Cloud Computing Emerging Technology Executive Briefing (Part II of II)

History of Evolution

The roots and subsequent evolution of cloud computing - as we understand it today - can be traced through a history of ideas, companies and technologies developed over the last half century. The idea of an "intergalactic computer network" was introduced in the sixties by J.C.R. Licklider, who was responsible for enabling the development of ARPANET (Advanced Research Projects Agency Network) in 1969.  Central to his vision was that everyone on the globe would be interconnected and accessing programs and data from any site.

After a lull of worthwhile developments, the idea of moving electronic mail to a web-based platform proved to be a catalyst in the adoption of a cloud mindset weakening the idea that software and services must reside on a local device.  Hotmail and Yahoo! Mail are two early SaaS examples.  Hotmail was introduced in 1996 and Yahoo! Mail in 1997.   Another early milestone for cloud computing was the arrival of Salesforce.com in 1999, which was introduced as an ASP model. This was one of the first applications to monetize the cloud. Later Salesforce.com evolved into a SaaS model of delivering enterprise applications via the web, blazing the first trail to deliver application services over the internet. 

The next development was Amazon Web Services in 2002, which established cloud-based services including storage, compute and services.  Then in 2006, Amazon launched its Elastic Compute cloud (EC2) as a commercial web service that allows small companies and individuals to rent computers on which to run their own computer applications.  

2009 was arguably the most significant year in cloud computing yet; starting with the introduction of the first cloud based operation system, VMware vSphere 4.0.  This was followed by Cisco's introduction of a scale-out server architecture known as Unified Computing which was purpose-built from the ground up with virtualization and scale in mind.  Additionally, both EMC and NetApp, the industry leaders in storage and data management, introduced solutions to provide a foundation to build private cloud infrastructures targeted to enterprise customers and multi-tenant infrastructures targeted to cloud service providers.  These hardware and software solutions are all based on virtualization architecture which allows economies of scale, density and efficiencies that were only dreamed about two years ago.

An equally significant milestone occurred in 2009, as Google, Microsoft and others introduced fully-capable browser-based enterprise applications through services such as Google Apps and Microsoft Azure.  A notable contribution to cloud computing has been the emergence of "web apps" from leading technology giants such as Microsoft and Google.

As the rise of the "consumer cloud" has occurred in recent years, the immediate benefit to consumers has been clearly communicated and is being realized.    However, the "business cloud" has not evolved with as much clarity.  A framework for businesses to adopt the cloud is certainly needed in today's boardrooms.  This would help the CEO, CFO, CTO and CIOs clearly lay out a strategy that aligns business and technology needs in the coming years.

A Framework For Business: How to adopt and employ the cloud

Figure 1 - Cloud Adoption Model

Step 1:  Virtualization - This adoption step involves organizations building a virtualization infrastructure and essentially constructing a "private cloud" infrastructure.  This foundation is composed of a unified compute, network and storage environment that is referred to as a "converged infrastructure" or "private cloud."

Step 2:  Experimentation -  Organizations begin to evaluate their CapEx and OpEx expenditures for IT Services and run select services outside their private networks based on their costs and security requirements.  The private network remains the primary production infrastructure during the adoption step. 

Step 3:  Cloud Foundation - This step further builds on the experimentation phase, and best practices begin to codify around the design and deployment of cloud services.   The private network remains the primary production infrastructure, but critical services such as CRM and ERP are selectively moved to cloud service providers on a case by case basis.  

Step 4:  Cloud Integration -  A combination of private, public and community clouds become primary production infrastructure at this point.  The private network remains the primary production infrastructure during this adoption step.  Single sign-on capability provides organizations secure access to resources across many different cloud infrastructures that feel like one private infrastructure to the user. 

Step 5: Cloud Actualization - At this point, a clear standard for the business cloud emerges.  These standards are actually different from the consumer cloud.  Organizations can selectively choose where their application services run.  The ability to load balance dynamically between cloud infrastructures is a reality.   At this point businesses have more freedom to run a large base of services in either a private our public business cloud infrastructure that aligns with their business and technical needs.

For each step in the adoption model, an organization will need to revisit their strategy, goals, investment criteria and security requirements.

Future Developments and Expectations
Speculation on Technology Trends According to Gartner

• By 2012, India-centric IT services companies will represent 20% of the leading cloud aggregators in the market
   (through cloud service offerings).
• By 2012, Facebook will become the hub for social network integration and Web socialization.
• By 2013, mobile devices will overtake PCs as the most common Web access device worldwide.
• By 2014, over 3 billion of the world's adult population will be able to transact electronically via mobile or Internet
   technology.
• By 2015, context will be as influential to mobile consumer services and relationships as search engines are to the
  Web.
• Businesses will move into a “Cloud Actualization” model by 2015. The limitations around data location, code
   portability, and data portability risk of data loss and privacy issues will all be addressed.

Figure 2 - Cloud Adoption Model Timeline

Future Considerations Surrounding A Cloud Infrastructure

The shift to the cloud will continue its evolutionary track, heavily influenced by four business considerations and requirements.

1. Data Location: The issue surrounding the location, control and availability of data is a critical inflection point for a company considering the balance and makeup of the cloud services they employ. Organizations must know exactly where their proprietary data is stored.  Some organizations have laws that require some level of control and visibility over this.  For instance, the U.S., the International Traffic in Arms Regulations (ITAR) and the European Union have strict regulations on where and how data can be accessed.   By 2012, service providers will start to adopt an open virtualization file format that will allow for virtual machine and data artifact portability between cloud providers. This will start to accelerate "Cloud Foundation" adoption in 2012.

2. Data and Code Portability: By 2012, cloud service providers will start to employ data and code portability standards that will allow organizations to leverage provider interfaces that will utilize data artifacts which are truly interoperable between cloud service providers. 

3. Data Security (Privacy) Risk Management:  Accessing data over an internet connection is risky because a cloud is more vulnerable to being accessed, altered or copied.  By 2015, organizational security architecture will mature and begin to address the majority of privacy and security issues.  Additionally, the rise of the business cloud will start to emerge and distinguish itself from what the consumer cloud is today.    

4. Data Loss Risk Mitigation:  An RPO or "Recovery Point Objective" is the acceptable amount of data loss measured in time that an organization is willing to accept.  For example, an organization may not be able to sustain more than 1 minute of data loss; RPO of 1 minute. An RTO or "Recovery Time Objective" is the acceptable duration of which a business process can be recovered after an outage.  By 2015, business cloud services providers will configure virtual machines or data artifacts with the appropriate RTO and RPO settings.  These objectives will be dynamically managed to meet data loss prevention requirements that are acceptable to a business.

Comments on the Adoption and Leveraging

Adoption of the "cloud" into organizations will be fueled by a mixture of financial drivers and innovation.  For instance, taking the McKinsey & Company IT Budget model with a $100 million IT budget; the breakdown of expenditure is as follows:

Figure 3 - $100 Million IT Budget (McKinsey & Company)

As cloud offerings mature and IT services reach the end of their life cycle, organizations can systematically employ SaaS, PaaS and IaaS offerings when the cost benefit is achievable.  The overall result will be the ability to manage more data, more locations, and more users with less capital.  The capital budget financial model below has an organization reducing their IT expenditure by 27.5% over a 4 year period.

Figure 4 - Capital Budget Trend for a 4 Year Cloud Technology Adoption Plan

The cloud's greatest benefit will be the infrastructure on demand; the least mature of the delivery models today.  This will require maturation of technical standards and government support to accelerate a secure and ubiquitous internet.  

What should the U.S. government do to advance cloud computing?   The short answer is to leave the standards development to the free market and industry leaders.  The government should also make strides to make internet access more ubiquitous by enacting legislation that promotes the proliferation of broadband access and fighting cybercrime.  A report by the Communications Workers of America (CWA) had the United States ranked as 28th in the world in average Internet connection speed.  They also cite that the country is NOT making significant progress in building a faster network.  The United States is significantly behind many emerging countries in having fast, reliable internet access which will be the largest inhibitor to cloud computing if left unaddressed.

4 Steps Organizations can Take to Prepare to Leverage Cloud Computing Service Offerings:

1. Software Asset Classification:  Assess IT software assets and classify them as commodities versus differentiating software assets.  The commodities are all candidates for "the cloud."  

2. IT Organizational Design and Alignment:  Reorganize IT teams according to functionality versus being aligned with a vendor (i.e. Microsoft Infrastructure team).  Getting the IT organization to think of their value according to their function versus a skill will change the mindset to embrace the new paradigm.  This would include groups such as enterprise mobility, data management, business intelligence, document & records management, telecommunications and network support.   

3. Service Catalog:  Establish an IT Service catalog that has a baseline for IT costs for each service per Information Technology Infrastructure Library (ITIL) standards. For instance, what does your Enterprise Resource Planning (ERP), email or Voice Over IP system cost in terms of hardware, software and support?   Firms cannot assess a fit in the cloud if they do not understand their current costs on a service by service basis.  

4. Stakeholder Involvement:  Engage all relevant stakeholders throughout the organization including information security, legal and finance.

Conclusion

Manufacturers today are pushing businesses to move to public cloud offerings. The consumer public cloud offerings of today are exciting and are gaining a lot of ground.  Globally, total consumer cloud services revenues are set to grow at a CAGR of 17.9% between 2010 and 2018. Companies like Google, Facebook and Apple are the forefront of this industry. 

When you look at the business cloud market, businesses are taking a different approach.   Businesses are embracing a private cloud centric model today.  More specifically and technically speaking this is a hybrid model that has the majority of their information assets and services running in a business private cloud with select services in the business public cloud services (i.e. Salesforce.com, Office 365, etc...).  The reason for this trend is that there are numerous risks that are based on legal, financial, security, availability and control concerns for today's businesses. Deploying services in a private centric business cloud model does move an organization toward a public cloud-ready platform while providing them significant financial benefits and meeting their organizations business demands.