when, where, or by whom the api can be used.

As cloud service providers we are eager to make it easy for others to consume the services we provide. Like energetic puppies we bounce around and make friends with everyone and partner as much as we can because we are all aligned at least along the lines of being SaaS providers as opposed to Legacy packaged application software providers. The adrenalin and excitement and the speed of this life is wonderful in this burgeoning, chaotic build-out phase. Nonetheless, once territories and leaders become defined, the technology industry quickly turns to intellectual property such as patents to create barriers to entry and to slow competitors through litigation and to increase the price of entry by requiring a substantial war-chest to fund intellectual property wars.

At the SIIA / OpSource All about the Cloud conference I attended in May 2011, at least twenty percent of the SaaS vendors were positioned as Business Intelligence plays. Moreover, each includes many features which are more of a "shell" for the real difference in their service. For example, some such as Host Analytics (a company and offering I admire) were focused on Corporate Performance Management. Others, such as LogiXML seemed to position Business Intelligence and Analysis as a service ready to be consumed by other SaaS vendors. In my opinion each company is uniquely valuable. However, as competition in this space increases, firms will be forced to specialize. The nature of web services is to ruthlessly weed out those species which do not find a niche in the ecosystem, and to survive it's likely that firms will increasingly specialize and will consume other web services to provide non-core capabilities.

At Cloud Expo in New York City in June 2011 I see several business intelligence solutions each positioned slightly differently, yet which much overlapping non-core, non-differentiating capabilities (the user interface, getting data, login/security, customization, user interface customization, user experience customization, multi-tenant capability, and such.). I also see firms which have focused on a narrow area, yet branched into separate offerings. One such firm is Layer7tech which seems to have started as a security / security appliance service play, yet out of necessity developed a service orchestration engine which could probably stand on its own as a separate company. While the early suite vendors such as WorkDay and NetSuite provide an integrated suite of essential services provided by a single vendor, to me the evolution of species (at least on earth) suggest to me that complex organisms will evolve through a Darwinian process and that artificially composed Suites will not hold up to higher species composed of highly efficient components and organized by highly evolved management systems yet to be discovered.

Back in the world of now and ten minutes from now the SaaS / Cloud ecosystem reflects an early stage in a rapid evolution of how the industry provides and consumes web services. At SIIA when I asked Microsoft's Matt Thompson and IBM's head of cloud strategy why firms were suddenly so eager to move to private cloud, yet had utterly failed to implement and integrate into existing datacenters most of the automation and management tools the software industry has already sold them. The response I received from IBM is that the Cloud has made these kinds of conversations easier to have with businesses. In other words, it's a little bit like Dorothy's ruby slippers in the Wizard of Oz. The industry has all the technical tools and knowledge to achieve Cloud capabilities, yet somehow the recognition of the consequences of non-execution (Borders, Circuit City, Barnes & Noble come to mind) looms large and visions of the graveyard now bring issues into starker contrast.

The burgeoning industry and the growing ecosystem of service providers seems to demand increasing specialization of services in order to compete and survive in the marketplace. In nature we see animals which mimic other animals in order to gain an edge and increase the survivability of their dna. In this brave new ecosystem of the cloud billions of web services will rise up from the primordial ooze and compete for survival. Imitation of interfaces will be a point of contention. In order to remain viable SaaS vendors will attempt to imitate and to 'flip' or switch the valuable networks of programmers and customers into their ecosystem.

Topics: Amazon.com, Business Intelligence, Channel, Cloud Computing, Cloud Expo, Datacenter, Dell, Eucalyptus, HP, IBM, Industrial Organization, Intellectual Property, service, Web Service, web services