Where Does the Cloud Make Sense?

Where Does the Cloud Make Sense?

Posted by on Monday, October 14th, 2013  

 

Although I’m a SharePoint guy (among other things), I’m also a huge virtualization geek. It’s something I‘m really passionate about.

Recently, my manager passed along an article about the Cloud. The article in InfoWorld, “Business – not IT – should make the case for cloud” by David Linthicum (you can find it here), makes the point that IT should not be the driver for introducing the cloud in an organization. He argues that IT doesn’t quite understand the business case for the cloud. Although Mr. Linthicum is largely correct, I can’t say that I totally agree with him. So let me talk a bit about where I disagree and where I believe the cloud makes sense for a business.

Does the Business Really Care?

Ultimately, I don’t think the business really cares that much about the cloud. They care about getting what they need when they need it. I believe the cloud can be successfully IT-initiated if it enables them to respond to business requests more quickly. Isn’t there the repeated sentiment that IT is too slow and doesn’t serve the business the way they need? IT can be the service provider it’s supposed to be if it’s able to successfully flex into the cloud. It’s like with virtual machines (VMs) – do you really think the business user cares if their CMS is running on a VM instead of a physical server? Of course not. They simply need the service that the CMS provides. So again, IT can successfully make the case for the cloud if they use it as a means to fulfill the requests coming in from the business.

Virtualization vs. the Cloud

First off, let’s pause for a moment to make a distinction that may help. I think there can be confusion about virtualization (internal or external) and the cloud. Virtualization really is a subset of the cloud concept, and it often takes the form of an internal, on-premises cloud. I absolutely, no-question see the business advantage of virtualization. At a previous company, the internal cloud we built enabled revolutionary agility and speed to market while at the same time costing the company less. It drove down risk, improved service, decreased complexity, etc. across almost the entire IT stack. So I’m a whole-hearted believer in the internal cloud in the form of a virtualization farm. I’m less convinced, though, about external VM clouds (Infrastructure as a Service, or IaaS).

Large Businesses and External IaaS

For large businesses, I said for years that the push to the public IaaS was an artificial creation of the cloud vendors. It seemed to me that they were the ones saying everyone needed to be in the cloud, not the business. I saw the whole cloud thing as an artificial crisis, if you will, generated by the vendors. I think that the vast majority of medium to large companies can create an internal cloud for cheaper than subscribing to an external one. If you get the same agility (although perhaps you get some extra in an external cloud) for cheaper, it doesn’t make sense for these organizations to go to the external cloud. It’s hard to justify the cost, especially when you add the loss in control and flexibility, the added complexity, fears around externalization/security, etc. Again, though, this is in the context of a large business’ need to host VMs.

So Where Does the Cloud Make Sense?
I believe that it’s a completely different story in three other categories: software/platform as a service (SaaS/PaaS), small business, and green-field expansion.

Software/Platform as a Service

SaaS/PaaS is, I believe, the primary play for the cloud across all customer bases. Hosted services offer tremendous benefit to both IT and business. For IT, being able to shift the responsibility for a system away from itself can be huge, even if it costs more. If we’re talking about VMs, then there’s not much benefit since IT is still responsible for the VM and installing/maintaining the software in it (the benefit is in not supporting the physical infrastructure). However, in SaaS, there’s no longer the need to maintain anything other than data, and, right or wrong, there’s comfort in knowing they’re not to blame if something goes wrong. For the business, they get what they really want from IT: options and speed. The cost of entry for a new system is usually miniscule compared to internal hosting, so SaaS enables the business to try something very quickly without fear of massive commitment. Also, IT is no longer standing in their way, saying they don’t have time or that something is too hard. It’s ironic, though – I suspect that most business folks will get a rude awakening when they find the cloud provider doing the same (and potentially more frequently).

The needs for SaaS can be a bit different between IT and business. IT would greatly benefit from SaaS for infrastructure-related services (like hosted Exchange or maybe SharePoint) or systems that IT relies on to provide its other services (like hosted source control for development). The business user is primarily interested in the hosting of 3rd party software (the stuff they would buy and ask IT to install). They’re able to enter a service very quickly, which could give them speed to market, potentially giving them that competitive advantage they’re looking for.

BTW, the cloud can be like a drug. Entering a cloud service may not be too difficult, but exiting is another story altogether. It’s not easy to get the needle out of the vein – and you better believe the cloud providers are counting on it.

Small Business

The cloud is huge for small businesses (like ours). Although a large organization can net a win out of an internal cloud, the vast majority of small businesses cannot. They are unable to get the efficiencies of scale (lower cost per VM, higher purchasing power, etc.) since you really do need some significant infrastructure to really get the full benefits (maximum ROI) of virtualization. They also don’t have the staff to support it. So that’s where the cloud (both IaaS and SaaS) becomes a no-brainer. It enables them to have big-boy systems with almost no servers (potentially none at all) on premises. The benefits of this is hard to overstate; IaaS is awesome for small businesses. SaaS/PaaS could potentially be even more powerful to them since they can buy into services and platforms that they might otherwise never be able to (take SharePoint Online, for example).

Business users in large organizations have the option of going in-house via their IT and datacenter – but not small businesses. They can hire expensive contractors to set it all up for them, but then they have the anxiety that comes with having infrastructure. I believe that a small business would quickly choose the higher overall cost than deal with servers.

BTW, virtual desktops (VDI) can have tremendous value for the larger small businesses or a distributed workforce.

Green Field

The benefits of the cloud with Green Field operations (establishing a service where none previously existed) are very similar to Small Business, but they apply to large businesses as well. Need to open up a new branch? Need to establish a D/R plan using an external facility? Consider the cloud. I see the cloud having huge value for organizations when they either don’t have a datacenter or need to implement infrastructure where there is none already.

Other Cloud Benefits

To me, the main advantages that a business gets out of the cloud is speed to market, which is often the other side of the coin from agility. They can spend this coin to gain competitive advantage. Let’s not be naïve, though, since it can be very complicated. There are a lot of tariffs, taxes, and potentially bad exchange rates which can decrease the value of that coin (potentially driving it less than the value of hosting internally). The cloud may not be the slam-dunk that it appears to be on first look.

Also, spreading costs over time and shifting IT costs from CapEx to OpEx can be a major win for businesses of all types. Although the overall cost will be higher over time, companies are often willing to pay it in order to gain more flexibility in the cash flow. They don’t have to tie up their money up front. Thus, the cloud decreases opportunity costs and could enable other investments in the company.

Heck, if nothing else, the need for IT to provide a cloud service nowadays might be almost necessary now that we’re in the mobile app world. Business users are used to try-before-buy and paying for lots of $2 apps. They will subconsciously expect that capability in IT services as well.

The Next IT Heroes

I believe there is a tremendous opportunity for internal IT folks, vendors, and consultants in the whole area of hybrid cloud. I believe that the major thing, other than security and privacy concerns, holding businesses back is the whole issue of connecting internal/external clouds. It’s not easy to do, especially in large organizations (usually more security and compliance concerns along with lots of bureaucracy, politics, and red tape). Once that bridge is built, though, I believe a large business will slowly shift more and more towards clouds of all flavors. I think it’s the lack of it which prohibits them from seriously considering the cloud.

So I think that the next batch of IT heroes will come out of the tremendous amount of bridge-building which is inevitable over the next several years. Large businesses really won’t be able to use the cloud as extensions of their datacenters until after they have been built.

So grab your hardhat and let’s get to work!

Posted by on Monday, October 14th, 2013  

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