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3/17/2010
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Cloud Connect: Grappling With Economics

The adoption of cloud computing by enterprises is no longer considered an experiment, but debates still rage over terminology and costs.

Although the cloud has come to be viewed as part of IT's future, cloud users and vendors are still debating several key questions. If a company has virtualized its data center, is that "a private cloud?"

The answer that came back over two days of the Cloud Connect show in Santa Clara, Calif., was a definite "no," virtualization by itself is not enough.

"Virtualization is a foundation, but it doesn't equal cloud," said Valerie Knafo, senior manager of Data Center Solutions at Dell, member of a panel Wednesday on the pros and cons of adopting cloud computing.

The servers need to be able to be self-provisioned by end users, whose identities are established and their use authorized at specific levels. In addition, the cloud, whether public or private, needs to be automatically managed to scale up or down, as applications' resource needs grow or shrink. Then end users are billed based on hourly use. That's different from server consolidation, the main impetus behind server virtualization so far.

The verdict on whether cloud computing is cheaper than normal data center operation was also a resounding yes, but that case, several critics pointed out, is less clear.

It's cheaper when the multi-tenant cloud increases server utilization rates. It's cheaper when the cloud supplier designs a new, efficient data center that escapes much of the complexity found in traditional enterprise data centers. And it's cheaper when only a few people are needed to maintain a large data center with thousands of applications running in it.

"The public cloud has the highest use levels. High utilization brings economies of scale," asserted Jinesh Varia, technology evangelist of Amazon Web Services, supplier of the EC2, on a panel on cloud economics.

He was immediately supported by fellow panelist Scott McClellan, VP of HP scalable computing: "Amazon is deriving great benefits from economies of scale." But in some cases, it may not be cheaper, several speakers warned.

Mission-critical transaction systems, using data that's tied to high privacy and compliance needs, cannot be easily moved to the cloud and run there. Moving an application to the cloud upends existing business processes for a small 5-10% gain in reduced operating expense, and the disruptive human cost may be too high to justify.

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