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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.

Charles Babcock

March 17, 2010

4 Min Read

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. Cloud computing is not a new technology, but a new model of delivering computing to end users, said IBM's Ric Telford, VP of cloud services, and IBM customers now believe that it will increase corporate agility and collaboration between employees and between the company and its customers.

The adoption of cloud computing by enterprises is no longer considered an experiment with a new technology. Rather, it's rapidly coming to be viewed as a continuation of the adoption of consumer computing patterns by IT.

"Cloud computing is inspired by consumer Internet services. Facebook has eclipsed Google as the number one site on the Internet," Telford said in the keynote address on day two of the Cloud Connect conference.

IBM operates what it considers a cloud data center in Research Triangle Park in North Carolina, its model "green" data center, which it will use to support its cloud initiatives, including offering Rational software development services. But so far, availability is limited as it prepares to ramp up, he said. The center runs IBM virtual machine images and in the future, will run other vendors' VMs.

Companies are finding numerous workloads that are appropriate for cloud computing. "A huge portion of IT is dedicated to development and test," Telford said. IBM tends to mention software development and testing as its first example.

In some cases, half the servers in a company are devoted to software development and testing, but they're idle 90% of the time. The cloud is also good for data storage, running desktop applications, collaboration apps, and analytics, he added.

Five years from now, hybrid clouds will be the norm. Open standards are required to enable mobility of applications between the on-premises and the public cloud, or between different cloud suppliers.

Relying on the cloud can reduce the labor cost of "cloud economics" and cloud technologies are real. Clients can achieve significant return on investment by adopting them," he concluded.

William Louth, CTO of startup JInspired, told the crowd that cloud services need finer-grained metering. JInspired, based in the UK and the Netherlands, produces software that probes, monitors, and meters services in the cloud.

Today, a bill from Amazon Web Services and other cloud providers looks a lot like a monthly utility bill; there's a total for the services used. What's needed, said Louth, is an application-by-application breakdown of how much each one uses CPU, disk, and network services.

In the future, the family washing machine will include a meter that tells the household the price of the power available to run the unit. Family members can then decide on whether they need the wash done or can wait for a time in the middle of the night when power is cheapest. Cloud services need to be provided the same way to gain the efficiencies implicit in the multi-tenant cloud model, he said.

About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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