The $80 data center: cheap computing or head in the cloud?

The $80 data center: cheap computing or head in the cloud?

Summary: Cloud Computing at the tipping point

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Would you pay $80 (USD) for a data center with unlimited scalability and capacity? Or hold out for something a little more affordable?

Cloud Computing at the tipping point

Is pay-as-you-go cloud computing the flavor of the month, or is it a major disruption -- major disruption -- that makes it possible for organizations to tap into someone else's data center infrastructure for a few pennies, and compete head-on with large corporations that have invested millions of dollars/euros/pounds/rupees in IT?

John Evdemon calls the phenomenon "Internet Scale Computing," while Amazon Web Services refers to it as "Web-Scale Computing."

ZDNet blogging colleagues Phil Wainewright and Dana Gardner talked about the Computing Cloud concept this week. Phil explores the vision behind Amazon Web Service's Elastic Compute Cloud (EC2) and Dana breaks the news about IBM's "Blue Cloud" offerings. I think Dana's headline really says it all: "IBM's 'Blue Cloud' signals the tipping point for enterprise IT into services model."

(A little note of irony here: Amazon, which started out as a bookseller, has gotten into the IT service business, while IBM, an IT service business, has gotten into the business of selling books.)

Web services and standardization make it possible to share both IT and business services not only across the enterprise, but across the Internet. The global SOA is becoming a reality.

Privately run data centers aren't always known for efficiency. As John Evdemon puts it:

"Server farms are designed and built for maximum load conditions and dedicated to specific solutions, effectively locking horizontally-oriented resources into vertically-oriented 'solution silos.' Average data center utilization rates typically range from 15-20%. These incredibly low utilization rates detrimentally impact infrastructure and solution ROI levels."

Online podcasting service GigaVox Media, an Amazon customer, reportedly spent just over $80 in its first two months of business on storage, messaging and processing.

GigaVox uses Amazon Simple Storage Service (S3) to store files from podcasts, videocasts, and advertising images. The alternative would have been to buy disks and storage arrays to provide back-up storage, which typically range in price between $2,500 to $20,000 for network-attached storage units. GigaVox would also have had to invest in switches and hubs, as well as the expertise to put it all together and manage on an ongoing basis.

The company then adopted Amazon EC2 to fulfill its transcoding and automated show-assembly needs, and Amazon Simple Queue Service (Amazon SQS) to serve as the glue between these services monitoring EC2 server instances, queuing transcoding requests, and issuing instructions for program processing. As Doug Kaye, co-founder and CTO of GigaVox, put it in a Webcast:

"Even if we could have done this with a cluster of outsourced managed servers, which still wouldn't have been as scalable, we would have spent tens of thousands of dollars more," said Kaye. "We didn’t have to buy a single server. We didn’t have to spend any time in a ‘cage.’”

GigaVox is a great poster child for Cloud Computing, but is just that -- what about a poster adult? Cloud Computing has obvious advantages for startups and small companies, but how will it go over for larger, more established companies?

As regular readers of this blog know, I frequently talk about the "loosely coupled business," which produces services for or draws services from both inside and outside the enterprise. But some hard questions need to be addressed as we move forward:

  • Surveys I have worked with show 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.
  • Other than the initial rush of cost savings, will cloud computing homogenize enterprises, therefore washing away competitive advantage?
  • Any transition will still require a great deal of integration work for established companies. (Costing plenty more dollars/euros/pounds/rupees)
  • What about vendor reliability? What happens if a provider suddenly goes out of business? Or what happens if the provider decides they want to get out of IT, and contract with yet another provider for IT services?
  • 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 such off-premise arrangements?

So, a large-scale movement to Cloud Computing may take some time as these things are sorted out.

But Dana speculates that all it would take would be some large companies tapping into an enterprise service such as IBM Blue Cloud -- and seeing total IT operating costs go down by 40% over a few years -- to change the rules of the IT game forever. In addition, there will be "the productivity benefits of SOA, SaaS, services ecologies like Salesforce.com," leading to greater agility "in how they acquire and adjust their business processes and services delivery. You might get to do more for a lot less. And a lot less IT labor."

Topics: Software Development, Amazon, CXO, Cloud, Data Centers, Hardware, Servers, Storage

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9 comments
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  • Need Information about NAS and Datacenters

    Plz, if anyone replying to this message is a technician i need information about Network Attached Storage, i've searched CNET, PCMAG and some other sites to find about best NAS in the market, and the prices were about $15000, but here in the article they are talking about NAS that ranges between $2,500 to $20,000... so please if anyone knows i want information about three things:

    1. Network Attached Storage producers and comparisons
    2. What Do I Need to build to create a web service with my own datacenter (technically: what kind of connection to internet, what type of servers)
    3. Good Sources to find good deals on those products.

    Thank you very much.
    nasspass
  • Non-issues

    Cloud computing is about scaleable capacity hosted elsewhere. It shouldn't effect
    your completive advantage as you can develop your own software stack on top of
    the cloud.

    Been trailing the cloud for 3 months, and I'm very impressed. The scalability is
    simply unbeatable, for the price simply amazing.

    The points raised are non-issues for *nix users. Our ability to secure a server in
    the cloud is no different to our data centre. Our applications can be rapidly moved
    between servers (packaged and scripted) and are designed for scalability (JEE).

    Particular attention needs to be paid to data backups and recovery. The difference
    being you don't have physical access to the server.

    For *nix users, the cloud is our future.
    Richard Flude
    • Imagine...

      ...a shift from home fat clients to the cloud with thin clients.

      For example, thin client functionality can be merged with a home router and packaged with subscription internet broadband services, including a VPS Desktop. The router just PXES boots into the cloud as it were and the user manages his/her system no differently than if it were a traditional local Desktop with and internal storage.

      I see initially, a larger potential for consumer applications to happen in significant numbers.

      Imagine...
      D T Schmitz
      • Offline Problem

        Networking will have to be a lot more stable and ubiquitous. If this model is to flourish, I have to be able to get my virtual desktop any where any time. Right now we are not there. As primarily a laptop user for the last decade, I have seen vast improvements, but we are not really even close to a place where I can get on my network any where or time even with cell service adapters.
        philpenn
  • More like smoke and mirrors ,,,

    NAS costs $25K if you let vendors upsell you on every ridiculous feature and gold-plated mounting bracket.

    There's no such thing as a free lunch. Yes, there are people who are only using a fraction of their server and storage power, but it's because they overbought based on somebody's bad judgment. If you use a service from Amazon or anybody else, you will be paying in full for the resources you use, bandwidth included.

    But I can also see how some companies who are primarily Internet-focussed (webtailers, content providers, etc.) could benefit from Amazon's know-how in designing and operating those services. Up until the day that Amazon decides to compete with them ...
    terry flores
  • RE: The $80 data center: cheap computing or head in the cloud?

    The discussions around the "Cloud" are starting to remind me of an old game show "Who Do You Trust".

    Who can you trust to secure your data, have it available 24/7, provide the apps (for thin clients in particular).

    I could see this having value in the enterprise as a top up utility, build out your system to cover the base load, then use the cloud for heavy usage periods to top up your capacity. You could also replicate your data to cover yourself if your system goes down, the data is safe at your "Cloud site" and they could step in and provide you with your base needs until you are restored.

    Look carefully there is really no free lunch

    Cynical in Toronto
    Tom in Toronto
  • RE: The $80 data center: cheap computing or head in the cloud?

    I just hope old XOOM wasn't an early pioneer "cloud." They did disappear in a puff of smoke though! Where is my screensavers? you bastards.. I don't even know who they were.

    Just hope, as an example, Microsoft have put all their confidential data about the hostile take-over of Yahoo in a "Cloud". That will show us they trust it!
    graham.lv
  • Penny wise pound foolish

    Actually cloud computing is very expensive for intranet type applications. Cloud computing is very cheap if you just need the cloud for few hours. But if you plan to replace your existing servers with the cloud, it is damn expensive.
    adurairaj@...
  • RE: The $80 data center: cheap computing or head in the cloud?

    the computing power needed to fulfill the request comes from faraway buildings called data centers???and is delivered via the Internet. It's referred to as computing "in the clouds," or more simply, cloud computing. <a href="http://public.fotki.com/timoninajulia06/julia-timonina/">Julia Timonina</a>
    jtimonina