I attended the Australian Computer Society (ACS) Victorian Branch (of which I am a member) forum this week. Paul Cooper from SMS Management and Technology presented on the topic of Cloud Computing.
He spoke about how cloud computing (of which there are many, incompatible brands) can bring IT costs closer to zero and how we can gain significant processing enhancements for little green cost. He indicated that cloud based infrastructures and applications can mean that a company can purchase capacity through operational expenditure rather than capital expenditure. He made the simplistic challenge early on to try to find a CFO who would rather spend Cap Ex on ICT instead of Op Ex. This would surely be a difficult challenge to meet.
The short summary of my opinion on the talk is that I didn't buy it.
Costs and benefits of reduced infrastructure cost
In arguing for reducing cost (for the company) closer to zero, he did not consider what costs this in itself may have.
Firstly, I think that it becomes too easy to simply buy more capacity. It may become more expedient to do this than to perform systems maintenance (eg. optimising databases, refactoring software, eliminating files and folders from the backup schedule...) which would otherwise reduce the need for processing power and storage. On a smaller scale, this is already the case - while we can reduce the resource footprint of an application, the cost of developer / DBA time to do this is often greater than the cost of purchasing more powerful hardware.
My second view on this is that we are likely to get something similar to what is happening to music and video - that for many people, it no longer has much financial value. It's value is purely emotional / aesthetic. Some evidence of this is in the prevalence of music file sharing and the rate at which ring tones are purchased. Ring tones themselves are also only several bars of a song, not even a whole one. Bringing this back to IT, what happens in a business when IT no longer has significant financial value? The risk is that while reducing IT costs in infrastructure and transactional assets closer to zero, emphasis could shift away from IT as a focus for innovation within the business. I think that one of the drivers of IT innovation presently is that IT is not cheap and attempting to innovate with it (particularly in the strategic IT Portfolio asset class) is seen as a way of deriving value from the investment.
Out of sight, out of mind?
In implementing cloud infrastructure, we end up with a situation similar to plugging a 240v car into a power point at night. That is, you're not running a green car / IT environment; you're just outsourcing the environmental cost. No longer does the business pay for it, the cloud provider does.
Staying with the power generation analogy, what happens now when instead of paying the green cost of our power in the La Trobe Valley, we outsource that to another country? We have plenty of examples here. Ok Tedi mine in Papua New Guinea comes to mind. Could the effort to save the Franklin River have been applied as successfully? We're not short of examples where if we remove something from sight, we don't care about it anymore.
Paul talked about siting green data centres in places where green power can be harnessed; particularly geo-thermal power in Iceland or New Zealand. Several questions arise: 1. Do we need to destroy natural environments to construct power plants to harness this power source? 2. Is the expense going to be such that companies will prefer to use a dirty data centre in a developing or third world country on cost grounds?
Utility Computing
Paul presented cloud computing as a utility service, subscribing to the views of Nicholas Carr. I have already indicated that Paul dwelt on the cost savings that could be gained in reducing infrastructure capital cost, reducing direct power costs to the business and indirectly reducing transactional costs through gaining more processing power for the dollar / watt of power.
This model has parallels to Carr's idea that the sole aim of technology should be to drive cost as close to zero as possible. Carr's argument is that implementing information technology should be about as complex as "implementing" mains power. The assumption is that everyone uses technology in the same way. Which they don't.
He also envisaged a world where assembling enterprise applications was about as difficult as plugging components together (Lego style). There is evidence of this occurring already, though mainly in an the research stage (I think Microsoft Oslo is an example).
Strategic Benefits for a Company
Tele-working
He proposed that cloud computing enables tele-working. No it doesn't. One member of the audience suggested that with VPN, anyone can tele-work without cloud infrastructure. Paul responded by saying that the cost of this is an extra computer to function as the gateway. This in itself is not necessary. Often, the VPN gateway can be operated on another device. They can be embedded into a router or built into a server. Portal software such as SharePoint or WebSphere also allow a company to expose a significant portion of its data over the Internet to authenticated users. Furthermore, applications like Lotus Notes support a disconnected operating mode where not only email but whole databases can be taken off-line for remote, occasionally connected work.
Tele-work is not a sound business case for implementing a cloud based infrastructure.
"Overload" Processing
This is where real strategic benefit can be gained, though I think Paul did not emphasise this advantage sufficiently. Paul talked about how a company can set up a hybrid cloud, hosting some / many of your applications on internal infrastructure. He was interested in maintaining close to 100% utilisation and bring online externally hosted cloud resources as needed.
This sounds fair, though I think I'd rather have some spare capacity on my internal infrastructure as the normal load ebbs and flows; particularly processing load but also temporary and to a lesser extent permanent storage.
The advantage I see is for a company requiring significant processing resources intermittently. Perhaps an IT consultancy that periodically performs data cleansing / transformation activities on significant quantities of data on projects for clients could take advantage of cloud infrastructure to shorten the cycle times for these operations. They may only need these substantial resources for 6 to 10 hours per week. It would be uneconomical for this consultancy to have this kind of processing power in house, idle for most of the week. The alternative for this company may be to scale down the processing power and just have to make do with the longer cycle times. The risk here is that the live data evolves beyond the state of the data in the set being used for the transformation.
Summary
Ultimately, what do I think about cloud computing? Where is its value? What are the risks? What are the costs?
Cloud computing is being marketed as a cost reducing measure. While this is so, the case for cloud computing is thin. A cost can only be cut once and once everyone else does it, there's no longer any advantage. A company must then either maintain their expenditure on cloud computing, just to "keep up with the Jones's" or must find a way of innovating their way forward with it.
There are environmental risks as I have discussed and legislative risks which I have not discussed.
Availability of the services that exist to date is high, so this is not an issue. Availability will be mostly affected by the reliability of the business's Internet gateway. A DOS attack on a company router that carries hosted ERP or CRM (or Google Apps) traffic will shut down the business until service can be resumed. At least everyone will have time to catch up on filing.
The success of cloud computing will depend on how it can be used to create sustainable competitive advantage for a company that chooses to innovate with it. In order to be more than just a passing fad, argument needs to evolve from the current cost cutting and Green IT issues and demonstrate how it can strategically enhance a company.
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