By Robin Bloor

It’s difficult for a CIO today not to be considering a cloud-related strategy. Over the past three years, these hosted services have acquired marketing sparkle and every IT vendor worth its socks has developed offerings.

For large enterprises, two things have become clear: First, Google, Yahoo and other Web-based businesses with very large data centers have demonstrated economies of scale by pointing thousands of servers at a single application. Second, and more important, Amazon has established a thriving and fast-growing business by providing storage and virtual machines on an hourly rental basis.

These two developments have proven that cloud computing has legs, although it is still evolving today. The critical question for the CIO, however, is what to say when the CEO asks, “What are we doing about cloud computing?”

My answer is that the primary motivation for moving systems into the cloud is to reduce costs: staff costs, establishment costs, energy costs and hardware costs. The cloud will not significantly improve the key business processes of your organization, though it will help you develop applications more quickly.

Currently, the major infrastructure-as-a-service (IaaS) options deliver only Intel-based resources running Windows or Linux. And sadly, only about half of all data center applications run on these operating systems. Even with the best intentions, you won’t be moving the other 50 percent to the cloud anytime soon. And some of the Windows or Linux applications aren’t really candidates for IaaS in any case. Anyone using Microsoft Exchange in-house, for example, might move to a hosted service. Call it cloud computing if you like, but in truth that’s business as usual.

Hosted e-mail systems existed long before cloud computing, as did hosted Web sites and other software-as-a-service alternatives to data center applications.

Low-Hanging Fruit
My advice to large organizations, then, is to begin with the low-hanging fruit. But, as for other applications, prove that you can run them in a private cloud first before you turn to an Internet-hosted cloud model. Management will be the key: resource management, application management, performance management, service management and recovery management. A good rule of thumb: If you can’t make it work in your own data center, it’s not going to work in the cloud.

Consider software development in all its aspects. Many companies already supplement this activity with cloud resources because development software is portable and there are obvious benefits. For example, developers no longer have to negotiate with data center staff to get extra resources. It can take days or weeks for a data center to make an extra server available, but in the cloud, you can get one in minutes, pay for it by the hour, and scrap it when it’s no longer needed.

When you look at operational systems, however, you run into more complexity. It’s true that some stand-alone systems can evaporate into the cloud with few consequences, but only if your cloud service provides a management interface and is secure. Most applications are not stand-alone; they have dependencies, and dependencies are not cloud-friendly because they don’t port very well.

The Role of Virtualization
Virtualization, therefore, is the litmus test and should precede any broad adoption of cloud computing. You may also call this server consolidation, or server virtualization. Some view it as creating a private, or internal, cloud.

Yet, virtualization has its own complexities. Anecdotal feedback from large sites that have pursued virtualization projects suggests that diminishing returns nearly always set in once software development and stand-alone systems have been virtualized. Eventually, a point is met where the payoff falls below zero, as management costs escalate and managing the set of virtualized resources becomes increasingly difficult.

All of this must be considered before implementing cloud computing.

[Robin Bloor is President and Chief Analyst, The Bloor Group, and founder, Bloor Research. He is also co-author of the books, Service Oriented Architecture for Dummies, Service Management for Dummies, and Cloud Computing for Dummies. Read his blog here.]

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