Cloud computing is cheaper, greener but not yet enterprise ready

Earlier this week Microsoft Subnet editor Julie Bort moderated a panel on the topic of cloud computing for the Society for Information Management. With about thirty-five invitees in attendance, a lively discussion ensued covering what cloud computing is (not just software-as-a-service), who benefits most from today's offerings, the truth/myth of the old CAPEX vs. OPEX argument and cloud computing's impact on the environment.

The panel consisted of Gerry Coady, CIO for Frontier Airlines; Anthony Hill, CTO and senior vice president of TopSchool, a cloud-based student lifecycle management system. (Hill was previously CIO for Golden Gate University); Scott Price, vice president of LoadStorm a set of on-demand, cloud-based testing tools that simulate the performance hit to your app of thousands of concurrent users performing various tasks; and Eric Olden, founder, CEO and chairman of Symplified, makers of single-sign-on security software that manages the hand off of users moving between on-premises applications and the cloud.

Definition of cloud computing: The cloud is more than software as a service. It is the hardware infrastructure as a service. This can be used to host any app. Eventually, the cloud will become a different beast than simply recreating your existing infrastructure on someone else's hardware, in an outsourced mode. As applications are re-architected for the cloud, they can take on Web 2.0 capabilities of collaboration and mashups with others' cloud apps.

Cloud computing does not eliminate vendor lock in. Dumping your data into a SaaS CRM system does not make it portable. Once users are trained on a certain app, all the same barriers exist when considering moving to a new app. On the other hand, software vendors offering SaaS or other cloud services remain motivated to providing good service, since cloud computing eliminates the software licensing model. With on-premises "pay and pray" software, once a deal is closed, the vendor may not be motivated to offer great support.

SLAs for cloud platforms aren't good yet. If traffic spikes on the service provider's cloud, your app could be affected and there's not much to be done about it. The IT experts in the room did think that eventually Amazon, Microsoft and others would offer "five nines" SLAs, but until they do, they won't be using the cloud for business apps. On the other hand, service levels are good enough right now to use the cloud for test/dev applications.

The larger the company, the less cost benefit of the cloud, at least today. The cloud costs less because service providers can run their data centers at very high utilization rates spreading the costs among many customers. In addition, they probably can get better volume discounts for servers and other hardware. The costs to the user are also "lowered" by a pay-as-you-go model. When building an individual data center, capacity must be built for the spikes in usage, that's a capital expenditure up front. With the cloud, payment for that capacity doesn't occur until the capacity is needed and costs are lowered when usage drops.

The only time this low-cost capacity argument falls flat is for the Fortune 1000-sized company that already has high utilization of its data center, can afford to staff data center specialists and is buying gear in such large quantities to qualify for premium discounts. These companies may be more interested in the "private cloud" concept, where they retain control over their infrastructure, even if someone else manages it as a combination of offsite and on-premises gear.

As data center gear ages, global enterprises will consider the cloud, rather than buying more gear. The reason the IBM/Sun deal fell apart is because enterprises told IBM that they are not likely to replenish aging Sun servers with IBM servers, one attendee believed. They are instead planning on getting out of owning hardware altogether, in favor of the cloud.

Cost benefits are unclear, maybe non-existent, for Microsoft in the cloud. One attendee that has been building a cloud app based on .Net believes that .Net is more expensive than other options, such as Java. (He was hired by his company after .Net development on the app had already begun.) Others also felt that Microsoft was not going to relax its licensing fees for companies using cloud versions of its products. Even so, given how young cloud computing is, they didn't feel compelled to ditch Microsoft software for cloud alternatives.

Cloud data centers are seen as more green than private data centers. The question arose if the mega data centers necessary for cloud computing are really a more environmentally friendly option than many smaller, private data centers. The consensus was yes. Cloud vendors will be able to specialize in green technologies, perhaps even creating their own off-grid energy from green sources. It will be in their financial interests to invest in ways to reduce power consumption and environmental impact. Enterprises that own their own data centers would never have the same resources to dedicate to green options.

[Aside: check out the interview of Frontier Airline's Gerry Coady in the Wall Street Article, an article entitled Crisis IT]

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