1. Cloud Computing
CLOUD COMPUTING
ECONOMICS
A BRIEF TIMELINE OF CRM
WHAT YOU WILL LEARN WHAT YOU SHOULD KNOW
• EARLY 1980’s: Innovation of CRM
• Economic issues surrounding cloud • Basic cloud architecture & billing • MID 1980’s: Custom built systems and
computing • CapEx & OpEx terms database driven marketing
• Basic project management • EARLY 1990’s: Product development and
maturity
• TODAY: Utility services of salesforce.com
INTRODUCTION called The Challenge of The Computer Utili- Business activities (including cloud) can be
Before we design the cloud and secure it, we ty by Douglas Parkhill where he predicted that mapped to the following lifecycle which starts
need to ask two questions. future computer resources will be provided with innovation and ends with utility:
just like electricity through large providers.
• What are we buying? Further, these large utilities will have the fol- • Innovation
• How much will this cost? lowing characteristics: • Custom Built
• Product
These days when I look at what the smart peo- • Online • Commodity
ple are doing, my client budget allocations for • Elastic (as needed) • Utility Services
next year, and listen to ‘vetted’ edicts from top • Charged on a utility basis
executives, architects, and engineers-- they say • Cover multiple deployment models (pri- You will notice that this also applies to other
the same thing: “Our top priority is Cloud.” vate, public, community, and government types of resources like Electricity for example.
which is quickly followed by “and Security.” utilities)
• Include everything from hardware to ap- ELECTRICITY
WHAT IS CLOUD COMPUTING plications
One definition from the Network National • Innovation of Walliston
Institute of Science & Technology (NIST) in IS THE CLOUD SOMETHING OLD PRE- • Early products like Hippolyte Pixii (1808
a nutshell says that cloud is still an evolving SENTED AS SOMETHING NEW? –1835)*
paradigm. To answer this question we need to take a look • Introduction of the first utility grids
at changes in business activities. We need to • Formation of the national Grid.
CLOUD: THE EVOLVING PARADYME? compare Ubiquity (how commonplace a busi- [*Hippolyte Pixii was an instrument mak-
Steve Ballmer’s recent comments on cloud. ness activity is) to Certainty (the certainty of er in France. He built one of the first al-
He said “The real thing to do today is to cap- the activity and how well defined and under- ternating current electric generators.]
ture, what are the dimensions of the thing stood it is).
that literally, I will tell you, we’re betting our Plotting Ubiquity on the Y-axis and Certainty ALL OF THE FOLLOWING BUSINESS ACTIVI-
company [Microsoft] on, and I think pretty on the X-axis. TIES ARE EVOLVING ALONG THE S CURVE
much everybody in the technology industry Importing data in the form of product matu-
is betting their companies on.” Translation? rity) we will see an S curve relationship exists • Electricity
Cloud is an evolving paradigm and Microsoft between ubiquity and certainty. • CRM
is invested. In my view Mr. Ballmer is an ex- • HR Systems
tremely intelligent chief executive and when • Infrastructure
he says he wants to look at “the dimensions,” • Search
competitors should run for the hills because
any keen observer will recognize the classic ALL are moving along the curve and becoming
Microsoft strategy in play here-- to take a few commoditized.
market percentage points per year, year after
year until they own the market. COMMODITIZATION
Why does commoditization occur? Any busi-
FAVORITE QUOTE nessman will tell you that business is a nothing
My favorite cloud quote. “…open up exciting more than warfare and as soon as one company
new prospects for the employment of com- gains some form of technological advantage,
puters in ways and on a scale that would have We see a pathway between a rarely understood then all its competitors will follow suit. This
seemed pure fantasy only five years ago.” The innovation over time as it becomes common ultimately creates a constant demand for any-
problem with this quote is that it was written and ultimately a well defined commodity. thing that is useful but it also creates a compe-
in 1966 and comes from a landmark book A great example of this is CRM. tition to support all of this new stuff.
1 Data Center 1/2011

2. CLOUD COMPUTING ARCHITECTURE
FACT • Time to procure and install 64 Node cessive toner and paper consumption. Reality
Anytime anyone introduces something new, Cluster 2,166/Hours is consumption of toner and paper increased.
someone will come up with a better version.
There is a constant drive for improvement DEPLOYMENT TIME AFTER SOME PEOPLE DONT LIKE CLOUDS
(supply competition). These two forces IMPLEMENTING PUBLIC AND Not everyone is happy about cloud technol-
(ubiquity) and (certainty) drive the process of PRIVATE CLOUD ogy because the cloud is highly disruptive to
commoditization. Information Technology software vendor income. The big product ven-
is a huge group of activities that were once in- • Time to install a New Server 7 Min dors who have not yet enabled their applica-
novations, but more recently have evolved in- • Time to install a 64 Node Cluster 15 Min tion architectures to transition into cloud op-
to products (with feature differentiation),so erations will experience the greatest level of
ubiquitous, so wide spread, and they have As we can see, the cloud promises us so much discomfort. These vendors are hooked on the
now migrated up the curve-- becoming power and agility but with great power comes big financial boost quarterly numbers get from
suitable for utility service provision—and great confusion. The ability to create and de- selling licenses and the inherent (constant) up-
that is the answer to our question: “What stroy such large infrastructures at will, across grade cycle.
is cloud?” multiple providers will create its own prob-
lems. We’re going to see questions such as SUMMARY
SO ANSWER THE QUESTION: “Where did I leave that 200 Node cluster” Take time to evaluate your current CapEx and
WHAT IS CLOUD? OpEx costs. Understand your OpEx budg-
Answer: Cloud is the ultimate end state of a COST etary discretion (flexibility). Evaluate your
finite set of business activities With the increased agility that we get from go- OpEx cost vs. cloud vendor projected utility
These business activities are products that have ing into the cloud we are also the recipients of cost (at current demand/load levels).
migrated to utility services, spanning across massive efficiency and economies of scale but Request a detailed walkthrough of the cloud
the computing stack, and are composed of ap- don’t confuse this with saving money. The cur- vendor datacenter(s) with your key operation-
plication, platform, and infrastructure. This is rent prevailing industry view is that although al folks and get a feel for how efficient (oper-
no different from what happened in the elec- you save on upfront CapEx cost, you may not ationally speaking) the cloud operations is.
tric industry and why we often use the anal- save that much and might actually pay more in Forecast your future demand (quarter/year).
ogy and why Douglas Parkhill’s predictions of OpEx cost. If the CapEx cost was small, or in When you go to the cloud, make sure you
1966 are so timely even today. organizations that have more OpEx flexibility, adapt your existing project management
going to the cloud may not pay off. methodologies and other internal systems to
WHY MOVE TO THE CLOUD Potential savings will be focused around the include toll gate/metered check points where
Why is the cloud happening today and more efficiency of an organizations current data- you can detect slight increases in demand/re-
importantly why didn’t it happen back in center operations vs. that of a cloud provider’s quests/load as this will have a very real impact
1966? We needed a number of elements to datacenter operations. The belief is that the on your cloud computing costs.
be in place before widespread cloud comput- operations of a cloud provider will be more ef-
ing adoption could occur. ficient because they spend all day just thinking
about cloud. RESOURCES
• [OK] The concept-- We’ve have had it for
40 years IT GETS DEEPER: COST CONTINUED • The Delta Cloud Project http://www.delta-
• [OK] The suitability of activities at a volume When we look at human behavior regard- cloud.org.
level suitable to support the utility provid- ing the consumption of resources (like cloud • GoGrid http://www.gogrid.com.
ers-- We’ve had it for the last 10 years for example) the increased efficiency and in- • Amazon Elastic Compute Cloud (Ama-
• [OK] The technology to achieve this-- creased agility given to you by going to the zon EC2) http://aws.amazon.com/ec2.
We’ve had that for the last 20 years cloud is most likely going to result in addi- • Microsoft Cloud Services http://www.Mi-
• [LOADING…] A change in business atti- tional consumption of cloud. crosoft.com/Cloud.
tude and a willingness to adopt these new • NIST - National Institute of Standards and
models – Please hit any key to continue JEVONS PARADOX Technology http://www.nist.gov/index.html.
– A change in business attitude is the criti- William Stanley Jevons best known for Jevons • Book - The Challenge of the computer
cal part which has only recently occurred. Paradox states that technological progress that utility by Douglas Parkhill.
increases the efficiency with which a resource • Book - The Mythical Man-Month: Essays
INCREASED AGILITY is used, tends to increase the rate of consump- on Software Engineering by Fred Brooks.
The commoditization of any activity offers tion of that resource. • InterviewTomorrow.Net - Helping Amer-
a promise of increased agility through the use Jevons was talking about steam engine man- ica get to work. Free access to the 2011 ex-
of standardized components. We have seen ufacturing and by making steam engines more ecutive recruiter database.‑
this in many industries and cloud computing efficient they believed they would use less coal.
is no different. Let’s take a look at a sample This turned out not to be the case, they just ABOUT THE AUTHOR
server and node cluster core deployment be- found new uses for steam engines. Cloud tech- Richard C. Batka is a business & technology ex-
fore and after the cloud in a Fortune 500 large nology is unlikely to save you money because ecutive who is based in New York. Mr. Batka has
scale enterprise environment. you will just end up doing more stuff. worked for global leaders such as Microsoft, Price-
waterhouseCoopers, Symantec, Thomson Reuters,
DEPLOYMENT TIME BEFORE CLOUD LASER PRINTERS and JPMorgan Chase. A graduate of New York
Remember when “efficient” printers were in- University he can be reached at rbusa1@gmail.
• Time to procure and install New Server troduced to the market? Manufactures touted com of followed on Twitter at http://twitter.com/
1,200/Hours more efficient printing as the solution to ex- RichardBatka.
Data Center 1/2011 2