How IBM Runs Its Cloud with Jason McGee

Cloud computing changed the economics of running a software company.

A cloud is a network of data centers that offers compute resources to developers. In the 1990s, software companies purchased servers–an upfront capital expense that required tens of thousands of dollars. In the early 2000s, cloud computing started, and turned that capital expense into an operational expense.

Instead of a huge bulk purchase of servers, a software developer can pay as they go–which is so much easier on the budget than the bulk purchase. This transformation of capital expense to operational expense significantly lowered the barrier to entry to starting software companies: cloud computing created an economic boom that continues to today, and shows no signs of slowing down.

Of course, the upfront capital expense did not disappear. It got aggregated into the cloud providers. Instead of individual software companies buying servers like they did in the 90’s, cloud providers buy thousands of servers and build data centers around the world. Because the of the aggregation, cloud providers get economies of scale–it is much cheaper for a single cloud provider to buy 1000 servers than for 1000 software companies to buy 1 server.

The first wave of cloud computing was all about deploying our applications to servers that run in cloud data centers. The next wave of cloud computing is moving more and more of our application logic into managed services.

In the first wave of cloud computing, we had to spin up a server to run our database. We needed a server for our search engine, and our load balancer. The logical unit of a server comes with the risk that the server will crash, or will be hacked, or will develop a bug that is difficult to solve.

Managed services abstract away the notion of a server. Database-as-a-service, search-as-a-service, load balancing-as-a-service; these services are reliable lego blocks that we can build entire applications out of. Developers pay a premium for a managed service–but they are happy to pay that premium because it represents a promise that this service will not crash, will not be hacked due to a software vulnerability, and will not develop bugs that are the responsibility of the developer.

Developers are very happy to pay higher unit prices for these managed services than they pay for raw servers. And cloud providers are very happy to develop these managed services–because it turns the infrastructure-as-a-service business into a software-as-a-service business. Software-as-a-service has better margins, better retention, and better competitive differentiation than infrastructure-as-a-service.

As a developer, I’m looking forward to building applications completely out of specialized managed services. But we are still pretty far from that time.

Today, developers still need to write their own application logic and their own backend services. But there are a set of tools that allow developers to write their own services while getting some of the resiliency and scalability of managed services. These tools are functions as a service and Kubernetes.

Functions as a service let developers deploy stateless application logic that is cheap and scalable. Functions as a service still have some problems to overcome in the areas state management, function composition, usability, and developer education.

Kubernetes is a tool for managing containerized infrastructure. Developers put their apps into containers on Kubernetes, and Kubernetes provides a control plane for deployment, scalability, load balancing, and monitoring. So–all of the things that you would want out of a managed service become much easier when you put applications into Kubernetes.

This is why Kubernetes has become so popular–and it is why Kubernetes itself is being offered as a managed service by many cloud providers–including IBM.

For the last decade, IBM has been building out its cloud offerings–and for two of those years, Jason McGee has been CTO of IBM Cloud Platform. In this episode, Jason discusses what it is like to build and manage a cloud, from operations to economics to engineering.

If you like this episode, we have done many other shows about engineering cloud services at Microsoft, Google, Amazon, and Digital Ocean. To find all of our old episodes, you can download the Software Engineering Daily app for iOS and for Android. In other podcast players, you can only access the most recent 100 episodes. With these apps, we are building a new way to consume content about software engineering. They are open-sourced at If you are looking for an open source project to get involved with, we would love to get your help.


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