Friday, February 19, 2010

The Private "Computing Cloud": Balancing Control with Cost

Just before Christmas I had the pleasure of attending a dinner event hosted by Ken Hausman from Mirador Capital .  I want to thank Ken for being such a gracious host for an excellent evening of discussion. 

A highlight of the dinner was an excellent discussion on Cloud Computing. One of the most interesting discussions was, "Is the cloud ready for the enterprise and is the enterprise ready for the cloud?" 

There were attendees from all corners in this debate including enterprise CIOs, IT Professionals and Cloud Computing services vendors and System Integrators. Those attending who are providers of cloud computing services were strong in their belief that the "Cloud" is in fact ready for the enterprise. They claimed they are seeing very strong interest in their cloud computing offerings from enterprise CIOs and CFOs." One CIO from a major bank added some support to this claim saying, "cloud penetration will be in the high double digits in 2-5 years time." 

Both of these guests felt this adoption is certain to happen because you can, with cloud computing, more closely quantify and track the cost of an application. Today's average CIO, with purely premises-based computing infrastructure, has real issues answering that question. Given the state of the economy corporations are placing a heavy cost focus on IT spending and the total cost of ownership (TCO) of their computing resources and staff. One result of that push is it is now common in many corporations for the CIO to report to the CFO. Recognizing this desire for cost metrics and the "CIO reports to CFO" trend, many cloud vendors are now targeting their sales pitches directly to the CFO. 

However, several other attendees raised an very important issue that may be the biggest barrier to adoption: "Vendor Lock-in". Several in the audience elaborated on the challenges of vendor lock in in observing/questioning; "How difficult will it be is to export data from the cloud if you want to switch vendors?"

My 2 cents: While it is true that "vendor lock-in" is a concern with Cloud Computing solutions, this problem is not a new one. "Vendor Lock-in" is always a goal of every enterprise solution vendor whether they are selling premises solutions or hosted solutions. 

What I see as the real barrier to cloud computing adoption is the issue of control. No matter how much a cloud software vendor argues that they "give customers full control of the SW and even HW elements of a hosted offering", the reality for an enterprise is a premise deployment will always offer more physical and management control. As a CEO/CIO, if you always run your own data center and manage your own software in-house, you always have someone in IT who works for you to hold accountable. This is the famous "throat to choke". 

Cloud Computing is certainly a growing trend and it is certain to take over some large and perhaps even a majority share of IT spending from the current premises-based vendors. But this is not an all or nothing transition in how enterprises deploy IT solutions. Depending on their size, enterprises will continue for the foreseeable future to have attractive choices for premises-based AND cloud-based solutions. So enterprises should expect to have, and demand from IT professionals, a mix of cloud-based services and premises-based infrastructure that interworks in a way that works best for each enterprise. This blended mix of premises and hosted solutions is where the the optimal solution lies for almost every enterprise.

One form of that range of choice that is likely to be attractive to the large enterprise in particular will be what I call the "Private Cloud". A Private Cloud is a hosted architecture for your software solutions but the servers and software and IT staff will all be on your premises. Some of the staffing may be in-house and on your payroll, some may be contracted and some may work for your third party vendors.

Of course it's a very gray area in delineating what is really "yours" versus "theirs" when it comes to IT equipment and software and even employees. Cloud vendors will argue that they view your servers and data racks in their data center as "your" data center and the staff they assign to you as "your" staff. But as hard as they may argue that point, the equipment and software and staff that isn't directly on your books or rolls is always, at the core, under the control of a third party vendor.

What do you think? Is a "Private Cloud" approach a good compromise solution for your enterprise for balancing control with TCO? What other solutions have you found to this dilemma of hosting versus premise for you business solutions?  I'm looking forward to your comments.

Tags: Cloud Computing Mirador Capital CIO Enterprise Software Hosting
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