The Service Provider of Tomorrow, Part 3: SaaS and Cloud Economics

The migration of IT infrastructure to the Cloud, which began in the late 1990s with the adoption of managed hosting services, is being driven by Cloud Economics.  Businesses want to consume IT as a service, not because it’s cool, but because of economies of scale.  By aggregating IT infrastructure in centralized Internet data centers, IaaS providers can deliver better IT infrastructure support than most businesses can achieve on their own while charging a price that is materially lower than the cost businesses would otherwise incur on their own.  This concept is now old hat, with these economies of scale having been demonstrated in spades over the past decade by dozens of successful managed hosting and IaaS providers.

Many industry participants and observers expect the IaaS economies of scale to be further leveraged as we further move into the cloud age.  In other words, as the IaaS industry moves from the proven model of providing discrete IT infrastructure for specific customers (i.e., traditional hosting) to cloud computing architectures – as delivered today by Amazon Web Services, Rackspace Cloud, Hosting.com, Opsource and others – IaaS economies of scale should become even greater as virtualizing/abstracting IT hardware adds yet another degree of operating leverage to the business model.  This is totally consistent with Cloud Economics 101.

While this expectation is valid as far as it goes, there is a one threat to Cloud Economics that is currently underappreciated and therefore a real danger to the continued rapid evolution of the industry…this threat is the inefficiencies in implementing traditional security solutions in cloud computing environments.

Let’s face it, even in traditional hosting environments, implementing IT security products such as enterprise IDS/IPS and log management have been among the most inefficient, costly, and non-scalable technologies deployed in service provider environments over the past decade.  This is largely due to the fact that most security vendors products are inherently designed for single-tenant delivery and everything about security vendors and their products, from product management to software architecture, is wired to support the needs of the enterprise – not multi-tenant IaaS providers.  The challenges encountered by traditional hosting providers will become exponentially more difficult in public cloud environments.  This issue poses a major threat to the ongoing march of Cloud Economics in the cloud age.

So what is the fix?  SaaS security solutions.  The only proven example of scalable security solutions delivered consistently and successfully over the 10-15 year history of the IaaS industry is this … many hosting companies have elected to overlay SaaS offerings from security vendors such as Alert Logic on top of their core IaaS offerings.  Security SaaS providers are few and far between, but those who have adopted the SaaS model are delivering economies of scale to their customers in the same way IaaS providers have delivered economies of scale around IT infrastructure management.  The marriage of these two models works.

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