August 2010

Yahoo is active on many fronts of cloud computing. The giant search engine company, whose 2009 revenue totaled $4.7 billion, takes advantage of its size to offer private cloud services to deliver everything from search capability to behavioral ad targeting for its millions of users. Obviously, that means its cloud services touch other parts of its value chain as well — such as its advertising partners who want to get their messages in front of the right users at the right time. In the future, cloud computing is expected to take greater hold among Yahoo’s internal stakeholders, as well.

Smart Enterprise Exchange contributor Jennifer Zaino recently spoke with Michael Kirwan, CIO, Corporate Systems at Yahoo, about how the Internet company does business with external and internal value chain constituents in a cloud environment.

Q: How has Yahoo’s use of its private cloud changed your business model — and your business? In particular, does it have an impact on your digital value chain?

A: Once you get a cloud infrastructure in place, the change to your business model is that you have a set infrastructure to build services on. You have defined boundaries around the cloud, which for us is quite large, with hundreds of thousands of servers. It provides us a standardized foundation for creating and integrating new services, and scaling effectively on a global basis. With the old point-to-point architecture, scaling was not necessarily possible. We have been at this for at least two years, if not longer, and the impetus was to scale to our growing needs.

One of the things about being in the media business and the Internet business is that response time is key. If you go back to the dial-up modem days, it took four or five seconds to download a Web page with basic graphics, and that was acceptable. But the user of today is all about instant gratification, so if a Web page with rich media takes more than a second to load, you are dead. The user goes elsewhere. So it’s natural for us to look to our cloud to deliver scale, quantity and a satisfying user experience.

Our internal Yahoo developers’ network adoption of the cloud is very high. We have a whole organization dedicated to developing applications for the cloud and it’s run at a very senior level. The cloud is sort of a matter of course for us now. In fact, I was at a presentation with our new chief product officer recently talking about some new initiatives, and it was a natural assumption that the foundation for these will be the cloud. It’s natural that if we come up with a new product, it gets deployed into the private cloud.

Q: Besides product and service interactions with consumers, how has the cloud made a difference with outside parties in your value chain, such as advertisers?

A: We serve 10 billion ads a day. Obviously, the monetization for displaying ads means you must display them. We won’t get paid for serving up a blank page. So [the cloud] improves our ability to have very highly available systems, which sort of guarantees revenue.

We also produce customizable ads, based on search queries and other criteria. So, if you do a search and say you’re in India, and someone else does a search from London, and you both put in the same search criteria, you will get two different ads served up based on geo-location and other information. That is made possible through cloud computing and the storage that lies behind it, because we have tera-petabytes of user behavior data that we’re analyzing — who and where you are and what you ask for can result in customized ads. We’re crunching all those numbers in real time, and with centralized storage, that wouldn’t work. With distributed storage across the cloud using the open-source Apache Hadoop framework, we can run very, very fast remote queries in the cloud.

Q: How does the cloud change relationships or ways of doing business along the internal value chain?

A: In my role as CIO, I’m not only looking at what and how to serve customers and how to assist in bringing in revenue, but I also have the company infrastructure to run. So with our financial and HR systems, for example, there is tremendous opportunity to use cloud-type services to move away from traditional fixed-point systems running in a single data center with some high-availability storage. You could get a cloud-based system up and running internally in a matter of months, whereas with a centralized approach — where you have to stand up the hardware, provide networking and consider a wide array of security measures — it could take a very long time. With a private, cloud-based solution it’s all there.

A good example is CRM: Going to a cloud-based model lets you adapt to changes very quickly. So we are looking at the benefits of cloud technology for our internal support systems as much as we are looking at it as an infrastructure for deploying revenue-generating systems.

Q:  Does the private cloud open up new opportunities for the CIO to be an orchestrator of a new and improved value chain?

A: I don’t think it changes the CIO's role at all. For us, the CIO’s role is to provide the best value for the dollar, weighing that against availability and scalability, and asking: Will this be a viable solution in three to four years’ time? So I’m taking a more consultative approach for the business.

Due diligence is an exceptionally important part of the transition to the cloud. One thing to look at — and my advice to those going about this for the first time — is to define cloud.  For Yahoo, cloud computing [consists of] a couple of hundred thousand servers distributed across every continent in the world offering customer services and support. By contrast, there are some service providers with 18 racks across two data centers and they call that a cloud. I would ask whether customers will get the reliability, the scalability of that, compared to a private cloud such as the one we offer.

Q: What are the risks for a CIO moving in this direction? For instance, could you see any reason that a value-chain participant would not want to access cloud services — yours or others?

A: In most cases there’s no awareness of where systems reside and how they are constructed. In a past life, I was in a position where we had two major competitors using our system that realized they were sharing the same database. They were both my customers, but they were rivals, so we had to assure them that there was no way each could see the other’s data. This is part of the due diligence that needs to be conducted with any cloud service provider. It’s essential that you as a cloud [provider] can address any of your customers’ questions about data security.

The biggest risk at Yahoo would have been in not adopting the cloud, given that the business is growing so fast. It’s a well-proven method for us to scale in a highly distributed fashion.

ASK THE EXPERT

Michael Kirwan, CIO, Yahoo

In his role as CIO of Yahoo, Michael Kirwan has global responsibility for Yahoo’s Corporate Systems Group, which includes the IT Infrastructure, corporate applications, CRM and premium services infrastructure teams. These teams ensure Yahoo’s internal systems, billing and anti-fraud services are available 24/7.

Before joining Yahoo, Michael was at VeriSign, where he held numerous management positions in production operations, network support and corporate systems support. Most recently, he served as Vice President of Global Customer Support and Business Operations.

Prior to that, Michael held several management positions in the banking industry at companies such as Bank of America, Bank of California, and Union Bank of California.