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Jul
6

Is it time to go Cloud?

by Dominic Monkhouse

Whilst cloud is being sold as the newest most flexible and therefore sensible approach, SME’s who are considering the dazzling benefits of having “technology on tap” would do well to consider where cloud has come from before re-thinking their entire IT infrastructure.

There has been extraordinary hype around the term “Cloud Hosting” which combines new and compelling ideas with re-labeled old ones, leading to lots of definitions and a great deal of confusion. Whilst cloud is being sold as the newest most flexible and therefore sensible approach, SME’s who are considering the dazzling benefits of having “technology on tap” would do well to consider where cloud has come from before re-thinking their entire IT infrastructure.

The concept of hosted services was born in the 70’s when businesses used to share computers to avoid the expense of buying their own. In the 80’s businesses had bought their own computers and hired in experts to keep them working. In the 90’s some companies outsourced their entire IT departments whilst others had a combination of their own infrastructure and worked with Application Service Providers (ASPs) who provided access to shared infrastructure, introducing the multi-tenancy model.

This model suffered in the 90’s due in part to the fact that broadband was dial- up, mobile data hadn’t arrived and people were paranoid about security. To get around security fears, some ASP’s gave each customer their own applications, resulting in a huge expense of running individual not multi-tenancy solutions.

The progression went from hosted website, hosted email to hosted applications. You needed the functionality but it wasn’t a business success factor to do it yourself. It just needed to be done right.

In the Noughties, Salseforce.com cracked the ASP model, with a solution that had broad appeal but that didn’t need to be integrated with other applications. This success proved that when the price was right, functionality relevant and internet access was affordable, hosted solutions could work. Salesforce.com also got its own sales right, with heavy investment in sales and marketing that could deploy outside of the IT department or sales prevention department as IT is known be those in SaaS sales teams. Timing played a crucial role, as people were keen to take advantage of CRM technologies; they had the budget but no solution that really delivered. In addition, the rise of hosted email such as Hotmail proved to individuals that hosted solutions could work well.

At the same time, ISP’s began to extend their traditional connectivity and web hosting businesses to offer hosted servers, allowing customers to rent access to dedicated or virtual servers. These servers were loaded with Microsft Windows or Linux and software such as databases, web servers, e-commerce or development tools. All of this was happening before the term “Cloud” was coined, and before big boys like Amazon, Google or Microsoft muscled in.

SME’s today grapple with a range of widely different services that fall under the “Cloud” banner. Typically these can be defined as services that incorporate on-demand payments, self service provisioning and shared service pools. Combined, these create an “elastic” environment that allows resources to be scaled according to need.

This flexibility has appeal, but it comes at a price. The utility is only one component of the price and therefore the cost saving is often dwarfed by the additional costs that a vendor will face in terms of marketing and churn. For example hosting with Amazon’s cloud is twice as expensive as buying the equivalent dedicated service from ServerBeach (www.serverbeach.co.uk). Also Amazon’s system is proprietary. You start with it, you scale with it,and then you’re stuck with it, paying more than you need forever and a day. For many SME’s, requirements are actually relatively stable and predictable. As such the expense of cloud solutions may be a luxury that is not needed. And using standard open source or Microsoft technology means you can move providers if required.

At a recent Tier 1 Research conference, a panel session of 4 businesses “using” cloud revealed the diverse routes that businesses were taking toward the cloud. One business was using Google email, another using VMwarevirtualisation to run 10 physical servers instead of 100 in both the UK and USA rather than just in the UK. The other two included a bank playing internally with virtualization, and a vendor about to supply a public cloud.

There is no doubt that the cloud is relevant for some businesses and some applications, but this is a market that is still evolving. A suppler who can offer a hybrid can give the best advice and make sure you only pay for what you need without being locked in.

Dominic Monkhouse
Dominic is the Managing Director of PEER 1 Hosting, one of the world’s leading IT hosting providers. The company is founded on a high performance 10GB SuperNetwork connected by 17 state-of-the-art data centres, 21 points-of-presence and 10 colocation facilities throughout North America and Europe.

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    • yannick

      Dominic, I believe you’re completely right – but…

      Cloud computing provides small businesses with the ability to use IT infrastructure, software and platforms while paying relatively small amounts of cash. At some times (crisis, start-up), this really is vital to some organisations.

      So in fact, it’s very immature to switch to cloud-computing if it’s not for either a specific project’s technical requirements or a strategic need.

      Cloud computing is very cheap if you have small amounts of data to process or/and store, as the price is proportional to the data that is stored or transferred. But if you ask finance analysts, they would rapidly find out that you finish paying again and again (usually, the period is monthly) for storing the same data on the cloud (that’s what happens with Amazon S3)(with traditional solutions, you invest once in a given infrastructure – fixed cost, then you pay nothing more – except your IT team, which is a variable cost). Then if you sum up each periodic payment, you will see that the total outgone cash flow is much higher with cloud computing (price evolution has a quadratic part!) than with traditional infrastructures (price evolves more or less linearly), provided you have big data amounts. (the sum represents the total quantity of money your organisation has paid until the given time)

      I think cloud-computing providers use 2 sources of income in their pricing models:
      - Some: Very big clients with big data storage needs, big computational needs and big data transfers, who (in my opinion) pay too much
      - A lot of: small clients, for whom the service is quite cheap, but whose service relies on massive economies of scale and automation

    • http://maggiefechner.blogspot.com/2011/07/whats-in-your-in-box.html Luciana

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