Cloud, High Finance, and Hollywood
While at the NAB Show, I kept an eye out for interesting vendors and trends. The cloud broker-dealer model is one trend worth following. Here “broker” is not used in a technical sense but refers to the finance / trading domain.
As you have already heard a gazillion times, converting capital expenditure into operating expense is a key value proposition of cloud computing. Yes, but customers need to understand that cloud vendors have different payment models which can eat into any such potential benefits. For example, a cloud vendor may offer deep discounts if you pay upfront. But does not paying upfront (for a long duration of say 2 years) equate to a kind of capex? Also, almost all cloud vendors ask you to pay the monthly bill in advance, while enterprise customers typically pay in arrears for non-cloud purchases (e.g., 45-60 days after service provisioning / invoicing) -- so there is an interest cost to paying in advance.
These may seem like very small leaks in the savings bucket, but lopping off a few percentage points from a large base of spend means tidy savings.
Media companies are starting to pay particular attention here. You may not think of it usually, but computing costs comprise a very big portion of movie budgets, particularly when the film involves out-of-this-world animation and special effects. A big line item in the estimated budget of $280 million for Avatar is the IT costs. You can imagine the compute power that goes into movies these days when the Kiwi company Weta's data center is counted among the Top 200 super computers in the world. Weta also created the special effects for King Kong and the Lord of the Rings trilogy. The new recipe for hit movies may well be “star power plus server power.”
Strategic Blue, a UK start-up whose founders have a finance background, is trying to bring smarts from the world of trading to optimize cloud purchases. The company is a cloud broker and dealer. It keeps track of the financial terms of different cloud providers and tries to offer you better terms and conditions by serving as a demand aggregator and may alleviate some of the issues discussed above. Note that you deal with the cloud provider directly for support and SLAs.
While the rest of the media industry is still trying to figure out the cloud, the finance folks at movie studios are evincing a lot of interest in such models, loosely based on the portfolio theory of modern finance. As they say, but now in a good way: In Hollywood, the really creative people are the accountants, perhaps?
Even if you're not in show business, keep an eye out for opportunities to optimize cloud procurement. If you decide to use an intermediary, be sure to fully understand any commercial / technical trade-offs and the implications on flexibility. And in the end, don't forget to negotiate.