“Cloud computing” is the business buzz-phrase of the year. It is genius marketing wordplay: familiar yet nebulous, has a high techy cool quotient, and conveys an image of IT ease — while being hazy, imprecise and just beyond one’s ability to grasp.
Cautious by nature, most Kentucky business decision makers continue to assess “the cloud.” Many still wonder what exactly it is. But this is the typical case elsewhere, too, according to IT experts and solution providers, who report vigorous levels of interest in the business community.
“The cloud” is outsourced IT — operations and/or services. There are probably as many variations in arrangements as there are weather conditions a meteorologist can name.
Kentucky IT service companies are busy upgrading infrastructure, adding service functions, even new lines of business, and fielding lots of inquiries from clients.
The principles of what is now known as cloud computing — and fully realized deployments — have been around for years among technologically sophisticated companies and operations.
At the largest levels of operation, Amazon Web Services is the Coca-Cola of cloud platform providers, according to the December issue of Wired magazine. Amazon’s massive computing server farms provide the IT muscle for huge clients: Netflix (its streams are believed to be 25 percent of all U.S. Internet traffic in evening movie-viewing hours), NASA Jet Propulsion Lab (high-resolution satellite image processing to guide robots), U.S. Department of Agriculture (information system for millions food stamp recipients), Newsweek/The Daily Beast (1 million page views per hour) and Harvard Medical School (mining a vast database to develop human genome analysis techniques).
Now, further down the food chain, three-plus lean years of financial crisis, recession and economic stalemate have pushed cloud computing downstream to the business community at large.
Owners and managers always seek lower costs and better business operations, and current common wisdom is that the highest visibility, lowest hanging fruit is … “moving to the cloud.” Rather than own IT hardware and horsepower – enough to satisfy peak demands — the “cloud” computing approach is to access, use and pay for IT muscle and capacity only when needed.
Releasing physical custody of infrastructure and support operation costs could be a rainmaker strategy that greens up balance sheets and frees up management to focus on crucial goals. But entering the mists of operational change — without adequately assessing all the parameters and while business barometer readings remain uncertain — could invite turbulence or a fiscal lightning strike should revenue flow be disrupted.
Charting the right, best course varies from business to business, according to experts.
Jeremy Brann, a master cloud strategist for HP, said those moving to cloud computing typically opt for a combination approach: keeping some IT functions in-house and outsourcing others to an IT provider who owns, operates and maintains a large, powerful system.
Brann, one of only five people with his job title among HP’s 324,000-plus employees, works from home in downtown Lexington but spends much of his time traveling the nation to help clients assess their options. He spent one recent week in South Florida with Miami-Dade County government officials contemplating a shift to the cloud.
“No one will move everything to the cloud,” Brann said. “It is a question of how much, how fast.”
There are many considerations in each case, he said, and nearly every answer is different.
“I use the analogy of a decision tree” in helping guide clients, Brann said. Factors to assess include financial impact, technology impact and organizational impact. Existing computer systems, IT personnel expertise and service level needs are important.
Determining the significance of each parameter for a specific organization is essential to good decision making.
Cost most often is the weightiest parameter, Brann said. Speed in accomplishing tasks or delivering business service can be most important; sometimes security is paramount, or it could be IT continuity. A CEO’s goal could be more efficiency management that focuses limited resources on key business processes rather than support operations.
“IT decisions are hard,” Brann said.
Determining what is doable, affordable and best is a judgment call.
“It is easiest for start-ups. For others, legacy systems change the formula; there is the cost of migration of data to consider. If a legacy system is paid for and comfortable to use, it might be cheaper to maintain that,” he said.
Big overall cost savings are a rare outcome, but productivity gains and a more valuable business operation are practical expectations, said the master cloud strategist, who believes the latter is likely.
“There is no industry yet that we’ve worked with that we’ve said, ‘You’d be a terrible fit for cloud. Just skip it.’ ”
Change partly driven by economy
Lexington-based technology solution provider SIS, which used to field minimal inquiries about cloud services, now is heavily engaged in answering questions from clients about its capabilities, said company CEO Steve Sigg.
SIS began noticing changes in how businesses were viewing IT services about three years ago — roughly the same time the recession hit. The company doesn’t credit the shift to the recession, although the economy does provide some motivation.
“The environment has everybody looking for productivity and to reduce cost,” said Michael Hardy, SIS vice president, Managed Solutions Center.
Other factors that favor business cloud computing are growing familiarity and comfort with online applications and conducting important functions via the Internet, an evolution paralleling home computer and Internet use, Hardy said.
“Business is much, much bigger,” he said, and that makes it more difficult to achieve a comfort level with having to depend on the Internet for functionality.
Meanwhile, IT equipment is less expensive, technology is more complex and data storage needs have exploded.
“The cloud is not a new phenomenon. It’s really an extension of the Internet,” Hardy said. “Three years ago we saw this coming. We saw customers that were going to purchase less equipment.”
SIS hired a prominent consultant, Sigg said. His advice was that a significant unmet need for cloud services existed and SIS had the technical know-how to provide it. So, the company came up with a plan.
Last summer, SIS opened a new headquarters in downtown Lexington, its building protectively enclosing a state of the art data and network operation center. It currently can run 60,000 server software instances, Hardy said, each capable of fulfilling data requests for hundreds of work stations. The 2,400-s.f. data center with dual support and protection systems has 23 racks of servers but can support up to 60 racks.
SIS chose its present location for the “bunker-like” building and because Lexington’s two primary electric grids overlap there, allowing access to both feeds, which now are backed up by uninterrupted power supply units and generators. There are high-bandwidth Internet connections from multiple providers.
The site was gutted to its extra thick walls and rebuilt to protect the computing hub at its core: with multiple levels of security, no plumbing or drainage elements above the data center, special floor and ceiling systems. Entry to the data center room requires a swipe with an authorized personal electronic badge and then a matching fingerprint scan. SIS opened its new headquarters July 18. The company does not reveal its cost.
“Security is the No. 1 concern of companies looking at the cloud,” Hardy said. They want to know who can see their data, how they will access it, and whether anyone else can see it — company employee identification and verification controls are very important.
Outside security auditors must be able to document and identify literally every individual entry to the premises.
After security issues, concern No. 2 is the skill level of SIS to provide the service it promises. No.3 is the physical characteristics ensuring uninterrupted service with 99.99 percent uptime, Hardy said.
A platform for new business offerings
At V-Soft Consulting Group, a $30 million Louisville business whose focus for 20-plus years has been IT staff augmentation and business consulting, managers recently determined the cloud presents them with a business opportunity: to sell technology-based business services that customers traditionally get by buying and running application software on their in-house computer system.
V-Soft expects its business solutions offerings to grow in the next two years from 5 percent of company revenue to 30 percent, said Bill Moore, who joined V-Soft in late summer as chief delivery officer. V-Soft also expects revenues to more than triple to $100 million in two years, said Moore, who was recruited to Louisville from a senior programming manager position with Microsoft in Redmond, Wash.
While with Microsoft, the Kentucky native spent part of 2005-06 studying enterprise architecture at the corporate university run by Capgemini, the $11 billion French global IT services and management consulting giant. There was much discussion, he said, of redistribution of IT assets and the changing way people think about how they conduct IT functions.
“It was ‘the cloud,’ ” Moore said. “I’ve been talking about it for years.”
Now, cloud esoterica is everyday discussion fodder in executive suites, if not around the water cooler.
“People are asking about it,” Moore said. And the questions are very similar: “Should I take it seriously? What can I do? What should I do?”
Kentucky business men and women are at same stage of assessment as most of their counterparts elsewhere, according to Moore. “Nobody’s going full steam ahead,” he said, not in the small and medium business sector.
DMD Data Systems Inc. in Frankfort is a cloud computing provider and a client, said Dave Sevigny, president of the 15-year-old company that garnered small business of the year recognitions last year from the Small Business Administration in Kentucky and from Commerce Lexington.
DMD is just starting in cloud services, providing basic applications to about a half dozen of its 250 clients, Sevigny said.
“We use a cloud-based financial package to run our business,” he said. That allows DMD’s 16 employees to focus their energy on the company’s IT business operations rather than making sure financial software and data are up to date and protected.
DMD partners with the Center for Rural Development in Somerset, which operates a network operations center and provides IT services especially to support business in Eastern and Southeastern Kentucky. Mike Cornett, its director of marketing and public relations, said the Center is not restricted to its specific 42-county service area and provides IT hosting and support to the Kentucky Community and Technical College System, which has more than 115,000 active students and 3,000 faculty users in its Courseware Management Service network.
The Center is just beginning to offer cloud services, Cornett said, and is still determining how to pitch the cloud in its market. Sevigny said part of what DMD will do is provide customer support for the Center’s clients, who will hear recognizable Kentucky voices when they seek help.
Large demands lead to early adoption
Certain very large businesses have led adoption of cloud computing practices.
“Telephone companies have been some of the earliest adopters,” Brann said, citing AT&T and Verizon, which must be able to handle very large amounts of data.
“They cannot run out of capacity,” he said.“They need the ability to scale, quickly.”
During holiday weekends, the wireless phone companies have very high needs, which then fall off quickly, Brann explained.
“You don’t want to own all that capacity,” he said. “The next week it’s wasted.”
Power companies have also been early to the cloud because they have processing spikes when modeling future customer demand to better manage power generation. Too little production would mean blackouts that disrupt revenue, but overproduction creates costs without generating revenue.
“They process truckloads of data,” Brann said. “They look at cloud computing as the horsepower to process that data.”
Again, he said, utilities they don’t want to invest in and own expensive computing power to run modeling programs because “the other 90 percent of the time the capacity to process that data would be wasted.”
Brann said anyone with cycles of IT usage is a good candidate to adopting cloud computing, whether those cycles are predictable or unpredictable. Compiling quarterly and year-end reports is predictable, while adding IT resources to fulfill a big new contract can be unexpected.
For needs likely to occur at an unknown time, some businesses identify “templates of use” — preconfigured packages of specific data capacity, programming, processing power and service levels — for which they prearrange access with a provider. An example would be the IT needs for adding a computer-assisted-design work station at an architectural firm.
Activating such a prearranged template is cheaper, easier and weeks faster than ordering, awaiting delivery and standing up new equipment and software.
Continuity planners like the cloud
Meanwhile, with business increasingly dependent on IT operations and connectivity, cloud services are the growing choice for business recovery and continuity plans. A backup operations center with hardware, software and personnel is much more costly than a cloud-based option, said Sigg and Hardy.
SIS has space and facilities for clients’ IT personnel who might have to implement a continuity plan.
Alltech, the Nicholasville-based animal health supplements maker with locations requiring IT services in 119 countries and across the United States, contracts with SIS for recovery and continuity services and used those facilities last month.
On Nov. 14, Alltech ran a surprise continuity drill when many of its 50 IT employees happened to be in Kentucky, said Tim Arthur, CIO and director of management information systems. Arthur unexpectedly declared to IT staff that an earthquake had occurred beneath Nicholasville, the main data center had to be shut down and its backup brought online.
“We have run similar exercises, but not to this extent,” Arthur said. Crediting what he called an incredibly helpful emergency services team at SIS, including special computer engineers, Alltech staff came to the Lexington headquarters “and literally within hours were able to recreate our infrastructure and be up and running in less than a day.”
Alltech’s data operations are large, he said, and when he first told IT staff several years ago the company had set a goal of being able to accomplish the same task in 48 hours, “I was laughed at and told it couldn’t be done.”
Arthur now believes 12 hours is possible, having identified human considerations rather than technical issues as the bigger hurdle in disaster response.
“The limitation … is us having to check on our families, etc., before doing the work,” he said.
Cloud computing capabilities exist today that could allow Alltech to have its system “back up and running seamlessly and never even have known we were down,” Arthur said, but there would be a large cost. “That’s not our goal. We’re not an Amazon.”