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The Road to Cloud Futures Gets Paved

The commoditization of cloud infrastructure is inevitable and an organized market will dramatically reshape the foundation of the entire IT supply chain. 6fusion exists to accelerate this reality for the betterment of both buyers and sellers in the market for cloud infrastructure services.  On April 14th, 6fusion and the CME Group announced an exclusive multi-year strategic and tactical collaboration to materialize the ultimate vision of 6fusion, nearly one year after 6fusion sparked an industry wide debate at the Cloud 2020 Summit  in Las Vegas.  Over the next three parts of this blog series, 6fusion’s co-founder & CEO John Cowan bridges the pivotal academic argument for the inevitability and possibility of a futures market for IaaS (Part I, Part II) by explaining the details of 6fusion’s deal with the CME Group, the journey to get to this point and what comes next for 6fusion and the cloud infrastructure market.


While Delano Seymour and I were working on 6fusion’s strategic plan under the radar in 2009, I published this statement on our blog:

“If computing is to follow the commodity path of electricity, achieving a similar level of ubiquity and pervasiveness, it must then have a single unit of measurement that transcends politics, production, language and proprietary invention.”

6fusion was founded five years ago on the thesis that economic innovation was going to be just as important, if not more so, than technical innovation in the development of IT as a true utility.   We didn’t foresee a business problem to solve.  We foresaw a market problem to solve.

Allow me to illustrate.

Picture a bucket.  Then imagine pouring some water into that bucket.  Now, if I asked you whether you would like to pay for the bucket or how much water you have in the bucket, what would you say?  Everyone would rather pay for how much water you have in the bucket and it’s the right answer.  Why?  Because we understand implicitly the value of consumption economics and risk.

Paying for what we consume is the fundamental economic principle in the procurement of EVERY utility service in the world. We don’t pay for gas by the size of our gas tank; we pay for gas according to how much we pump. We don’t pay for electricity by the appliance; we pay for electricity according to how much electricity the appliances use.  I think you get the picture.

IT has never worked this way in the modern era, which is why cloud computing, while important, is not a true utility.

Since the advent of the Client/Server model, we’ve been to trained to accept the “box” as the logical billing unit of IT infrastructure.  We buy a box and it has a defined amount of processing power, memory and disk storage. Virtualization emerged in the industry about 10 years ago to make more efficient use of the box, but the logical billing unit was still a box.  Only we called it a virtual machine.

Then, cloud computing came along,  and in particular the concept of Infrastructure-as-a-Service (IaaS). IaaS solved for important technical hurdles like resource elasticity and self-service access to giant clusters of infrastructure. But, low and behold, cloud computing has not solved the logical billing unit issue. We are still buying a “box” with a defined set of infrastructure resources – only now the accepted nomenclature is an “instance”.

But why is all of this problematic?  Why can’t we just continue to do what we know.  Why can’t we stick with “boxes?”

The answer is simple.

Boxes are proprietary definitions of resource allocation that are neither pervasive or ubiquitous in nature.  They lack the fundamental qualities that define a utility. They are constrained to vendor specificity and thus represent one of the single biggest barriers to the massive, tectonic shift to the cloud everyone is waiting for in the industry: No economic interchangeability.

There are two ways you can solve the economic interchangeability problem.  You can try to force everyone to pick one type of box – a strategy rife with political obstacles, vendor pissing contests and endless arguing among standards bodies.  Or, you can eliminate the box all together.

6fusion is going to eliminate the boxes. Enter the Workload Allocation Cube.

Affectionately referred by it’s 3 letter acronym of WAC, the Workload Allocation Cube is a mathematical algorithm that Delano Seymour (6fusion CTO and Co-Founder) and I created for an entirely different purpose than what eventually became the objective of 6fusion.

Like most good ideas, the WAC was an accidental side effect of another process.  Exactly 10 years ago Delano and I were busy building a boutique early adopter consulting practice around VMware’s game changing ESX server product.  We were among the early experts in the enterprise use case of x86 virtualization.  Virtualization, we contended, could do to the server what modern networking protocols did for telecom – we could achieve true multi-tenancy and thus true economic advantages.

As we created the first multi-tenant solutions powered by ESX we quickly discovered a major flaw in the concept of a one-to-many equation for compute services. There was no universal measurement and without one, the model fell apart at scale.

I would characterize the research question we pursued this way: How do you ensure the user of the multi-tenant host paid only for what it used while simultaneously ensuring the multi-tenant host achieved a sufficient financial return for the actual load borne by the user’s workload?

The answer to the equation was to compare real-time utilization (workload) against a fixed baseline (allocation) covering six vectors (cube) – CPU, Memory, Storage, Disk I/O, LAN I/O, and WAN I/O.  By establishing a statistical relationship between each of the vectors, weighted by the cost of production as constrained by physical capacity, we could establish a remarkably precise representation of workload consumption as an output reflected as a singular unit value (a WAC Unit).

For better or worse, the algorithm worked.  As early purveyors of x86 multi-tenant solutions, we had an efficient tool to ensure customers paid an appropriate amount of money for the load they represented on a set of virtual infrastructure.  And conversely, that the owner/operator of the virtual infrastructure achieved optimal return on their hardware investment regardless of customer workload behavior.

It didn’t take us very long to realize that what we had invented could be the basis of a commodity market to exist.  And with the announcement on April 14th, we are on the path to that vision becoming reality.  We have set sail toward the first truly open market for IT infrastructure.  This is bigger than cloud computing.  And the ramifications will transcend the supply chain.

I would best describe 6fusion’s relationship with the CME Group as strategic collaborators.  A true dichotomy of style and approach – the young brash software start up and the hundred year old exchange that plays only to win and win big – the two companies have forged an agreement rooted in our mutual disrespect for the status quo.

To accomplish this goal a new entity will be created whose job is to foster and develop the Spot Exchange.  This new entity will license 6fusion’s patented technology for the WAC and the CME Group’s industry leading trading platform and begin to facilitate the trading of contracts between buyers and sellers later this year.  We plan to launch this new entity with industry support and backing that will raise eyebrows. When the lid comes off this thing there will be zero doubt about just how ready the market is for this and just how disruptive the new economics of IT will be.

But the job of the CME Group and 6fusion won’t stop there.  Operationally, each company will serve two very important purposes.  We expect the next phase our journey to be an arduous one.  And over the course of the journey we see the CME Group as the ultimate mentor.   You see, as crazy as this sounds, we fully intend to see WAC financial products traded and financially settled like any other derivatives product.  And for that, I couldn’t think of a more capable collaborator than the most diverse, experience exchange operator in the history of markets to help us navigate these early stage waters.

6fusion, on the other hand, will provide the critical service of physical contract settlement (delivery).  Our flagship software platform, UC6, will be wired into the trading platform so that contracts created can be metered and settled between the contracting parties as an extension to the functional Marketplace 6fusion has operated for the past three years.  The development of the spot exchange could not succeed without physical settlement and the ability to accomplish that transparently, and without prejudice across any underlying hardware or software stack, is what our software does.

The disruption to the economics of IT represented by 6fusion and the CME Group is rooted in the unprecedented value we can create for both suppliers and buyers in the market.  But before I dig in to that it is important to appreciate just how much has gone into the ten year odyssey to get us to this point.  In part II of this post I will elaborate on how 6fusion has evolved, the role and influence Chicago has had on our thinking, and the timing and readiness of the cloud market.

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