Cloud set to reign

Sunday Business Post - Computers in Business magazine - April 6 2008
Read this story on the SBP website by clicking here.

Utility computing will allow companies to utilise a system that suits their needs, writes Dermot Corrigan.

Many of the services Irish consumers and businesses use on a daily basis are delivered on a utility basis and paid for by usage. For example, we flick a switch and the radio comes on, we turn the tap and water comes out, and we pick up the phone and make a call. Nobody worries about buying a generator to generate electricity, a well to provide drinking water, or their own telephone exchange to connect with the outside world.

It was not always thus. It was only at the end of the 19th century that large utility companies were formed to take the work in generating power, providing water or running the telephone system away from the general user, and provide electricity, water and phone calls as a service.

Now, in the early 21st century, a similar process is underway which, if leading industry figures are to be believed, will mean that soon businesses and consumers will no longer need to have their own computing infrastructure - servers, networks, storage units etc, etc - but will receive and pay for al l of their computing requirements as a service, delivered over an internet connection.

Utility computing is coming.
“The utility computing model is very similar to electricity, gas or telecommunications,” said Ciaran Doherty, sales director at Horizon Open Systems.

“People come in and hit the switch and it comes on. They pay for what they use and they do not pay when they do not use it. A hundred years ago people had generators, but now they are connected to the national grid.”

Doherty maintained that the way IT has been delivered has been evolving in this direction for some time.

“There was facilities management in the 1960s and 1970s and outsourcing in the 1980s and the shift towards application server provision at the height of the dotcom boom and now the shift towards the utility computing model,” he said.

With utility computing, computing resources are consolidated into large systems by the utility providers. Users draw down the computing power they need from a central system as required, instead of having a number of dedicated systems running individual functions or applications in-house.

“Up until a couple of years ago most organisations bought what were referred to as stove-pipe platforms,” said Doherty.

“For example that meant if you were a telecoms provider, you had a particular platform for your SMS solution and a particular platform for your billing solution, and so on. They were al l identical, but they were all just there to support the particular individual function. You only used the testing and development systems when you were testing and developing something. The rest of the time it was just sitting there.”

Until now businesses were required to buy systems that were capable of meeting the company's maximum usage requirement, Doherty said.

“You would buy the platform based on your maximum peak usage at a given point of the year, it could be Christmas or summer or whenever,” he said.

“You needed to be able to deliver your service to your customers at that time, so you needed that maximum computing capacity and you had to purchase that up front to make sure it was there when you needed it.” Most companies therefore had the majority of their computing resources lying idle the majority of the time.

“The utilisation of IT in Ireland is about 25 per cent,” Doherty said. “Companies buy capacity based on peak usage time, whether it is end of month, quarter or end of the year. That is a huge cost, as whether the machine is operating at 95 per cent or 5 per cent of its capacity, it is still costing money to power it, to house it and to manage it. They are very significant costs.”

Cloud computing
IBM is currently investing heavily in utility computing, or ‘cloud' computing as it refers to the concept. Last month it opened Europe's first cloud computing centre in Ireland. The centre, at the IBM Innovation Centre in Dublin, will offer computing power to customers, and will give companies in Europe the ability to use virtual computing power to spur technology research and business development.

The aim of the centre is to replace the traditional data centre model in which companies own and manage stand-alone hardware and software systems, according to Po/l MacAonghusa, business development manager with IBM's strategy, development and innovation team in Dublin.

“We are setting up a lot of hardware here, probably about 100 CPUs [central processing units] in our cloud here in Dublin,” said MacAonghusa. “IBM has built up a framework of software based on our products and various projects we have worked on with partners around the world. We will look after EMEA [Europe, Middle East and Africa] from Dublin. It is up and running now and we will be hosting our first customer event this month and we will be running live on the cloud here in Dublin.”

MacAonghusa said users utilising the ‘cloud' would just plug in and start to work, without having to invest in and manage all the infrastructure that traditionally comes with a traditional IT solution.

“Cloud computing is a flavour of utility or shared resource computing,” he said. “The analogy that people usually refer to is the internet. You, as the user, are not really aware of the size of the internet. It is all hidden from you behind the browser. Even though there are hundreds of thousands of machines, physically linked together with wire, you really have no view of that. In effect, it is a cloud.”

MacAonghusa said utility computing removed any technical concerns, giving an unhindered user experience.

“I just log on to a nice portal or web interface and say: “For my payroll I would like to use this number of computers'‘.

And the management software would look after al l the physical provisioning of those systems and make them available to me in a matter of minutes,” he said.

“In other words, the management software can dip into the cloud and find you the resources that you need and make them available to you so that you can run your application inside the cloud without worrying about configuring the different systems and applications that are required.”

IBM will offer the use of the ‘cloud' within the Dublin centre to its Irish customers, according to MacAonghusa.

“We will have a utility or cloud computing environment available on demand to Irish clients,” he said.

“We will have a significant services team, involved in client engagements, providing hosted services and we will also have the know-how and personnel available to help them with their projects and make them a success.”

Gaining pace
The utility computing concept is quickly gaining pace. IT giants such as Microsoft, Oracle and Google are working on their own utility computing projects. Smaller Irish companies, such as Hosting 365, are gearing for the arrival of ‘hardware as a service' provision.

GRID Ireland, run by the Higher Education Authority, is connecting university systems together to provide a utility-like service for Irish researchers, while SAP has a research Campus-based Engineering Centre (CEC) in Belfast with links to both the University of Ulster and Queen's University Belfast, which is developing ‘Business Grids' to become the ICT backbone of the future.

Doherty said a number of factors were coming together to encourage the growth of utility computing.

“Virtualisation technology has really taken off - that is, the ability to pool IT server and disk resources together to deliver maximum utilisation on a given platform,” he said.

“The other thing that is happening is the concept of software as a service. This was one of the blockers to utility computing over the years because everybody had bought perpetual licenses for their software. They were paying for that license, typically on a per-user basis or a PC basis. You bought it and you could use it forever. All the global software vendors are stampeding to get into software as a service licensing models.”

Doherty said that anyone buying software as a service, or on-demand software products, such as salesforce.com's CRM solutions, was in effect already getting into utility computing.

“If you are buying software as a service, well then the underlying platform is going to be delivered as a service,” he said.

“In essence then you are buying your computing power as a service, and your CRM and your ERP as a service. That is driving the whole thing forward.” Software providers are pushing the idea of SaaS and utility computing, as it makes business sense for them.

“They are all trying to get recurring revenues and predictability in their own revenue cycle,” Doherty said. “If you have customers who are paying you on a monthly, quarterly or annual basis, that is guaranteed revenue, so Wall Street love it.”

Hooking up to grid
Doherty said that most businesses should be interested in utility computing, as it has the potential to move investment in IT from the capital budget to the day-to-day expenses.

“The customers love it themselves, because you are reducing their capital costs substantially,” he said. “They are only paying for capacity when and where you need it.”

Utility computing al lows managers to see exactly how much their computing power is costing, and clearly relate their IT expenditure to the returns generated, according to Doherty.

“Utility computing allows people to map IT directly onto business value,” he said. “You are paying for IT directly in line with the business value that arises from it.”

MacAonghusa said there was potential for IBM's existing Irish customers to migrate from their current in-house servers or data centres into the new cloud model.

“The individual IBM client teams will work with their clients to decide whether to do that,” he said.

“The capability is there, for a certain number of customers, particularly in the small and medium sized business sector, cloud may well be a serious consideration, because it allows them either to go for a hosted service where IBM could manage their IBM resources with them, or the cloud offers them an opportunity to begin to optimise their own resources.”

Doherty said most companies would move gradually from their existing hardware infrastructure towards the utility model.

“People are going to get into utility computing based on their use of specific applications,” he said.

“If you are an SME you could easily get into this environment, rather than purchasing software in the traditional manner you purchase it on a subscription basis. You are logging on via the web to use that application and at the same time you are paying for hardware that is running that on a subscription basis.”

MacAonghusa said that as companies required more and more computing power, they would be drawn to the utility model.

“From our own experience we have seen that as a team grows, the number of servers required to keep everybody happy grows quite dramatically,” he said. “A lot of these server machines are under utilised, so the cloud allows you a way of consolidating a number of servers so that more and more applications can use them.”

Impact on IT
One reason why some companies were slow to recognise the merits of utility computing was that it was viewed as a threat by IT professionals within organisations, Doherty said.

“It reduces your need to have a level of expertise in house and the need for complex and expensive hardware installation,” he said. “So IT departments saw utility computing and managed services as threats to their own jobs and environment.”

This situation is changing, however.

“They now realise they can offload a lot of the general, mundane tasks that they were doing in relation to operational upkeep, and now focus on the more strategic end of the business from an IT perspective,” said Doherty.