Is Cloud computing too good to be true for enterprises?

Is Cloud computing too good to be true for enterprises?

Summary: Is Cloud computing a sweet escape or honey trap?

TOPICS: Amazon, Cloud, Google

Just how valuable will Cloud computing be to organizations? The ease of deployment and pay-as-you-go pricing model offered through Amazon Web Services, and now Google with its Google App Engine (with no pricing model) could be a honey trap, as some of my esteemed colleagues here at ZDNet warn.

Is Cloud computing a sweet escape or honey trap?

ZDNet blogging colleague Garett Rogers, for one, wonders if using Google App Engine will create too much dependence on the Big G, making it a wretching, messy process to cut the cord to move to another platform. Another blogmate, Phil Wainewright, also has questions about the business-readiness of Google App Engine, reporting that Google is apparently playing down the notion that its online infrastructure-as-a-service is intended for serious business use.

Dependence on any outside party is one of the quandaries of Cloud Computing, whether its on the Big G, AWS, or other providers.

Dion Hinchliffe asks whether either Google or Amazon -- while offering fantastic value propositions for startups or small companies -- are even suitable for more established enterprises that already have their own infrastructure:

"The decision for many startups will be an easy one; the benefits of using these platforms for their new products are compelling across the board despite minor concerns about platform lock-in even though the models used by both companies are actually surprisingly lock-in free.... But the decision for enterprises on how far to leverage computing platforms in the cloud will be much more complicated. ...issues around governance, security, privacy, and control will be hard to overcome."

The value propositions of low-entry costs and flexibility offered by Cloud computing are huge, enticing advantages. Why sink thousands, hundreds of thousands, or even millions of dollars/euros/pounds/rupees into hardware and software and then constantly worry about maintaining, upgrading and patching said systems?

However, I have also asked similar questions to what Dion is asking about Cloud computing in previous posts. For example, surveys I have worked with consistently have found that larger companies are not inclined at this point to tap into Cloud solutions for mission-critical applications, since the systems they have built up over the years still offer competitive advantage.

In many cases, even 20-year-old mainframe programs contain custom processes and logic that provide market advantages. Thus, we also have to see how beyond the initial rush of cost savings Cloud computing offers, whether it poses the risk of homogenizing enterprises and therefore washing away competitive advantage. Not to mention that for many large organizations which well-established enterprise data management infrastructures, any transition will still require a great deal of integration work for established companies. (Costing plenty more dollars/euros/pounds/rupees)

Vendor reliability is also always a major risk factor that lurks behind any such arrangement. What happens if a provider suddenly goes out of business? Or changes business models? Or decides to contract with yet another company for IT services it decides it no longer wants to provide?

And, of course, there are always worries about security, especially when files are in someone else’s hands. Will Sarbanes-Oxley auditors look kindly on off-premise arrangements?

Nevertheless, Google's forceful entry into the Cloud computing space means a game-changing battle royale is emerging. Dion says the move is turning the Internet cloud computing space "into a fully-fledged industry virtually overnight." As he observes:

"What makes these offerings so interesting is their promise to turn enormous amounts of operational competency and accumulated economies of scale (which are enormous in Amazon’s and Google’s cases) into a highly competitive new software platform, akin to Windows or Linux, except entirely hosted off-premises and on the Internet."

With Google and Amazon going head to head, there is quite a battle in the Cloud brewing. My colleague Dan Gardner even coined name for this new level of aerial combat, as "gangsta cloud wars."

Amazon, which has been offering infrastructure-as-a-service Web services for several years now, is not sitting still, having recently announced new offerings such as its "Elastic IP" addresses offering, which enable Amazon EC2 (Elastic Compute Cloud) developers to build more robust and fault-resilient applications in the Cloud.

[UPDATE April 14: Amazon just added another new feature, in which persistent storage "volumes" can be added to EC2 implementations. Thanks to reader Thorsten von Eicken for the pointer.]

Dion reviewed the strengths and weaknesses of each noting that "in terms of capacity, Google currently has sharp limits on many of it Web services while Amazon has been impressively open-ended about 'sky-is-the-limit' capacity ceilings." However, Google may appeal more to developers seeking a more integrated approach versus Amazon’s services , which are "essentially a box of high quality pieces without much integration."

Readers -- give us your thoughts on Cloud computing. Is it a good bet, or too risky for mission-critical business systems right now?

[poll id=11]

Topics: Amazon, Cloud, Google

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  • this will work for Small companies

    This will work for small companies, that can't afford the Mainframe with custom logic and custom software. Small companies will be able better to compete against the Large enterprises, I do not see this working for Large Companies unless someone brings in the cloud computing into the corp. network (which is pretty much what an enterprise network does with VPN, employees that travel or work from home get all the apps as if they are in the company building.) Cloud computing will be disruptive because, the small companies will be able to scale better and be more efficient then large enterprises (most large enterprises have way too much overhead to begin with)Large companies will see more competition and small companies will get more work because the added capability.
    • True, to start, this will be almost all small companies. But, eventually,

      even big companies will want to shed the infrastructure that has nothing to do with their core business. Yes, it has to mature, and people to get comfortable with it, but it is just a matter of time.
    • insourcing is not so common... what about the growth?

      eventually the successful small companies will become big companies... and then what? they likely will want to insource, and then they'll lose much of that advantage...

      Really, there will come a balancing point, where you can link a local machine into the cloud so thoroughly, it becomes transparent whether you're using the local or the remote part of the cloud...

      but either way, we've got a long ways to go, still.
  • RE: Is Cloud computing too good to be true for enterprises?

    its a bit of both, it a risky however cheap and fast solution for startups.
  • Just like he risks are a lot less with your money in a trusted bank rather

    than under you mattress, you will be a lot safer with a trusted service provider.
    • bank vs stock market, as well...

      trusted bank will guarantee you a tiny interest...

      stock market will offer you a huge gain (potentially).

      risk vs. reward. huge advantage at high risk of no advantage? or slight gain at a guarantee?

      it's not always an easy call which is better.
  • I have apprehensions about cloud computing take too far

    The following are some of the problems I have with companies moving their internal IT to the cloud. The need for fault tolerant, higher traffic ISP connections would make connecting to the Internet more expensive ? at least initially. There will be privacy, security, and accountability issues. Will companies be able to sue cloud vendors when things go wrong? Now, if all of the above and other issues were somehow taken care of, and most companies moved all their IT operations to the cloud, you would end up with dramatically less choice and hence competition among server vendors ? eventually driving up the prices of servers and software services provided by cloud companies. Therefore the value of cloud of computing would decline significantly over time, due to dramatically less competition for servers and services. I believe further that over time, we would wind up with a computing landscape similar to the way things were before the PC came along, where you have giant IBM like companies which are expensive and unresponsive to customers, because there is not much competition prodding them to be different. There is also a national security issue where terrorists could strategically take out a few cloud facilities, which would cause our economy to literally implode ? since so many companies? operations (tied up in these facilities) would irreversibly come to a halt.

    Beyond the above reasons, having nearly all computing shift to the cloud scares the heck out of me, because I remember the way things were before the PC became very popular. Then, you would be sitting at a dumb terminal and be at the complete mercy of unresponsive system administrators, who were absolutely intoxicated with the power they had over you. Computing in those days were a nightmare, and I simply cringe at going back to the way things were. For what it is worth, I think the computer market is too smart to make this happen.
    P. Douglas
    • Point well taken

      Sure is scary to turn over anything in the hands of a few but reality of it is that it's been like that for some time now and banks are in the forefront of this.

      Is it less scary to have as many players or is it a matter of feeling helpless with the information that seems out of your hands?

      Only time will tell if we'd have enough proof to dispel or promote the opposite sides but sure looks like clouds are winning and fast.

      • I still have my doubts

        [i]Sure is scary to turn over anything in the hands of a few but reality of it is that it's been like that for some time now and banks are in the forefront of this.[/i]

        There may be a big difference between people using banks and utility companies, and people using the cloud. Most people (and companies) cannot afford to set up their own alternatives to banks and utility companies. The same however is not true for transportation and servers. There are many alternatives to public transportation (which is generally cheaper), and most people can afford to, and opt for these alternatives. For example, most people regard the flexibility and privacy of cars as being worthy of the premium they pay over private transportation. The same I believe will wind up being true for companies and individuals when it comes to IT services.
        P. Douglas
        • Sorry ...

          ... I meant to say:

          [i]For example, most people regard the flexibility and privacy of cars as being worthy of the premium they pay over [b]public[/b] transportation.[/i]
          P. Douglas
      • non-3rd party...

        you trust a bank or utility company, they're not farming it off to someone else. The banks' data is stored on the banks' servers/mainframes/machines...

        do you trust your data to a company you know is going to just have it stored on yet ANOTHER company's systems?
    • balance... all good things in moderation.

      a company should never entrust its most important and vital tasks to someone else, without absolute security...

      of course, the main problem for cloud computing is the national boundaries and variances in national laws...

      Canadian security information can't be stored on US servers without the US government being able to access it on demand... and that is a privacy concern of the greatest to many people...

      we'll wind up finding the happy medium in due time, really.
      • I agree

        I'm all for using the cloud to augment computing for individuals and companies. However, putting the IT fate of your company [b]entirely[/b] in someone else's hands (particularly when you have the option to control much of it yourself) strikes me as foolhardy. History shows that this does not work.

        Again, the reason why governments, and banks, and utility companies work, is because people cannot afford to come up with their own alternatives to these institutions. The same is not true with IT. Companies can afford and already have their own IT infrastructures. I therefore believe that cloud computing will work. I just think that it will more augment companies' IT, rather than displace it.
        P. Douglas
  • RE: Is Cloud computing too good to be true for enterprises?

    A few weeks ago it was Elastic IPs and now it's storage volumes in the cloud. Did you see the new announcement Amazon made? The AWS blog has the official stuff and I wrote some more about how it changes the game at
    The Amazon folks are on a roll!

    With the addition of the storage volumes there's no doubt in my mind anymore: the cloud adopters will have much more computing horsepower and flexibility at their fingertips than those who are still racking their own machines. Cloud computing is going to be as significant for deployment as agile is for software development. You either compute in the cloud or you'll be left behind by your competitors because they can deploy faster, better, and cheaper than you can.
    • secrecy means private, not cloud...

      yeah, it's quick and easy to deploy on the cloud...

      but is it going to work as nicely? is it going to provide you with data security? well, the first point is unknown, really. The second, however... well, it's not going to provide as much security, as you don't have the control over the system. Man-in-the-middle attacks are so much easier when they can get between your system and its data storage, no need to find a client of yours, anymore.
    • Thank you, new AWS announcement added

      Thank you! The new AWS announcement you reference (and a link to your post!) has beem added as an update to this post.
  • Cloud has possibilities for us. But..

    I don't believe that you can really have 'secure code', we live in an imperfect world, and too many external factors come into play. If anyone had really seen secure code can they give me an example?

    I do believe that you can have secure methodology and we are experimenting with cloud computing for financial transactions and we think it may be the future. The jury isn't out yet so we're not prepared to sat whether it is yet. We do see a hint that it may change the financial transaction landscape but we must remember that the financial industry is risk averse, so they won't be the innovators here quite yet.

    This presents new players with an opportunity to build transaction systems of such scale that they have the potential to dwarf many of the current systems.

    There are of course pitfalls - it would be very risky to agree to Amazon or Google's terms of use and then go on to invest a lot of time and money into a system which they could shut down at any time, or if they were taken over by another player competing with you.
    Of course competitors will emerge who'll offer identical PaaS so that you could switch and the market will segment into different quality offerings with different strengths. It may be that you'll do part of some process in one cloud, and another for a different process with the final assembly or completion on say an IBM cloud.
    Ebay is particularly at risk of a group of coders coming together and building a better platform on the cloud. It has the potential to level the field, and if managed and supported properly we'll see some great stuff.

    The costs seem reasonable, but will they remain that way and what is to stop the 'cloud' from observing what is working, duplicating it and pulling the plug on the original creators?
    I suggest that anything you do just use the cloud for the grunt and keep the core of your system on your own servers. At least you may be able to switch to a competitor like IBM or HP when you've proved your business model.

    If these problems are overcome, and the right methodology is used there is certainly a place for cloud computing. We see some real possibilities here but not as it stands.
  • Get a clue.

    It's never going to happen. Companies like Google, Yahoo, MS, etc., simply can't manage your IT. Especially for an Enterprise.

    This may be all the rage for bloggers but the reality is not so.

    Today it's CAPTCHA. But every security feature will be a target for hackers. Cloud computing will not survive.
  • too good to be true? probably... when will it be transparent?

    when you can have some data being stored only on a local, secured network, and other data being stored safely on the cloud, and have it all clearly and easily written in the code... THAT is when I could see the big enterprises shedding the dead weight of supporting all sorts of systems that are non-critical to them. but the critical data and critical processes will be retained in-house, as you don't want anyone else to be able to interrupt your essential systems (short of toasting the power grid, but that's no small feat, anyways.)
  • Criteria for outsourcing application hosting hasn't changed

    "Cloud computing" seems to be yet another in a long line of labels that we love to latch onto. From the "application hostee" viewpoint, do we care if the infrastructure is a "cloud" or not? Well, not directly. We care about uptime, administration ease, user access, scalability, etc.

    Ultimately, the decision about whether or not to outsource the hosting of your applications still relies on the same ol' criteria that have been around for some time. Current offerrings may make administration simpler (e.g. deploying a database) and the overall price might be cheaper than before, but the set of considerations remains the same.

    Martin LaMonica had this comment in his blog entry
    "Of course, issues associated with outsourcing remain despite all the technological progress."