The king was in his counting house ...

... handing out our money.

This was the year that Mervyn King & Alistair Darling managed to spectacularly fritter away billions of taxpayers' money.

I was never opposed to lending money to banks but quantitative easing (a dishonest way of printing cash and giving it away in truckloads to the usual cronies) was disgraceful.

The tally to date is that the taxpayer has been exposed to £1 trillion of potential debt through cash injections, state guarantees, quantitative easing and other interventions. As a result of this, the taxpayer is expected to lose anywhere between ten to a hundred billion. All of this is to prop up an industry which generates at best £200 billion a year in tax.

Why is it that when the taxpayer acts as a lender of last resort, we have to make a loss into the bargain? When the hard up resort to loan sharks, you never hear tales of some financial wheeze where money is given away.

Of course, it's different because we couldn't let the banks fail despite no-one explaining why not. Still that doesn't mean we have to be 'soft' and being the lender of last resort should be a time of piracy. For some reason the city, unlike the poor, got let off the hook.

We could (and should) have demanded equity equal to any loans plus the loan capital plus punitive interest rates, but we didn't. Where's our pound of flesh and 2000% APR?

We could (and should) have invested heavily in social housing, bought out the building industry when it was on its knees and grew our state owned banks by providing liquidity into the economy. We didn't.

What did happen was that Meryvn & Darling were cheered by the financial giants like a pub landlord who has wiped the tab clean for his heaviest drinkers. Naturally, the taxpayer got lumbered with the bill and the underlying causes of the mess (huge debt, delusional valuation, excessive gambling, economic instability) have been unresolved.

Expect more bad news to come.

At least Darling has got a potential excuse in trying to mess things up for the Conservatives. If only some of the largesse had been spent on things that really matter, like combating global warming (which from the Copenhagen Accord laughingly only gets £60 billion a year by 2020).

A wasted opportunity but then that's how I feel about New Labour - a decade of disappointment. Whilst the noughties have been personally good for me, in general it failed to live up to the expectations. Unless of course you consider that WAGs, myspace house parties, wii fit, 4x4's, an endless war on terror, draconian legislation reducing civil liberties, excessive celebrities and a highly materialistic and self serving environment are the pinnacle of human nature.

To summarise the noughties, you'd have to say "nought for the environment, nought for social mobility and lots of noughts for bankers".

On a positive note, Doctor Who was utterly brilliant.

Where is Amazon heading?

There is something that I've always found confusing about Amazon's cloud strategy.

The development of EC2 & S3 makes good sense given the suitability of these activities for large scale volume operations (an activity that Amazon, as a book-seller, specialises in).

The growth of an ecosystem around these core services and the provision of these services through APIs are ideal. The solving of some of the transitional educational barriers to cloud (such as persistency through EBS) seems spot on and ... well the list goes.

However, I've never quite understood why Amazon chooses to cannibalise its own ecosystem (the creation of a hadoop service when cloudera existed, the creation of autoscaling when many alternatives existed) rather than buying-out those different groups.

Given that, I can't be sure of where Amazon is going to head.

Other than the eventual need to move into a platform space. the moves towards a spot market could suggest that Amazon might attempt to set itself up as the computing exchange for basic infrastructure resources. To do this, it would also need to define itself as the industry standard (not just the defacto) probably through an IETF certification route and hence encourage other providers to adopt this standard.

Fortunately for Amazon, it already has several alternative open source implementations to support this claim and these open source technologies (such as Ubuntu Enterprise Cloud) provide a quick means for providers to get started.

There is huge future value in the exchange, brokerage and trading businesses for computing resources. It's what I was intending to go after with Zimki, all those years back.

I'm not going to make any predictions for now, I'll leave that until early January. However, if I was a betting man then I wouldn't be surprised if, over time, Amazon :-

• Goes for IETF standardisation of EC2 & S3
• Allows reserved instances to be traded on its spot market hence creating a basic form of commodity exchange
• Enters the platform layer of the computing stack with provision of a development platform
• Allows other providers (who adopt the EC2 / S3 standard) to sell instances on the exchange
• Exits the infrastructure provision business by selling on the EC2 / S3 services (at a phenomenal premium) whilst keeping the exchange and any established brokerage business

Mystic Meg Epic Fail

I hate predictions.

Don't get me wrong, I don't mind the "oh, it's already happening but I'll pretend it's new" type of predictions because you're guaranteed to look good.

I can happily quote that "the cloud market will grow", "standards, portability and interoperability will become increasingly important" and "the platform layer will be a major market" will full knowledge that these are safe bets.

Problem is, that these aren't really predictions and I've got a big mouth. Hence, I tend to make predictions which tend to explode rather nastily.

For example, back in 2002 I was predicting a financial meltdown in 2005 due to the massive growth in debt. Did it happen? Nope. I was out by a couple of years but that's the point of prediction, the when is vastly more important than the what.

That said, I can happily get the what wrong as well. Hence back in January 2009 when the FTSE was at 4,608, growing rapidly and many were talking about a rebound - I had to go and predict that it would drop to 3,500 within the year. Did it? Nope, it got close at 3,512 but never quite made it (back to the drawing board with my economic model again).

However, I'd be safe talking about cloud wouldn't I? Turns out that I get that wrong too. Hence back in 2007, I was predicting that "six years from now, you'll be seeing job adverts for computer resource brokers".

Earlier this year, I realised that prediction was going to be spectacularly wrong and happen much sooner. Eventually, I even admitted as much.

Adding salt to a fresh wound, is Amazon's announcement of a fully fledged spot market.

I suspect, it won't take long for someone to offer spread betting on the Amazon spot price or for some form of OTC derivative to mitigate against fluctuation in price and cover the risk of paying the full on demand price (because of failure to buy). Of course, this would work a lot better if users could resell reserved instances on the spot market providing the basis for a commodity exchange.

Opening up the spot market to the resell of instances between consumers will enable market pricing, making reserved instances more attractive. This will provide Amazon itself with future capacity planning information.

An alternative would be for users to resell reserved instances back to Amazon for sale on the spot market. However, this depends upon upon a quartet of objective, offers, availability and pricing.

For example, if revenue is the main objective, then there are scenarios (especially in the early days) where an increased revenue will be generated by selling a smaller number of instances at a higher spot price, leaving unfulfilled demand and capacity. It should be remembered that this is not market pricing but Amazon pricing.

Under a revenue objective, the conditions where it will be viable for Amazon to increase capacity on the spot market by the re-purchase of reserved instances (presuming Amazon isn't playing a double booking game with reserved instances, which are in essence a forward contract) will be limited.

It all depends upon this quartet and the only thing that I'm sure of, is that my prediction is out by a few years.

Ouch ... damn, how I hate predictions.

Cloud Camp Frankfurt

A few months ago I provided an introductory talk on cloud computing at Cloud Camp Frankfurt. I was asked to be vendor neutral, so it is light on Ubuntu Enterprise Cloud.

They've put the video of my talk up, so I thought I'd provided some links. Please note, it is split into two parts.

Cloud Computing - Part I

Cloud Computing - Part II

There are more videos on the Cloud Camp Frankfurt site, they're worth watching as the event was a blast.

Old yet new ...

I'm just comparing two of my talks, both on cloud computing and if anyone has time, I'd like some feedback.

The first is my recent talk from OSCON in 2009 covering "What is cloud computing and why IT matters", the second is my talk from OSCON in 2007 covering "Commoditisation of IT"

They both cover the same topic matter but with a different viewpoint (N.B. terms have changed since the 2007 talk but I'd like some feedback on style & content.)

Both are 15 minutes long but which was better and more importantly, why?

OSCON 2009: What is cloud computing and why IT matters

OSCON 2007: Commoditisation of IT

Private or Public clouds?

There is ample evidence to suggest that many common and well defined activities in I.T. are shifting from a product to a service based economy. Naturally this change creates a broad range of risks including :-

• the risk of doing nothing as competitors gain advantage from economies of scale through volume operations, utility charging, ability to focus on core activities and a faster speed to market through componentisation .
• transitional risks including confusion, security of supply, trust in new providers, transparency and governance.
• outsourcing risks including suitability, vendor lock-in, pricing competition, second sourcing options and loss of strategic control.

For any organisation, it is a case of balancing the risk of not using the cloud against the risks of using it. There appears to be two general schools of thought on this subject.

The first school states that whilst the outsourcing risks will be solved by the formation of competitive utility computing markets (with easy switching between providers) these markets do not exist today. Hence, whilst the movement to public clouds is considered inevitable (bar for the largest companies and governments), we're still in a time of transition. Private clouds can help solve many of these transitional risks whilst preparing for a future movement towards public cloud services.

The first school accepts that private clouds have a role, it emphasises the importance of standards, of reducing barriers to education and promotes a hybrid model of both public and private clouds. It encourages a compromise between economies of scale and transitional risks during this time of change.

I've been an advocate of this first school of thought for many years (since before 2006).

The second school of thought states that private clouds aren't cloud computing and advocates adoption of public clouds. It dismisses the transitional phase and talks of continuous innovation in the provision of what is fundamentally a commodity (commonplace, well defined and hence suitable for service provision). It is almost purist by nature, sometimes describing public clouds as true cloud computing and finding little distinction between private clouds and virtualisation platforms.

I don't subscribe to this second school of thought. Basic economic sense and risk management would suggest that in this time of transition, organisations will attempt to gain some of the benefits whilst mitigating the dangers of this phase. Hence, for the next few years I'd expect the cloud industry to be dominated by hybrid models.

After which I'd expect it to become more slanted towards public provision (as competitive markets form) but nevertheless hybrid models will continue to have a role.

Capital...

Over the years, I've often discussed the ideas of physical and human (intellectual and social) capital within organisations. I thought I'd cover some old ground again.

Organisations simply exist between the intersection of a network of people and a mass of activities undertaken. Remove this and you're left with what an organisation really is, nothing bar any remaining residual capital.

The act of people interacting with activities creates several forms of capital, three of the most interesting are physical, intellectual and social. All of these forms of capital are susceptible to the ravages of commoditisation.

We've already experienced the effects of commoditisation on physical assets. For example, the news industry was once able to use physical assets (large and expensive printing machinery) to control the activity of publishing - not only what was published but whom. In days of past if you wanted to be a journalist your options were limited.

Today, the digitisation of content and the spread of the means of mass communication have changed the rules and commoditised this activity. The barriers to entry have been severely diminished and anyone can publish, This means news organisations have been forced to seek other means of differentiation, value and ultimately control.

Equally, many forms of intellectual capital has slowly been commoditised. Whereas in the past you needed direct access to a lawyer to help with the arcane knowledge of how to write a will, today you can download forms online.

All manner of knowledge has been neatly codified, commodified (given a value for access) and ultimately commoditised (become standardised, commonly available, relentlessly driven to a lower cost) through market forces.

Access to knowledge can (and has been) an important mechanism of control for some organisations. The commoditisation of such knowledge diminishes this means of control. As a journalist may find they are less dependent on a news company in order to publish, a budding lawyer may find it easier to access the knowledge they need without a law firm.

Obviously both types of organisations still provide the benefits created by the internal ecosystem of a network of people and a mass of different activities (i.e. rapid access to certain skills, specialists and supporting structures). However, both types of organisation will also have social capital - interactions, reputation and relationships with others.

Hence a journalist or lawyer my choose to work with one particular organisation because it can offer access to the right people, provides a prestigious network and has a high amount of social capital.

I mention this because many social network tools are currently busy codifying relationships between people. Furthermore, some are also trying to identify and provide measurable value in those networks (the act of commodification). Could this onslaught also lead to the commoditisation of business networks?

Will we see a future where we can buy and sell access to a social network? How will this impact organisations who depend upon their networks and use access as a means of control? Will companies also attempt to control and own this network more tightly?

These are just some of the questions I suspect we will be facing over the next few years.

FlashForward

I rarely watch T.V. series, however FlashForward was recommended to me. I have to say it's outstanding.

The principle behind the story is fairly straightforward. The entire world experiences an event which causes everyone to see the "future", six months ahead.

Of course, it's not quite that simple. The "future" seen is that of an alternative world (from the many world principle) and therefore doesn't necessarily represent the character's current future but instead another timeline where the character may have made other choices in their past.

This creates a continuous drama of whether the future visions are right or wrong and an obvious illusion of choice where people try to change (or make happen) a future which is not necessarily theirs.

This paradox is illustrated with one particular character Dr. Olivia Benford. In the "current" world Olivia is married to a recovering alcoholic, Mark Benford. However, in her "future" vision she is with another of the characters Dr. Lloyd Simcoe. The paradox is that the "future" vision is that of another timeline, hence there are three obvious possibilities for this other timeline. Either :-

• She is married to Mark (as per the "current" timeline) but has an affair with Lloyd
• The interpretation of the vision is incorrect (i.e. Lloyd is just staying in the house for some other reason)
• Her timeline is different in the other world i.e. she attended Harvard, met LLoyd and was never married to Mark (or divorced him due to his drinking etc).

This is the deliciousness of the series which has many examples of these paradoxes woven into the plot. You're kept guessing whether the visions being seen are a possible future of the current timeline or not.

All the time, the characters in the "current" world are making choices based upon the belief that their "future" visions are correct and in some cases they are even trying to make them happen (even when those visions aren't possible because of other past choices).

Of course, there is also the subplot of what caused the event, will it happen again and several other plot lines. I hope they don't mess this up like Lost which became a repetitive bore.

For the time being though, it is utterly brilliant.