What is “THE” Cloud

Companies that want the benefits of cloud services without the risks are looking to create cloud-like environments in their own data centers – the private cloud is born. As the over-utilization of the public cloud continues; Mick said it best in 1965 and it rings true today . . .

by The Rolling Stones
(M. Jagger/K. Richards)
Recorded: September 6 & 7, 1965

“I said, Hey! You! Get off of my cloud
Hey! You! Get off of my cloud
Hey! You! Get off of my cloud
Don’t hang around ’cause two’s a crowd
On my cloud, baby”

In order to enable cloud-like benefits on their own, IT will need to layer in new infrastructure – virtualization, management APIs, self-service portals, charge-back systems, and possibly even more into existing data center systems and existing processes. In totality, a whole lot of work and likely unattainable for most mid-sized businesses. Alas, you’re relegated back to the public cloud and being one of the millions using it.

Enter the utility model; the future of enterprise IT is in private clouds. Elastic, pay-as-you-go data center infrastructure modeled after public cloud providers like Google and Amazon, but put together and managed from within for each independent business unit. “Our belief is the future of internal IT is very much a private cloud,” says Gartner analyst Thomas Bittman. “Our clients want to know what Google’s secret is? What is Microsoft’s secret? There is huge interest in being able to get learning’s from the cloud.”

Change in the Environment
A ‘utilitized’ infrastructure is the financial packaging of resources, such as storage, computing, network and software as a metered service; analogous to a traditional public utility company (such as electricity, water, natural gas, or telephone network). The utility infrastructure has the benefit of the zero capital acquisition; in its place, hardware resources are in effect rented.
Here’s how I recently explained it to a colleague:

Buying gasoline at the local Texaco station is just like the utility infrastructure model – you acquire only what you need when you need it, albeit at $3.76 a gallon for your 15 gallons – your total cost of ownership [TCO] is $56.40. If you had to buy gas like IT had to purchase infrastructure for the data center; you’d have to buy, with capital dollars, the oil field, the ship, the refinery, a truck and the gas station, notwithstanding the former, at $1.35 a gallon for your 15 million gallons – your TCO would be north of 1 trillion dollars though. But, you saved $1.41 per gallon getting it this way.

This apples-to-oranges mis-comparison is common amongst all the hardware providers, it’s like chalk and cheese – they just don’t compare to one another. You cannot compare the $3.76/gal to the $1.35/gal, you must consider the current cost of capital, the actual utilization of your environment, the value of capital as compared to revenue generating projects that compete for capital, etc. To get to the net/net of it all, you’ll need to build a financial model that uncovers the true comparisons and business case.

To segue from this narrative; IT infrastructure, such as a storage array will typically have allocated LUNS based upon the needs of many projects and applications. Today, a storage manager buys and allocates centered on what a project needs in the future; typically these are projected data requirements 2 to 4 years from now. Storage that is allocated directly to a host is not accessible by other host servers; creating pockets of unavailable and therefore underutilized capacity across the enterprise organization. Experience and research show us that the average storage array that is 100% allocated, is usually only 20 to 30% utilized based upon the actual data stored – the array is 100% allocated and therefore in order to add LUN’S, a new array must be purchased.

The utility model capitalizes on both thin and thin-like provisioning and can be metered down to the actual consumption level, not just the allocation level. Utility is configured with base and buffer – and are charged for based upon actual usage today, not what is needed a year from now or even 4 years from now. Using our gas anecdote above, I would have had to buy 99 gallons to get 33 gallons of usable gas for my car. Considering the 30% actual data utilization statistics from above, my cost per gallon for the tank of gas would be $11.28 per gallon. Fundamentally, this is why over the years we’ve all gone from fireplace heating, to a central boiler heating to forced air powered by the grid – the utility model works; it is the power of economies of scale.
Businesses with unpredictable storage requirements, unplanned or out-of-cycle growth or even sudden peaks in demand can avoid the delays and capital expenses that result from physically acquiring and installing new hardware – utility resolves the issues within our ever changing environment.

What is Cloud and What is Private Cloud?
Public cloud refers to the capability of a business to gain access to computing services, storage systems, business processes, and software from a utility-like service over the Internet. The net/net being that if a corporation has to pay only for what it’s using, then it will likely be able to save OpEx and ultimately loads of CapEx. The rub; as Amazon (AMZN) and Google (GOOG) build-out gigantic cloud computing multiplexes or specifically the Googleplex, these considerable enterprise networks are already encountering unmatched pressures including scalability problems, performance issues, outages, slowdowns and licensing complexities. While the public cloud company offering services can benefit from economies of scale by using the same infrastructure to service multiple clients, you’re sometimes left, as the small guy, crying, ranting and raving at the top of your lungs to someone who doesn’t speak your language from a country in an unknown number of time zones away. The big guy, maybe one of the larger companies in your city, actually gets to talk to a local help center at the Amazon Data Center. Think it ain’t so? – Amazon Web Services has ‘quietly passed an interesting benchmark: the company’s S3 storage service now hosts more than 100 billion objects’. Now, what was that you said about your 100TB’s or even your 1PB of data and how you’d get moved up in the priority line when you call?

Private cloud refers to the same flexible computing networks modeled after public providers such as Google and Amazon, but built and managed internally for the business – without the unmatched pressures and performance issues. Private cloud can even capitalize on the economies of scale by using the same infrastructure to service multiple business unit clients. Private cloud has replaced public cloud as the new hot topic of 2010. Imbedded in every story or conversation there is a very basic shift taking place in the enterprise that assures even more debate in the very near future. This transference of opinion is most likely the constriction of our economy – we’ve now gone 3 plus years without tech refreshes and infrastructure development, resulting in an escalating pressure on an already tired infrastructure.

What is Utility Infrastructure?
Utility infrastructure, sometimes known as on-demand IT, pay-per-use and, commonly, infrastructure-as-a-service, is new, agile and cloud-like. With utility infrastructure you get a “cloud-like” experience within a corporate environment under your corporate controls. Data centers are infamously underutilized, with resources such as storage arrays often only utilized at 20 to 30% of their data capacity, but yet 100% allocated. This is due to over-provisioning and over-allocation — buying more hardware than is needed on average in order to handle what you need 3 to 4 years from now. It is often bought for peaks, unexpected future demands, and unanticipated swells in usage (such as a data migration project, the holiday shopping season, or project scope creep). The utility model allows companies to pay for only the resources they need as they’re needed. There is a built-in on-site buffer for unplanned requirements: Gone is the day of the procurement fire-drill.
Today we are a part of a game-changing shift in information technology — witness technologists and CFO’s working in tandem to make decisions based upon business requirements and financial choices, not on technology opinions. This magnitude of change comes around only once a decade. The utility model opportunity is so substantial that it affects not only the current business model, it will additionally affect IT architecture and how we design, deploy, run and deliver infrastructure.

Utility infrastructure can often mimic private cloud-like infrastructure because it is built for a many-to-one offering. Providing a faster time-to-market and improved agility, simply put, a utility infrastructure offering is one in which customers receive resources and ‘pay-by-the-drink’, just like gasoline [see above] – a point that Nicholas Carr discusses extensively in ‘The Big Switch’. Utility offers business access to dynamic quantities of resources within their own data center – it is the frictionless environment you control.

Utility is the Next Generation of IT Services
Today’s economic conditions continue to intensify the liquidity problems faced by many technologies based, IT centric or even IT dependent organizations. If corporations wish to access outside capital or make use of internally generated funds, capital is still scarce. In both good times and not so good times, three factors influence capital allotment by managers of all organizations: corporate mission, availability of funds, and cost of funds. Utility addresses all three factors.

The alternative to the new utility model is to continue to buy hardware that can handle peak loads, account for unplanned growth and be immediately available when procurement can’t pull the right strings and get it “in time”. Remember, this new hardware you’re purchasing is often using something along the lines of 15% to 30% of its available resources. It’s the equivalent of the $8.28 per gallon gasoline. Utility computing is the evolutionary step up from the application service providers (ASP) and the public cloud providers.

As more and more functional uses are revealed to the masses through case studies, utility will continue to gain momentum as the technology services solution for businesses needing new infrastructure and for hosting providers wanting to offer private cloud infrastructure to mid-tier corporations. With the combination of best practices from on-demand SaaS, cloud computing and virtualization, utility is the latest evolution of IT services and solutions.

Maximizing Economy with Utility: How It Can Improve TCO
There are millions of dollars in utility savings available for savvy clients. And the most well-situated and cost effective way to assemble that million-dollar opportunity is through a discovery engagement or a proof-of-concept deployment with a bona fide utility provider.
Corporations have few programs as potentially transforming to their operations as utility infrastructure. Utility acquisition, when done accurately, promises better and more flexible use of resources, lower costs, best practice implementation and efficient staff deployment. Utility also provides managers a perspective on the process that allows them to understand operational costs, and an ability to improve the reconciliation or charge-back process internally.

A utility storage/server discovery session should include the following services:

•Utility vs Lease/Buy Financial Model: An accurate, reliable simulation of relations among relevant costs, benefits, value, and risk that is useful for supporting business decisions. Financial modeling is the result of building hundreds of abstract representations (a model) of a financial decision making situation. The result is one of complete awareness on your part; by creating a new level of transparency within your IT environment, you’ll now be able to make an infrastructure decision based upon financial facts, versus technology fictions previously provided to you.

•Business Case: An excellent tool for generating an overview of your enterprise-wide infrastructure and discovering potential infrastructure under various consolidation scenarios; assessing the current IT infrastructure to identify consolidation and virtualization opportunities. The business model describes the rationale of how an organization creates, delivers, and captures value – economically speaking, using the time value of money, or other forms of value. The process of this business model design becomes part of your acquisition business strategy.

To properly provide a financial or ‘CFO Affinitive’ business case, the follow-up to a detailed discovery session, requires a multi-pronged approach: drive efficiency (more with less) and push for more effectiveness. Effectiveness is calculated not only in productivity gains but also in regards to risk mitigation, minimization of business disruptions, guaranteed compliance and the optimization of the IT environment; providing for its ability to deliver desired benefits to a company’s lines of business.

The drive for best-practice delivery of IT services – that is, achieving both efficiency and effectiveness – requires a multidisciplinary approach in business case criteria and in building an accurate model.

In Final Summary
Companies want the benefits of cloud services without the risks. Companies want to create cloud-like environments in their own data centers. These are the new private cloud infrastructures that many are beginning to talk about. As the over-utilization of the public cloud continues, corporations will drive evolution. The foremost benefit of utility computing is healthier economics inside a private cloud environment; these economics will steer us toward this next generation of infrastructure.

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Any views or opinions presented in this article are solely those of the author and do not necessarily represent those of the company.

By Bill Thomas, Senior Manager at EMC Consulting. EMC is a global leader in enabling businesses and service providers to transform their operations and deliver Information Technology as a service. Fundamental to this transformation is cloud computing. Through innovative products and services, EMC accelerates the journey to cloud computing, helping IT departments to store, manage, protect and analyze their most valuable asset — information — in a more agile, trusted and cost-efficient way. We are a publicly traded company, listed on the New York Stock Exchange under the symbol EMC, and are a component of the S&P 500 Index.