Forrester has done quite a number of reports in the last two years around platform-as-a-service (PaaS) from the long-term strategy perspective from me and from the application developer perspective from my friend John R. Rymer. During this time, we saw many different business cases around PaaS. We have predicted and quantified that the major buying power of PaaS will come out of three camps:

1. ISVs are buying PaaS technology. This is a model that we saw with many ISVs on major platforms that managed to create a viable marketplace such as salesforce.com's AppExchange and Google's marketplace.
2. Corporate application developers are using PaaS to deploy custom apps and add-ons around SaaS applications. They are doing this significantly faster and at a lower TCO than before.

An important prerequisite for a full cloud broker model is the technical capability of cloud bursting:

Cloud bursting is the dynamic relocation of workloads from private environments to cloud providers and vice versa. A workload can represent IT infrastructure or end-to-end business processes.

The initial meaning of cloud bursting was relatively simple. Consider this scenario: An enterprise with traditional, non-cloud infrastructure is running out of infrastructure and temporarily gets additional compute power from a cloud service provider. Many enterprises have now established private clouds, and cloud bursting fits even better here, with dynamic workload relocation between private clouds, public clouds, and the more private provider models in the middle; Forrester calls these virtual private clouds. The private cloud is literally bursting into the next cloud level at peak times.

An essential step before leveraging cloud bursting is properly classifying workloads. This involves describing the most public cloud level possible, based on technical restrictions and data privacy needs (including compliance concerns). A conservative enterprise could structure their workloads into three classes of cloud:

• Productive workloads of back-office data and processes, such as financial applications or customer-related transactions:These need to remain on-premises. An example is the trading system of an investment bank.

The Nebula appliance announced today jumps right into this space and provides a standardized hardware configuration for OpenStack implementations. It offers scaled-out compute power based on commoditized x86 CPUs and standardizes a configuration of switches and other components to glue a large number of these CPUs together. The new VC-backed startup will thus compete head to head with EMC’s Vblock and Microsoft’s Azure appliance; neither of these are based on open source, and the latter isn’t really on the market yet.

But Nebula is more than just a hardware deliverable. Its mission is to transparently standardize the cloud hardware stack. Basically, it’s nothing more than the complex specification Microsoft worked out with its hardware partners (Dell, Fujitsu, and HP) to deliver the Azure appliance to local cloud providers and large-scale private clouds. However, Nebula’s openness is the differentiator; it reminds me a bit of IBM’s approach around the original personal computer back in the 1970s. Sure, it enabled hardware competitors to produce compatible PCs — but it also brought mass adoption of the PC, outperforming Apple over four decades.

If Nebula delivers a compelling price point, it has an appealing approach that could gain significant share in the growing cloud hardware market. If the new company aims to spur a revolution similar to that of the PC, its founders need to tweak their strategy soon:

Forrester’s Forrsights Software Survey, Q4 2010 has quantified for the first time how enterprise demand is shifting from traditional licensing models to subscriptions and other licensing models, such as financing and license leasing. However, the shift to subscriptions for business-applications-as-a-service is the major driver of this change. Traditional enterprise licenses are slowly decreasing, and Forrester predicts that subscriptions for SaaS applications will drive alternative license spending up to 29% — as early as 2011. This demand-side change goes beyond front-office applications like CRM. In 2011 and 2012, enterprises will opt for “as-a-service” subscriptions for more back-office applications, such as ERP, instead of licensed and on-premise installations. Detailed data cuts by company size and region are available to clients from our Forrsights service.

Base: 622 (2007), 1,026 (2008), 537 (2009), and 930 (2010) software decision-makers predicting license spending for the coming year
Source: Enterprise And SMB Software Survey, North America And Europe, Q3 2007; Enterprise And SMB Software Survey, North America And Europe, Q4 2008; Enterprise And SMB Software Survey, North America And Europe, Q4 2009; Forrsights Software Survey, Q4 2010

What does this means for existing independent software vendors (ISVs) and infrastructure vendors?

Oracle’s keynotes and salesforce.com’s presentation next door have never been more confusing and contradictory for large users than they were today. Larry Ellison gave the 41,000 attendants of this year’s OpenWorld a cloud computing 101 session prior to the launch of the new EXALOGIC appliance, a machine engineered to run the Oracle Fusion Middleware stack very efficiently. After he rejected talking about the cloud for years, he swung over to the opposite end of the spectrum. Even though EXALOGIC is mainly aimed, in its first version, at private data centers, Larry simply renamed the virtualized data centers as private clouds and promised customers that they will get an elastic cloud with the help of the EXALOGIC box.

On the other side, salesforce.com’s Marc Benioff called every server on premise the “false cloud,” basically implying that something like a private cloud is simply a stupidity in itself.

Who is right or wrong in this debate? Is Larry simply doing cloud-washing at its best, or is Marc running a “false marketing” campaign, calling everything except his own cloud the “false cloud”?

Let’s understand how Forrester believes a private cloud differentiates itself from a traditional but modern and virtualized data center: