Cloud Holdouts Face Tipping Point - InformationWeek

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Cloud // Platform as a Service
09:06 AM
Jasmine  McTigue
Jasmine McTigue

Cloud Holdouts Face Tipping Point

If your technology strategy doesn't emphasize a phased approach to cloud architectures during the next 18 months, it might be time to look for a new job.

8 Data Centers For Cloud's Toughest Jobs
8 Data Centers For Cloud's Toughest Jobs
(Click image for larger view and slideshow.)

The numbers don't lie. IDC and Gartner stats cited by IBM's Marc Dietz show that 85% of new software is now being built for the cloud. One quarter of all the applications ever written will be available in a cloud model by 2016, and 72% of developers incorporate cloud-based services or APIs. This will be a $45.8 billion market by 2017.

SaaS isn't just salesforce automation, collaboration, and HR suites. You can buy everything from ERP to end-point security -- two systems that are hellishly complex and expensive to run internally. How long can your 20-person IT shop compete with cloud service providers that are laser-focused on slashing costs while improving integration, functionality, and quality of service?

IT still has concerns regarding security and compliance, customization as a business advantage, and loss of hands-on control. I get it. But the economies of scale cloud vendors enjoy afford them space to specialize, meet the requirements of verticals, and offer ubiquitous PaaS services. That's a tremendous competitive advantage. Very few internal teams can keep up, even with a hybrid cloud. Pure private clouds will be hard-pressed to meet, let alone beat, the value proposition.

[How's your security budget compared with 2013? Tell us in our 2014 Strategic Security Survey and enter to win a 64 GB Apple iPad Air with WiFi + cellular or one of three 60-minute one-on-one consultations with the survey author Michael A. Davis.]

Take the open-source Linux virtual private server market as a microcosm. Linode, for decades the dominant open-source Linux VM host, sells a decent machine for $20 per month. VC-funded cloud upstart Digital Ocean, by comparison, offers comparable specifications and all solid-state disks for less than half the cost for comparable hardware. Its services start at only $5 per month, and you can buy on a granular hourly basis. In addition, it's able to sweeten the pot with synergistic offerings like free DNS hosting, prebuilt templates, and simple backup. Pressure from Digital Ocean has been so intense that Linode had to adopt hourly billing and slashed rates just to stay in the game.

Providers like Digital Ocean compete -- very effectively -- by leveraging automation, commodity hardware, and open-source KVM virtualization. They provide better service at half the cost and still make money by shredding established methodologies.

But the hosting industry is only a slice of the big picture. I expect to see this story play out in every vertical, but most disruptively where big data analytics and previously isolated data silos interconnect. Being able to analyze the totality of business data is the holy grail, and SaaS analytics vendors are literally lining up to earn this business.

The potential of these new services is so great that the next three years may see a massive displacement of on-premises big data programs. The rate of technological change is increasing exponentially, sometimes before IT leaders can react. Human forces are in play too -- the talent at large analytics vendors far exceeds what a typical company could afford.

None of this will surprise anyone who's watched how commodity hardware and innovative multimaster storage structures have dramatically improved the still-reigning Google search engine. Or how innovative vendors like Bridgstor are bringing enterprise, non-locational file services to sites all over the world.

Further, as distrust for cloud wanes and user confidence increases, performance will no longer be an inhibitor. Fiber to the curb and node Internet delivery mechanisms are slowly becoming the norm in even the most remote areas of the country,

Jasmine McTigue is principal and lead analyst of McTigue Analytics and an InformationWeek and Network Computing contributor, specializing in emergent technology, automation/orchestration, virtualization of the entire stack, and the conglomerate we call cloud. She also has ... View Full Bio

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User Rank: Apprentice
6/19/2014 | 5:19:09 PM
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User Rank: Ninja
4/18/2014 | 10:57:41 AM
Re: The enterprise data center is not passe
Speaking for the SMBs, its becoming increasingly important that companies look at their internal operations and do the math on how much running their own services is costing.  If your core services involve mroe complex solutions, such as in the case of a hosting company, security company, etc, yes, often it might make sense to keep your in-house builds.  But for most of the companies out there, cloud makes it easier to focus on your core business by outsourcing services where you don't have the skillsets to manage, or that you simply shouldn't be spending your money doing in-house.  For most businesses, the more technical services make more sense to outsource to cloud services, so that you can actually focus on your core functions that drive business value.  I think it's this key benefit that is getting lost on many organizations, the idea that you don't have to do everything yourself to be competitive, you now have the opportunity to leverages these services which are based on best practices to avoid most of the headaches of trying to do it yourselves, and save some money at the same time.
User Rank: Strategist
4/18/2014 | 1:20:33 AM
Re: The enterprise data center is not passe
Hi Charlie, 

I wanted to take a second to respond to your post personally. I'm not saying rip down your private cloud, I'm just calling IT's attention to the fact that these services are going to be really hard for completely private vendors to compete with. The smarter vendors are using standards to ensure that their architecture will work anywhere, and I think that's real progress. 

I also completely agree that a nucleus of core network services is still an important part of the present network paradigm. I hear a lot of irrational decision making directed at cloud services, and this post is designed to make people think a little more deeply about why we "can't" use a cloud service for "that."


Thanks for the comment! 
IW Pick
User Rank: Strategist
4/18/2014 | 1:17:44 AM
In response to comments below:
The point we're trying to put across in this article is just this: 

1. Cloud is attracing the best developers in the world. 

2. The majority of new project have a public cloud integration focus. 

3. Improvements in backbone internet connectivity worldwide continue to mitigate the impact of the "No internet, no service." service delivery paradigm. 

4. The ability of highly specialized cloud vendors to zero in on a vertical and offer better feature set than the average on premises solution is already superior and will only increase with time. 

5. In house teams attempting to duplicate that level of expertise are either doomed to fail, or ought to think about marketing their internal system for the masses. 

My firm handles a lot of legal services; I'm not recommending public cloud except very cautiously and in specific use cases to these clients. That being said, we need to be aware as IT leaders and stewards that frivolous recommendations against cloud technologies are potentially hurting the organizations we represent. 

In the ERP space, I've seen 99/100 of the top of market start putting forward stateful web services on top of SOA driven products. It's not that the vendors who make software for pure private cloud don't get it: they do, and they're actively taking steps to close the cloud winner's circle with them inside. In the meantime, pure cloud offerings like Netsuite are getting fiercer and fiercer. 

I'm also not bashing hybrid clouds, nor even private clouds. But in some cases, it's possible to take a public cloud geared architecture and spin up hybrid or semi-hybrid instances in a standards compatible way.  

The issue is this: Sea change in cloud is coming, vendors that put their heads in the sand and ignore the revolution will be irrelevant. And if your organization isn't considering cloud, at all, then it's time to take a look around before you're left behind. Yesteryears attitude of "I don't trust it." isn't going do your organization any services when 95% of the avaialble "pure private" software offerings in a given space are going to lose, cost to cost and feature to feature versus today's cloud services; and that in a cloud market space which has only just arrived. 


Finally, in response to the Prism comment: The Feds are decoding 128bit encrytption real time. Those of us serious about security are hardly surprised, having considered SSL a paltry privacy envelope for at least a decade. But if they are publicly announcing this capability, that means that in covert ops, we can expect to see at least an entire order of magnitude above and beyond announced capabilities. 

Crunch on this: Darpa is and has been the leading funder of supercomputer research for 30 years. Anyone who thinks that the networks they've been building are for anything other than the realtime decoding of private data streams for national security reasons is wearing blinders. Unless you think they're using them for synthetic organisms and social predictive analytics, in which case you'd be hitting on secondary objectives.

Hiding anything from government oversight is going to become a cagier proposition daily, and if Prism gives the IRS eyes and ears into transfer rate pricing and corporate tax evasion, I'm hardly demonizing it. In this country, we have the rule of law. Prism is the latest tool we use in detecting, assessing and choosing to take action against individuals and corporations who break the law. 
User Rank: Strategist
4/17/2014 | 4:06:12 PM
Distrust of Cloud Wanes??? Where on earth did you get that?
Hmm... Last I heard cloud providers were estimating a loss of what, around $13 billion in revenues due to Prism. And what is Prism again? A Built-In back door to EVERY cloud provider? So lets talk about security for a second. Snowden revealed the fundamental abuses of the access to data that happens when you have carte' blanc access to, well, everything. And not to mention if there is a back-door built, you better believe every malicious agency is drooling to take a crack at it. And it's security will fall, just the nature of the beast regarding limiting access. Major international corporations get this, that is why they are pulling out (hence the major projected loss in revenue.)

Let's say you are a law firm with a case against the government, can you say obvious breach of client-counsel privilege if records are housed in the cloud?

The point I am making here is that as wonderful and powerful as the virtualization cloud resource is, it must be used/applied appropriately. If you don't want it on the front page of the WSJ, don't put it in the public cloud.

I am a strong advocate of the hybrid cloud model, with a private on-premises, in-house cloud infrastructure to protect IP, financial, and privacy data requirements. These are only the intangible assets that can cost your entire business operation pretty much everything if lost/stolen.
 As wonderful as Salesforce is, consider for a moment, the cloud's back door is cracked, your client and vendor relationship data is hijacked in the dragnet cast across the viewable servers, and then sold in the "dark net" markets to the highest bidder... repeatedly. Oh, and you would never know it happened because the NSA channel is already cloning your data and they would be sniffing that channel feed. Scared for your wallet yet? How about the ability of your company to even fund your job position? Now granted, I am not saying the security of in-house IT is a guarantee of total perfection and it too has it's risks. But, I sleep better at night knowing that my core of Intellectual Property is not wandering across international outsourced datacenters only to finally end up in a data-warehouse in China. I like the onion layers of security my team and I have built. I like seeing the attempts at data compromise as they occur and being able to pull a network cable out of the wall if need be. When I have need of leveraging the massive cloud processing power of the cloud; I use it, and then promptly pull the results back into the in-house private cloud and servers.

I strongly suggest considering the actual environment carefully and make the decision on how you will use "cloud" virtualization resources if at all. (Dirty secret - most SMBs don't need the cloud power at all for what they do. It just creates a single point of failure if their Internet connection goes down.)

So get your IT staff involved and really listen to them. If you are having a hard time understanding them, ask them to slow down and try it again in more human terms, they really do want to help make your bottom line better. They are your "experts" who live for this stuff. If there are great advertised features in a solution, get them to investigate and give you a report about the SWOT, and have them interpret it if needed. IT is your protection and your ace-in-the-hole when talking to vendors. They will find hidden negotiating points that will pick up money left on the table and illuminate hidden risks and costs (like say, migrating to a completely new version of a package that will create a loss of all your historical data over 6 months old... because it's the new cloud version and you are still running 2 version releases behind. Yes, it happens.)

Cloud is not a boardroom exec brag like a Rolex or the old i-phones, rather it should be viewed as a facility infrastructure investment. Implementing virtualization cloud resources properly and profitably is a non-trivial undertaking. Anyone who tells you differently is either an idiot or has something to sell you.
Charlie Babcock
Charlie Babcock,
User Rank: Author
4/17/2014 | 4:02:41 PM
The enterprise data center is not passe
A lot of people didn't understand the challenge that Digital Ocean was going to pose. It was combination of SSDs as standard and the built in following of Ruby developers that first caught my eye. But I don't entirelyh agree with Jasmine McTigue that private clouds will soon be passe. I think there's a good argument to keep a core, enterprise data center, just reduced in scale and not expanding in the future.
Lorna Garey
Lorna Garey,
User Rank: Author
4/17/2014 | 10:45:22 AM
From the 'if you can't beat them" files, Linode just announced it's spending $45 million to retool itself as more of a cloud player to better compete with AWS and Digital Ocean. Also adding SSDs, more RAM, Ivy Bridge. Winner: IT.

User Rank: Author
4/17/2014 | 10:14:37 AM
BI/ analytics via SaaS
To your point about connecting data sets, the interest among CIOs in BI and data analyis via SaaS options was evident in my conversations at our recent InformationWeek conference. This is a way to win for the business (think speed) and build political capital with folks on the business side for other projects.
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