Burnham's Beat

Is RFID Application Oriented Networking’s Killer App?

RFID is a widely hyped next generation technology for wirelessly “scanning” items.  AON, or Application Oriented Networking, is widely hyped next generation technology for managing middleware messages.  Put the two technologies together and not only do you have a whole lot of hype, but you may also have a match made in technology heaven, one which ends up making both technologies better.

AONs Second Generation
I have written about AON, or what I prefer to call Message Aware Networking, quite a bit in the past.  AON is at the core of a revolution in software architectures that is moving a significant amount of functionality out of applications and pushing it down into the network.  The first generation of AON devices act as simple gatekeepers/routers and are limited to pre-processing messages that they then deliver to applications.  Datapower, which was recently sold to IBM, was the leading player in this space.  While the space is still quite young, already a 2nd generation of AON devices is under development.  These devices will not simply serve as intermediaries, but they will actually become an integral part of an application and an embedded part of a business process.  By embracing the concepts of distribution and virtualization, as well as standards such as BPEL, these 2nd generation devices will turn the network into an integrated part of a given application and in doing so should enable significant new functionalities while reducing costs and improving performance.

RFID: Almost Ready For Prime Time
RFID seems worlds away from AON, but RFID’s future may be more closely tied to AON than one might at first suspect.  Much of the attention around RFID has focused on the core hardware technologies required to make RFID a reality.  Not only are there very difficult RF-related physics problems that must be solved, but the costs of silicon-based RFID “tags” must be reduced in order to make RFID economically viable.  Now however, with companies such as Impinj shipping cost effective RFID 2.0 tags in volume and with retailers like Wal-Mart mandating RFID adoption, it appears as if RFID is finally poised for rapid growth.

Unfortunately for RFID, if anyone ever does install the hardware, the first thing they are likely to do is crash all of their software.  That’s because a fully instrumented RFID installation is bound to kick off thousands, even millions of messages a day and processing all these messages is likely to bring even the most robust computer system to its knees.  To solve these performance issues companies will either have invest a fortune in significantly upgrading their core logistics systems or they will have to figure out another way to get the job done.

That other way may be a new class of AON-based devices that are specifically focused on RFID.  Such devices could not only locally process millions of RFID messages, thus greatly reducing the overall “load” generated by RFID systems, but they could also offer new capabilities, such as the ability to efficiently “multiplex” messages across an entire supply/demand chain.  For example, AON-based RFID devices could use cached lists of expected shipments to identify in real time when specific shipments failed to arrive or arrive incomplete.  These devices could also simultaneously notify all of the different supply chain members about missed shipments or out-of-stock events.  While a retailer’s or distributor’s centralized computer systems could no doubt do all of this, constantly hitting those servers with updates on every single SKU from every single store, warehouse, truck, etc. would not only be wildly inefficient, it may also distract those systems from more important higher level tasks.  In this way, AON-based RFID devices provide a relatively cheap way to “off load” to the network the processing of routine RFID related messages.

Startups To the Rescue
But don’t take my word for it, just look at the start-ups that are springing up to take advantage of this potential opportunity, the most interesting of which I have seen to date is a company called Omnitrol.  Omnitrol has built a very intriguing RFID focused AON-based device.  Unlike many 1st generation AON players which used Intel-based Linux “pizza boxes” as their hardware platform, Omnitrol has engineered a sophisticated hardware platform that uses Gigabit Ethernet to interconnect multiple RISC processors allowing for greatly increased message processing capabilities within a single box and the ability to seamlessly interconnect multiple boxes.  Such an architecture not only guarantees that Omnitrol should be able to process massive message loads, but it also offers a great example of how 2nd generation of AON devices are likely to use much more sophisticated hardware platforms that look more like network devices than enterprise servers.

With Omnitrol’s AON-based RFID devices in place, retailers can keep a large portion of their RFID processing “local”, i.e. confined to the actual store or distribution center where it takes place.  Only critical events and/or summaries of activities need be forwarded to the central system (which in most big retailers remains an IBM mainframe).  The RFID devices have also been designed from the ground up to be compliant with the various EPCGlobal RFID related standards and have the ports needed to accommodate a variety of RFID readers.  In this way, Omnitrol has customized both the hardware and software of its device so that it is RFID centric.

In addition to Omnitrol another start-up focused on this space is Reva Systems.  Reva is already shipping a device that is focused on managing RFID networks and clearly has designs on providing more sophisticated “application aware” capabilities over time.

Despite their promise, the success of these RFID-focused AON start-ups heavily depends on how quickly large companies embrace and roll-out RFID.  While recent signs seem to indicate that adoption should dramatically accelerate in the next year or two, this is still a major risk.

A Sea Change?
Despite this risk, both companies are great examples of how Application Oriented Networking is rapidly evolving.  Perhaps the most interesting trend that these devices underscore is the ability to tailor an AON device, at both a hardware and software level, to a specific application.  This tailoring raises the interesting question as to whether or not we will see an explosion of application specific AON devices, each targeting a different enterprise application.  Such an explosion may not only provide a whole new class of investment opportunities, but it may also significantly challenge the dominance of general purpose computing platforms in enterprise software.  After all, if you move enterprise software into the network, why won’t the devices used to process that software look a lot more like network devices than enterprise severs?   Of course, we are a long way off from such a change, but it is interesting to contemplate and once again underscores that Application Oriented Networking is one of the most important and potentially disruptive trends within the software industry. 

IBM Acquires Datapower, Software Will Never Be The Same

IBM announced today that it was acquiring Datapower, the pioneer of message aware networking.  As some may know, I invested in Datapower and given that I’ve written another post on some of the venture capital aspects of the deal, but I thought I would also write this post about the higher level significance of deal from an industry perspective as I think it is pretty interesting for anyone involved in software.

From an industry perspective, IBM’s announcement is significant for a few reasons:

1. It represents very a powerful endorsement of the long term promise of message aware networking.
   Message aware networking involves shifting the processing of software messages away from applications (and their associated middleware) into specialized hardware devices.   These devices dramatically improve the security, performance, and manageability of software messages.  As I have written before, message aware networking is one of the top trends in the software industry, but up until recently most of the major technology companies had yet to make a commitment to the space.  However in just the past few months a number of tech heavyweights have weighed in on the space.   First, Cisco announced its AON line of message aware network equipment and then Intel surprisingly announced that it was getting back into the space when it acquired one of Datapower’s smaller competitors, Sarvega.  IBM’s move now marks the first major enterprise software vendor (and arguably the most influential one) to embrace the trend.  So in the space of just a few months, message aware networking has gone from the province of just of few enterprising start-ups to a major battle-zone between some of the tech industry’s biggest titans.  Much of this has to do with the growing realization that as software is broken into smaller and smaller pieces that are distributed further and further apart, that the messages between these software pieces are becoming an incredibly important.  In this environment “the message is becoming the software” to such an extent that the processing and handling of the messages is becoming as important if not more important than the application itself.  IBM’s entry into the space, with its vast stable of enterprise customers and huge enterprise “stack” will likely accelerate the adoption of message aware networking (and the Service Oriented Architectures that sit on top of it) and will put pressure on other software vendors to follow suit.
2. It underscores the inevitable collision between enterprise software and enterprise networking vendors.
   Message aware networking sits in a supposed “no man’s land” in between enterprise software and networking. It looks a lot like networking because it requires high speed dedicated devices to process large numbers of standards-based messages, but it also looks a lot like software because it requires intelligent middleware to make content and context sensitive decisions.  Because message aware networking did not naturally fit into the networking space or the enterprise software space, the big guns in each space weren’t really sure what to do.  However with a potentially huge market at stake, neither side was prepared to concede the market to the other.  Ultimately, Cisco broke an uneasy truce and moved into the market with its AON products.  In this light IBM’s purchase of Datapower can be seen as a direct response to Cisco’s moves.  These moves and countermoves come despite the fact that Cisco and IBM are supposed to be the best of friends.  However, as I outlined in an earlier post, Cisco and IBM are destined to find themselves competing head-on much more frequently thanks in large part to the inexorable melding of the traditional networking world with the traditional middleware world.   Who knows, they might have even competed over Datapower.  This “battle of the stack” will likely be one of the most important enterprise computing stories of the next decade.
3. It marks what is likely the beginning of a very aggressive push by IBM to develop a fully featured SOA “stack”.
   As a wise man once said “He who says A, must say B”.  In buying Datapower, IBM is making it clear that they intend to build to a robust stack of message oriented products.   As relatively “dumb” yet critically important message processors, Datapower’s products will likely serve as the foundation for a wide array of message oriented products, which will mostly be grouped under the Service Oriented Architecture (SOA) label.  With the foundation in place, IBM will likely add products with other features such as SOA management, BPEL-based business process management.  Datapower’s acquisition is critical because it secures IBM’s rear flank from attack by the networking vendors and allows them concentrate their full force on enterprise software related issues.

I admit, it’s a bit of a stretch to say that software will never be the same after IBM’s acquisition of Datapower, but I do think that the acquisition underscores the fact that some of the biggest names in technology now endorse the fundamentals tenants of message oriented networking and that this promises to help spur long term changes in not just the architecture of software programs but in the competitive positioning of the technology industry.

SOA Under The Radar: Recap

Last night I served on a panel of VCs at IBD's "Under the Radar: SOA Death Match".  The event featured 4 companies with products that were either directly or indirectly focused on enabling Service Oriented Architectures (SOA).  Each company presented for 6 minutes, then the panel of VCs asked 6 minutes of questions.  At the end of the event, the VC panel picked a "best in show" and the audience picked their own "people's choice".

Perhaps what I found most interesting about the conference was that you could actually get 75 people into a room on a Tuesday evening to discuss Service Oriented Architectures.   Sure this is Silicon Valley and there are lots of tech geeks that are always up to discuss the latest and greatest technology trends, but I remember in 2001/2002 when the mere mention of XML, SOAP, etc. brought puzzled stares from many in Silicon Valley.   I think it just shows that the whole concept of XML and SOA has reached mainstream acceptance, at least within technology circles, and really is destined to become an important and long term part the technology fabric.

In case you are interested, here's an overview of the 4 companies that presented:

Appistry:  Appistry was a bit of mis-match for the conference in that they are more of a application virtualization play than an SOA play.  I actually like the application virtualization space quite a bit, although many of the big players have already made acquisitions in the space so the amount of opportunity remaining for start-ups is limited.   That said, Appistry seemed to have a very solid product and several good reference customers.  They were a bit of a sentimental favorite for me given that the CEO was a former Wash U grad and they are located in Wash U's hometown of St. Louis (not exactly the tech start-up capital), but they clearly were at a disadvantage in the competition because SOA wasn't really their sweet spot.  I suspect they knew this and were really just looking to get some valley exposure for their business/fund-raising efforts, so they should have gotten an award for entrepreneurial pluck.

Blue Titan:  Blue Titan's main product is a web services management platform that enables companies to provision, secure and manage lots of different web services.  Their main competitors are Amber Point and SOA Software (which was supposed to present at this conference but canceled at the last moment).   Blue's Titan's founder and CTO presented and he was probably the most engaging presenter of the evening.  Conceptually I like the web services management space a lot.  I actually funded a company in early 2001 to go after this space (Maaya), but I was *way* too early and I was lucky just to get my money back.  These days it looks as though the space is finally getting some traction, but the sales process is complicated by the fundamental architecture issues that come along with embracing SOA which means it's a technical sale that requires multiple sign-offs.  In one of the more humorous outcomes of the evening, Blue Titan actually won the "people's choice" award but finished last in the VC panel's voting.  I think we VCs were concerned with the difficult sales cycle that Blue Titan faces while the audience was more focused on the visionary nature of the product.  Blue Titan's CTO took the difference in stride and said that the vote just proved his belief that potential customers appreciated his business much better than potential VC investors.

Ipedo:   Ipedo is focused on Enterprise Information Integration (EII) which I like to call data abstraction.  They aren't really focused on SOA per se, but their technology is arguably critical to the enablement of SOAs.  Ipedo competes primarily with other start-ups, most notably Composite Software and MetaMatrix.   I like this space a lot and actually came very close to investing in the first round of Composite Software (which I still believe is the best company in the space) but wasn't able to get my partners over the goal line.  I believe Ipedo started out as more of an XML-database play, but they quickly (and correctly) realized that a more generalized EII platform had more long term promise.  One of the most interesting things the CEO mentioned in his presentation was that Ipedo had an office in Shanghai, that their Chinese operations were profitable on a stand-alone basis, and that they were seeing strong demand for their EII solutions in China.  Given that EII solutions are just now being adopted by many US corporations I would not have suspected that there was demand in China, but I think it just goes to show how quickly the software market is developing over there.  As it turns out, Ipedo ended up winning the VC panel award.  I think this had to do with the fact that Ipedo seemed to be addressing a more pragmatic and immediate business need (data integration) than SOAs, so in some senses it really isn't fair as that's really comparing apples and oranges.

Reactivity:  Reactivity is a Message Aware Networking company that sells a "software appliance" focused primarily on securing XML messages as they transit a company's network.   I funded one of their direct competitors, Datapower, so I am very familiar with the space.  XML appliances aren't theoretically required to build an SOA, but they provide a much more secure, reliable and manageable foundation for SOAs.  Reactivity has traditionally been focused almost exclusively on the security side of equation (many refer to their product as an XML firewall).  To their credit this has really turned out to be the near term sweet spot of the market, however I think Reactivity's early focus has allowed some of their competitors to pigeon hole them as only security focused which may hurt Reactivity as customers begin to look for broader XML message platforms.   The big news in this space has been Cisco's recent announcement of its AON initiative which I think will likely force other big networking and software players to seriously consider buying some of the start-ups in the space.  I asked the CEO about Cisco and he gave a very honest, straightforward and mature response about  Cisco's efforts which was very refreshing to hear from a start-up CEO.  Ultimately I think both Datapower and Reactivity will do well, as the space is growing quickly and strategically important to a number of companies.

Super Services, Process Portals and the Road to Composite Applications

Publicly accessible web services seem to be proliferating like rabbits days.   Not only are high profile early adopters such as Amazon.com, Ebay, Google and FedEx launching a plethora of new services, but an increasing number of more obscure firms are throwing their hats into the ring, offering everything from commodity futures prices to bible quotes.

Super Services
Theoretically, this large pool of publicly accessible web services should foster the creation of a new class of “super services”.  Super services simply combine several different web services into one master service.  They can be custom-designed to serve the needs of a specific company or be repackaged and offered to the public as yet another service.  In fact, there are already some interesting examples of enterprising developers stringing together a few web services to create a rudimentary websites which themselves could be exposed as super services such as this "mashup" of Amazon/Google/Yahoo, this mixing of Flickr and the US Government's zip code database, and this combination of Google Maps and Craigslist.

Unfortunately, creating a true super service is much harder than these early examples might suggest.  To create super services developers must not only link web services at a semantic and programmatic level but they must also find a way to successfully orchestrate a business process across these services in an orderly enough fashion that a basic level of performance and transactional integrity is maintained.   Luckily, emerging business process orchestration technologies, most prominently BPEL, provide a standardized mechanism for creating the process logic underpinning super services.   However, while adding BPEL to the mix has tremendous benefits it also makes the act of building super services even more complex and less accessible.

Process Portals
In recognition of both the increasing number of web services and the increasing complexity of linking them together, a new crop of start-ups has emerged including such companies as eSigma,  Bindingpoint, Xmethods, and Strike Iron.  Initially these start-ups appear to have the rather mundane goal of creating directories of publicly available web services or even libraries of proprietary web services (such as Strike Iron and Xignite have done), but dig a bit deeper and you realize that their ambitions may extend much further.

Take eSigma for example.  I had the opportunity to chat with its founder, Troy Haaland, the other day.  As Troy explained, the simple portal-like interface of eSigma actually hides an increasingly complex infrastructure.  Right now, at the core of this infrastructure is a fully functioning UDDI directory.  All of the services you can browse via the portal are actually formally registered in the UDDI directory making them programmatically discoverable.   The goal is to link this directory core to a higher level process management capability via a BPEL-based visual authoring/scripting platform.  Not only would such a platform allow enterprising developers to easily create and, theoretically re-sell, their own super services, but more importantly it would allow enterprises to create composite applications that exist solely in the “cloud”.  Such “cloud based” composite applications could then be used a back-bone of inter-enterprise applications.

In this way, what appear at first to be simple directories may ultimately be transformed into Process Portals, or sites that not only centralize web services meta-data, but host a set of custom-designed super-services and composite applications as well as the visual authoring tools needed to create them.

The Road Ahead
While this is clearly a long term vision, there are indications that elements of this vision may be closer at hand than one might imagine.  Within the enterprise, there are already a number of products, from companies such as Amberpoint, Blue Titan, and Digital Evolution vying to manage the low-level provisioning and performance of intra-enterprise web services.  As the number of web services multiplies within an enterprise, a directory infrastructure is a logical next step (indeed some products have already taken this step) and some kind of orchestration layer will also clearly be necessary if enterprises want to foster re-usability and enable the creation of super services.   In some ways then, the writing is on the wall: Process Portals are an inevitable result of the increasing number of web services.  The key questions outstanding then are: 1. Will these portals first make their presence felt inside the enterprise as packaged applications or outside the firewall as publicly accessible Process Portals?  2.  Will de novo start-ups be best positioned to own this space or will the pre-existing web services management products “grow” into this space? and 3. Just when exactly will this space generate enough revenue to make it interesting from an investment standpoint?