Tag Archives: fungible

Is cloud computing a fungible commodity?

Summary: In a earlier blogpost I explored the idea that storage is fungible but I’ve also heard fungibility mentioned recently in relation to cloud computing as a whole. If cloud computing is becoming a commodity (which is another argument) why shouldn’t it be traded like any other commodity, with a marketplace, brokers, futures trading etc? Are we going to see cloud compute traded much like gas or electricity?

Strategic Blue’s presentation on ‘Cloud brokers’ at CloudCamp London back in October 2012 centered around this exact idea and generated plenty of animated discussion on the night. Some felt that this was a pipe dream whereas others felt it was inevitable. My wife’s a commodity trader so after returning home I had various discussions with her trying to understand the concepts of commodity trading. It’s harder than I thought! The more technically minded of us immediately started thinking about issues like compatibility, interoperability, and service maturity but apparently (and somewhat surprisingly) these are all irrelevant when it comes to a true marketplace. It’s not the current IT providers that will define and run the cloud computing markets which is an idea that takes a bit of getting used to!

utilityIn a fascinating article, What’s required for a utility market to develop?, Jack Clark identified & scored the various criteria which need to be satisfied before cloud computing can be considered a utility. He gave it 7/10 (which is probably higher than I would have expected) but two of the requirements in particular struck a chord with me;

  • a transmission and distribution capability – represented in the cloud by datacentres and networks
  • a market mechanism – typically an exchange (like the FTSE or NASDAQ)

Let’s investigate these two criteria.
Continue reading Is cloud computing a fungible commodity?

Is storage a fungible commodity?

Fungibility – are you getting what you expect? 🙂

I keep hearing that ‘IT is becoming a commodity‘, cloud computing is ‘like a utility‘, and recently I’ve heard the term ‘fungibility’ applied to computing on multiple occasions. The technologies behind cloud computing are driving these changes but what does it mean to be a commodity, what on earth is fungibility, and what’s it got to do with cloud computing? In this post I’ll explore the fungibility of storage and in a future blogpost the wider impact to cloud computing.

Lets dig into what fungibility is and why it’s important. Wikipedia defines it as;

Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution, such as crude oil, shares in a company, bonds, precious metals, or currencies.

In plain English fungibility means something is interchangeable – a common example is money. If someone owes you ten dollars you don’t care if they pay you one ten dollar bill, two fives, or ten ones – you get essentially the same thing. Another example is that you’re supposed to eat five portions of fruit and veg every day but you could eat five fruits, five veg, or a mixture – they’re fungible (interchangeable).

Now we know what is it but who cares if something is fungible?

  • for consumers fungibility is a good thing as it increases competition and flexibility – you can buy your commodity from anyone, often driving down prices
  • for providers fungibility could be good and bad. The increased competition might benefit your competitors but history has shown that once a market becomes a commodity it tends to grow, leading to more business for all involved.

Note that just because a commodity is fungible it doesn’t mean there’s no differentiation. Many metals are considered fungible – a tonne of molybdenum may be valued the same whether it’s mined from Australia or Europe. If you need that metal in Europe however you’ll incur shipping costs if you buy the Australian sourced tonne so you’ll pay a premium to get the supplier from Europe. It’s this differentiation which enables trade – more on this in the followup post coming shortly.

Fungibility and storage

Two of the references I’ve heard were in regard to storage and whether it is or isn’t fungible, so that’s where I’ll start. Virsto’s argument during their storage hypervisor presentation at SFD2 argued that while CPU and memory are fungible (specifically in virtualized environments) storage isn’t and is therefore a pain point (which they aim to solve obviously). In his 2013 predictions article Arthur Cole at IT BusinessEdge sees storage becoming a fungible commodity which has ramifications for how it’s consumed.

Uncertainty over whether storage is fungible or not is understandable – my first reaction when I thought about it was ‘no chance’! I’m a storage admin in my current job and each storage request is slightly different – there are too many variable factors which affect the outcome that you couldn’t consider two requests as interchangeable unless the solution was from the same vendor and with the same configuration. Here’s just some of the factors when specifying solutions or diagnosing storage issues;

  • Capacity (typically in GB or TB)
  • Performance – throughput, latency, IOps
  • Workload – read/write ratio, block sizes, sustained or variable demand
  • Availability – HA, clustering, support, SLAs etc
  • Backups – snapshots, long term archiving, restore times
  • Security – location, governance, compliance

Crucially however, as a storage provider I have a different perspective to a consumer of my storage. For a consumer most of this complexity is invisible, hidden behind either a technical or business abstraction – hence why a storage request often only considers capacity (much to my frustration!). What I get concerns me, not how it’s implemented. If you look at storage from the customer’s perspective then it’s a simpler construct and provided it satisfies the user’s expectations it can be considered fungible. All those variables can differentiate one service from another but for many services they’re of secondary importance.

Take a simple consumer example – Dropbox. I’ve used this excellent service for quite a few years and the only thing I really care about is how much storage I can consume and that it works reliably. I assume that it’s always available, that I can get my files back when needed, and that the storage provided by Dropbox can handle what I throw at it. If I don’t like the service offering I can move to one of their competitors like Crashplan, Skydrive, or Bitcasa and while the functionality is slightly different (maybe they don’t all support Linux clients for example) I can compare prices and pick the one that best suits me.

At the enterprise level companies like Amazon, with their S3 and Glacier services, compete with other industry heavyweights like Google’s Cloud Storage, Microsoft’s Azure, Nirvanix etc. Take up of these services started with the Web 2.0 generation but today’s they’re starting to tackle the ‘legacy’ enterprises. This is the more complex world where the factors I mentioned above are more relevant – if someone offered me some ‘cloud’ storage versus some traditional onsite storage (using Netapp’s or EMC gear) then I’d expect them to deliver completely different experiences. Rodney Rogers, the CEO of Virtustream, has recently written an excellent piece about why Amazon may struggle when delivering to the enterprise and I’d agree completely – the demands of the average enterprise are not the same as the Web 2.0 companies running commodity hardware. There are plenty of successful cloud storage companies doing business in the enterprise world today but as Gartner warn you need to be on your guard as the services offered vary widely and are not therefore easily compared – they’re not fungible. They also indicated that 20% of companies are already using cloud storage so one hopes it’s delivering some value. Apologies for mentioning the ‘G******’ word so often!

The answer to ‘is storage fungible?’ is the classic ‘it depends’. For some, typically consumer, requirements I’d say it is but for the more demanding enterprise it’s not there yet.

Further Reading

Fungibility applied to IT

Your storage in the cloud (Hans De Leenheer)

Cloud storage viable option, but proceed with caution (Gartner)

Top 10 cloud storage providers (Gartner)

The longevity of IT skills