HOW SEAT­TLE BE­CAME ‘CLOUD CITY’

Ama­zon and Mi­crosoft are lead­ing a tech rev­o­lu­tion.

Houston Chronicle - - EXTRA TECHNOLOGY + GADGETS - By Matt Day | Seat­tle Times Ken Lambert/ The Seat­tle Times/TNS

IN a Seat­tle-area con­fer­ence room ear­lier last year, Washington state’s two largest em­ploy­ers started sketch­ing out the fu­ture.

In a day­long se­ries of meet­ings at Mi­crosoft’s cam­pus, en­gi­neers from the soft­ware com­pany knocked heads and key­boards with their coun­ter­parts at Boe­ing. The goal: tap­ping in to Mi­crosoft’s Azure, the soft­ware maker’s net­work of on-de­mand computing power, to build a new gen­er­a­tion of soft­ware.

Boe­ing for years has made tools, from pa­per nav­i­ga­tional aids to main­te­nance soft­ware, that help its aerospace cus­tomers fly and take care of their planes. An en­gi­neer with a record book and a man­ual knows roughly when to re­place a part. But an en­gi­neer equipped with soft­ware that can help make sense of decades of main­te­nance data could do a more pre­cise job, the think­ing goes, im­prov­ing air­craft main­te­nance and fuel con­sump­tion. Boe­ing is hop­ing to build web-based vari­ants of its avi­a­tion an­a­lyt­ics tools on Mi­crosoft’s Azure.

“If you’re not build­ing (tools) that are keeping up with your cus­tomers on a daily or weekly ba­sis, you’re fall­ing be­hind,” said Corey San­ders, a Mi­crosoft man­ager who leads a cloud-computing team work­ing with Boe­ing. “Be­cause your com­peti­tors are.”

Cloud computing, or tap­ping in to rented com­puter power and data stor­age over the in­ter­net, has ex­isted for more than a decade. Most peo­ple know the cloud as the un­seen servers that store the emails in their Gmail ac­count or back up their iPhone pho­tos.

But en­abled by in­creas­ingly so­phis­ti­cated tech­nolo­gies — and bil­lions of dol­lars’ worth of fac­to­ry­sized server farms be­ing built around the world — cloud computing is chang­ing from a con­sumer phe­nom­e­non to one that’s re­shap­ing big busi­ness. Thanks to the growth of Ama­zon.com, Mi­crosoft and a ros­ter of Sil­i­con Val­ley trans­plants, it’s also re­shap­ing Seat­tle.

Tech­nol­o­gists com­pare the shift now un­der way to the ad­vent of elec­tri­cal util­i­ties a cen­tury ago that sparked rapid ad­vances in fields from agri­cul­ture to medicine and en­ter­tain­ment. Elec­tric­ity rapidly changed from an ex­pen­sive good avail­able only to those with the where­withal to gen­er­ate it them­selves to a ubiq­ui­tous com­mod­ity only no­ticed when it goes down.

“In gen­eral, there is some­one who can de­liver you elec­tric­ity more re­li­ably and less ex­pen­sively than you can gen­er­ate it your­self,” said Ed La­zowska, a Univer­sity of Washington com­puter sci­en­tist. “What’s hap­pen­ing now is most of us are in­creas­ingly re­ly­ing on util­i­ties, be it Ama­zon, or Mi­crosoft or Google, to give us the computing we need.”

In other words, the power of the tech­nol­ogy at your fin­ger­tips no longer de­pends on how pow­er­ful of a PC you bought for your den or the num­ber of servers blink­ing in the back­room where you work.

All you need is a credit card, which can give you ac­cess to the power and tech­nol­ogy that en­ables ev­ery­thing from your cor­po­rate email ac­count to a su­per­com­puter.

COM­PET­ING FOR CASH

Sales of in­ter­net-ac­cessed soft­ware and tech­nol­ogy ser­vices are ex­pected to to­tal about $118 bil­lion this year, re­searcher Gart­ner es­ti­mates.

That sum rep­re­sents an in­dus­try in its in­fancy. Gart­ner es­ti­mates that busi­ness will di­rect more than $1 tril­lion of cash to­ward cloud computing be­tween now and 2020.

The tech­nol­ogy in­dus­try is fiercely com­pet­ing for that cash, a race pit­ting tra­di­tional busi­ness computing gi­ants like IBM and Or­a­cle against rel­a­tive new­com­ers Sales­force.com and Drop­box, and hun­dreds of star­tups.

Seat­tle is at the fore­front of this rev­o­lu­tion, largely thanks to Ama­zon.com.

Google, Mi­crosoft and Ya­hoo all built their own search en­gines, email plat­forms and other global web ser­vices that re­lied on mas­sive data cen­ters, but it was Ama­zon that first started rent­ing that kind of in­fra­struc­ture to other busi­nesses.

In 2006 the com­pany launched Ama­zon Web Ser­vices, or AWS, which at first amounted to a big, web-ac­cessed hard drive where other busi­nesses could store their data. A few months later the com­pany added a ser­vice where busi­nesses could also rent the pro­cess­ing power avail­able on Ama­zon-main­tained servers.

At the time, the world of busi­ness tech­nol­ogy was struc­tured like this: cor­po­rate in­for­ma­tion-tech­nol­ogy de­part­ments bought servers and the ex­pen­sive soft­ware that made them tick and in­stalled on top of that the spe­cific ap­pli­ca­tions that the busi­ness needed to run, be it word-pro­cess­ing tools, ac­count­ing data­bases or other soft­ware.

Of­fice work­ers ac­cessed the whole pile of tech­nol­ogy from a per­sonal com­puter.

Ama­zon’s al­ter­na­tive was sim­ple: Don’t bother with most of that; rent it from us in­stead. Em­ploy­ees, who can still ac­cess the whole sys­tem via the web or their PC, won’t no­tice.

That premise was a hit among tech­nol­ogy star­tups, an al­ter­na­tive

to shelling out tens of thou­sands of dol­lars for servers and soft­ware, and spend­ing days or weeks set­ting it up.

CAUGHT FLAT-FOOTED

AWS built dozens of ser­vices, repli­cat­ing in cy­berspace the func­tions of all sorts of out-of-the-box soft­ware.

Much of the rest of the in­dus­try, liv­ing well off the high mar­gins they were used to reap­ing from busi­ness soft­ware sales, was caught flat­footed.

A water­shed mo­ment ar­rived in 2013 when the Cen­tral In­tel­li­gence Agency awarded a large data-cen­ter con­tract to Ama­zon over IBM, a com­pany with decades of ex­pe­ri­ence pro­vid­ing tech­nol­ogy ser­vices to gi­ant cus­tomers. The vote of con­fi­dence from the spy agency helped ease busi­ness-tech­nol­ogy buy­ers’ worry about the re­li­a­bil­ity and se­cu­rity of Ama­zon, a com­pany bet­ter known as an on­line book­store than a tech­nol­ogy provider.

In the years since, in­ter­est in cloud ser­vices has spread to in­creas­ingly large and so­phis­ti­cated busi­nesses and gov­ern­ment in­sti­tu­tions. When they go look­ing for data stor­age, pro­cess­ing power and other in­fra­struc­ture ser­vices, many choose Ama­zon.

Ama­zon’s an­nual share­hold­ers meet­ing in May was a tri­umphant af­fair. The com­pany’s stock was near a record high, and in­vestors cheered the trans­for­ma­tion of an on­line book­seller to a re­tail jug­ger­naut with a mas­sive tech­nol­ogy arm.

AWS took in more than $11 bil­lion in sales over the most re­cently re­ported 12 months, ac­count­ing for 71 per­cent of the com­pany’s op­er­at­ing in­come be­fore taxes.

Jeff Be­zos, Ama­zon’s chief ex­ec­u­tive, said he was sur­prised by how long it took big tech­nol­ogy-in­dus­try in­cum­bents to match AWS’ ca­pa­bil­i­ties af­ter the ser­vice was hatched.

“We got a sev­enyear run­way,” Be­zos said. “That’s al­most un­heard of. For years, we were kind of left alone.”

MI­CROSOFT JUMPS IN

When a big com­peti­tor did come call­ing, it was a fa­mil­iar name.

Af­ter a decade of flubs in con­sumer tech­nol­ogy, and a few false-starts in cloud computing, Mi­crosoft has gone all-in on the cloud, in­vest­ing bil­lions of dol­lars in data cen­ters from Aus­tralia to Ger­many and Quincy, Wash.

While it built that in­fra­struc­ture, Mi­crosoft also changed its ap­proach, re­ori­ent­ing a com­pany that built its busi­ness around mas­sive soft­ware re­leases de­liv­ered ev­ery few years to one that pushed out new prod­ucts ev­ery week — and sud­denly had to lis­ten to cus­tomers at the same time.

Scott Guthrie, the Mi­crosoft ex­ec­u­tive vice pres­i­dent who over­sees the com­pany’s Cloud and En­ter­prise unit, says the pay­off has started to ar­rive in the past cou­ple of years.

“There’s al­most no cloud (buy­ing) con­ver­sa­tion any­where that we’re not part of,” he said in an in­ter­view.

This year, those con­ver­sa­tions have made cus­tomers out of com­pa­nies like BMW, Gen­eral Elec­tric and Boe­ing.

“They came from so far be­hind, and they came out of the gate roar­ing,” said Brent Frei, an ex­ec­u­tive with Smartsheet, a soft­ware com­pany that part­ners with both Ama­zon and Mi­crosoft. “I didn’t know you could turn a big com­pany around that much.”

CLOUD COMPUTING

Broadly de­fined, cloud computing comes in three cat­e­gories: In­fra­struc­ture as a ser­vice:

Nuts and bolts of computing, rented vir­tual ma­chines, stor­age space or net­work time, usu­ally on a pay-for­what-you-use ba­sis. This realm is dom­i­nated by Ama­zon.com.

Plat­form as a ser­vice: A de­vel­oper’s sand­box, in­clud­ing ready­made data­bases or tools to cre­ate web­sites. Soft­ware as a ser­vice: Ready­made tools ac­cessed over the web. This is the bucket most con­sumers would rec­og­nize — think Face­book or Gmail. In the cor­po­rate world, think Mi­crosoft’s Of­fice 365, Sales­force.com’s sales track­ing tools or Con­cur’s ex­pense-man­age­ment soft­ware. Corey San­ders, a Mi­crosoft en­gi­neer, leads a cloud­com­put­ing team which worked on a key part of Mi­crosoft’s chal­lenge to Ama­zon. “It was very daunt­ing,” he said.

David Ry­der/Getty Im­ages

Cloud computing is chang­ing from a con­sumer phe­nom­e­non to one that’s re­shap­ing big busi­ness. Seat­tle is at the fore­front of this rev­o­lu­tion, largely thanks to Ama­zon.com, led by Jeff Be­zos, above.

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