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How Smart Enterprises are Riding the Cloud

By June 2, 2010Article

Corporate executives often ask me when the Cloud will be “enterprise ready”—meaning, fit to handle the computing of big companies like theirs. My answer? Right now. Cloud computing is for everyone—but not for everything. By that, I mean that every company, large or small, can use the Cloud to make its computing more agile and affordable. But the Cloud today is not the best place to handle every application. It will be, perhaps in a decade or so. But isn’t there just yet.
Smart enterprises are approaching the Cloud not as an all-or-nothing alternative to company-owned hardware, but rather are weighing each workload to see whether it’s best handled in-house, through multi-tenant cloud computing, or somewhere in between. They know that one size does not fit all. They’re instead picking the best horse for each course: a thoroughbred for the racetrack, and a Clydesdale to pull the beer wagon.
Enterprises that adopt this gradual, sensible, approach find they can save money safely on IT, focus more and more on their core business, and become nimbler than their rivals. By embracing this hybrid approach, and bringing innovation to it, hosting companies and software vendors can help their enterprise customers realize the promise of the cloud, free of over-promising and disappointment.
Which Cloud?
Whenever we talk about cloud computing, it’s useful to make clear whether we’re using the broad, popular definition (computing as a service, delivered over the Internet) or the IT industry’s narrower definition (virtualized, multi-tenant computing on pools of servers).
Multi-tenant cloud computing offers blazing speed, instant deployment, dramatic cost savings, and the ability to pay for only the computing that you use. But it requires the enterprise to give up much of the control it now exercises over how and where its computing is performed, and where its data is stored. Multi-tenant cloud computing is widely regarded as less secure and reliable than in-house computing. Some of these worries are overblown; far more data breaches and outages take place in corporate datacenters than among hosting providers. But some concerns about the Cloud are very real, at this early stage in its development. Many companies of all sizes, for example, avoid using multi-tenant computing for workloads that require compliance with the rules of the Payment Card Industry (PCI) or the U.S. Health Insurance and Portability Act (HIPPA).
The broader definition of cloud computing includes not only virtualized, multi-tenant computing, but also traditional managed hosting, performed on servers that are dedicated to specific customers, but are owned and managed by a hosting provider. The top managed-hosting providers offer IT that is more reliable and more secure than that delivered by most corporate datacenters, and at a fraction of the cost. The cost savings aren’t as eye-popping as for multi-tenant cloud computing, but they’re still substantial.
Managed hosting is, I believe, a prudent choice today for most mission-critical applications. Many enterprise customers appear to agree. At Rackspace, we host workloads for 40 of the huge global enterprises in the Fortune 100. All of them use our managed hosting on dedicated hardware, often for mission-critical applications for which we offer premium levels of support. Some big enterprises also use our multi-tenant cloud hosting for certain applications, including test-and-development projects, deployment of SaaS applications and public-facing websites, and high-compute projects that need bursts of capacity not available in-house.
All of these global enterprises continue to handle much of their computing in company datacenters—where Rackspace estimates that 90 percent of the world’s computing takes place today. This only makes sense. Big companies have invested billions of dollars in legacy systems such as mainframes and ERP software, and they will continue to use them for certain workloads over the next decade or so, even as they boost their adoption of cloud computing.
Hybrid Vigor
A recent SandHill Group study, “Leaders in the Cloud,” predicted rapid growth for the hybrid model, combining multi-tenant cloud computing, managed hosting, and in-house computing. Among the enterprise IT executives surveyed, 43 percent expected to adopt a hybrid-cloud approach over the next three years, up from 13 percent today. As one CIO told the SandHill researchers, “Because the public cloud is not going to be the answer for everything, hybrid clouds are where most companies are going to live.”
Some big companies are building their own so-called “private” clouds. These clouds can’t offer the cost savings of public clouds, but do employ virtualization to make the company’s in-house datacenters more agile and responsive to the needs of employees and customers. IT executives have told my colleagues and me that some of their companies’ employees have told them, “If you can’t get me a server fast enough to do this project, I’m going to Rackspace.” IT departments have to be responsive to these needs or risk losing the very control and security that in-house IT is presumed to insure.
The open-source movement has expanded into the Cloud, and is emerging as a way for large companies to deploy their own private clouds, while linking seamlessly to hosting providers. By using the OpenStack platform sponsored by Rackspace, enterprises can avoid the vendor lock-in that has until now acted as a major inhibitor to adoption of cloud computing by large companies.
The movement toward an open-source cloud, and the embrace by big enterprises of a hybrid computing model, together offer big opportunities to developers and vendors of enterprise software. Huge needs already are evident in such areas as monitoring and integration. Many companies of all sizes need help in getting new applications in the Cloud to work with legacy systems such as EMC storage, or a Cisco firewall. Vendors will need to work closely with enterprise customers to get their applications tuned to the Cloud environment; to insure that each application is monitored, can scale on demand, and will perform smoothly.
Opportunities for Software Vendors
Consider just a few of the opportunities that the rapid growth of cloud computing offers to software vendors:

  1. PRODUCT: As enterprise CIOs evaluate the Cloud’s potential, they continually identify gaps in the product and service offerings for enterprise-level security, networking and storage.
  2. SUPPORT: Enterprise customers demand more support on the Cloud than do the early adopters among SMBs, regarding everything from pre-sales education to maintenance. Enterprise users want great technology along with the managed services that will eventually let them run mission-critical apps on the Cloud.
  3. OPEN-SOURCE: Enterprise customers are justifiably fearful of being locked into the proprietary software and systems of a particular Cloud vendor. Software vendors must work to create products that assure customers that they can change their minds and move their workloads to another vendor—or back in-house—whenever they choose.
  4. ECOSYSTEM: Vendors must offer API-driven services, enterprise-class additions, value-added integrations to nurture a thriving cloud ecosystem built around their products.

Let’s look back to our original question: When will the Cloud be ready to handle enterprise computing? It’s ready for much of it now. It will be ready for all of it within a decade of so. And in the interim, the pace of adoption will depend on the energy and ingenuity of software vendors and hosting providers.
Lew Moorman is President, Cloud, and Chief Strategy Officer of Rackspace, the world’s #1 specialist in the hosting and cloud-computing industry. He welcomes questions and comments at

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